Harry Jenkins (Speaker) Share this | Link to this | Hansard source

I have received a letter from the honourable member for Dunkley proposing that a definite matter of public importance be submitted to the House for discussion, namely:

The damaging impact of rising interest rates on small business.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Deregulation, Competition Policy and Sustainable Cities) Share this | Link to this | Hansard source

The only thing that matches the concern the small business community have about rising interest rates is their concern about the lack of Rudd government interest in their plight. The Rudd government has created a perfect storm. It has produced higher interest rate costs for small business, made it harder for small businesses to access finance, caused small business borrowers to face harsher terms and conditions, and is causing hardship for small business employees and employers alike.

The Rudd government’s action and inaction spell out a menu of what you would not do if you were at all interested in supporting the small business community. The Rudd government’s insatiable spending and the unprecedented growth in Commonwealth debt is crowding out opportunities for finance for the small business community. The Rudd government’s bungled handling of the bank guarantee has killed off competition—those second-tier and non-bank lenders that the small business community turned to for competition and for competitive prices. Where that competition improved affordability and services, that has been killed off dead by the Rudd government’s bungled bank guarantee. The Rudd government has killed off the competition, it has nobbled those second-tier banks, and it has made no national interest reciprocity contingent on the enormous taxpayer support for the bank guarantee. It has not said to the banks, ‘If the Australian taxpayer is going to provide you guarantees worth tens and hundreds of millions of dollars, in some cases, we expect the banks to make a contribution to recognise a reciprocal obligation to support the growth and the recovery of the economy.’

The Rudd government has stood by while banks have increased their margins, while their profits have grown and while they look to the small business community as a source of great revenue stream and great profit growth—but have not quite taken the responsibility small businesses are looking for from the banks. The Rudd government has turned its back on these concerns. The Rudd government has heard over and over and over again that the small business community is concerned about the cost of its finance, the difficulty in accessing finance, and the impact that rising interest rates are having on their business viability, their success and their opportunities to employ.

What has the Rudd government done? It has just stood back and done nothing. When the coalition proposed a Senate inquiry to examine these very important issues, what did we hear from the Rudd Labor government? Absolutely nothing: not a word of support, not an acknowledgement that this is an important set of issues that need to be addressed, not a recognition that this inquiry is what the small business community wants. We have heard nothing. We cannot even be confident that the Rudd Labor government and government agencies will cooperate with the Senate inquiry into small business financing. We have not even been given a reassurance that the Rudd Labor government will participate and that the agencies that report to the government will be able to freely contribute in a positive and constructive way. The coalition has made that call and the small business community has, as one, said, ‘This is what is needed.’ And what has the Rudd government done? Absolutely nothing.

If the Prime Minister does not want to listen to the coalition, he could have, as an acolyte of President Obama, listened to the President’s State of the Union address. President Obama said:

Financing remains difficult for small business owners across the country, even those that are making a profit.

President Obama went on to propose a number of measures to address what was described as ‘an obstacle to economic recovery and employment growth in the United States’. If the Rudd Labor government will not listen to the small business community, if the Rudd Labor government will not listen to the industry organisations representing their view, if the Rudd Labor government will not listen to the overwhelmingly positive response to the coalition’s proposal for the Senate inquiry, who will they listen to?

We are not sure who the Rudd government are listening to because they are certainly not listening to the small business community. The recent COSBOA Telstra business survey recognised the cost and availability of funding as the biggest issue of concern for the small business community. But there was still no response from the Rudd Labor government. There was still no response from the Marcel Marceau of small business ministers, Dr Emerson, who is sitting opposite me. Have you heard a word about these issues? It is the most reductionist approach to the small business portfolio we have seen for a long time. If it is anything that is not precisely funded or overseen by his department, the Minister for Small Business, Independent Contractors and the Service Economy says nothing. He says nothing about finance because that is a Treasury issue. He says nothing about workplace relations because that is in Ms Gillard’s portfolio. He says nothing about the compelling issues that the small business community raise over and over again and get nothing but a wall of stony indifference and silence from the small business minister.

You can understand why the small business community are frustrated. They are frustrated by the fact that the banks have obviously seen small business as a way of accelerating improvement in their bottom line. If you look at the figures, there is a very stark and simple comparison of the cost of borrowing for a home owner for a loan secured by a house compared to the cost of borrowing for a small business owner for a loan secured by a house—the security is the same, the currency is the same, even the lender is the same and in many cases the borrower is the same, but what do you see? You see on average a two per cent or greater price penalty paid by small businesses for residential property backed lending. It may be the same property, the same security and the same borrower but they are charged two per cent more. These examples appear right across the country, are raised with this government but still there is no response.

The COSBOA survey recognised that 81 per cent of businesses are worried about the cost of servicing their debt. This was closely followed by financing availability and access, which nearly three-quarters of the small business community were worried about. The COSBOA chief executive, Jaye Radisich, said:

The cost and availability of credit and finance has been a top issue for COSBOA and small businesses in recent times—it is patently clear that more has to be done to support small businesses in this area … Politicians, regulators and banks need to hear this loud and clear message from small business and develop innovative solutions.

The coalition parties have heard this loud and clear. We did not need the COSBOA Telstra survey, as confirming and reassuring as it is, to know this requires attention. I think that is a message for the Rudd Labor government where these concerns are being raised over and over again, but simply hit a wall of indifference from the Rudd Labor government and the small business minister. What is going on out there? We are seeing small business, the engine room of the economy and a key driver of economic growth and employment recovery in Australia, being starved of the oxygen it needs to trade, to grow and to prosper. Why on earth would any government want to have one arm tied behind its back as it seeks to pursue economic recovery? In this case that arm is the small business financing challenge that these 2½ million entrepreneurs, employers and family members face in trying to access affordable and available funding on reasonable terms, and yet the Rudd Labor government does absolutely nothing about it.

There is example after example of the tightening of credit that is available, such as unilateral risk re-rating of profitable businesses trading well in a difficult economic climate getting a phone call from the bank saying, ‘We have had a look at the financing services we offer you and you need to come in for a chat.’ Coming in for a chat usually means, ‘Where is the mortgage over your house to secure this lending?’ This means, ‘We are going to cut off that overdraft we threw at you a couple of years ago on very attractive terms because we don’t really want to let you to have that now.’ This is the bank saying, ‘We want to bump up your fees a little bit too because you know things are difficult and we have to raise money and the government is out there crowding out any cash available to be borrowed. It is tough for us to get resources so we will bump up your fees as well. And then we will come and revisit it.’ Then the banks say, ‘Look at what we have loaned. Aren’t we doing great by small business?’ They do not tell you how many of those small businesses have been obliged to refinance on a more expensive basis involving greater costs, higher interest rates and greater personal security to get access to their funding.

The opposition have heard that concern and that is why we proposed the Senate inquiry. I say to all those small businesses that have been sharing stories that have moved me that I understand how difficult it can be in a difficult trading environment when your costs are going up through interest rate rises. They should share those stories with the Senate economics committee. They should share those stories with their industry association and be heard. They should be heard through the parliament if they do not feel they are being heard through the Prime Minister’s office or the small business minister’s office. I can understand why they feel that way, because that is exactly what is happening. These concerns are being raised over and over again and all they generate from those opposite is inactivity and indifference. The concerns of the small business community are rising interest rates, increasing costs and difficulties accessing credit. But they are also concerned about the impact of the interest rate on their customers and on consumers. The small business community are feeling the slight hesitation that is in so many households around Australia as people coping with increasing costs of living are having to tighten their belts a little bit. Small businesses are also feeling that pain as their customers think twice and are anxious about their economic future. As the mums and dads running their household budgets work out how they are going to cope with this exorbitant increase in the cost of living everywhere they turn under this Rudd Labor government, they wonder what they can do and how they can be more modest in their expenditure. That is impacting on the small business community.

The issue is clear—rising interest rates are causing harm and hardship for the small business community directly and for the customers and consumers that they depend upon. Small business are saying loud and clear that accessing affordable financing on reasonable terms is becoming more and more difficult and they are paying more and more for financing services and lending that the banks are offering them however reluctantly. As we work to help the Australian economy recover, why are the small business community being starved of the oxygen, the finance, they need to carry out their business and to expand?

That is why we were proposing the Senate inquiry. That is why you see examples of the small business community unfortunately experiencing this finance and credit squeeze. This is why they are viewed, as the small business minister would say, as not having enjoyed quite the glee and benefits of the stimulus package and in fact feeling the pain of a bungled bank guarantee. That is the situation for the small business community. What we need to do as a nation is to recognise that the small business community drives our economy. It is an enormous employer and its health and vitality goes right to the heart of the health and vitality of our nation, our economy and the communities that they represent. This is why we are talking about options and opportunities.

This is why we are recognising that in other countries that are so much followed by the Rudd Labor government they are doing things that the Rudd Labor government here simply is not. There are examples that President Obama highlighted. There are examples in the UK from Prime Minister Brown. They handled the bank guarantee differently. They actually offered the bank guarantee to the borrower, so the small business could go to the bank and say: ‘Look, I’m backed by a bank guarantee. Please don’t hurt me with punitive interest rates and costs because you think I’m a credit risk.’ That might be an opportunity. We do not know whether that is the best solution for our nation, but what it shows is that governments in developed economies around the world have understood clearly what the small business community is saying, what the opposition parties know and what the Rudd Labor government has ignored—and that is, vitality in the small business community is inextricably linked to the availability of affordable finance that they can access on reasonable terms.

No-one is talking about reckless lending. No-one is talking about lending to uncreditworthy borrowers. That is not the issue here. This is about profitable, successful, creditworthy, positive cash flow businesses finding it hard to get the finance oxygen that they need. So I say to the minister opposite: you had a bit of a love-in a while back and nothing came of it. There were lots of discussions where the banks and the small business community sat around a table, but nothing came of it. What we have seen is that, when interest rates were going down, not all of that benefit was passed on to the small business community. When they are going up, more than the amount they go up gets passed on to the small business community.

We have seen a spread of interest rates for lending, in many cases to the same person with the same security for the same amount of money but incurring a two per cent plus price penalty. We are seeing available finance being competed for by a government on an insatiable spending spree with an unstoppable thirst for finance in the marketplace. It is squeezing out small businesses. We have seen a bank guarantee that has nobbled competition and has limited options for small business and we have seen a government completely indifferent to how its actions have actually made a difficult economic climate for the small business community worse.

We need access to finance on affordable, reasonable terms and a chance for small business to do what it does best, and that is drive the growth in this economy and provide jobs and opportunities for Australians. That is what is needed. That is why we welcome the endorsement from VECCI, we welcome the endorsement from the Australian Chamber of Commerce and Industry, we welcome the New South Wales Business Chamber’s support and we welcome the Australian Bankers Association saying they would happily participate in the Senate inquiry. What we would welcome is a commitment from the Rudd Labor government to play a positive and constructive role. I say to everybody who is as concerned, as passionate and as understanding of the difficulties the small business community faces: make a contribution. Make a submission to the Senate inquiry. Let’s drive home to this government that this matters and it needs to take action. (Time expired)

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

I welcome this debate on the matter of public importance relating to small business and interest rates. It is an important matter. I must pass judgment: I thought that the shadow minister’s contribution was low on energy. His predecessor was more energetic when he did get around to asking a question, as rarely as that was. Indeed, in the short time that the shadow minister has been in the shadow small business portfolio, his main contribution occurred at the dry-cleaning shop when his leader was talking about the fact that, in his world, housewives do the ironing. The contribution of the shadow small business minister was to correct him twice and say, ‘And house husbands,’ ‘And house husbands.’

But we have heard a debate here and a contribution from the shadow minister that lasted 15 minutes. I was ready and waiting for the one policy idea in relation to small business from a coalition who have been in opposition now for two years. His predecessor and the former opposition leader did actually have a webpage—I suppose that is a start—and they had five ideas. I do not know what happened to those, because we have witnessed the demise of both the shadow small business minister and the Leader of the Opposition. But at least, I suppose, there was some sort of effort to pretend that there was an idea—but none today.

As for a Senate inquiry, I think a Senate inquiry is fine. I would like to support a Senate inquiry. But let’s not get carried away and think that a Senate inquiry will fix all the problems of small business financing in this country. If that is what the coalition is asserting its policy is in an election year—a Senate inquiry—the people will make a judgment about that, I guess, but I think there would be an expectation of more policy than that.

I want to take the opportunity to thank the small business community of Australia for the work that they do, for the risk-taking in which they engage. There is not a lot of gratitude around the place for the contribution that small businesses make with that entrepreneurship, that risk-taking and the sense that they go out on their own and feel on their own. But of course the Rudd government has that gratitude. We always have. We did in opposition and we have it now.

There is a particularly magnificent contribution that small business has made in the last couple of years, and that happened in the midst of the worst global recession since the Great Depression here in Australia, when people were very worried and I know small businesses were very worried about their prospects. What did they do? They said to their staff: ‘We’ve got problems here but we don’t want to let you go. We value the contribution that you make to this business.’ Yes, there were reductions in hours, and even to this day employees in small businesses might be working fewer hours than they would like. Nevertheless, it was an important social contribution that small business owners tried not to let their staff go, because they remembered the value of good staff and the value of good staff during the recovery phase. So thank you to the small business community. Thank you for what you have done, and be assured that this government will continue to work shoulder to shoulder with you as we work our way into the recovery phase. But we do have a long way to go yet.

With respect to access to finance, what has the government done? We have in fact convened those roundtable meetings. They were very useful. We followed up with individual meetings between business associations and the major banks, including the Australian Bankers Association. I went to Cairns just before Christmas, where we had another very important discussion. We have set up a small business credit complaints line. We have set up a small business support line. I can advise the House that the response to that support line has really been first-rate. There has been a lot of interest and a lot of good work going on there. We will continue to support small business through the advisory services and the 36 business enterprise centres that for the first time the Commonwealth of Australia is funding. At no point during the 11 or so years of the Howard government did any continual Commonwealth funding flow to those business enterprise centres. They are very grateful for the funding they will receive.

When this global financial crisis hit and then we moved into a deep global recession, what did the government do? It supported our small businesses and tradies—a point I was trying to quietly make during question time. Business has been very grateful for that support. The shadow minister was talking about various surveys that have come out. The Sensis Business Index small and medium enterprises survey stated that small businesses are remaining strongly supportive of the economic stimulus package. Just this week the Australian Industry Group’s Associate Director of Public Policy, Dr Peter Burn, commented on results for construction, saying:

The improved conditions in January coincided with the reporting of increased tendering opportunities, new contract wins and a further uptake of work stemming from the federal government’s infrastructure stimulus programmes.

Hear, hear! Here we have small business organisations, one after the other, backing the stimulus package, backing it to this day, not just saying, ‘Oh, thanks, you did some good things last year’ but right now saying how important it is. The view of the Leader of the Opposition was, ‘It was not the stimulus package or the spending that saved Australia.’ The opposition have continually indicated that they would abandon the biggest school modernisation program in Australia’s history. That would threaten the livelihoods of small businesses and tradies right around Australia. There is this quaint idea that the Liberal Party is the party of small business when in fact it is the party of betrayal of small businesses. In their hour of need, when those small businesses were desperately worried and looking for some support from the Commonwealth government, what did the opposition say? ‘Let the market take its course. Let’s just see what happens.’ Two hundred thousand Australians would have lost their jobs were it not for that stimulus package. Instead, 112,000 jobs have been created in this country when most other countries have been in a recession in the last year, and many of the people in those 112,000 jobs would be employed in Australian small businesses. Many of those would be the tradespeople who turned to the Commonwealth in their hour of need, who turned to the Rudd government and got a response, a response through the stimulus package—and we have the Leader of the Opposition on the first anniversary of the second stimulus package saying, ‘It was nothing to do with the stimulus package.’

In a further big risk to the Australian economy and small businesses, what did the opposition leader float in the Sydney Morning Herald just a couple of days ago—a six-month paid parental leave scheme. Where is the money coming from for that? On the Alan Jones program he referred to his book, Battlelinesa little bit of book promotion. The book says, ‘It could be funded through a small general levy. Small business would instinctively regard any extra cost as unfair.’ As I said, you bet your sweet bippy, because these businesses cannot afford a new slug to fund a six-month paid parental leave scheme. That is just another example of the fiscal recklessness and riskiness of the Leader of the Opposition and his sidekick, the shadow finance minister. Shadow? He has completely overshadowed the shadow Treasurer, and the shadow Treasurer is a big guy. The shadow Treasurer is desperately trying to find a bit of space, a bit of oxygen. His only job is to go out and try to clean up the mess made by Senator Joyce, the shadow finance minister.

I note today that when the Leader of the Opposition was given the opportunity to repudiate the risky and reckless comments of the shadow finance minister he would not do so. To his credit the shadow Treasurer said: ‘It’s my job again today. What is today? It is a day ending in A-Y. I will have to go and clean up Senator Joyce’s mess.’ There they were in Queanbeyan today and there was an opportunity for the Leader of the Opposition to simply say, ‘I don’t agree with Senator Joyce and this should not have happened.’ But instead he said, ‘I’m keeping him; I’m keeping the team right through to the next election no matter what Senator Joyce says.’ This is the fact of the matter: he is in on the caper. The opposition leader is in on the caper. These are not just shooting from the lip remarks by Senator Joyce. They are perfectly well choreographed. The opposition leader says to him: ‘You go out and make some outrageous remarks to try to get the issue of public debt on the agenda. We will send out the poor old hapless tutu-wearing shadow Treasurer to go and clean up the mess’—so poor old Joe has to do that—‘but I won’t repudiate you, mate, because you and I know what the caper is,’ and the caper is saying the most outrageous and risky comments, which have in fact been reported by Reuters and other international organisations and wire services, because they do go around the world.

I was talking with Senator Brandis on radio today and he said, ‘Senator Joyce said it does not really matter; you’re saying it’s reverberating around the world.’ Do they take themselves seriously or not? This is the alternative finance minister of Australia making these reckless comments. Where was the shadow small business minister? Did he go around to Senator Joyce’s office and say, ‘Well, hold on, this is a problem, because this can make people very worried and this recklessness, this risk, does have implications down the track for small business interest rates’? When an alternative finance minister, a senior economic shadow minister, is prepared to go and say that Australia is at risk of defaulting on its loans, that the United States is at risk of defaulting on its loans, what sort of economic environment does that create in this country in terms of perceptions of sovereign risk? It is the height of recklessness, the height of irresponsibility. And make no mistake that the Leader of the Opposition is in on the caper. He sends him out with the assurance that he will not repudiate the comments of Senator Joyce. But poor old Joe will get the knock on the door and be told, ‘Go and clean it up and then we can say, “Well, you know, it was just a little bit of loose lips again from Senator Joyce.”‘

The opposition is a big risk for the Australian economy and a big risk for small businesses. Just in the last week, a $10 billion climate change con job has been unveiled by the coalition. When Senator Joyce was asked at the National Press Club where the funding would come from, he referred to the tax system and he said, ‘That’s the whole thing where we’re going to get the money.’ They are going to get the money out of the tax system. What do you reckon small business will think about that? Higher taxes on small business. We know who are the champion taxers in Australian history, the gold medal taxers in Australian history, the bobsleigh champions of Australian history and the highest taxing government in Australian history.

Philip Ruddock (Berowra, Liberal Party, Shadow Cabinet Secretary) Share this | Link to this | Hansard source

Mr Ruddock interjecting

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

No, it is not Labor, and you should know better. In Budget Paper No. 1, ‘Tax as a share of GDP’, in mid-2000, the figures are 24.9, 24.9, 24.6 and 24.6. Under us, it is 22. So, if you want to find a party that is interested in reducing taxes as a share of GDP, as we have done, go to the Labor Party, but if you want to go to the highest-taxing government in Australia’s history that is the coalition—the world champion taxers.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Deregulation, Competition Policy and Sustainable Cities) Share this | Link to this | Hansard source

Madam Deputy Speaker, a point of order: Dr Emerson has a minute to go. He might wish to address the MPI and talk about interest rate impacts on small business and access to finance.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Dunkley will remember to call people by their appropriate titles. The minister has the call.

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

The Reserve Bank cash rate at the moment is 3.75 per cent. Apart from this period of easing that has been going on, that is at its lowest level since 1967—more than 40 years ago. A lot of things happened in 1967. The Cronulla Sharks and Penrith Panthers entered the rugby league competition. The shadow minister for small business was in nappies, having been born on 26 January 1966. The Beatles released Penny Lane. (Time expired)

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I welcome the opportunity to address this matter of public importance on the damaging impact of rising interest rates on small business. We saw highlighted in the global financial crisis the importance of capital flows to the operation of the world economy and we saw the impact of a near breakdown of the world banking sector and what that meant to companies and businesses large and small. Credit is the lifeblood of commerce on a global scale and at a local level. If corporations cannot refinance their debt obligations, then the result is catastrophic. If the local hardware store cannot refinance its working capital needs, the result for that small business is much the same, albeit on a smaller scale.

There are two important elements to finance: availability and price. Whilst the availability of finance has improved, the price of that finance to small business has been rising rapidly. We see this government, through its spending decisions, putting upward pressure on interest rates. We see this government, through its inability to manage its budget position, being active in the market, competing with small business, competing with home owners and competing with consumers for available finance resources. It is a simple equation of supply and demand. The government, through its failure to manage its finances, is driving up interest rates to a level higher than they need to be, to the detriment of small business, to the detriment of home owners and to the detriment of consumers. The Governor of the Reserve Bank of Australia put it quite clearly when he said:

... a relatively rapid fiscal consolidation would help keep official interest rates down, lower the government debt burden and reduce the potential for crowding out of private investment normally associated with high fiscal deficits and upward pressure on interest rates.

The crowding-out effect is alive and well with Labor. Labor has reverted to type. Debt and deficit are back, and it is small business that is paying the price. Small business is being crowded out of the finance market by the $850 million cost blowout on the Solar Homes and Communities Plan—a program that was supposed to cost $150 million. But what did it cost? Is the cost now sitting at $300 million? No, it is not. Is it $500 million? No, it is not. It is $1 billion. Small business is being crowded out by the $4 billion Energy Efficient Homes scheme—$4 billion on a scheme that is out of control, that is a haven for shonky operators and a scheme that kills people.

But wait, there’s more! There is the big daddy of them all—the yet unfunded National Broadband Network. The government will be out in the market again competing with small business for a miserly $43 billion. There is no business plan, no detailed feasibility study, no detailed costings on the rollout and no detailed revenue projections. It is all blue sky, and it will be small business, home owners and consumers who will be paying the price through increased interest rates as the government tries to finance a scheme for which there is no guaranteed demand.

No-one in the private sector could make a more modest scheme stack up, but this government is going to risk vast sums of taxpayers’ money without a business plan. In corporate Australia management would be sacked for such reckless behaviour, but for the Labor Party this is just par for the course. This government thinks it is okay to go out and borrow a large amount of money and in doing so put pressure on the funds for small business. We have a government that cannot control its own spending when reducing that spending would take pressure off interest rates and would provide better credit conditions for small business. The federal government is spending at a rate faster than any government in this nation’s history. This government makes Whitlam looks like a miser.

This government has its policy levers working in opposite directions. We have the government with its foot flat to the floor, with its spending out of control, and then we have the Reserve Bank governor, Glenn Stevens, throwing out the anchors. He is pulling on the handbrake, but Kevin and the boys have the accelerator flat to the floor. The losers out of all this are going to be small business, homeowners and consumers on the street. This government is working against those people and those small businesses, because it cannot manage money. It is working against small businesses by driving up interest rates due to their out-of-control spending.

Making matters worse, we have seen rising interest rates for small business over and above the increases in the cash rate. Back in January 2008, small businesses were paying a margin of about 3.1 per cent over the Reserve Bank cash rate. That has since blown out. Towards the end of last year, it was running at around 4.95 per cent above the cash rate. So small businesses are being hit twice: firstly, by the rise in the cash rate and, secondly, by the rise in margins. This is largely because government spending is out of control. These dual factors are putting a great onus on the government to act prudently and responsibly in the interests of small business and the community generally. But what is this government doing to help small business? Is it reining in spending to take pressure off interest rates? No, it is not. What the government is about to introduce to help small business is a great big new tax on everything. It will help small business in a number of ways. It will help small businesses by making their electricity more expensive, by making gas more expensive and by making every import that small business buys more expensive. It is a great big new tax that will cost jobs and drive small businesses to the wall.

What will this new tax do to inflation? The government’s own estimates say that the impact on inflation could be in the order of 1.5 per cent. And what will higher inflation do to interest rates? I think it will do only one thing; it will—surprise, surprise!—drive interest rates up. What will that do to small business? Once again, small business will be carrying the can for the incompetence of this government.

We have a Prime Minister who has made many promises to the Australian people. He was going to fix our hospitals by 30 June 2009. He was going to end the blame game with the states. He was going to save the whales. He was going to massively increase the number of nurses and he was going to put a computer on the desk of every child from year 9 up. And—perhaps the biggest promise of them all—he was going to be a fiscal conservative. A fiscal conservative does not rack up a debt of over $120 billion in just two years. A fiscal conservative does not waste money on programs that are so badly administered they do not achieve their objectives. A fiscal conservative does not compete with small business in finance markets to drive up the cost of their money.

What a fiscal conservative does is ensure that both arms of policy—monetary and fiscal—are working in the same direction. What a fiscal conservative does is ensure that the budget is under control. A fiscal conservative does not allow cost blow-outs of the magnitude that we are seeing from this government. We have the Prime Minister with the accelerator flat to the floor, we have the Reserve Bank governor pulling on the handbrake as hard as he can, and there is only one loser in this farcical situation. That loser is small business—small business people who work hard to make their businesses pay, who work hard to provide jobs in many regional communities and cities alike, who work hard to provide good services to their customers and who put their houses on the line to keep their businesses going. Yet we have this government driving up the cost of interest rates with a disregard for the interests of small business.

In this House on 3 February I asked the Minister for Small Business, Independent Contractors and the Service Economy a question about the impact of increased electricity prices on one particular small business. Basically, the small business minister mocked the question. He showed a complete disregard for the interests of that small business in exactly the same way this government shows disregard for small business in the way it is managing its budget and the economy. This government stands condemned for the impact it is having in the marketplace on interest rates. It is going to drive small businesses to the wall and, as interest rates continue to rise, the situation is only going to worsen.

Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Western and Northern Australia) Share this | Link to this | Hansard source

I rise to speak in response to this matter of public importance raised by the shadow minister for small business. It is a matter of public importance, and I thank him for raising this debate. It is important that we discuss matters of important public policy and it is especially important that those opposite address significant matters of economic policy and that it be done seriously and in a sober way. I think a hallmark of this shadow minister is that he does approach his work so seriously. It is in many ways an adornment to the opposition that we have a shadow minister who raises these issues in such a way so that they can be taken seriously. I know that the member for Dunkley takes these matters seriously, and he should be taken seriously by his own party.

It is a great pity that not all of those opposite take matters of economic policy so seriously. It is a great policy flaw of those opposite that they do not take the shadow minister for small business too seriously. How could they? In the course of the last five years we have seen the once-great Liberal Party, the home of conservative policy making, shattered to the point where Barnaby Joyce is now their spokesperson for finance—shattered to the point where your economic credibility is not just in tatters; it is represented by a shadow minister who brings nothing but a sense of humour, joke and shame to the serious business of economic commentary. Not so the shadow minister for small business. He has quite appropriately addressed those matters that are of concern to small businesses.

When I talk to small businesses in my electorate, they have a slightly different take; and that is legitimate because down my way the impact of the global financial crisis could have been absolutely devastating. The federal government put in place a set of fiscal measures supported by the Reserve Bank and supported by the Reserve Bank Governor which supported jobs and supported our local economy. These measures supported jobs for local contractors; they supported jobs for local tradespeople such as plumbers, carpenters, bricklayers and people who now work building our schools, building our roads and building our hospitals. These people are now able again, with great certainty, to build their businesses in the face of what would have been crushing uncertainty.

That crushing uncertainty is extremely important for us to contemplate because that crushing uncertainty of the global financial crisis is something that those opposite at times seek to take advantage of. At a time of uncertainty created by collapsing global financial markets, uncertainty created by collapsing banking systems—when the world’s great banks collapsed, when the world’s great private enterprise manufacturing organisations collapsed and when the world’s great economies suffered from unemployment increasing at the rate of hundreds of thousands per week—Barnaby Joyce became the shadow minister for finance. Senator Joyce has one important qualification in becoming the shadow minister for finance—that is, he is a National Party senator.

I think those opposite—and there are members opposite who are deeply thoughtful people—should think about the following. They should think about the fact that the National Party in 1996 had 16 members in this place—16 members making a contribution and seeking to define public policy and to support regional Australian communities. By 2001 there were 13 National Party members of parliament. Following a period of incredible fiscal irresponsibility, following a period of reckless spending, by 2004 there were 14 National Party members in this place. At the time of the federal election in 2007 there were 10 National Party members in this place. Today there are nine. With that track record of dwindling public support, with that track record of a dwindling number of members of parliament and with that track record of clearly being incapable of representing their constituency appropriately, the National Party are handed the great prize of the finance portfolio. This great prize for all aspiring politicians with an economic bent is a portfolio to be taken very seriously.

I follow today in this debate the speech given by the Minister for Small Business, Independent Contractors and the Service Economy. He began his career in this place as an economic adviser to Prime Minister Hawke. He was at that stage a serious young economist and he was taken seriously by the Prime Minister of the day. He was then the senior adviser to the Minister for Resources and Energy. He helped define, describe and implement the petroleum resource rent tax. This is a guy who then went on to a senior role in the public service in the state of Queensland. This is a guy who entered this place with a serious background in and with a credible knowledge of the economy, finance and public finances that sees him now being the minister for small business.

As I said at the start of my remarks, it is encouraging that the shadow minister for small business should put this motion on the Notice Paper and have it debated properly and appropriately. It is unfortunate that behind him the clowns in the shadow cabinet and the clowns of the National Party continue to bring nothing but scorn and shame upon the opposition and the way in which it prosecutes its economic debates. Why is this important? It is important because, as we all know, what we do in this place sets the tone and tenor for how our nation responds to important issues of the day. By that I mean that when we talk seriously about economics people take it seriously. When Senator Joyce speaks of the economy people are aghast. It is not as if he were an essential choice to be the shadow minister for finance, but he was the choice of those opposite. He is a reckless choice. He is a choice who places on the public record comments such as ‘we are going into hock to our eyeballs to people overseas’. He said:

You have got to ask the question, how far into debt do you want to go? We are getting to a point where we can’t repay it …

What do we believe those overseas who watch our country and who listen to our senior politicians will take away from such comments? What we know they will take away from such comments is that Senator Joyce is a clown. What he would like them to take from those comments is that our nation’s finances are in peril. What he would like them to take from such comments is that our nation’s finances are unstable. What he would like to see happen is a substantial international crisis—damaging our currency, damaging our terms of trade, throwing people into unemployment, damaging small business and causing the very harm that the shadow minister for small business would like to avoid. What is the shadow minister doing about it? He is the front man—the straight man—for the stooge. It is not good enough to turn up in this place making serious arguments but actually providing the cover, being the stooge, for the fool who continually attempts to drag down the Australian economy and continually attempts to bring nothing but disaster upon the Australian economy—because that is the only way we can interpret his public comments that attack foreign investment in our country, his public comments that attack foreign investment in our resources economy and his public comments which go to the core of damaging the lifeline which our economy has in creating jobs and in creating a future for our children and for our businesses, large and small.

It is not good enough just to turn up in this place with a plausible MPI and to argue that with great coherence and eloquence. It is important also to get your own house in order, to get an economic debate happening within your own party which is both responsible and measures up to the heritage of the Liberal Party and not the lunacy of the dwindling sideshow of the National Party—the tail wagging the dog, the tail telling the dog what economic policy it will have and bringing nothing but embarrassment upon those opposite. (Time expired)

Kelly O'Dwyer (Higgins, Liberal Party) Share this | Link to this | Hansard source

I am very pleased today to rise in this matter of public importance discussion. First, I would like to direct my comments to the speeches from those opposite. We have heard a lot of talk today about the Liberal Party and the coalition team, but we have not heard much about what the government is doing to assist small business—small business that is struggling at the moment with the impact of rising interest rates.

Small business is critical to the engine room of the Australian economy. There are 2.4 million small businesses in Australia, which employ around 5.1 million Australians and provide them with a livelihood. In Higgins—in Ashburton, Murrumbeena, South Yarra and Prahran—there are around 19,000 small businesses, and they contribute very, very significantly to employment and to the prosperity and growth of this country. They contribute as well to the great culture of our local community.

There are some very significant threats to small business. Only yesterday we heard from the Reserve Bank governor warnings about excessive and poorly targeted stimulus spending putting pressure on interest rates. The Sydney Morning Herald yesterday reported:

Mr Stevens told the governors he suspected they had a moral duty to do more, and to target excessive growth of asset prices and debt and risk taking as they became apparent.

‘‘This amounts to an argument to err on the side - much earlier in the process - of not keeping interest rates unusually low,’’ he said.

This comes after the most recent warnings from the Reserve Bank, in their monetary policy statement:

If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.

This is very clear. It is very clear that Labor’s reckless spending is putting upward pressure on interest rates through their massive borrowing and debt. My colleagues pointed out earlier some significant issues for small business, in particular issues around access to capital and the fact that capital has been constrained—working capital so that they can pay for stock and pay bills while they are waiting for creditors to pay their bills, and capital for set-up of new small businesses and expansion of small businesses that are already established.

According to Reserve Bank statistics in September 2009, small businesses are paying a 130-basis-point premium for credit. This is the difference between a standard variable housing loan and a residential secured small business term loan. This is significant because this premium is more than six times the difference during the Asian financial crisis, which was 20 basis points, and more than five times the average of the past 10 years, which is 22 basis points.

Small business needs to be able to borrow at reasonable rates to keep going and to expand. COSBOA, the Council of Small Business Organisations of Australia, had something to say on this subject. We should listen to what they say; they represent their members very well. Their chief executive, Jaye Radisich, said:

The cost and availability of credit and finance has been a top issue for COSBOA and small businesses in recent times – it is patently clear that more has to be done to support small businesses in this area.

Unlike some of those opposite, I know small businesses are hurting, and I know they are hurting because I have been speaking to them. In the Higgins by-election, I convened a forum in my electorate to talk to small businesses about the challenges that were facing them. I had an overwhelming response, and they were very, very clear. They know that interest rates are hurting their businesses. Interest rates, they say, need to be addressed by the government.

The government made many promises at the last election. They made promises that they would be economic conservatives. They made promises that they would keep interest rates low. Yet today we have not had one word from the government about the action that they will be taking. This is true of the government’s record in a number of areas. They have made significant promises in relation to health and private health insurance, they have had a number of committees and inquiries and yet we see nothing actually being done. We on this side of the House will always be strong advocates—(Time expired)

Brett Raguse (Forde, Australian Labor Party) Share this | Link to this | Hansard source

I want to compliment the last speaker. It is certainly a tough task to come new into this parliament and have to do an MPI, but she performed very well. Having been a small business man myself, I think some of the comments coming from the other side are just rhetoric. We as a government do understand small business. We have empathy for small business. I would like to ask all those speakers on the other side how many of them actually have small business experience. My understanding is that very few of them do, although maybe as a council bureaucrat, and certainly as a lawyer, some of them have experience in business.

What is small business? I know from my experiences of listening over a period of time to the opposition and their responses that they are full of rhetoric. They run the company line. They talk about mismanagement by the Rudd government and a whole lot of other issues. But they are incorrect. The thing that worries me the most is when we see the new opposition leader out there in public with small businesses talking about the threat and the fear that these interest rate rises are going to kill their businesses. I should remind the member for Higgins that our current cash rate now is three per cent lower than what it was under the previous government and when we came to government. The reality is, they are running a scare campaign on rising interest rates.

I did not hear from one of the opposition today—again, because of their lack of small business—about the reality of small business. The reality of small business is not about cost or interest rate hikes or a whole range of other issues: it is about bringing in business. When the economy is flat, when there is no business activity, small businesses fail. At the age of 21 I employed 25 people. Howard was in government as the Treasurer. We had 22 per cent interest rates. That was bizarre and terrible but we survived. The reality was that there was enough stimulus created by the work that we were doing at the time to get by. The reality is that the fear about a whole range of issues does not matter. If you do not have the business, you do not survive. How do the internal machinations or mechanics of a business work in terms of the financing and leveraging? The reality is, if the business model is not working it is not working.

Regarding the consideration that was put by the other side about how we as a government have spent a lot of money, firstly they say that we have not kept our promises and then they complain that we are overspending. I do not understand where they are coming from. The reality is that there is, through our stimulus package, a large amount of money going into the economy through projects that we identified. As the global financial crisis hit, it was something that we needed to attend for large corporations and the many employees that they have but for small business particularly. Small business can fail due to people simply pulling up and not spending on some very basic day-to-day items. We saw the dry cleaning example very eloquently used the other day. The member for Dunkley was very prominent there, reminding his leader that there are men who also do the housework. The reality for small businesses is that if the demand disappears, they have no work. That said, we as a government have responded very well through the global financial crisis. We will continue to respond and to maintain that stimulus, watching very carefully to see that the stimulus supports small business at the first level and large organisations at the higher level.

For those opposition members who have not had the personal experience of having to finance their own business, the reality is that you only survive on your own collateral and your own ability to finance your business. There are no large pools or surpluses of dollars, or some reserve or even shareholders who may make good with dollars when the company is in business. The tipping balance for a small business is very low. In fact, a small business can fall over very easily if the wrong dynamics are in place.

As a government, we understood this. We understood immediately the issue of credit flowing into this country—the large investments for big business and the credit for those right down the chain, such as the small businesses who provide services to larger companies by working on small contracts. They often have half-a-dozen employees. Without the business, they do not survive. The Rudd government provided that stimulus. We understood. Not only do we have empathy for small business—and that is evident in the work that we have done in our approach to the GFC—but we have a holistic approach to financial management. Unlike the other side, we have confidence in our economy and in the decisions that we have made. The proof is in the pudding: what we have been able to achieve as a government. (Time expired)

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

Order! The discussion is now concluded.