Speech at the Small Business Association of Australia National Conference

Release Date: 
21 November 2014
Speech

Thank you for the opportunity to address your conference, representing the Prime Minister. Can I thank Anne Nalder and the Small Business Association of Australia for your work and advocacy on behalf of the two million small businesses nationally - The two million who generate five million jobs and who are the engine of our economy; the two million who typically mortgage their houses and often sweat over making payroll each month.

Can I also say at the outset how fitting it is that this conference is being held in Darwin. We are here in a town filled with entrepreneurs who are having a go and providing services and products for Northern Territory, the rest of Australia and the world.

Darwin is the frontier town where anything is possible - where is it only limited by your imagination. And of course it is backed by a Northern Territory Government that wants to back development and see Darwin and the north thrive even more, as do we.

Today, I would like to discuss three ways that the federal government is supporting the small business sector.

  1. Through opening market opportunities.
  2. Through creating a tax and regulatory regime that makes it the most small business friendly environment possible.
  3. Through supporting business creation and innovation.

Let me start with the first, which will be most of my focus, and then briefly touch on the second and third.

OPENING MARKET OPPORTUNITIES

I am so optimistic about the possibilities for Australia over the decade ahead.

We live in a region, on the same time zone, in the same geography, which is the fastest growing region in the world and is developing on a scale that has never been seen before in the history of the world.

The figures are staggering.

There are about 500 million people today in the region that are middle class. By 2030 - 16 years' time - that figure will be 3.2 billion.

The region, led by China and India, will soon be the biggest consumer of goods and services in the world.

And as a country becomes more middle class, the goods and services that they want are the goods and services that we produce.

  1. It is a more westernised diet of more meat and dairy and quality vegetables.
  2. It is the higher quality produce we grow or manufacture generally.
  3. It is the education services, higher education particularly, but also vocational education.
  4. It is the services expertise - legal, accounting, banking, water expertise.
  5. It is the resources which underpin their construction.

The leaders of China and India themselves have told us this over the last week.

What could look like a niche market to our north will actually resemble mass markets to Australian businesses.

And it is on our doorstep. We already have the relationships. And we have a multicultural population that helps us to engage.

And in the last six months, we have just negotiated free trade agreements with our three biggest export destinations - Japan, South Korea and China - and within 12 months we will negotiate one with the biggest democracy and emerging democratic superpower in the region - India.

These agreements are historic and in many cases will completely eliminate all tariffs. The FTA with Korea will see 99.8 per cent of Korea's tariffs eliminated. The FTA with Japan - the first Japan has signed with a major agricultural exporter - gives 97.5% of our exports duty-free or preferential entry.

The biggest one of all is with China - which already constitutes a third of our exports - and it is truly historic. Signed earlier this week, it eliminates 95 percent of all tariffs.

As Jennifer Westacott from the Business Council of Australia said, this is a "transformative moment for the Australian economy".

Industry by industry, tariffs are gone or significantly reduced.

I will give you a few examples. Across all agricultural products, tariffs are slashed: barley, sheep and goat meet, beef, diary, wine, live cattle, fruit and veg, seafood. Tariffs of up to 30 per cent will be reduced to zero or low single digits.

Resources, pharmaceuticals, wood and paper products, other manufacturing (which constitute $2 billion in exports already) with tariffs of typically 5-10 per cent have gone to zero in most cases.

But the biggest gains of all may actually be in our services sector, which represents 70 per cent of our economy, but only 17 per cent of exports. Access has been opened to our education industry, tourism, lawyers, accountants, financial services.

What does all this mean in practice and does this actually impact small business, or is it just for big business?

Take a look at what happened in just one industry in New Zealand after their free trade agreement with China was signed. Their milk exports went from 9 billion litres to 20 billion litres in four years, while ours actually went marginally backwards.

Yes, this was a boon for Fonterra, New Zealand's biggest company, but it was also a boon for dairy farmers across the country and every supplier of those dairy farmers and every  supplier of Fonterra.

That will be the same in Australia.

Every dairy farmer, every wine producer, every cattleman, will have direct opportunities.

But also, when big businesses grow, the opportunities for small businesses flourish. Witness the mining boom particularly in Western Australia. The big companies have done well, but  so have the suppliers, small hotels, restaurants, small truck drivers, the cleaners, the cafes.

These free trade agreements - ones which were put in the too hard basket over the last six years - are truly monumental, particularly the China FTA.

We are in the booming region.  Trade is our major source of growth.
And now we have agreements that will accelerate the opportunities. I am so optimistic and I hope you share my enthusiasm.
As well as the opportunities that arise from our proximity to Asia and our Free Trade
Agreements, let me mention two other areas that the Government is facilitating.

The first is facilitating major investment projects through streamlining approval
processes. Environment Minister Greg Hunt has now given environmental approval to over a trillion dollars' worth of projects.

Most of these were again in Labor's too hard basket, where decisions were simply not made for fear of upsetting the Greens or the environmental lobby.

Again, many of these approvals relate to medium or larger companies, but as you know only too well, if a Rio Tinto gets approval, the downstream opportunities for small contractors, deliverers, service providers, cleaners, caterers are significant.

Finally, these are opportunities from large scale government supported infrastructure. We are embarking on the largest infrastructure spend in history with major projects in every state and territory, and that means better logistics for businesses, but also direct opportunities for small businesses to contribute.

I was asked about emerging industries and how the government is supporting those.

In some respects it is impossible to know what will be the new industries which emerge over the next decade or two. If you did know, you would be a millionaire by now!

I recall when I was doing my MBA in the United States in 2001 and many companies were coming around recruiting. There was this small company called Google that was hiring, but virtually no one was interested. Facebook wasn't even around. Apple was floundering.

Who would have known then that these would be the global giants today?

The Government's view is that we will not be picking winners, but we back our strengths and are making the business environment as attractive as possible for businesses to thrive.

Backing our strengths is a policy mindset as much as a detailed program. It means that we would never have thought that making our mining companies less competitive through a mining tax was a good idea. Can you imagine New Zealand putting an extra tax on Fonterra because it was doing so well? It means we would never have shut down our live cattle industry off the back of a TV program. Mining, agriculture, education - these are some of Australia's core strengths and our mindset is to continue to back them.

CREATING A POSITIVE BUSINESS ENVIRONMENT

This brings me to my second theme.

We want to make the tax and regulatory environment as small-business-friendly as possible so that you can focus on serving your customers and innovating and not have government holding you up.

Let me just mention a few things that we have already done in this space and what we are working on.

We started by honouring our commitment to repeal the carbon tax. In its first 12 months of operation, the carbon tax cost $7.6 billion while emissions fell by only 0.1 percent. It was a bad tax that hampered small businesses who in many cases were forced to absorb the costs of the tax because you were unable to pass on the price rises forced upon you by it. Already we have seen electricity prices drop across the country.

It is important to remember that the carbon tax started at $23 but was actually forecast in Labor's projections to rise all the way to $350. The $23 added 10 per cent to your electricity bill. Imagine if the tax was 15 times as high.

For small business in a company structure, we are reducing your tax by 1.5% from July next year.

We want to go further and will be having a tax white paper process to make the overall tax regime more efficient.

Second, we have a religious fervour for getting rid of red tape. Deloitte estimates that one million Australians are employed in compliance - three times as many as work in the mining industry.

A colleague of mine told the story the other day of a volunteer's awards night he was attending in his electorate. You can imagine the type of evening with the local CFA and SES heroes and the incredible contributors from the Salvos and other charitable organisations. The person who won the award received it for 'form filling' - it was now one of the most important roles in the organisation.

In small business, red tape can be the bane of your existence.

Many governments have promised to cut red tape, but few have actually done it. The last government even changed the title of the portfolio from the Minister for Regulation to the Minister for De-regulation and he then went and added 20,000 new regulations and removed only 200!

Our de-regulation agenda consists of dedicated days in parliament where we do not add legislation, but repeal it.

It consists of senior bureaucrats being rewarded for de-regulating in their departments. It consists of a relentless drive across all aspects of government. So already, we have repealed over 11,000 pieces of legislation comprising 57,000 pages, saving $2.1 billion across the economy.

To a small business owner, this means some very practical and tangible things to make life easier.

For example, if you are a small business with no GST payable - there are over 30,000 such businesses - you will no longer be required to lodge a business activity statement which will save you over $67 million in compliance costs.

If you have minimum income (about 450,000 businesses) you are now exempt from pay-as- you-go requirements.

We have made it easier for small business to get paid if they are doing business with government. Government will now pay with a credit or debit card for purchases under $10,000.

But this red tape crusade is just the beginning. Anywhere we can get rid of red tape, please let us know. If there is a particular thing that drives you mad, speak to us. We can do more and want to do more.

I know that many of you are concerned about the industrial relations regime and the impediments it presents to employing more people. We hear you loudly on this. You only have to see the closed restaurants and shops on Sunday to realise there are issues.

We have already introduced a number of measures, implementing our election commitments. As you probably know, we are undertaking a productivity commission review into the industrial relations system and this will help inform what we take to the next election.

SUPPORTING BUSINESS CREATION AND INNOVATION

Our final theme is that we want to make it easier for small businesses to start and businesses to innovate.

There are many things we are doing in this space, including creating industry growth centres, reforming training, promoting science, technology and maths.

But the measure I particularly want to highlight is the changes to employee share ownership.

As you know better than anyone, cash is the biggest constraint for a start-up and so often small companies will want to use share options as a way of attracting great workers.

We are changing the rules to delay the point that employees become liable for tax on the shares and allowing tax exemptions when shares are provided at a small discount by eligible small companies.

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Ladies and gentlemen, in her foreword in the conference papers, Anne Nalder asks the question "Does anyone truly understand small business?"

I want to say to Anne, yes we do. There would be about 40 members of the federal coalition Government who were small business operators themselves. There would be a great many more who grew up in a small business family, such as myself.

Our small business minister himself - a Cabinet position for the first time - ran a small business with his wife before entering parliament.

We understand deeply the sacrifice that it involves. We understand deeply the risks that are required - the sleepless nights, the stress of wondering whether you can make payroll, the worry that one of your big customers has gone belly-up and you might not get paid.

Our message is that we are open for business.

We know that when small business flourishes, we all flourish.

We are also aware of how government can make a difference... and how it can hinder small business.

And we are making a positive difference.

We are opening unprecedented market opportunities. The free trade agreements particularly are truly historic.

We are changing the tax and regulatory system to make it cheaper and easier for you to thrive and we want to do more.

We are making changes to help entrepreneurship and innovation.

Thank you again for the work that you do - for your sacrifice, for your commitment. When you do well, we all do well.

Thank you again to the Small Business Association of Australia for the opportunity to speak.