ADDRESS BY THE PRIME MINISTER, T'HE HON P. 3. KEATING, MP TO
THE SIXTH NATIONAL SMALL BUSINESS FORUM SYDNEY, 19
OCTOBER 1992
Mr Edwards, my coleague, the Flon David Beddall, ladies arnd gentlemen.
Thank you for inviting me to talk to you today.
I want to talk to you about what the Government is now doing, and what it intends to
do to make sure that small business continues to play its part in the expansion of the
Australian economy which is now underway.
But before I do that I want to spend a little time describing to you the quite
extraordinary sea change which the Australian economy has undergone In recent
years. We face many challenges over the coming decade, and the most important evidence of
our capacity for change is the change we have already made.
We simply are a much morc competitive, productive, internationally-oriented, export
based ccononiy.
No one would deny that that is what we want to be what we must bc.
Australians should be aware of these achievements because they arc theirs. They
should know, for Instance, that:
we now export almost twice as much as we did a decade ago.
that, exports now account for more than 23 per cent of total output.
that we now sell more than manufactured products overseas than metal
ores and minerals, and, for the first time in our history they match our
expotts of rural products.
that in 199U-91 our manufactured exports showed the fastest growth in
the OECD, and fastest among them were Elaborately Transformed
Manufactures which have grown at a rate of about 45 per cent in recent
years. that our service exports have tripled in the last decade.
that tourism is now our single largest export industry, accounting for
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that we arc exporting ETMs and services as well as mincral and rural
products to thc fastest growing economies in the world thc Asian
economics. that we are exporting them through ports which have doubled their
productivity in the past couple of years.
that they are being generated in officesq and factories and mines which
arc increasingly working under enterprise agreements whose number is
growing so fast we expect half the workforce to be under them by
midway through next year.
There has been a great change in our economy and a great change in our attitudes and
I think Australians deserve to be reminded of it, and encouraged to take heart and
pride from what they have achieved.
And it is for thesc reasons that I have to say that I willt passionately resist the
Opposition's intentions to undo those achievements.
And you shouldn't be surprised if I'm passionate about it because you know it was
the L. abor Government which took the leap, against much more internal resistance
than you would expect the conservatives to have faced, and made the changes, and
opened the economy up.
And 1 believe very strongly that we wouldn't have made them, we wouldn't have the
chance we now have, if we hadn't taken the people with us.
if we hadn't built a consensus, encouraged negotiation and consultation and
maintained our commitment to social development.
Unashamedly, I take the view that there is a role for government. We cannot
responsibly back away from maintaining the necessities of peoples lives, we cannot
retreat from our economic role.
I take the view that governments can make subtlc and sensible interventions in the
economy and I think the facts of the last decade support me.
I have no doubt about that and no doubt about the one great certainty in the
economic life of this country that a great deal will depend on the continuing cnergy
and initiative and skills and ideas of small business.
It will continue to depend on the success of people like yourselves and those you
represent. We recognise that small and medium sized firms employ much of the Australian
labour force over the past two decades small business has generated more than
per cent of the new jobs.
We recognise that small businesses generate a lot of the new product, and that they
drive a lot of those very welcome developments I outlined earlier.
We recognise that the potential of their enterprise s unlimited. When they thrive
Australia does.
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We recognise that they form the basis of much of the future growth and prosperity of
the Australian economy.
We recognise that it is among them that a lot of the risk is taken. A lot of the
necessary risk.
They know fear. They know frustration. They know hard work.
But they also know hope, and excitement and fulfilment.
Recognising all these things, the Government's role is to minimise the frustration, and
maximise the fulfilment.
Small business has been an integral part of the consultative process of this
Government starting with the Economic Summit in 1983 and put on a more permanent
footing with the establishment of this very successful Small Business Forum.
We have not always agreed with each other.
And we have not always been able to do all we would have liked.
But the results of the continuing consultation between Government and the
representatives of small business can be seen in the measures introduced.
Our assistance to business has ranged from the deregulation of financial markets to
the deregulation of aviation; reducing company tax to reducing wholesale sales tax on
motor vehicles; reducing the number of strikes to a thirty year low to reducing
inflation to a thirty year low.
We made tax reforms in One Nation specifically for business.
the nine week deferral of company tax payments for instance.
a new accelerated depreciation schedule which allows plant and
equipment with an effective life of, say, ten years, to be written off
over five years, rather than eight. A measure which in one year alone
constitutes a peak saving to business of $ 1.25 billion.
an increased depreciation rate for industrial and short term traveller
accommodation from 2.5% to 4%.
an increase from 20 to 50 per cent of the capital gains tax exemption
ood will, and a doubling of the eligibility ceiling from $ 1 million to
2 million of net business interests.
We have legislated to allow for the development of Pooled Development Funds to
help firms obtain equity capital, and I am pleased to announce that the Equity
Investors Ltd has been registered as the first of many PDFs that will play a vital role
in assisting the expansion of small and medium sized Australian businesses.
Ladies and gentlemen, with public discussion in economic reform directed largely at
the need to create internationally competitive industries, there is a tendency to feel that
locally made goods and services are uncompetitive.
This is a long way from the truth an increasingly long way.
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Our agriculture and mining industries are among the most competitive in the world,
while the record of our manufacturing and service sectors in responding to the
competitive challenge has been simply outstanding.
Manufactured exports have grown at a rate of more than 14 per cent each year since
1985/ 86 and now total nearly $ 13 billion annually.
Exports of services such as tourism have been similarly impressive with a real 8.5 per
Cent average annual growth since 1985.
And one of the reasons for the extraordinary growth has been the greatly improved
quality of the products Australians now make.
And small and medium fixed businesses are a major clement of this success.
Of course, the Government recognises the extra hurdles small businesses face if they
are to succeed in international markets.
This is why we established the Export Access pogram that will assist 700 small and
medium enterprises over the next three years.
These days we build cars and sell them into the most demanding car market in the
world, Japan the same country where Peters WA sells $ 50 million worth of ice
cream each year.
Australian companies build the ferries that cross the English Channel. And some of
the best luxury motor yachts in the world.
I could list dozens of other examples, but chances are you will know about them,
because it is companies like your own or your members' which are doing a lot of these
things.
The simple fact is that these days, across a whole range of products, you can't buy
better than Australian.
All of us have an interest in telling Australians about it telling Australians that
Australian made products are very often as good, if not better, than anything made
anywhere else in the world, and that when they buy them they are doing both
themselves and their country a favour.
In a sense it is the return on their initiative, imagination and hard work. Buying good
Australian products pays the dividend on the all the changes we have made.
It is for this reason in this Australian Made month that I am pleased today to
announce that the iovcrnment will work with the Advance Australia Foundation to
further promote the Australian Made symbol.
We will put in $ 2 million in each of the next two years to ensure continuity and a high
profile for the campaign.
And a central element of the campaign will be the quality and reliability of products
made in Australia.
It's desirablc for example for the Governmnt to regulate unconscionable conduct under the trade practices legislation, and we will introduce a Bill into Parliament for
passage this session to do just that.
It's certainly desirable to have clear and conmprehensive rules to encourage competition and fair pricing.
This is one reason the State and the Federal Governments agrccd to the need for a
national competition p~ olicy which, as I recently announced, is the subject of an
enquiry to be cha" ird y Professor Fred Hilir of the Australian Graduate School of
Management. it will look at extending the reach of competition policy into areas not now covered,
such as government business enterprises and the professions.
There has to be cquality of competitive standing betwecn government enterprise and
private enterprise.
Again, that is an area where the application of law to Ousincss is a good and necessary
thing and, by and large, business both big and small supports it.
But I know there are regulatory inconsistencies between thc States or between the
States and the Commonwealth areas whcrc regulations may no longer fulfil their
original goal, and areas whcre regulations may have been made without sufficient
supervision by the Parliament or the Govcrrcment.
Many of these problems have been addressed by the adoption of principles of mutual
recognition by the States and the Commonwealth.
From March next ycar standards recognised in one Statc will be recogniscd in all
States. I am firmly committed to cutting inessential regulatory burdens on small businesses
but let me tell you that the administrativc burden of a GST will be vastly greatcr than
any reporting requirements presently faced by small business.
I havc spokent to a lot of small business people about the idea of a Goods and Services
Tax in recent months, and I must say I am puzzled by the gap between what they say
and what somec small business organisations say on their behalf.
The people who spcak to mc recognise that small business would be a big loser from
the GST.
It is small business which will have to collect the tax. Undcr our amended wholesale
sales tax, only 20,000 businesses will be required to be in the system. Most small
business will be able to opt out and have no reporting requirement whatsoever.
But under the Opposition proposals all small businesses will havc to pay a 15 per cent
tax on their purchases, and add a 15 per ent tax to their sales. They will get the first
per cent back eventually of course, hut only when they have done the paperwork.
They will remit the 15 per cent on sales to the Govermecnt, and again they will have
to do the paperwork.
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Already, Australian products compete favourably on price; a clearer apprcciation by
consumers, other producers and distributors of the quality of our products can only be
beneficial for all Australia.
In deciding to provide this additional support to thc Australian Made -symbol, I have
been very awvare of the problems that have bccn cncounicrcd recently by some
doubtful labelling practices.
We have all heard stories of thc overseas product with a Made in Australia label
because it was packagcd here.
Fortunately this is not a major problem with thc Australian Made symbol itself.
But it is clcarly a problem with the rangc of descriptions that appear like " Made in
Australia", " Product of Australia", " Manufactured in Australia' and so on.
And it is not only the consumecr who is confused.
Business does not have clear guidelinei and definitions in the various Federal or State
legislation to which it must adherc.
Accordingly, the Ministcr for Consumer Affairs, Jeanniette. McHugh, has been given
the task of developirng practical definitions of such termis to ensure that both
consumers and those charged with enforcement such as the Trade Practices
Commission and Customs have a solid and universally-applicable basis for
assessing whether something is, in fact, Australian made or not.
Thcrc will bc a number of complex matters involved in the review and the vicws of all
affected parties including the groups represented here today will be welcomed.
I will also be writing to the State and Territory governments asking them to contribute
to this process and adopt its outcome.
I expect that this task can be undertaken without delay, and that we can put
appropriate changes into legislation in the first half of next year.
I said earlier that 1 know something about the hopes and fears of small business
people. I know it primarily because my father ran a medium sized business. I grew up
knowing it.
For example, I know of the difficulty my father had in persuading the banks to lend
him money on cash flow or receivables. They only wanted to lend against the
property and I have to say that therc is still too much of that kind of thinking among
the banks today.
It was hard to get a loan from a bank in those days, and just as hard to finance the
business from profits, because undlistributed profits in private companies were taxed
in a very discriminatory way.
That's one of the things I'm pleased to say I fixed as Treasurer.
Government regulation is a particularly difficult prohlcn because there are, Of course,
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As a New Zealand accountant reported for that country, small businesses people will
lose their Sundays to new paperwork.
The Canadian expericnce is particularly telling for small business.
Canada intfoduced its GST in January 1991. In November 1991, the Canadian peak
small business organ on, the CFIB, released the results of a survey it conducted of
its members in a report titlcd " The GST: A National Tax Tragedy."
Over 25,000 responded to the survey, the biggest response to a CFJB survey ever.
And their message was very clear.
Over 70 per cent of respondents reported a negative impact from the GST on their
businesses while only 8 per cent reported a positive impact.
The message was clear small business is much more disadvantaged by a GST than
is largc business.
Compliance costs were 5.5 per cent of sales for small business but less than 0.2 per
cent f) r largc firms.
We are told business will b; better off because payroll tax will bc eliminated but
most small businesses don't pay payroll tax. Only a small proportion of the 800,000
small businesses in this country, pay payroll tax.
About 700,000 businesses will not benefit at all from the removal of payroll tax.
What they will receive is a new and complex consumption tax which will hit each and
every link in the business chain.
In a way, the position of small businesses illustrates what I think is one of the biggest
problems with a OST.
It is a very considerable clerical burden but for nothing.
It won't sell one additional article of commerce.
It won't help most of the small businesses selling services, which are not taxed now at
all. It won't help the construction industry, which will not be able to offset the tax it will
pay on all inputs.
It won't help the tourist industry, which would be obliged to hit its clients on day one
with a 15 per cent price rise.
Here we have an industry which is making a tremendous contribution to our export
success, which has grown so rapidly in the eighties that it is now one of the major
employers and export carers in this country, and the Opposition proposes a
cent tax on cvcrything it does.
It wants to slap on the tax despite pleas from the Access Economics firm which
helped it write the GST package.
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It wants to slap it on despite the resistance of the Opposition shadow minister for
tourism.
Anid it wants to slap it on despite thc nearly unanimous view of the industry iself that
important products of the tourism industry should be exempted.
It's a similar story with industrial relations, We have right now in Australia a set-up
in which employers can ncgotiate just about anything with their eniployccs penalty
rates, hours of work, thc working week, work practices and so forth.
They can negotiate whatever they wish and come to any agreement they wish, so long
as the employees arc not lcft worse off by the new arrangement.
That seems to mc a reasonable reservation in our socicly.
These deals can be done in a framework of cooperation which has sccn Australia's
competitiveness improve by miore than 10 pcr cent over the last decade, and our
inflation fall to one of the lowest in thc OECD and in our region.
Yet again the Opposition want to throw all that away. It wants to tear up all thc
present agreemcnts and awards and return to thc kind of pitched battles bctwcen
employers and unions which wc had in the sixties and seventies.
Ladies and gentlemecn I began by saying that Australians could take pride in what they
have achieved in the past decade, and that they have many reasons for confidene
about dccadc ahead.
What they have achievced may be attibuted very largely to the spirit of consultation
and consensus which dcveloped in the eighties, and which now characteriscs so much
of our industrial relations Culture and the relationship between government, business
and unions.
I said there had been a sea change in the Australian economy: it has been the change
in our attitudes and in the way we do things which has produced it.
And this will bc the province from which more change comies.
Morc than anything elsc, it has been the change in the culture from conflict to
cooperation which has brought us up to the rest of thc world and given us a chance.
And it is the threat to those gains which I think we should perhaps fear most.
I have addressed you today as people engaged in business.
In conclusion I would addrcss you as Australians meaning people with a care for thc
society and economy at large.
It seems to mie, and I quite sure it will become clear to the majority of Australians, that
our Opponents' policies will be destructivc of both.
Destructive of the economy for the reasons which I have broadly outlined.
Destructive of the social fabric principally because they seek to replace the principles
of cooperation and consultation with a regression to conflict and divisiorn.
We small business and the Government have come a long way in the past decade.
Further, I suspect, than of either of us can readily recall.
And, faccd with the alternative which the Opposition is proposing with absolute inflexibility, I do believe we need to be rernindcd. We've come too far to throw it all away.