SMEs need to be heard in national policy

PAST recessions have destroyed the livelihood, savings, partnerships and families of tens of thousands of business people.

At the Australian Chamber of Commerce and Industry, we have spent 2009 determined to work with industry and our governments to try and learn lessons from past experience so that this global recession imposes fewer of these hardships on our nation’s business men and women, and their employees.

We have done this because the chambers and industry associations of Australia are deeply committed to the wellbeing of the private sector. This has been the driving force behind ACCI for more than 100 years.

It is in small and medium business that we find most of Australia’s entrepreneurs, risk takers and wealth creators.

Right now, on the cusp of recovery, there is a special need for small and medium businesses to have their voice heard in national policy.

ACCI is Australia’s largest and most representative business organisation. Our membership is a true cross section of the private economy. More than 85 per cent of members of chambers and industry organisations are small and medium business. We don’t need to call ourselves a small business organisation to represent small business, because it’s the very essence of what chambers and industry associations do.

Giving SMEs a voice and collective strength is also a core part of our three-year strategic plan at ACCI.

Though not designed that way, the conjunction of the plan and the global financial crisis gives us the opportunity – in fact, the responsibility – to bring the small business case to Canberra.

The economic downturn has made 2009 a very tough year. But not as bad as it could have been.

Thanks to a more open economy started by the Hawke government, and sound economic, labour market and fiscal management by the Howard government, we had a surplus, full employment and a very well supervised financial sector when the global recession hit.

We spent most of this year cashing in those cheques of past reform.

And thanks to early and responsive action by the Rudd government and a business community that held its nerve, we maintained growth and supported jobs and confidence. Our downturn has been serious, but shallower than major industrialised nations.

This is no theoretical achievement. In practical terms, many small businesses are in better shape than they would have been had, for example, policy makers reacted slowly and badly as they did in the recession of the early 1990s.

Nonetheless it has still been a year of worry and sleepless nights for small business owners, wondering if they will get through. For most, sales and demand fell, and labour was cut back. In turn, owners and family members worked longer, with great pressure on cash flow, more debt, and a struggle to get finance from banks.

Now, one year on, confidence is returning. We are on the cusp of recovery.

Our business owners are moving from managing a downturn to managing a recovery. So must our governments.

Four major concerns

Small business must not be left behind when managing the recovery. There are four areas of special risk identified by ACCI where this could happen if we are not careful.

These are interest rates, tax reform, energy costs and workplace regulation.

On interest rates, the full benefit of reductions earlier this year did not flow to SMEs but the full cost of recent increases has. We are concerned at excessive risk rating by retail banks when it comes to small business lending. This makes credit expensive. SMEs seeking export finance are routinely refused. One of the unfortunate legacies of the downturn is a less competitive finance industry, making our concerns all the more real. The margin between small business lending and household mortgage rates has blown out during the year. Small business feels it is a softer target for banks than mortgage holders.

On tax reform it is vital that natural pressure to protect Commonwealth revenues does not lead to trade-offs that harm small business in areas like capital gains tax or removing payroll tax concessions.

On the Carbon Pollution Reduction Scheme, we have been the only national business organisation to commission independent work on the impacts on SMEs.

That work, by international consultants Castalia, shows that small business will be left paying much higher electricity bills, which is a hit on the bottom line. Small businesses are neither the large emissions intensive trade-exposed industries that get free permits, nor the low-income households that get compensated. They sit in the middle, exposed, and with few options.

It is also important to acknowledge the joint efforts made by many business owners and their staff – in some cases supported by their unions – to get through this tougher year with commonsense working arrangements.

We need to keep that commonsense approach into 2010, both in how business conducts itself, and in the wage and other expectations coming from the labour movement.

On workplace regulation, there is an enormous amount of change to digest. Not all of it is negative, but new employment standards and new awards that operate from

Next year will involve higher labour costs and additional regulation for some small business sectors and regions.

It is vital that the productivity gains of recent decades are not handed back through the implementation of new IR laws. We all share a common goal in continued job creation off the back of an increasingly productive and internationally competitive Australia.

Yet in each of these four areas the cause is far from lost.

The government has not been insensitive to hearing our concerns and solutions. Steps in each area have been taken to address business issues, but there are still many policy shortcomings and regulatory roadblocks.

I take the opportunity of this public forum to express my full confidence in our future leadership.

Two years ago my term commenced just as Australia turned a new page with the election of the Rudd government.

I wanted ACCI to react effectively to the new government’s policy agenda, and we did. During 2008 we started building effective working relationships with new ministers, advisers and public servants. Then the global financial crisis hit.

Especially at a time of serious economic threat the expectation of the business community was that its governments and business organisations work collaboratively in the national interest.

We are playing our part, and the government has reciprocated with mostly constructive dialogue.

I also end my term pleased that we have taken no backward steps in advocating policies that support a productive, competitive and globalised Australian economy.

Important lobbying successes during the year, such as the investment allowance, investment in skills, the minimum wage pause, the back-down by the tax office on putting superannuation on overtime, and the five-year phasing of modern awards have all saved real dollars and jobs.

These, together with the emerging national consensus on the need to increase our productivity, are positive notes on which to end my term.

Yet I remain concerned at the risk of ‘a she’ll be right approach’ to economic reform from within the community once the recovery takes hold. The reality is far different.

Governments and the community must recognise that the private sector – meaning both business and its staff – is the only source of sustaining wealth generation. It might be fading rock stars that get the publicity for wanting to save the world, but it is the daily grind and risk of private enterprise that establishes the living standards that reduce poverty and social disadvantage.

Government must be an agent for economic change during the recovery – but change that lifts and supports the entrepreneurship of the private sector – not hammers it with more regulation, taxation or red tape.

n This is an edited extract from Perth company director Tony Howarth’s president’s address to the Australian Chamber of Commerce and Industry’s annual dinner in Canberra, November 18 2009.