E&OE..................
Thank you very much Ella. To Rob Bastian, my parliamentary colleagues, ladies and gentlemen. It is an important occasion this. It does represent the first national small business summit and I congratulate COSBOA on the enormous effort that has been put in to organising this gathering.
It';s not only important because it';s the first time such a gathering has taken place, but it';s also occurring at a time when for very understandable reasons which I will address very directly in the course of my speech, there is a very big focus on the role of small business in the Australian economy.
I come to this gathering not only as Prime Minister but also as somebody who';s very proud of his own small business heritage. My father was a small businessman having run as many of you know a petrol service station in the inner suburbs of Sydney between the late 1920s and the mid 1950s. As a young child, as a teenager I knew something of the frustrations and challenges of somebody running a small business. I';ve never forgotten the fairly peremptory way in which the local council instructed my father to remove the petrol pump from the kerb side apparently without much feeling as to the impact of such a bureaucratic instruction on the conduct of his business. So when small businessmen and women speak to me of government and bureaucratic insensitivity, and I say government and bureaucratic because sometimes the insensitivity flows from political decision making and not all of it can be apportioned to bureaucratic decision making, I do have some understanding of what people are really talking about.
The small business sector is of immense importance to the Australian economy. This is probably an audience better than any that understands just how much employment it accounts for. And when we came to government we were determined to try and make a difference for small business, we were determined to try and improve the economic conditions in which you operate. And I would argue with great passion and conviction that despite some of the criticisms you may have to make, and I';ll deal with those in a moment, we have by and large delivered on that promise.
The economic climate in Australia now is vastly stronger and better than what it was five years ago. We do have lower interest rates, vastly lower interest rates now. Many of you will remember the interest rates of 20% to 21% that obtained in the early years of the '90s and the in the late '80s. You will all remember those and none of you I';m sure will want to return to those rather dismal days. We did set our face very determinedly towards reforming Australia';s antiquated industrial relations system. And to me it remains a source of very considerable pride that we have changed the industrial relations culture of this country. Now that means different things to different people in small business. To some of you that doesn';t matter very much because you were not in businesses that were touched by the activities of unions.
But many of you are in businesses that were and will in the future if there';s a change of government be touched by the activities of unions because if there';s one thing we can be utterly certain of without any contradiction that if there is a change of government at the end of this year the union boys and girls will be back in the box seat and that will make an enormous difference. And we saw an example of it last night in the Senate where a measure that your own Chief Executive - Rob Bastian - said would generate 50,000 jobs in small business - that is Tony Abbott';s legislation to get rid of the unfair dismissal laws - that was again, what for the fourth time, thrown out by the combined votes of the Australian Labor Party and the Australian Democrats. Now that particular measure we will continue to put up and we';ll continue to pursue it. I regard the existing unfair dismissal laws as an absurd impost on the small business community of Australia.
But we have tried to create a better and a stronger economic climate. We';ve not only seen interest rates fall, we';ve not only seen other changes, but of course we';ve also seen a very significant reduction in government debt. You all know that when you have debt you';ve got to service it. I don';t want to burden you with too many figures tonight but the federal government';s debt to GDP ratio in Australia now stands at only 6.4%. And if you think that sounds too much let me remind you that in Japan it';s 130%, and in the United States it';s something like 45%. And repaying that debt has given an underlying strength to the Australian economy which was very important at the time of the Asian economic downturn and is very important now that we have moved into a somewhat more challenging economic circumstance.
You are all aware that we recorded in the December quarter the first negative growth figure for nine years. And that was a set back, it was a disappointment. It was a matter of regret to the government and to many in the community. It';s important though we keep a sense of perspective about it. Something like 95% of the Australian economy continued according to our advice to grow at roughly 4%. But the remaining 5% comprising largely of the construction industry suffered a severe downturn. The downturn in the housing industry after the introduction of the GST, we expected a significant downturn because of the natural pull forward of economic activity prior to the introduction of the GST, the downturn in that sector was much sharper than we had believed was likely. And when we saw the December quarter figures you will be aware that the Government decided within the period of two days to inject a further $150 million over the next 12 calender months into the economy via a doubling of the first homeowners grant for new dwellings. That combined with very significant reductions in interest rates that have occurred over recent months will we believe act as a major source of stimulus to economic activity in the housing and construction industry over the remainder of this year.
But it is enormously important at this particular time when for the first time in years we are dealing with a negative quarter of economic growth to keep a sense of perspective. One quarter of economic growth does not devour five years of achievement and progress. One quarter of economic growth does not mean that in the irresponsible words of one newspaper headline Australia has hit the wall. One quarter of economic growth does not presage a recession. It certainly does not represent a return to the days of astronomical high interest rates and much greater high unemployment.
The only real threat we have to continued economic prosperity in this country is if we talk ourselves into a sense of doom and gloom and despair, if we lose confidence in our capacity as a nation and a people to deal with economic challenges. And my strongest request, entreaty to all of you is to have a sense of proportion and a sense of balance about what has occurred, to understand that when the basics of our economy are so much stronger than they were a few years ago we have a much greater capacity to deal with temporary adversity.
As all of you know we went to the 1998 election with a detailed plan to change Australia';s taxation system. We have needed taxation reform in this country for more than a quarter of a century. And we decided before the 1998 election to put that plan in detail in front of the Australian people and to invite them to support it or reject it. They decided to support it. Not without some reservation, not in the eyes of many people without some trepidation but they decided to support it. It was a risk both politically and otherwise. But we decided that it was a reasoned risk that was worth taking politically because we believed that in the long run it would be of fundamental benefit to the Australian economy. And that remains my very passionate conviction. I know we are going through some difficulties with it at the moment. I am aware of the political adversity that the Government is suffering at the present time. But that is not shaking my conviction that what we are doing and what we have done is the right thing.
I want to say to all of you as representatives of the small business community in Australia that I am very grateful, the Government is much in your debt, and the Government is very comprehending of the challenges that you have had to deal with in implementing the new system. I knew that there would be challenges for the small business sector. The consumer acceptance of the new tax proved to be better than the doomsayers and our opponents predicted and wanted. But the small business sector has had some challenges, particularly in relation to the compliance regime. I';m aware of that and as early as November of last year I said that if changes in the Business Activity Statement, and other changes in relation to compliance were needed, the Government would be willing to respond. And many of you will know that we had a lengthy meeting in Sydney attended by your President on behalf of COSBOA and many other organisations with the Commissioner of Taxation, and the Treasurer, the Small Business Minister and myself, and we sat down and we broadly reached agreement on changes that would be made.
Now I don';t regard those changes as representing in any way a backflip or a retreat. But if they are in the eyes of some well so be it. The important thing is that we are engaged in implementing the biggest change to Australia';s taxation system in the lifetime of anybody in this room. And when you are elected to high office, particularly to the office I hold, you really have two choices. You can opt for the easy life of enjoying the privilege of being Prime Minister, and it is an immense privilege to be Prime Minister of this wonderful country. Or you can decide that in certain areas of public policy you';re going to try and make a difference, you';re going to try and see it through until a change that you believe in and you believe is important to the long term benefit of the country is achieved. We are going through some of the more difficult aspects of implementing that change. I certainly don';t underestimate the challenges that many of you face and I certainly don';t underestimate the broader political challenge that I face. But if I had my time over again I wouldn';t have adopted a different course because I do believe that when it is bedded down we will have a much better tax system. I also know this, as certain as you can be of anything that if we are replaced by our political opponents at the election in a couple of years time you won';t see much difference in the tax system either.
The reality is that deep down everybody of any consequence in Australian politics has known for years that we';ve needed a new tax system. We';ve been running away from it as a country for a generation. The difference is that the Government I lead decided that we should stop running away from it and we should face up to our responsibility to bring about change.
Now we will continue to monitor very closely and we';ll continue to consult very closely. And may I say that one of the reasons in the reshuffle that I appointed a minister specifically, with the sole responsibility of dealing with small business and it';s Ian Macfarlane, somebody who';s had a small business background and small business experience, was to increase the level of communication and increase the level of contact between the Government and the small business community.
Now we';re going to continue to listen and communicate very closely with you about the further implementation of the tax changes. And we stand ready, if it';s necessary, to further finetune the compliance procedures. Now somebody here might jump up and say 'oh that';s rollback'; - how ridiculous. Rollback is when you take the tax off items that it is on, it';s not when you elect to improve and make smoother the administrative implementation of the new system. When you bring in a new system of this magnitude, the very suggestion that you could have every single administrative procedure exactly right at the very beginning and never have to change any of it is palpably absurd. I believe the changes that were made and announced by the Treasurer on behalf of the Government a few weeks ago represent very, very significant and very important and I believe lasting changes. And the reaction that I';ve had from most people, certainly here tonight, mean that they are changes that by and large have met the concerns that people have expressed.
I don';t know whether there are any food retailers here tonight, but can I say to them as an example of our ongoing determination to make further improvements and changes where it';s necessary that you';ll be aware that food retailers were given access to certain simplified accounting methods with an annual turnover of between $1 million and $2 million. And that $2 million ceiling was originally intended as only a transitional arrangement during the first twelve months of the operation of the new system. I can now inform you tonight, that that will become a permanent feature, up to a level of $2 million, of the new system. And that means that the transitional measure, those.no longer a transitional measure, that those businesses up to a level of $2 million will be given access to the snapshop, the snapshot rather and the analysis of purchase, simplified accounting method operating under the new taxation system.
I remind you that on the 1st of July, financial institutions'; duty will be completely abolished as an incidence of the new taxation system. I';d also remind you that company tax is scheduled to fall from 34 cents in the dollar to 30 cents in the dollar on the 1st of July also under the new taxation arrangements. It is important that we constantly remind ourselves that we are dealing here with a total change to the taxation system. We';re not dealing just with a GST, we';re not just dealing with cuts in personal income tax, we';re not just dealing with the virtual halving of capital gains'; tax. We are dealing with what in aggregate is the largest tax change or revolution that this country has had, as I said before, in the lifetime of anybody in this room. And it';s my view that given the magnitude of the change and the challenge and the task that was involved, that the Australian community has responded in a quite magnificent fashion.
It';s not only represented a huge change in the way in which the business community and in many cases individual Australians interact with the taxation system, but it also has brought in a huge change in the financial relations between the states and the Commonwealth. Under the new tax system all of the GST revenue goes to the Australian states, every last dollar. Not one dollar of the GST revenue goes to the federal government. And can I say on the subject of revenue, and I say this in specific response to a gentleman who spoke to me about it just before I got up to deliver this address, can I dispel very deliberately and very explicitly the false notion held by many in the community perhaps as a result of rather careless reporting, that we are collecting billions more under the GST than we were advised would be the case. We are not. We are not billions ahead. We';re not even hundreds of millions ahead. Indeed the Treasury Tax Office estimates in relation to collections have proved certainly not to have been too conservative and indeed any suggestion that we';re ahead at all in relation to collections on the latest advice that I have, is completely wrong.
Now it';s important that I make that point because there is a view to be found in some small business circles as well as generally in the community that we are raking in billions more than we predicted we would. Ladies and gentlemen I have to tell you that that is not right. We are broadly collecting what our advisers said would turn out to be the case. And I repeat that all of that GST revenue goes to the states and as the years go by for the first time since the introduction of uniform taxation as a war time measure in 1942, the states of Australia will have access to a growth tax which will deliver rising revenues to them in the years ahead. The year after next will see the state of Queensland, the first of the Australian states to be better off under the GST arrangement than they would have been if they had continued with the old arrangement. And as each year goes by other states will join Queensland in being so advantaged by the introduction of the new tax system. Now this means that the states will have growing capacity as a result of our taxation reforms which most of them opposed politically but happily signed up to, they will have access to growing revenues to provide schools and hospitals and police services and all the other day-to-day bread and butter responsibilities which are important to keep a community together and are important to good government.
So ladies and gentlemen I have greatly welcomed the opportunity. Tonight';s gathering is timely for me. I hope it';s been timely for you. I say again how personally committed I am to the role of the small business community in Australian life. It is the great employer. It is the great innovator. It';s the great engine room of activity and enterprise within the Australian community. It suits the Australian character. We are not a people that happily accept regimentation, we are not a people who easily lend ourselves to conformity. Australians like nothing other than to start with nothing and to build something up and leave a bit behind. Australians are always impressed with the notion of achievement, of individual initiative and of self-reliance. There are many great Australian characteristics and that characteristic of self-reliance is to be found very much within the small business community of Australia. I know that the Government has its critics in the small business community. I know that not all members of it are our supporters. But that matters not, in the end what does matter is the desire and the commitment of this Government to sympathise with your sector, where we believe we can in the interests of good public policy introduce policies which are beneficial. We believe we have done that overwhelmingly in the economic climate that we have created. We believe that our commitment to free industrial relations, our determination to resist the intrusion of union power into the small business sector is very important to your wellbeing. We acknowledge with gratitude the way in which the small business sector has grappled with the implementation of the new tax system.
We will continue to listen very closely to your concerns on that front. We believe that the benefits of that new system will continue to become apparent to the Australian people and in the end most of the community will look back on this period in our economic experience of being one in which a government with the co-operation of the business community was prepared to undertake a change that in the short-term may have presented challenge and it certainly has, but in the medium to longer-term will leave this country stronger and better economically, more modern, more competitive and more able to work effectively in the broader world community. And in the end that is the key to the ongoing prosperity of the Australian community. I thank you very warmly for your understanding and your partnership in this very important enterprise. Thank you.
[Ends]