COSBOA

TRANSCRIPT: COSBOA Summit, energising enterprise

Emily Carter — Fri, 05 Apr 2024 03:11:50 +0000

TRANSCRIPT: COSBOA Summit, energising enterprise Emily Carter Fri, 04/05/2024 - 14:11

04 April 2024

TRANSCRIPT

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson interview with Deb Knight.

Money News

Subjects: COSBOA Summit, energising enterprise

Deb Knight

Bruce Billson is a former federal minister for small business and now the �Թ�� and Family Enterprise Ombudsman, and he was involved in the COSBOA summit. He even facilitated one of the sessions and he joins me now. Bruce, welcome back to Money News.

Bruce Billson

Deb, great to be with you and your enterprising audience.

Deb Knight

Yes, they are indeed. Well, a lot of them are small business owners, too. And I know that this summit is held every year by COSBOA, but these would have to be some of the most challenging times wouldn’t they for small businesses in this country?

Bruce Billson

Yeah, they are challenging times but one of the things I marvel at though is some of the leading indicators still point to the optimism of enterprising men and women. I think positivity amongst small business men and women is the greatest renewable resource in our country. But they do also report challenging times, input costs pressures. The reduction of discretionary expenditure through interest rate increases and the like is really hitting hard on some businesses and they're working hard to try and stay in the black.

Deb Knight

Well, it's hard to keep that momentum and that optimism going when you do have the headwinds that keep on coming.

Bruce Billson

I think some of that optimism is despite hard evidence suggesting it is tough at the moment. We've seen insolvencies up. We know some of the practices during COVID that saw lenders and the Tax Office go a little bit softer on people that owed money is shifting. It’s into a more regularised arrangement so we're seeing more activity on those fronts.

We're still seeing a lot of businesses just finding it hard to get paid. So, they provide the goods and services that were asked of them, they've incurred the cost and they've deployed their teams to do it and they are just wanting to be paid. So that's another consideration. And I suppose the other thing is the compliance regimes that are around are getting more demanding. More is expected of small business owning men and women. It's a big responsibility owning your own business. But some of the changes in the regulatory space can be pretty hard to navigate if you're a small operation without a specialist HR department or compliance team that a big a corporate might have.

Deb Knight

Which brings us to the government because you did have some heavy hitters in attendance at the summit. Some big-name speakers, including the Prime Minister. Does Anthony Albanese and his government have a full understanding of the challenges that small businesses are facing, do you think?

Bruce Billson

I don't think you can help but be respectful of the connectedness that the Prime Minister spoke with. He seemed to really understand the small businesses, particularly in his own electorate, and that that gives him a lens. That was encouraging.

Deb Knight

I guess it's encouraging that the PM's even there speaking about business because for a Labor government, it’s about workers and upping their wages, isn't it?

Bruce Billson

Look, I think it was an important sign that he was present because I think at times a lot of the broader political debate – and you’ve touched on some around wage rates and the like - I think small businesses, particularly those employing people, might have thought why are they not talking about my circumstances. So, I think it was important that the Prime Minister was there and he spoke about what he'd seen and what he gleaned through his own working life and in his own electorate. I think that was reassuring.

I think there was a good discussion over the two days about more things that could be done. So, you know, there's still pressures in the economy that small businesses are looking for pathways through. And it was good to see the Prime Minister touch on some of those as well. But also the Opposition Leader, Peter Dutton, who spoke very, very passionately about his own small business journey and I think the audience really responded to that.

We had some of the crossbenchers in town as well, Deb. They were really talking about their engagement and their own journey. The ‘I see you’ message was strongly throughout the presentations from our political leaders. I know from the discussion that people are looking for more specific, direct action on a range of fronts where they really got pain points and pitch points.

Deb Knight

And the prime minister did indicate when he did speak at the summit that energy bill relief for households and businesses will be one of the things extended as part of the May budget. Is that something that will make a big difference?

Bruce Billson

Look, I think it will. And I think he also pointed to the number of small businesses that have taken up incentives around solar photovoltaic systems and batteries, and that can be another measure.

It's important to realise the other steps about reducing the bills themselves, you and your listeners would know many small businesses don't occupy their own premises. They occupy someone else’s. So, when talking about an investment in a photovoltaic system and batteries, well, that's something the landlord might be interested in. The tenant is saying, hey, can you help out here? I hate to use the jargon, the split incentives is how the policy makers describe it. The asset owner is different from the business as the occupier, and that can present some challenges. So, I think that was reassuring. And it's one of a number of pain points. You mentioned shifts in labour rates that's always having an impact and a concern.

Insurances Deb, oh my goodness. I mean, the difficulty too many small businesses are having accessing the insurance they need and then the eye watering price increase.

Deb Knight

Well households too, it’s across the board, isn't it?

Bruce Billson

It is. And that's something I keep reminding the insurance industry about. They're regularly talking about households. And that's right. But, you know, consumers sometimes make choices. I would say courageous choices but understandable choices if the budgets are tight to maybe under-insure or not insurer at all or self-insure. Deb, you and I know, and your listeners would know, for many businesses, you don't have that choice. If you don't have certain essential insurances, you can't engage in trade and commerce. When they’re talking about multiples of premium increases, again, that's a that's a hit to the bottom line when margins are very tight.

Deb Knight

What about wages? Because we know that the wages umpire will be making a decision shortly. We've got the claims coming in from the unions and from businesses. How much do you think small businesses can cope when it comes to setting the limit for wage rises?

Bruce Billson

Look, I don't think there's a single answer to that, Deb. I mean, the regulator, the Fair Work Commission, will make the decision around wages. But the story is very different depending on what part of the economy you're operating in. We've seen just through insolvency rates, the hospitality sector are finding it really hard and extra price pressures are going to be, for some, just too much.

In the construction area, again, where there's pressure points, small businesses are having to pay way over the odds in terms of award rates to attract staff. So, they're already well in advance of those wage determinations. But that will land differently. And it will be in another area that a business owner who, is the last to be paid, needs to navigate in these economic times.

Deb Knight

There was an interesting address from the RBA Assistant Governor Brad Jones, who said small and medium businesses are driving a lot of the innovation that's needed to boost productivity, which we know isn't at the levels it should be. And they're spending a quarter, 25% more on R&D than the larger businesses are. The RBA, though, critical of the banks for not lending to entrepreneurs, not taking risks? How much is that holding the country back?

Bruce Billson

Look, access to finance for enterprising men and women continues to be a challenge. I mean, too often the conversation is show us your collateral debt. You haven't got a house to underpin it - and it's 50% of all small business lending is underpinned by someone's private home. So, you can see how invested business owners are not only for the roof over their head but their own enterprise. In many cases, their identity is interwoven into their business.

But it also points to a bigger trend. It wasn't so long ago the third of the economy that's made possible by small business was much higher than that. About 41% of GDP was generated by small business back in 2006.

And you think about that narrative, which I think is true, how innovative and what a driver of wealth creation and opportunity small business can be. Now we’re seeing the bigger end of town tending to grow fast, to be more profitable, maybe better placed to navigate the complex regulatory environment than small businesses. And my call out was, well, let's not just try and reduce the headwinds that small businesses face. How about we all get together to put some wind in the sails of enterprising men and women and really give the best prospects. Let’s energise enterprise to make sure that full potential can be met.

Deb Knight

It’s such an engine room of the economy. We want to make sure that they can fire on all cylinders.

Bruce Billson

And let’s not take a cylinder out either. You look at some of those numbers about share of private sector employment, the profit trajectory. Even the aging profile. The average age of a small business owner now is 50. And there's only 8% of business owners that are under the age of 30. It was nearly twice that in the ‘70s.

So, something is happening. I think it's all about getting that risk and reward balance right, making small business and entrepreneurship a really attractive option for people, then creating a supportive ecosystem to give them the best chance to be successful.

Deb Knight

You bet. We need them to be successful for all of our benefit. Bruce, always great to talk. Thank you so much.

Bruce Billson

Thanks, Deb. And best wishes to your enterprising listeners.

SPEECH TO COSBOA NATIONAL SMALL BUSINESS SUMMIT

Emily Carter — Fri, 05 Apr 2024 00:25:37 +0000

SPEECH TO COSBOA NATIONAL SMALL BUSINESS SUMMIT Emily Carter Fri, 04/05/2024 - 11:25

04 April 2024

SPEECH

Australian �Թ�� and Family Enterprise Ombudsman Bruce Billson.

Speech to COSBOA National �Թ�� Summit

I particularly want to acknowledge Matthew (Addison), Luke (Achterstraat), Liz (Skirving) as the helmswoman of the organising committee and all the team at COSBOA for putting on a terrific summit.

There's a lot of things coming ‘at’ the small business community. We seem to be perpetually involved in consultation about a new imposition, a new measure, a new burden, a new complication that’s on top of the challenges and those late night compliance activities that those of us that have run a business know we are contending with right now.

It seems so often that we are there to mitigate the worst of new headwinds. That we're trying to make something that's not that great, a little a little less bad. That's important. Last year I encouraged us all at this summit to turn up. I shared with you a thought that the world is run by people who turn up. If you have an input or an insight, there’s only one sure-fire way that it'll have no implications on the discussion, and that is to share it with nobody. So, turning up is a great start.

We also should honour what I think is the greatest renewable resource in our country, and that's the perpetual optimism of enterprising men and women. You look at the stats and we see a lot of leading indicators, and it's quite uplifting and remarkable how optimistic our community is even when they're describing business conditions that are quite confronting or they are looking at some hard numbers that might tell a different story.

I thought I'd talk about some hard numbers. 43% of our small business community were not profitable in the last full tax year. Three-quarters of self-employed people for whom, self-declared, their business is their full-time endeavour, take home less than average total weekly earnings. There’s no rivers of gold for those people. They’re working their tails off every day.

The average age of a business owner is 50, not 45 where it was in 2006. Currently 8% of our small business owning fraternity are under the age of 30, half what it was in the 1970s.

70% of small businesses are unincorporated. So, when we think about their share of profit and the journalistic narrative about how buoyant profitability is in the business economy, if we think about that 70% that are unincorporated, we see that their profit trajectory, if there is profit, is 3% a year, whereas for the larger corporates annual growth is at 13%.

We honour and we should celebrate the 42% of private sector jobs that are made possible by the small and family business community. That is fantastic and small business continues to be the largest employer compared to large and medium sized enterprises. 42% is a number to marvel at. But in 2006 it was 53%!

We contribute one-third of Gross Domestic Product and that is industry value add 32.4% for those that are interested. That's actually the lowest number since that data series began in 2006 when small businesses were contributing 41% of the economy.

I have this theory that on the surface we're all working extremely hard and we're making gains where we can grab them. But the subterranean shift is that Australia is becoming a big corporate economy. This transformation is happening before our eyes. And I would suggest we need to do more to try and bring about a change if we do, as I believe, think that small and family businesses will be the drivers of innovation. They are our best prospects for improving incomes and living standards. This has been the narrative since the time I hosted a B20 for small business a decade and a half ago.

But those underlying numbers point to a different story. A consolidation. Advantage being gained by large, already advantaged, well-resourced businesses. With new opportunities like AI, who's going to make the most of those unless we try and make sure there's some enablement. Not minimising the headwinds, but maximising the wind in the sails of our small and family business community. Surely that's the conversation we need to be having. And isn’t now the moment to make that change? I think so.

Explaining a new imposition that's complex and overwhelming, it is not enough if it's still there. How do we delight the next generation? For those of us that go to graduations, how many do we hear say I want to be a business owner when I grow up? Not many.

And even if we talk to those who have been raised in a family of enterprising people, a family business, they say, ‘I don't know what I want to do with my life, but I've seen what my folks do and that’s not it’. How do we inspire and enable them? How do we make it more likely that an idea will become an investment. That an entrepreneurial urge or an inspiration will actually turn into an enterprise and those self-employed business people will actually become an employing business in the near future?

How do we take that inspiration, support the perspiration that's part of it, and drive the innovation that people keep talking about with the new productivity initiative. Something that will do better than what we're doing right now. I think that's where we need to shift the conversation.

I think with the discussion we heard amongst our political leaders and regulators, they are interested in our ideas. And ideas we should bring forward about how to put more wind in the sails of small and family businesses, not just to mitigate wind in their face.

We've talked about workplace relations. It's hard not to talk about that isn’t it? It's quite extraordinary that you can be an entrepreneur who can grow a $10 million business, but never be quite sure whether you've got your employment arrangements right. It could be a young woman with a wonderful market changing initiative, terrified you might get the pay rate wrong for your team.

It's really interesting too, when you think about employing businesses. Let's think about the respondents to the industrial instruments that we’ve had a very interesting talk about. The vast majority of those are small businesses. One of the only growth areas in the stats that we can find is that in 2007-08, 89% of employing businesses were small. In 2022-23, 94% of employing businesses were small. They are the respondents to our workplace relations regime. Does anyone here think that the system is designed for the respondents in the majority? It’s not.

Even the department that shaped some of the rules couldn't get it right.

And I loved the (panel) conversation about workplace relations but I’m going to be mildly discordant. ‘The Club’ revels in the complexity. They love it as complex as it can be because you have to pay somebody to navigate it. You've got an event going on in a commission, small business people aren't quite sure whether it's a commission or it's an ombudsman, and then the outcome comes out and you have to live with it and you have to go get an explanation about it. Surely, we can do better than that.

Isn’t your team a key input? Aren’t they vital enablers of your entrepreneurial capacity? Isn’t it the essence of workforce collaboration? Yet, the rule book that surrounds that relationship is so complicated you need an in-house HR department or a technical expert to navigate it. I'm not sure that's good enough.

Surely, we can come together around making the workplace relations regime work better for smaller employers who are overwhelmingly the majority respondent of those instruments. We’ve been arguing for a �Թ�� Division within the Fair Work Commission that's got processes and people connected to and informed by small business real life experiences. We've argued for a �Թ�� Commissioner to keep an eye on that 94% of the respondent audience and keep an eye on the rules that shape that engagement in the workplace.

We are not a believer in a small business award. The economy is too complex. The amount of classifications you would have in a small business award would look like a voters roll. But we are an advocate for an annexure to the awards we have. A cut-to-the-car-chase vital elements that a smaller employee needs to respond to that they can absorb and navigate with confidence and competence.

We're not a fan of shoehorning business-to-business relationships into the industrial relations system. Business-to-business relationships do not belong in a workplace regulated environment. But it's happening because the instruments designed to support independent contractor relationships and others are just not accessible for small businesses. During the debate around the latest workplace relations changes, people said the Independent Contractors Act hasn’t worked. Do you know why it hasn't worked? It’s not because it was a poor piece of legislation or the ideas underpinning it, or the public policy motives were wrong. No, no. If you wanted to exercise it, you had to go to the Federal Court of Australia. Can you imagine an independent contractor, maybe earning barely average weekly wages, going I've got a dispute with somebody, I know, I’ll commit a quarter of a million dollars and two years and I'll front up to the Federal Court of Australia knowing that if I get it wrong, I've got to pay the other party’s costs.

This is an access to justice issue. We need to get together and rally around a simple, clear and absolutely logical idea of a Federal Circuit Court �Թ�� and Codes List that can function like a tribunal, that can deal with independent contracting disputes. That actually gives the tools that are designed to give small business a chance to win on merit, not on muscle in our economy, half a chance.

Those unfair contract terms protections, how do you enforce those if you feel you're being infringed against? You can’t. So, you hope and pray the regulator will do that for you. And the regulator has a limitation to its budget. You know what they prioritise? Material impact on the economy, systemic failure or considerable public interest.

If I’m a franchisee who has been done-over by a franchisor in a blatant breach of the Franchise Code, does any of that story hit those enforcement parameters? No. There's plenty of empathy, but will the regulator do anything? No. So, where is the promise of protection for me? I am incapable of defending my own interest in the Federal Court of Australia. So why don't we enable me to defend my own economic interests by having a jurisdiction that is relevant, right-sized and responsive to small business. So that these tools and safeguards, these bumper rails, these protections to give small and family business the best chance to thrive can actually be applied. Not at the wish of the regulator, but at our wish where the owner of the economic interests defends it. Where a contest over intellectual property can be worked through. Where a dispute around an independent contractor can be heard and heard quickly.

Isn't that something that would change everything because all of a sudden these regulatory instruments will mean something. Too often they are hunting dogs that won't leave the porch. And too frequently the commission is just not there for those people who have had their life and their livelihoods harmed, in some cases ripped away from them, from conduct that is in blatant breach of laws, codes and regulations but that no one will do anything about. And those infringed can't do anything about themselves.

That would change the game.

And in the regulatory space, where are the deregulation targets? Where is the agenda that says we are about right-size regulation, risk informed, proportionate, relevant and able to be competently implemented by a party of good will? Where’s that work going? The structural changes to support that aren't that complicated. Chris Lamont (NSW �Թ�� Commissioner) talked about ones that we’ve talked about. Regulatory Impact Statements that have to have a small business impact and implications area in them. Cabinet submissions talk about regional implications. Where's the small business implication so that those considerations are front-of-mind and bright on the radar screen every time governments make a decision.

The Regulator Evaluation Framework. Where is the criteria that talks about how responsive and engaging that agency is with small and family businesses they are regulating? How are natural business systems being used? Is there a competitive neutrality issue where the rules are so complicated - we heard some discussion around digitisation and safeguards for cyber – but if Regulators and impositions get too heavy who can open that door to that opportunity? It won’t be a small, less well-resourced businesses. It will be a big business already advantaged with another avenue to exercise that advantage.

I thank you for all that came to our ESG Symposium. There’s an idea that frightens the socks off a lot of people. You know, you're a participant in the supply chain. They want to know what your scope 3 emissions are and you go, isn't that a big Falcon? No, that’s a Phase 3. But know, if you can’t answer those questions there's an opportunity gone on government procurement, access to finance, equity, customer interest, engaging scarce staff. We talked about synchronicity. If you’re reporting on climate disclosures through this regulator, isn't it possible someone else with an interest in it might agree that there's not a bespokeness every time there's a new audience? That we can actually enable and equip our community to be engaged and not miss out on opportunities.

But it also goes for help and support resources. It was fantastic to hear about all those resources that regulators and others have. The ATO has done a great chart just on government supports. It looked like Noodle Nation. You needed to be a genius to navigate it. What's a time-poor small business to do? They've had a cyber attack, what do I do? Do you think the Office of the Information Commissioner would pop up and tell them about their reporting obligations? I think not. Privacy reforms principles – only some possibly being applied to small business. What principles apply and what do they mean for my business? Tell me what I have to do, is what our small business community is asking of us. Yet that’s not always readily available and easy to locate. And the silos that help government and policy makers frame their engagement are unhelpful obstacles to small business engage effectively.

Let's think about digitisation. A really crucial challenge for us. An enormous opportunity, something that will help the business of running the business, as well as finding new markets and new opportunities, new ways to delight customers. New value, new income. We've got that program to help. We’ve got cyber here. There's a little bit of info management/privacy over there. Consumer Data Right. Digital platforms, reg-tech, a-ha tech to let you know how your business is going. AI, so that hopefully won't be another point of comparative disadvantage for our community. Can’t we join all that up? Can’t we make it easier for our people to embrace those opportunities?

I just think we need to talk about incentives, recognition, enablement. Wind in the sails.

In Singapore – and we heard about that valley of death of cash flow in the early years of a business - you actually get a discount on your tax in those first few years. It's a statement that new enterprise matters and the tax system is going to support that challenging time. Is that for us? Asset write-off is a year-to-year thing. Does it need to be that way? Incentives for digitisation. They are very positive measures but can’t we lock them in so people can plan?

For those young entrepreneurs maybe, maybe, maybe, at a graduation ceremony we’ll hear that Troy wants to be a business owner. Or Charlotte wants to create an enterprise that's about profit and purpose because she wants meaning in life. Help me make that conversation work.

And after the travails of recent times, the reserves of emotional responsiveness and cash reserves are deplenished in too many of our community. I'm trying to make business continuity planning sexy. Wow, is that a challenge. Then we run into insurance. I know insurance is hard for consumers. I know there’s many consumers who are under-insuring or choosing not to insure. But for our community that is not a choice. To have an insurance coverage for certain activities is a condition to engage in trade or commerce. Yet we know the pressure and the commercial lines keeps getting talked about and explained away - not addressed and resolved. We need to do something in that space.

I heard someone mention the Jobs and Skills Summit. You know there were a million and a half people who were invisible there. They were self-employed people. What’s wrong with honouring self-employment. Surely, we should be celebrating people who nurture their own opportunities, create their own livelihoods. Surely, we should be out there responding to the different entrepreneurial trajectory of women-owned, women-led businesses; the overrepresentation of CALD communities as business leaders in our nation. We can do these things, but it is about shifting our mindset from not minimising the headwinds, but to maximising the wind in our sails.

We celebrate arts and sport. Why not a Prime Minister’s �Թ�� Awards to draw attention to how valued these people are? We are coming into the election season. Ideas matter. Within this room we’ve got plenty. Let's find some shared ideas. Pick up Chris Lamont’s point. Make our case so compelling that no political leader could not respond to our call.

Let's energise enterprise.

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