Allegra Spender (Wentworth, Independent) Share this | Hansard source

As the minister said in her second reading speech, small business is the backbone of our economy. They represent 97 per cent of all Australian businesses, around 40 per cent of private sector jobs and 30 per cent of GDP.

Small businesses deliver growth, innovation, productivity, employment and support for local communities. I'm very proud of the small businesses in Wentworth who are doing all these things. Some of those businesses, such as florists and cafes, you'll see as you walk down the street, but many of those small businesses will be businesses in the B2B sector. They're people that you don't see, but they are also critical parts of the supply chain. They are the beds of our innovation. There are so many businesses I've seen in Wentworth who may be small now but aspire to great things. So many of the Australian businesses that we have in the community today were small businesses once. It is that innovation, that talent and that drive that we, in this place, need to harness.

To come to the Payment Times Reporting Amendment Bill, this is a really important bill on the basis that there are important relationships between those small, medium and large businesses. According to the BCA, trade between small and large businesses represents around $700 billion a year. That is enormous. At the same time, in looking at that trade, we need to recognise the environment that our small businesses are operating in right now. It is a hard time to be a small business. Coming out of the COVID pandemic, when lockdowns were in place and demand slumped, businesses now face the enduring effects of inflation, supply chain bottlenecks, a struggling economy, high material costs and, still, difficulty in finding people to employ in their businesses. It is a really difficult time to be in business, and that's something that I hear constantly from the people I know in the business community.

On top of that, smaller businesses are facing a skewed business environment in the hands of large local multinational organisations that can exert power in different ways. That exertion of power actually stops smaller businesses growing and developing in the way that they would like to. I think this is an important area to address in the parliament. One area where this plays out is in payment times. As a former small-business owner, I know firsthand how difficult it is to manage the timing of cash flows, along with everything else. According to ASIC, inadequate cash flow is the most common cause for insolvencies in Australian businesses, and often, as a small business, this can be out of your hands. My mum often told me that when she started her business she learned very quickly and very early on that you have to get paid. That was a big part of what she used to do, as someone who supplied clothes to bigger businesses. As the owner of a new business starting out she was as obsessive about that as she was about the quality and fit of the clothes she made—because you have to get paid. If you don't get paid, you don't have a business.

The small business ombudsman found, in 2017, that large businesses were extending payment terms and delaying payments to better manage their own inventory and essentially using delayed payments as a form of cheap credit. This is undertaken often without consideration for the impact on small businesses dealing with their own cash flow issues. In 2020, the original form of this act established the Payment Times Reporting Scheme to address this issue. The scheme required regular payment time reports from eligible entities to be published on a register which could be accessed by small businesses. The idea was: greater transparency, faster payments.

A review of the original act published two years later, however, found that the register had no material decrease in payment times and found no evidence that small businesses were rejecting customers based on the reports published. That makes complete sense to me, because, if you're a small business, most of the time you don't get to pick and choose your customers. You're trying very hard to get and build your customer base, so, even if someone is a late payer, if you believe they're going to pay you you're going to stick with them. As of this week, the average payment time is still at 32 days, above the 30-day target period outlined in the legislation, with payment times in many instances extending well beyond this.

This bill strengthens the act from 2020 by implementing greater enforceability and compulsion powers for the regulator. Under this new law, the regulator will have expanded powers to gather information beyond just payment times from large businesses and to enact penalties for the slowest payers and those who fail to comply. The explanatory memorandum outlines that slow payers will be required to publish a statement on their website and other relevant documentation, including procurement documents, invoices and other commercial documents.

I recognise what this bill is trying to achieve but I have concerns that, for all its good intentions, it may not achieve the outcomes it seeks. That's because piecemeal solutions without the muscle behind them may not do anything substantial to affect small businesses and may instead just increase the volume of regulation in the economy. Despite the change in this bill, the legislation fails to address the fact that the 2020 review found that small businesses generally don't have the luxury of being choosy as to with whom they conduct business. Even if large companies have to publish their track record, small businesses are unlikely to turn down a major contract because of payment delay. Previous reviews tell us that.

The mechanisms of this bill are also somewhat dependent on the average. The explanatory memorandum states that the bottom 20 per cent of late payers will be subject to penalties, but currently not even the average payment falls within the target 30-day period. While it means that the most egregious offenders will be punished, there is little incentive for those businesses safely in the middle of the pack until the bottom quintile get their act together. My question to the minister is: is this the best that we can do to get rid of slow payments in our economy? For instance, would the government consider implementing a policy to not use slow payers in public contracts as an additional incentive to see if that's one way that we can actually drive better practices for small businesses?

In conclusion, the government is bringing this legislation forward to try to protect small businesses. I support the ethos and I support what the bill is actually trying to achieve. My big question is whether this will have the muscle to make the difference in the payment times for small businesses that I believe the minister would like to make and that I know small businesses critically need. One last issue I want to raise is that regulators that are established without powers or the means to make meaningful difference to the business community are worse than useless. I see this in the current ACCC, which only has a capacity to deal with 42 per cent of competition complaints, only 70 per cent of which are conducted within the target time of 12 months. So, if we have a regulator that can't actually deliver on the protections, then we don't actually have the protections in place, as much as we might feel that we are passing those protections as we stand here giving speeches in the House.

I will support this legislation because I believe this is a significant issue. However, I'm not convinced that it will significantly improve the lives of small businesses in the way that we would like it to. I hope I am proved wrong.

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