Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

by leave—I make a ministerial statement relating to the COAG business regulation agreement and small business initiatives.

During the current difficult economic times brought on by the global financial crisis, business confidence is all-important. Businesses seeking to cope with the local impacts of the global financial crisis need the confidence to know that the Australian government is doing the right thing by them. Doing the right thing does not only mean stabilising the financial system and providing a short-term economic stimulus, which the Rudd government has done. Doing the right thing, importantly, also involves sticking with a long-term economic reform program designed to lift productivity growth off the floor. And that is what the Rudd government is doing. The Rudd government will not be diverted or distracted from long-term economic reform by the global financial crisis.

The meeting of the Council of Australian Governments on Saturday, 29 November 2008 demonstrated the Rudd government’s commitment to long-term economic reform. It did so in vitally important areas such as improving the nation’s education system, taking it into the 21st century and providing true equality of opportunity for children from disadvantaged communities. It did so by reducing the wasteful overlaps and ambiguous responsibilities of the different levels of government in the provision of health services and in providing stronger emphasis on preventative health. And it did so in the area of business regulation.

Today’s productivity growth is tomorrow’s prosperity. I have made this same observation on numerous occasions. In fact, my first warning of the dangers of declining productivity growth was way back in October 2000. When I say today’s productivity growth is tomorrow’s prosperity, I can support that proposition with objective evidence. The Productivity Commission estimates that 80 per cent of the increase in Australia’s prosperity over the last 40 years is attributable to productivity growth. The rest has been contributed by growth in the labour force and fortuitous events such as the contribution to Australia’s national income of booms in commodity prices.

Now I will borrow from an eminent American economist and Nobel Prize winner, Paul Krugman, who said that productivity growth is not everything but in the long run it is almost everything. Krugman was making the 80 per cent observation that I have just made specifically in respect of Australia. But he was doing more than that. He was pointing out that without productivity growth we simply cannot generate the prosperity to alleviate suffering and sickness, to look after our brothers and sisters at home and abroad who just do not have the means to look after themselves. Productivity growth is not just an arcane economic term; it is the key to a prosperous, fair and compassionate society.

But what is it? What is productivity growth? Labour productivity growth is the value of a country’s production of goods and services—otherwise known as gross domestic product, or GDP—divided by the total number of hours worked by that country’s workforce. That is, productivity growth is the value of production per hour worked. The more we produce per hour worked, the more productive we are as a nation. There are other measures of productivity, like multifactor productivity. And productivity can be measured in the market economy or in the whole economy that includes the public sector. But for the purposes of the discussion today, labour productivity will do. In a modern economy like Australia’s, we like to think that we can produce more, not by working ever harder but by working smarter. That is the trick—working smarter. And that requires governments to invest wisely in education and training, in infrastructure and in innovation. It also requires governments to remove incentive-crushing impediments to working smarter.

Governments impose two sorts of incentive-crushing impediments to working smarter. In an open, competitive economy like Australia’s, fashioned by the Hawke and Keating Labor governments, businesses need incentives for risk-taking and for entrepreneurship. The first set of incentive crushers comes from the tax system. That is why the Rudd government is taking on the ambitious task of reforming the tax system through the review being overseen by the Secretary to the Treasury, Ken Henry. The second set of incentive crushers comes from the snarl of regulations affecting private business in this country. Left unattended, this snarl will become a gridlock—seizing up the entrepreneurial flair and talent of our business community, grinding the engine of the Australian economy to a shuddering halt. That is exactly what has happened to Australia’s productivity growth—it has ground to a halt. This is a national tragedy—not the sort of tragedy that appears in the daily newspapers, but a national tragedy all the same. If today’s productivity growth is tomorrow’s prosperity and today’s productivity growth is zero, then it is not hard to figure out what this means to Australia’s future prosperity and our capacity to support the underprivileged.

The productivity boom of the 1990s built on the pro-competitive economic reform program initiated by the Hawke and Keating Labor governments laid the foundations for this country’s modern prosperity. Yet, instead of pressing ahead with economic reforms, the previous coalition government coasted on the productivity boom of the 1990s and then on the mining boom of the 2000s. It squandered the opportunity to build on Labor reforms by investing in education, infrastructure and innovation by reforming the tax system and by pressing ahead with the reform of business regulation.

The Productivity Commission has estimated that about half of the recent slump in Australia’s productivity growth has been caused by temporary factors such as the drought and mining investment that has not yet fully resulted in increased production. But that leaves another half that is attributable to a slackening in reform effort. It has fallen to the Rudd government to revitalise the reform of business regulation. On Saturday at COAG the Commonwealth and the states and territories reached a historic reform agreement on business regulation. Reviving productivity growth has been at the heart of the work that has been going on all year through COAG’s Business Regulation and Competition Working Group, which I have been co-chairing with the Minister for Finance and Deregulation.

In close cooperation with the states and territories, we have been working on reforms to 27 different areas of regulation that reach across national borders. Never before in Australia’s history has a government attempted such an ambitious program of reducing unnecessary business regulation. We are moving Australia from being nine markets to one and putting an end to the rail gauge economics that have plagued the business community for more than a century. We have been working to create national systems of regulation in areas which will cut costs to business and advance Australia toward a seamless national economy.

Saturday’s agreement was the culmination of this work when the Commonwealth provided a $550 million package to implement reforms in these 27 areas of regulation as well as a number of different competition reforms. On top of this, the government has already committed to directly spend $475 million on some of these reform areas where the Commonwealth is assuming responsibility from the states and territories. Altogether, this funding package totals over $1 billion. That is $1 billion towards creating a seamless national economy, lifting productivity growth, creating jobs and boosting business confidence.

In so many areas it just does not make sense to continue with up to nine different sets of regulation. Take trade measurement, for example. Last week the Senate passed legislation which 107 years after Federation created a national system of weights and measures that replaces eight state and territory systems. This is the first of the 10 so-called regulatory hotspots agreed by COAG in 2006 to go through the federal parliament. Progress in implementing those agreed hotspot reforms had been so slow under the previous government that Chief Executive of the Business Council of Australia, Katie Lahey, was compelled to conclude:

Clearly they were so hot they burnt a hole in the piece of paper and we haven’t seen them since.

COAG has also agreed to create a national system for registering business names, another hotspot. Under this national system, businesses operating across Australia will no longer need to register and renew their business name in each state and territory. This reform alone has been estimated by Ernst and Young to save Australian businesses $1 billion over the next 10 years.

COAG has further agreed to create a national system of trade licensing so that a plumber, for example, who is licensed in Victoria can work in any other state or territory around Australia without having to apply for a new licence. The agreement also paves the way for a new national electronic conveyancing system. This new national system has the potential to save homebuyers up to $400 on house purchases, helping to support the government’s work on affordable housing. Total savings on conveyancing costs are estimated at up to $250 million a year. I will not take members through each of the 27 areas. But it is worth mentioning that agreement has also been reached in important areas like financial services and consumer credit regulation, consumer policy and for further work on food regulation and on the competition reform agenda.

We have achieved a great deal over the last eight months, having reached a landing at the COAG meeting on Saturday with the agreement on the funding package for those reforms. But the Minister for Finance and Deregulation and I will not just leave it to others to implement the agreed reforms. We will drive them through to completion. Contrast these achievements with the lack of progress on reforming business regulation over the previous 11 years, a period that the Business Council of Australia describes as one of ‘the creeping re-regulation of business’ as an example of ‘how the benefits of past reform can be quietly eroded over time’.

The Business Council of Australia has shown strong and constructive support for this important reform agenda. Ahead of Saturday’s COAG meeting, President of the BCA, Greig Gailey, said:

Right now we need businesses to have the confidence to employ and invest. Businesses will have significantly greater confidence when they see governments pushing ahead with reforms that enhance the productive capacity of the economy.”

Following Saturday’s meeting, Chief Executive of the BCA, Katie Lahey, said:

The BCA commends the COAG partners for their continued progress towards a ‘seamless economy’ where differences between states do not disrupt business activity.

The BCA particularly welcomes the $550 million reform National Partnership funding to be provided to states in return for unified business regulation and cuts to red tape.

The OECD has also recognised the importance of this reform work. On 30 October this year, my colleague the Minister for Finance and Deregulation announced that the OECD will undertake a regulatory review of Australia, including a special chapter on cross-jurisdictional regulatory reform. We look forward to receiving the OECD’s findings by the end of 2009. In advance of this report, I note that a recent OECD policy brief on Australia says:

It is also important to reduce product market segmentation caused by the regulatory differences between the states.

It goes on to say:

The government is putting a wide ranging reform programme in place … The implementation of reforms is in most areas a shared responsibility between the states and the federal government. Implementation is backed up by measures to achieve better co-ordination of cross-jurisdictional policies in the Council of Australian Governments (COAG). It is promising, for example, that there are now financial incentives for the states to move this process forward.

The government will continue to press ahead with economic reform while managing the impacts of the global financial crisis. The result of Saturday’s COAG meeting is good for national productivity, good for business confidence and good for jobs growth in Australia.

I would like to talk now about small businesses in Australia. The agreements reached at the COAG meeting on Saturday will be of benefit to all businesses, but we know inefficient regulation with high compliance costs can hit small businesses particularly hard. Without the resources of larger businesses, small businesses can find it particularly time consuming and costly to deal with the paperwork and other compliance requirements imposed by regulation. These landmark agreements on the 27 different areas of regulatory reform will help drive business costs down for small businesses.

In this global financial crisis, the Rudd government is supporting small business in other ways too. The government’s economic stimulus package was designed with small business squarely in mind.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

What about farmers?

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

Farmers are actually small business people, and this has been very strongly supported by the National Farmers Federation, so you might want to get on board. Small businesses are the first to feel the effects of an economic downturn. On 24 October, the Prime Minister held a small business summit in Brisbane which was attended by over 500 small business owners and representative organisations. The summit provided an opportunity for the Prime Minister, the Treasurer, the Minister for Superannuation and Corporate Law, and me to hear directly from small business owners and their representatives.

At the summit, the Prime Minister launched a package of initiatives to support small businesses. I am pleased to announce that today marks the commencement of the guarantee of on-time payment for new small business contracts with Commonwealth government departments. From today, for contracts of up to $1 million, Commonwealth government departments will pay small businesses within 30 days, otherwise small businesses will have the right to charge penalty interest. This will help small businesses maintain their cash flows, something which is critical any time but even more so in the difficult economic times we are facing now. And the government has called on bigger businesses to follow our lead.

The government has made a further commitment to develop standard procurement documents and standard approaches to make it cheaper and easier for small businesses to sell to the government. The government will also provide extra support and advice to small businesses during the financial crisis through a $4 million government investment over the calendar year of 2009. Applications for this funding do not close until 18 December but so far 245 inquiries have been made to the hotline and 194 application kits have been sent out.

There are other government initiatives to help small business. These initiatives build on those already underway. In this year’s budget we provided $42 million to support 36 one-stop business advisory shops for small business around Australia in providing assistance to small business debutantes as well as existing businesses.

The Rudd government’s first budget began the process of tax reform. Our tax package means that typically small business owners will receive tax relief of up to $50 a week this financial year followed by up to $91 a week next financial year. We are also looking at ways to simplify GST compliance for small business owners through our BAS Easy proposal. The Board of Taxation is reviewing the legal and administrative framework of the GST, including the BAS Easy proposal, and is expected to report to the government by the end of the year.

To ease some of the administrative burdens associated with superannuation, the government is creating a superannuation clearing house for small business. And the government will roll out a national high-speed broadband network across Australia, especially benefiting small businesses. The government is also delivering on its promise to reform the Trade Practices Act to crack down on anticompetitive behaviour by powerful businesses. And we have provided small business with a permanent voice on the ACCC through the appointment of Professor Michael Schaper as a Deputy Chair of the ACCC.

The best thing governments can do for small business is provide them with an operating environment in which they can grow and thrive. As the Prime Minister said last year:

Labor believes that Australia’s small businesses deserve support from a government that will help them make it easier to do business, to grow their business and as a result grow our future economy.

The government is committed to lifting productivity and creating jobs, while continuing to deal with the effects of the global financial crisis. The agreements reached over the weekend with the states and territories will help drive this agenda and help build a modern economy capable of meeting the challenges of the 21st century.

I ask leave of the House to move a motion to enable the member for Moncrieff to speak for 17 minutes.

Leave granted.

I move:

That so much of the standing and sessional orders be suspended as would prevent Mr Ciobo speaking for a period not exceeding 17 minutes.

Question agreed to.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

How fitting that the Minister for Small Business, Independent Contractors and the Service Economy in a speech on small business did not mention small business until page 6 of a seven-page speech. This symbolism truly represents where small business sits for the Rudd government: tucked away neatly somewhere towards the back. The reality is that this ministerial statement has more to do with this minister’s aspirations to be Treasurer than it does with providing leadership, not to mention any assurance, to Australia’s small business sector.

The Minister for Small Business, Independent Contractors and the Service Economy and aspiring Treasurer says that the Rudd government has stabilised the financial system. Perhaps the minister should explain this so-called stability to the 270,000 Australians with investments in unguaranteed mortgage funds and cash management trusts. These Australians, many of whom are small business men and women, have had their savings frozen as a direct consequence of the Rudd government’s rushed and bungled decisions on the unlimited bank deposit guarantee.

The minister, as if preparing his resume, detailed his so-called long-term economic reform program. I will leave it to my colleagues to highlight the minister’s error in claiming last week’s COAG meeting will miraculously solve all of Labor’s mismanagement when it comes to health and education. Certainly the minister’s suggestion that the business regulation changes announced at COAG are the white knight that will carry Australia’s small businesses through the global financial crisis is misleading at best and fanciful at worst.

Indeed, COAG has been working to reform 27 different areas of regulation that reach across state borders. While these reforms are welcome, they are reforms that benefit Australia’s largest businesses. The minister quoted extensively from the Business Council of Australia. The Business Council of Australia is an association of CEOs of 100 of Australia’s leading corporations. We would expect that they would welcome the 27 regulatory reforms that were announced at COAG. While the coalition certainly welcomes business deregulation, the Rudd Labor government’s attempts to pass this off as not for big business but as somehow the government’s golden gift to small businesses is a cruel hoax on the part of the Rudd Labor government.

According to the Australian Bureau of Statistics in its latest Counts of Australian businesses only 24,444 small businesses, or about one per cent of all small businesses, operate in more than one state. So, for the other 99 per cent of Australia’s 2.4 million small businesses, the government’s big business deregulation agenda is of little interest, of little benefit and of little assurance. What we see here is another case of the Rudd Labor government talking without actually delivering. I was most interested to hear the minister describe the potential benefits of a new national electronic conveyancing system. According to the Rudd Labor government, this could save homebuyers up to $400 on house purchases. This $400 may go some way towards helping to pay the thousands and thousands of dollars of stamp duty and land taxes which have been the hallmark of this very government’s state Labor colleagues. It is not lost on the Australian people that today we saw widespread reporting of the fact that paying Labor stamp duties requires up to three months of an annual salary. Again, we see Labor is very good at making announcements but it cannot quite deliver any meaningful outcomes to Australia’s small business sector.

Indeed, the real work on delivering meaningful red tape reduction has been left to the opposition. On 20 November I was pleased to announce a coalition policy to help small businesses better manage their cash flow. The coalition believes our small businesses deserve genuine policy responses to the challenges of operating in these difficult economic times. They do not need more photo opportunities and talkfests with the Prime Minister hopelessly out of touch with Australia’s small business sector. Cash flow in many small businesses is being burdened by PAYG instalments, which are likely to have been calculated on revenue from brighter economic circumstances. The coalition believes that varying PAYG instalments is an important way small businesses can manage their cash flow more ably. While variations are allowed currently, if small businesses underpay their instalments by 15 per cent or more, the tax office will apply a heavy penalty. The coalition has therefore called on the Rudd Labor government to double the allowable margin of error in PAYG instalment variations from 15 per cent to 30 per cent. This means that small businesses can then vary their PAYG instalments with more confidence, without the fear of being unreasonably penalised by the tax office. If the minister, and indeed his government, were genuinely concerned with providing genuine assistance to Australia’s small businesses and helping to maintain the jobs of those 3.8 million Australians that they employ, they would implement this coalition policy without delay.

In his speech, the minister said: ‘The first set of incentive crushers comes from the tax system.’ The coalition recognises this and only the coalition has a track record of delivering tax cuts. The coalition, under the previous Howard-Costello government, delivered tax cuts in 2000, 2003, 2004, 2005, 2006 and 2007. That is the coalition’s track record on delivering tax cuts. On the other hand, the Rudd Labor government deliberately targeted small businesses with tax increases in the May budget. I would particularly draw the attention of the House to the additional family income test which was placed on the entrepreneurs tax offset. The entrepreneurs tax offset provides a 25 per cent tax offset for small businesses with annual turnover of less than $75,000 and begins to phase out for turnover greater than $50,000. The Rudd Labor government introduced an additional income tax test for the entrepreneurs tax offset that took effect from 1 July 2008. This measure deliberately and unfairly targeted families that work in small business. For example, under Labor’s new rules, a wife who earns just $42,000 a year working in her own small business as, say, a hairdresser—will be whacked with a massive 25 per cent tax increase as a direct result of this new Labor tax on small business if her husband—for example, a plumber—is earning $79,000 year.

Why have Labor so unfairly slapped working partners and small businesses with such a harsh new tax? The reality is that Labor just do not understand small business. This is another example where the Rudd government say one thing and do another. They say they believe in lower taxes, the minister says the tax system is crushing incentive, but what is the actual result? The Rudd Labor government policy actually crushes the incentive of small business even more than it did previously.

But we should hardly be surprised at the attitude of the Rudd Labor government towards tax reform. Indeed, all Australians should remember the declaration of our current Prime Minister on 30 June 1999, when he said about the previous coalition government’s very bold and significant tax reform package:

When the history of this parliament, this nation and this century is written, 30 June 1999 will be recorded as a day of fundamental injustice—an injustice which is real, an injustice which is not simply conjured up by the fleeting rhetoric of politicians. It will be recorded as the day when the social compact that has governed this nation for the last 100 years was torn up.

Has the Prime Minister miraculously transformed from his previous cynical position into a tax reformist in the last eight years? Most certainly he has not. The Prime Minister has, however, become very clever at saying one thing and doing another. The honesty with which he came to this House on 30 June 1999 has vanished. In its place we now find as a hallmark of the Rudd Labor government a commitment to putting talk, spin and news headlines ahead of actually delivering for Australia’s small business sector. Similarly, the minister says the government has provided $42 million to support 36 small business contact points. What the minister neglected to say, however, is that the Rudd Labor government also axed in its most recent budget nearly $1 billion of small business advisory and support programs. Included in that $1 billion of axed small business programs was the Small Business Field Officer Program, which delivered 65 small business contact points right across Australia at an annual cost of some $7.2 million.

So we have the situation in which the Minister for Small Business, Independent Contractors and the Service Economy scrapped 65 small business field offices which cost $7.2 million annually and replaced them with 35 Business Enterprise Centres at an annual cost of $10.5 million. I note that in the Senate estimates hearings that were held earlier this year the minister’s department was unable to identify one single activity which would be undertaken at a Business Enterprise Centre which was not already undertaken by the coalition’s small business field officer program. So you could forgive small businesses for asking the minister to explain why the Rudd government was spending $3 million more each and every year to provide the same services at nearly half the contact points that existed previously.

This Labor government’s commitment to spending more on getting less is a telling story for those small businesses who wondered how a government could possibly take a budget into deficit while the economy was forecast to grow at two per cent. Perhaps this is according to the Sensis business index, the No. 1 reason why support for the federal government’s policies has collapsed by 57 percentage points since the election of the Rudd Labor government. There is a belief that there has been economic mismanagement by this government. Quite extraordinarily, the government is spending less today on small business advisory and support programs than the federal government was this time 12 months ago—before the global financial crisis was on the doorstep of our small businesses. Once again, what we see is that the Rudd government’s talk does not match their actions.

Another case in point has been the government’s disastrous broadband policy. The minister said in his speech that ‘the government will roll out a national high-speed broadband network across Australia’. I am certain that there are plenty of small businesses across Australia that are starting to ask, ‘When is this going to happen?’ This is a prime example of where the Rudd Labor government’s rhetoric has far outbalanced their results. As my colleague Senator Minchin said in the other place, the Rudd government had a broadband election sound bite with no sound public policy to support it.

Despite the promises of the Prime Minister and the promises of the minister’s colleague Senator Conroy, the Rudd government has failed to deliver its election commitment of selecting a builder for the national broadband network within six months of coming to office. Instead, it has taken over double that and we are still waiting. The government is already at least six months behind schedule in commencing network construction before the end of 2009 and offering new services over the new network.

The Rudd government scrapped the coalition’s OPEL broadband project for rural, regional and remote Australia despite having no alternative to it. Using WiMax technology, this network would have delivered metro equivalent services to around 750,000 underserved households and small businesses across the country. According to the Age newspaper of 24 June this year, ‘Labor’s election pledge to appoint a National Broadband Network builder by the end of the year is in tatters because of another extension of the bid deadline and a trebling of the expected construction costs.’ Once again, despite all the talk, all the spin, all the headlines and all the commitments, there has been no delivery from the Rudd Labor government.

The minister said in his speech, ‘From today, for contracts of up to $1 million, Commonwealth government departments will pay small businesses within 30 days.’ That is a statement that is big on announcement and little on delivery. That is a statement that, consistent with this Rudd Labor government’s priorities, is about headlines and not about substance. This announcement had an air of familiarity about it. And indeed it does. Some 572 days ago, on 10 May 2007, the minister at the table, together with the Prime Minister, issued a press release titled ‘Real action to cut business red tape’. I quote from the release:

Labor will make sure that all government departments are meeting their commitments to small business.

It also says:

Labor will give small business the right to charge Commonwealth Government departments and agencies interest on bills not paid within thirty days.

Perhaps the media release should have been titled ‘Real inaction to grow business red tape’, because since the Rudd Labor government was elected the number of federal government departments and agencies which are paying small businesses on time has decreased.

According to the survey of Australian government payments to small business, in October 2007, under the previous coalition government, 95 per cent of all invoices to small businesses were being paid within 30 days. Yet 12 months later, on ABC TV’s Insiders program on 26 October this year, the minister at the table said that only 92 per cent of invoices to small businesses were being paid within 30 days. So the minister says that the Rudd Labor government will increase the percentage of government invoices paid on time to small businesses from 95 per cent to 100 per cent and yet the reality of Labor’s policies is that the percentage has gone backwards to 92 per cent. Once again, there are no results behind the rhetoric of the Rudd Labor government. After 12 months in office, the Rudd Labor government has failed to deliver on this election commitment. It is little wonder that the Sensis business index reports that only nine per cent of small businesses believe that the Rudd government’s policies support them. But if there is one way that the Rudd government knows how to fix a problem, it is to talk about it. According to the Rudd government mantra, talking and watching fix everything.

At their grand small business talkfest in Brisbane on 24 October, after the minister had personally called people begging them to get over their Rudd government summit fatigue and come along, the Prime Minister said, ‘What I’d like to propose today is a government guarantee to pay all of the federal government’s contracts up to $1 million to small business on time, within 30 days.’ What I would like to ask is this: did the Prime Minister forget that his name was on top of a press release proposing exactly the same thing 18 months ago? Here we have the Prime Minister and the minister coming into the House to announce for a third time now that under a Rudd Labor government small businesses who deal with the government will be paid within 30 days.

I will give this guarantee: small businesses out there are hoping that this Rudd Labor government gets it right third time lucky. Far from meeting their election commitment to make things better, so far the Rudd Labor government has only made matters worse. I will conclude my comments by quoting the Prime Minister, who recently in fact made this statement in his address to the small business summit in Brisbane. He said: ‘There is no government policy that is going to make running a business easy.’ That is going to be the case for as long as Labor is in government. (Time expired)

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

Mr Deputy Speaker, with your indulgence, I wish the shadow minister for small business and his wife, Astra, all the best for the impending birth of their first baby.