James Paterson (Victoria, Liberal Party) Share this | Hansard source

Thank you, Minister; I appreciate that comprehensive answer to my question. Given that we're considering an amendment from Senator Polley, I wanted to take the opportunity to reflect on an amendment that was moved in the House of Representatives. The government moved an amendment to the legislation—this is to schedule 2 of the act—and, in doing so, it was acting on the concerns raised by stakeholders that a mixed business that provides perhaps some courier or some cleaning services might be disproportionately affected by the compliance burden in this legislation, because the provision of those services are merely a small part of their overall activity of the business. They might provide a range of services, including courier and cleaning services, but it might not be the principle purpose of their business and they could effectively be caught by this legislation when, in fact, they're quite a small player in those industries that we've identified as being higher risk industries, along with the building and construction industry that was addressed by previous legislation.

In response to concerns raised by stakeholders, the government moved an amendment in the House of Representatives to our legislation, which imposed a threshold test. That means that businesses that receive payments for courier or cleaning services that are less than 10 per cent of the business's overall GST turnover for the reporting period will be exempt from reporting the payments they make to contractors commissioned to complete their services.

I think this is a really important amendment, and it's worth reflecting more broadly on why these sorts of amendments are necessary. In dealing with a very important issue like the black economy, and seeking to address it, we also have to be mindful that, in doing so, we don't create an unnecessary or excessive red tape burden. This is a lesson that applies in a very general way to all legislation that government seeks to enact: stakeholders and community groups and experts raise concern about a social or economic ill, and they call on the government to address it. The government actually has limited tools to address these sorts of problems. If it is the government to solve this problem then it can do it with a tax, it can do it with a regulation, it can do it with a law: it can do it with a very limited number of tools. And while we are going about addressing these very serious issues—indeed, the black economy is a serious issue—we don't want, in doing so, to raise the burden of red tape on the economy, raise the red-tape burden on businesses and on individuals, because we know the corrosive impact that red tape has on our economy and on our society.

The truth is that in recent decades governments of all political persuasions have quite often passed legislation to address very genuine and serious issues, but, in doing so, have created what is a very excessive red-tape burden. Just an example of that: in 1915 the Commonwealth parliament passed just 112 pages of legislation, but 50 years later, in 1965, the Commonwealth parliament passed 1,357 pages of legislation. You can see the exponential growth in just 50 years. And, by 2012, the parliament passed 8,150 pages of new legislation. In fact, in an amusing sidenote, the Gillard government promoted this statistic as evidence of their success. They were proud of the fact that they were passing so much legislation, but that's legislation that every citizen has to comply with, that every business has to comply with. That's a very serious burden for them to comply with.

There's very good evidence that there is economic and social harm as a result of red tape burden. For example, the 2017-18 World Economic Forum's Global competitiveness report ranked Australia at 80th out of 137 countries in the world for the burden of government regulation. Now, Australia should be aspiring to be in a much better position on that list. We want to have the least burden possible. To be only 80th out of 137 countries in the world is a disturbing statistic. The OECD has ranked Australia only 20 out of 47 countries for barriers to entrepreneurship, and that report considers the regulatory burden to be licences and the protection of incumbents. Again, we should be aspiring to be a country that is very conducive and welcoming of entrepreneurs, not to discourage them.

The Institute of Public Affairs, which, as senators know, is a former employ year of mine, has estimated that $176 billion is the annual cost of red tape on the Australian economy. That equates to $19,300 per household—almost $20,000 per household. And, if red tape were in industry—if we measured it alongside other industries as a proportion of our economy—it would be larger than the mining industry, the manufacturing industry and the agriculture industry. Red tape should not be an industry in Australia. It should certainly not be an industry larger than some of our largest industries. One of the potential effects of that has been the declining rates of entrepreneurship in recent years in Australia. For example, between 2003-05 and 2012-14, small business start-ups as a percentage of all small businesses actually declined by 40 per cent; and the percentage of Australians in that key entrepreneurial age group—typically, aged between 25 and 49—has declined from 38 per cent to 35 per cent and will reach just 30 per cent by 2065. So we want to give those remaining in that age group as much encouragement as possible to be involved in entrepreneurship.

This government over its five years in office has recognised very seriously the evidence and the concern with red tape with not just the amendment to this bill but a range of measures. Prior to the 2013 election, senators might recall that the coalition made a promise that it would reduce the red tape burden by at least $1 billion every year in office. And, in just our first three years, between September 2013 and December 2016, decisions taken by the government to reduce the red tape burden amounted to about $5.8 billion—so, far exceeding the promise of the $1 billion a year. But, of course, we know that there is much more work to be done in this area.

I'm pleased that the government listened to stakeholders that identified the serious issue of the potential regulatory burden on businesses that only play a small role in the cleaning and courier industries and has established a threshold test to carve out those businesses which only participate in the industry in a small way. I want to follow up that contribution with a question to the minister about the threshold: why, in your view, is the threshold test necessary; and is it possible for the threshold test to be changed?