Transcript – Address to Canberra Business Chamber
Subjects: small business measures, jobs growth, women in business, exporting, competition policy review
Thanks Glenn. Glenn has thought of everything tonight. The mood lighting is just right for a face like mine, so thank you for that. It is good to be with you.
How about a cheer for James and his story? I have great respect for what James has done and in fact I want to say to each and every one of you thank you for what you are doing.
I do not think we celebrate entrepreneurship enough in this country and we certainly do not pause enough to say to enterprising men and women – thank you for mortgaging your house and your first born. Thank you for the livelihoods that you are pursuing on your own, and through your enterprise creating for others. And I think you all deserve a cheer.
I say that with a great degree of admiration because unlike all of you, I am a former small business owner and ours has not survived. My wife and I had a wonderful enterprise but I am a failure in entrepreneurial terms. I hope you forgive me for that.
But some decade after we had that tough decision to shut the door and say ‘look there is nothing more we can do’, it was nice to have my master’s degree mentioned and I have got to tell you: I had the spunkiest business plan. They said ‘that is world class Bruce’. All those years of study and application and entrepreneurial perspicacity and I thought ‘I better check out what that actually means’.
They loved my business plan. It was spectacular, and my wife was a leader in her field of endeavour – and together we thought we had all that it took to actually make this work.
Interestingly, the bank was saying ‘look that is a great business plan, we can really see what you are working for. We are happy to provide you the finance….but can we have your house?’
And I thought, I am not sure that is quite the level of support I was looking for. But sure, why not and to this day, a decade later, each month I am reminded of the toil of entrepreneurship.
Half my mortgage is for my accommodation and the other half is for our enterprise which was cremated about a decade ago.
And who can miss that joy of being in business, particularly with your partner, your life partner. My wife and I loved that pillow talk of cash flow. It was the greatest contraceptive ever invented. And to sit there and know that our space, which isn’t it interesting, I remember it was a little bit larger than the dance floor was $4667 a month in rent.
We were in Mornington, the Riviera of Melbourne and on a cold winter’s day you could get a natural exfoliation just by walking outside, but there would be no customers.
And it taught me one very great lesson that I bring and inject into the Cabinet discussions, that as one of the nineteen men and women around the Cabinet table; when we are talking about commerce there is no substitute for customers. Regardless of what you do, this is an essential precondition.
In the blurb that you saw promoting my presence here tonight it did mention my small business journey and it is not a spectacular one, but it has underlined how personal this is for me. Because it is personal for all of you.
Every waking moment, just about, you are thinking about what else you can do. What is that next step? What is that new idea that will delight customers in a way that they have not thought of before? That will increase your prospects of profitability?
That profit, the word that seems so reluctantly spoken about in our nation. It is such an essential precondition for people to invest, to recruit, to grow, to see private endeavour driving our great promise of our country.
That deserves to be celebrated and that is why I am so enthusiastic and perpetually upbeat about what it is we are doing. So such great admiration for all that you are doing.
You are amongst two million enterprises operating in our economy right across the spread and as was mentioned in the introduction, the overwhelming majority of enterprises in our economy are businesses that are small, small enterprises, self-employed.
Even the renaissance of entrepreneurship in the home: the mumpreneurs that are driving a new kind of economy. I was thrilled to me amongst them the other night at their annual awards where they are joining together not only the skillset that we have invested in as a nation.
Imagine investing in a degree for a woman with great contribution to the economy perhaps a life journey punctuated by another goal of a family and then not to do what we can to bring all of that talent back into our economy. It is a no brainer, yet it is entrepreneurial women that are finding a pathway to do both.
Pursue goals of family and life objectives but also to pursue a livelihood, often using new technologies, engaging in social media, operating from home knowing that barriers to entry have been reduced by that very same technology.
So I am excited about that and I am seeing that excitement reflected in so many aspects in our economy.
And I have got to pay tribute to all of you. In the last financial year where the stats are available, 280,000 new small businesses entered our economy across all sectors and across all states and territories.
But nowhere was that entry greater than here in the ACT. The ACT had the highest business entry rate for our nation in 2013 and 2014.
And that is something genuinely worth celebrating and I admire you all for being the path finders in that appetite to grow your own small business economy.
And we are seeing that optimism reflected in a range of indicators. Record company registrations, I am pleased about that, but also 20 year low bankruptcies.
So something is happening that is going well. And I suppose my focus is on trying to get the entrepreneurial eco-system if you will, right so that it supports and nurtures that kind of ‘have a go’ entrepreneurial attitude.
We inherited a trajectory from the previous government that was quite troubling. Nearly half a million livelihoods, jobs were lost in small business. The very economic opportunities that your entrepreneurial endeavours make possible for others.
We saw the share of the private sector workforce, where small business used to be the main provider of jobs in the private sector, actually decline from 52% down to 43%. I am thrilled that we have arrested that decline. It has been turned around.
Nearly 150,000 jobs have now been provided since the Government was elected in small businesses and the share of the private sector workforce is now increasing again and I think that is a great sign of what is happening in our economy.
We are also seeing those women business owners forming businesses at a faster rate than the blokes. 4% year on year comparison to July of this year compared to we blokes a bit slow: 0.8%.
You are seeing the sisters not only doing it for themselves and their economies and their families, they are doing it for our nation and I think that is a great story and a great example for young women thinking about what it is they will do with their economic ambitions and with their lives.
And there is a bit going on. You might have picked up the mining industry is sort of not quite as spectacular as it was some years ago.
I think of it this way, what a blessing we have in our earth and around our coastline, and what a great gift it has been for our economic prospects. But that shone so bright, so bright it has actually blinded people about what else is and is not going on in the economy.
We are now confronting that change. As we transition from that mining-led economy into a more diversified economy that sees multiple avenues of strength and opportunity, and what we are trying to do is see that non-mining sector drive growth and investment in the economy and that transition is underway.
Since the election of our Government, there is $68 billion more of economic activity in our economy. Jobs growth is 10 times the rate it was at the time of the legacy that we received. Stronger than the US, stronger the Canada, stronger than the UK, not matched by any G7 economy and that is a reason to be upbeat.
Participation rate is up. Job seekers are seeing this vitality in the economy. Job ads are up by about 16%. Retail sales are up. Exports are up. Residential dwelling construction is up quite considerably, in fact 23% more dwellings under construction now than at the last election. And we know the domino effect right throughout the economy.
What is particularly exciting for me is the investment in the services economy is up 12% and you are starting to see that transformation really taking hold in the services economy.
This is what we aimed to support because governments rarely create jobs but we can get the conditions right to encourage you to make those decisions. And that is what the Budget package is all about.
We do have a Budget challenge. We are improving the deficit situation by half a billion of GDP year on year. But we had to find the funds to put that small business budget package in place, the largest one in our nation’s history.
It was all about a simple idea. All the research tells us that Australians wander around with ideas percolating in their minds. We apparently are right up there: 40% of us spend our lives thinking about some new initiative, according to international research.
The execution of those ideas is nowhere near that rate. So the Budget was about saying if you have got those ideas and those ambitions, what is it we can do as a catalyst to turn that sparkle in the eye, that fire in the belly into investment, economic activity and jobs growth.
And that is why we crafted it the way we did.
The small business company tax rate is now the lowest it has been since 1967. Sadie The Cleaning Lady was number one then, and I was one so it is a long time ago.
But we know two out of three businesses are not incorporated. We have got small businesses from Tony’s tradies to self-employed to people operating through partnerships and trusts.
And we did not want to lose sight of the fact that just because you were not conveniently structured as a small business company that you should somehow miss out on the incentive and the encouragement and the enhancement award that we were seeking to offer through those tax cuts.
So we came up with a novel, agile measure – a tax discount. Work out what your normal tax liability is and take 5% off it. That is our way of saying ‘thank you for your enterprise and what you are doing, even if you are not structured as companies’.
And the asset write-off measure. $20,000 was an effort to say to people that had business ideas, growth opportunities, an appetite for new kit, new capacity, new ways to find new markets and new customers: What was it that we could do to activate that interest?
A cash splash, we have seen those in the past and dogs and dead people have gotten $900. That is not the most cunning plan targeting scarce resources.
What we have done is said ‘you decide what is best for your business’. And better still, ‘you pay for it’. You make that discerning choice. We will simply get those resources back to you quicker by being able to depreciate up to $20,000 for those purchases in the year in which those purchases are deployed.
But we went further. Why is it that restructuring a business with the same owners and the same enterprise to make it ready for the kind of transition James talked about or the entrants of a new partner or something: why is it that simply restructuring risks’ triggering a Capital Gains Tax event? That was silly. That is what we are changing.
The professional advice you get during the early business stage, the accountant’s advice, even if you are preparing for a crowd source equity funding pitch – why depreciate that over three years? You get the advice, you consume it and you move on and these are some of the changes that were in there.
Fixing the employee share scheme arrangements. That change by the previous government in 2009 killed employee share schemes dead. Why should you tax somebody for the prospect of a benefit down the track, delivered to you in the way of an option, when you have no economic or material gain to service that tax liability?
It was an enormous disincentive. It took away one of the best tools to align the enterprise’s objectives with that of the team. So we have fixed that and then we put an added incentive for start-ups, saying that you might not be able to get the finance or the equity that you are looking for but here is an avenue to build the team and build the capacity that you want.
And particularly for start-ups and those in a growth phase, contesting in a market for the best talent, a lot of it agile and globally engaged, if we want to bring it here there has got to be some reason for it to come.
And that start-up phase, I remember, we were not flush with cash. I was the one sanding the floors, getting the fit out right. Fortunately, the son of a carpenter. We did not have money. In that start-up phase you cannot pay the best people big incomes so they can have wagyu s-t-e-a-k each night for dinner. But you can give them s-t-a-k-e in the business and tell to enjoy the noodles until pay day comes around.
These are the kind of ideas we are trying to inculcate in what we do in our economy to energise enterprise. Because that is really what this is about.
Folks we have got a choice as a nation. If we are going to nourish the great promise of our country that the next generation have it better than we have, we have to change.
In the 1970s when I was a wee lad seven people in the workforce for every one retiree. Today, it is five. By the middle of the century when James is my age, it will be less than three in the workforce for every one retiree. 2.7 to be precise.
Those 2.7 are going to have to be able to generate wealth and the income for our nation in ways that we have not even mentioned.
They are, if we do not get the Budget right, also having to carry the can for us not paying our way as a generation. We need our economy to hum.
We need to be able to seize and make the very best of every opportunity and through that sustain the great promise of our country that we will gift to the next generation a better quality of life and better opportunities than we enjoy. And to do that, the only way we can achieve that is to energise enterprise. Private endeavour will drive that.
You cannot tax and spend your way to prosperity. Winston Churchill said that is like standing in a bucket and trying to pick yourself up while you are in it by the handle. It just does not work.
But private endeavour will and that is why so much of our focus is on activating that. We cannot make every business succeed. That is not within my gift. I can tell you I will work as hard for your success in getting the obstacles out of the way as you work for your own success.
Red tape. We have heard it talked about, but did you realise that there are no priority picks in a sporting sense of being so low down the league ladder as we are as an economy in terms of how gummed up our economy is for compliance costs, for red tape.
When the Howard Government left office we were 68th in the world according to the World Economic Forum. Only 67 less gummed up than ours. At the last election, we had fallen to 128th in the world.
We have become more nanny than Europe. Able to find anything that moves on its own to regulate. That every problem had a regulatory or compliance intervention as the solution and as a consequence we are 128th in the world in terms of the cost in burden and compliance in our economy.
That works out that around $65 billion a year of our GDP goes to regulatory burdens in costs from the Commonwealth Government alone.
If you add in all of the states and territories and the joy of local government – and I hope you do not have to put an A frame out the front of your business James. That is a journey you can look forward to.
That is 4.2% of our GDP that goes into compliance costs. Now if you think about the future and go back from where I started and the simple idea that there is no substitute for customers: we want access to more customers.
That is what the free trade agreements are about. And as north-Asian economic partnership agreements open the door to hundreds of millions of new prospective customers, all able to be delighted by us.
Some of the 800,000 Chinese visitors that come to our country, many to this city, expect to see the magnificent vista that we see tonight. But they are not anticipating the quality of the food and the wine, and that is an evocative and enduring memory that this ought to be relived again when they return home and brag about their visits to their friends.
That mining boom transitioned to a dining boom. It is an enormous opportunity for us.
But think of all of your work. It is not just the stuff we make, it is the knowhow we bring to our task and our economy.
70% of our economy is in the services sector here. 80% of all the jobs are in the services economy. Yet only 17% of our export earnings come from services.
Yet we see on our doorstep growing middle class, a sophistication in cities, an appetite for the things we do well. Dealing with our needs as a nation prepares us well to service the needs of those north-Asian economies as well.
90% of the exporters in our country are SMEs. Already active, yet only 5% of the income comes through those enterprises.
This is a delicious opportunity for us and we need to open more doors and be agile, not weighed down by excessive regulation. Tooled up, equipped, engaged with technology to meet the opportunities that are there and to make them our own.
And through that we will grow. We will grow the incomes for our nation and we will do our bit to make sure the next generation has it better than we have had it.
Along the way, fixing employee share schemes. The legislation for Australia’s first Small Business and Family Enterprise Ombudsman has passed.
First time in our nation’s history that the term family enterprise has been entered into the title of statutes from up the road on the hill.
That is a unique contribution, with unique challenges. You know what it is like when the boardroom table becomes the dining room table and vice-versa. The parental oversight doesn’t quiet work out amongst equal shareholders, these are interesting dynamics.
And when they say to you James marry well because we want a marketing person to come into the business these are the questions.
One of the Canberra builders the other day, his family built the bridges over to Parliament House said we have every trade covered but a plumber. So he is encouraging his sons to choose wisely.
We have got the reforms through the franchising code recognising that is a unique relationship. One that goes well at its best but can go very parent-child when it is not going so well.
Food and Grocery Code of Conduct: making sure that those suppliers to our big supermarkets, wholesalers and retailers is one of respect and transparency, not one of serfdom because of dependency on those narrow markets.
The entrepreneurs programs are in place, the support for skills, transformation in the Fair Work Ombudsman of a dedicated small business person, the guide to employing new people.
Probably the world’s first economy wide unfair contract terms protections for small business. The 80% of contracts small businesses see day to day that often have in them clauses that are punishing, harmful for small businesses, completely unjustified on any business terms – that is no way to grow the economy and that is why we are taking action on it.
Crowd source equity funding framework- an important avenue for people to get equity into their businesses.
That whole piece about what we can do to put together that innovation architecture so that our research institutions talk to the industrialists, investors and the entrepreneurs and we can take those pure insights and discoveries and create wealth and opportunity out of it.
Then making sure at the end of the day that out there is an economy where an efficient business big and small, have the opportunity to thrive and prosper.
That is what the Harper Review is about. Getting that right so a small enterprise knows the rules it operates under and won’t have the rug pulled out from underneath them when they are making an investment decision or trying to engage in competition -just because a bigger dominant business thinks they can.
My vision is that we need to be the best place to start and grow a business. We aren’t there yet but we are making progress. I will keep at it.
I benefit greatly from your insights and your ideas and I thank you for having me here tonight.