Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I rise to speak on the Competition and Consumer Amendment (Industry Code Penalties) Bill 2014. It is a great pleasure to follow the member for Eden-Monaro, who has such wide knowledge in this particular area. I would like to briefly talk about the franchising sector. There are currently 73,000 business units employing over 400,000 Australians, with estimated sales of $131 billion annually. It is an enormous section of our Australian economy. Here we are introducing a bill to improve that section.

How many speakers do we have from the opposition on this? A duck egg. Not one single member of the opposition here in this parliament today is prepared to speak on this bill about an important franchising sector. It is a sector of the economy that employs 400,000 people, and we cannot get one single speaker from the opposition. I think that says it all.

But we have seen this during the past six years. As the member for Eden-Monaro correctly said, we saw the small business sector in this country shed 518,000 jobs. I will say that again: 518,000 jobs. If you are at the MCG and you look up and there are 100,000 people there, you see enormous, vast crowds. To think that, under the previous Labor government, we could have filled that MCG five times over with the number of people from small business who lost their jobs and still have 18,000 people left over!

But, really, is it any wonder, when we look at what we were served up under the previous Labor government? There was a revolving door of small business ministers who did not have a clue about the subject that they were talking about. We had the good Dr Emerson, an economist and public servant. We had Mr Nick Sherry; his background was as a state secretary of an employees' union. Then of course there was Senator Arbib; his background was as the general secretary of the Australian Labor Party, and he was from the good old New South Wales Sussex Street branch. Then we had Mr O'Connor, whose background was as the assistant national secretary of the Australian Services Union. The current member for what used to be Prospect was an industrial officer for the Finance Sector Union and a ministerial adviser. And it goes on. Now we have the current opposition leader, who is now the spokesman for small business—though we hardly hear him mention the words—whose previous background was as the national secretary of the Australian Workers Union. So is it any wonder that, under the past six years of Labor government, those small business ministers seemed to think that their job was to make small business smaller? And they succeeded remarkably.

So now the coalition is proud to have, in Minister Bruce Billson, a minister for small business, in cabinet, actually getting on with the job and trying to get small business moving again. Just look at some of the things we have done in the short 12 months that we have been in office.

We have repealed the carbon tax, because the carbon tax was probably one of the things that hurt small business the most. That is gone. But we need to be ever-vigilant on that point, because we know that, should Labor ever come to power again, as sure as night follows day, that carbon tax will be coming back and they will be smashing small business with it; it will be the small business sector that will pay.

We have also established the $484 million Entrepreneurs' Infrastructure Program which will provide practical support for businesses, including advice for people with relevant private-sector experience, and small co-contributions for re-engineering or regrowth opportunities for business.

We will provide an additional $304 million over four years to boost wage subsidies for mature-age job seekers, to get those mature-age workers with all that experience back in the workforce. I am sure that a lot of small businesses will be taking that up.

Most importantly, we have started the root and branch review of our competition act. That is an act that, under the previous six years of Labor government they said was—and they say now is—all fine, and that nothing needed or needs to be done. We need to look at that act seriously. We also know that the old section 46 of the Trade Practices Act on the misuse of market power is simply not working. We are seeing more and more concentration in industry, in almost every sector of the economy, squeezing out small business because of anticompetitive practices that are allowed here in Australia under our laws but would not be allowed to occur under the laws in other countries. And that is harming the most innovative, productive sector of the economy—the small business sector, which we need to provide those jobs in the future.

We have made changes to the tax thresholds, saving small business $56 million a year in red tape. We have also put money back into the ACCC so that they can actually run cases and look after the interests of small business. We saw the previous government basically let the ACCC's funding run out, because they had simply run out of money. Despite the difficult budgetary situation, we have put an extra $80 million into a funding boost to the ACCC so that they can actually get on and do their work.

Also important for small business is the export market development awards. It is most important to encourage small business to go out there and tackle that international economy. After all, over 98 per cent of the world's economy is beyond our shores. Small business has to look not only in Australia but also beyond our borders—especially to those growing areas of China, South-East Asia and India—to see what products we can sell to them. That is what we want to encourage our small business sector to do. We have also removed $48 million worth of red tape burden from small business by removing the burden on small business to have to be the pay clerk for the Paid Parental Leave Scheme.

Of course, with this bill, we are working to improve the franchising sector. The franchising sector does need some regulation because of the information imbalances—or information asymmetries, as they are often called—where the franchisee does not have the same information as the franchisor. Back in 1998, the previous coalition government brought in an industry code, and if you were setting up a franchise system you had to provide that code and certain disclosure documents to a potential franchisee. But one of the weaknesses of this code—and it has been developing and it will need further development as we go—is that if you broke the code there were no penalties involved.

This bill brings in a pecuniary penalty for breaches of the code. The penalty will be 300 penalty units, which is currently $51,000 maximum. I think this is a fair balance. People who want to use their money to go into a franchise system need to be sure that the person running that franchise is doing everything correctly, that they are acting in good faith and that, if they break the code, there is some mandated penalty. This should reinvigorate our franchising system throughout Australia and should give encouragement to people to actually take on a franchise and go into business and take those risks.

One of the big areas of concern for franchising, especially, in the retail sector, is the cost of retail rent in Australia. That is where a lot of disputes and business failures arise from. Fortunately, the Treasurer asked the Productivity Commission to undertake an inquiry into the relative costs of doing business in the retail sector in Australia. The Productivity Commission handed down an interim report, as at June 2013, which had some quite concerning information.

Firstly, the Productivity Commission did an international comparison of the costs of running a retail business in Australia. Why that is probably more than ever is that, in the past, we were almost like an island continent but today, with the internet, people can by fashion, books, clothing and many different products over the internet from overseas retailers. So like never before in our nation's history, our retail sector is actually competing with retailers overseas. We need to ensure that our retail sector and our Australian retailers—many of whom are in franchising—are internationally competitive. If they are not, they will lose business and the nation will lose business, lose employment and lose innovation.

The Productivity Commission's inquiry found a bit of good news. It found that the cost of rent for our supermarket sector is less than the cost of rent in the United Kingdom and the USA. That should be good news for consumers, but it still does not explain the reason that, when you go to a supermarket in Australia, you pay a higher price for a jar of Vegemite, which is made in Australia, than you would pay if you bought that same jar of Vegemite in the UK or in New Zealand. It does not explain why the price of Coca-Cola—probably the most basic supermarket staple in everyone's shopping trolley—is so much higher in Australia than it is elsewhere in the world. An excuse that has been given previously is that the cost to operate these supermarkets in Australia is much higher. But that excuse no longer holds up.

It is also concerning when we look at the comparison the Productivity Commission has done with respect to the clothing and fashion retailing sector. The Productivity Commission found that, on average, if you are a fashion retailer here in Australia, the cost of your rent is almost three times higher than it is for a retailer in the UK and the USA. That simply means that you have to have higher retail prices, which are paid for by the consumer.

Although I am glad that the Treasurer got the Productivity Commission to go ahead and look at this, back in 2007, before I came to this place, I put together a paper along similar lines, called International retail rent comparisons: are Australian retailers at an international competitive disadvantage? In that paper in 2007, I detailed how occupancy costs and rents in Australia are three to four times higher than in comparative countries, whether we look at Europe, the USA, Canada or even Japan. This is something that we need to address.

One of the great problems we have and the reason why this occurs is our local zoning laws. We have been trying to protect some of our large retailers from competition and shopping centres from our zoning laws. As when the government interferes in the market, when it puts those artificial restraints in, it distorts the market. The result is that our retail rents in Australia are three times higher than in the rest of the world. The ultimate victim of that? Yes, it is those small business people in the franchise sector. But the ultimate victim is the Australian consumer. If we do almost any international price comparison, the Australian consumer is paying far too high a price for the goods in retail shops in Australia.

This is a problem we must address, as I said previously. With the advent of the internet and the growing amount of online sales, we have to address this because we have to make our Australian retail sector competitive, and the way to do that is to allow the forces of the free market to operate. We simply cannot interfere to try and protect inefficient retail centres and retail shopping centres. We must allow people to set up new businesses, to establish new businesses, because that is the only way we can bring these retail rents back to the true market price. If we do an international comparison of office rents, our office rents are very similar to those in the rest of the world and in fact lower on a city-to-city comparison with the USA. But, when it comes to retail rents, we are out of step. That is harming our franchising sector. It is harming our consumers. These are some of the issues we have to address. I have great faith in our minister for small business, and these issues will be addressed, hopefully, in that root-and branch review of our competition policy.

The bill before us today, the Competition and Consumer Amendment (Industry Code Penalties) Bill, takes an important step towards strengthening our franchising sector. It will strengthen the relationship and the trust between the franchisor and the franchisee, introducing the provision that they both act in good faith and bringing in penalties for a breach of the code. This will strengthen the sector, it will strengthen small business, and I commend the bill to the House.

See this speech in context