I’m delighted to join you this morning to be able to address you and address Australia’s largest peak business body. You have tremendous reach and responsibility at ACCI. You’ve been vocal leaders and advocates in business ever since 1992, the last time Australia experienced a recession.
Since then, we’ve had an extraordinary run of growth.
We’re now in our 25th consecutive year of growth: the second longest growth run in the advanced world. That is an outstanding achievement for our country.
But looking ahead there are no guarantees. Prosperity is not predestined.
While the outlook is still positive, growth is below its long-run average, as it is around the world. And the slowing down of the commodities boom, that’s helped keep us growing in recent years means we’re also pursuing other sources of growth and export opportunities.
Encouragingly, we’re now seeing above-average business conditions in non-mining sectors, and the lower dollar helping sectors like tourism.
In 2014 – 15, services exports were up a solid 7.5 per cent, and investment in the services sector was up by 12 per cent. Residential investment remains at record levels. The labour market is proving resilient, and employment growth is picking up with 167,000 new jobs created so far in 2015.
Backing business to help sustain current jobs and create new jobs, and give people opportunities, is central to this Government’s plans.
As a nation our greatest asset is our people.
Our success as a nation continues to be built off the back of men and women who have a great idea or who have identified an opportunity; been prepared to take risks; and have a go – all with the aspiration that they will build a better future for themselves and for their family.
I know this from family experience. When my grandparents married they rented a house and in true entrepreneurial fashion started a small business. Gwen made felt ties; Alec sold them door-to-door. Keen to make a home for their family, they rented a shop in Windsor and started a milk bar. They worked in the shop during the day and lived above it at night. They took risks. They employed people. Later, they set up a grocery business, going into debt to buy a small shop in South Yarra. A business they worked together in for over 30 years.
When they could, Alec and Gwen moved to a house in Windsor, renting out half of it to make ends meet. They took one holiday in their working life and that was on their retirement. The rest, they put money back into their business. It is a story like so many others.
Each and every small business, family business or start-up is at the heart of the great Australian story of enterprise.
And the figures speak for themselves.
Ninety-seven per cent of all business is small business, employing more than 4 million people.
Our task as a Government is to create the framework for innovation and entrepreneurial activity to thrive.
This means getting the balance right on: tax; the labour market; regulation; trade; investing in human capital and access to funds. While I won’t address all of these topics in the time available today, I do believe that the relationship between each of these is critical to growing opportunity, and to growing jobs.
As our population and workforce is changing, so too are jobs and the industries and the markets around the globe.
Disruptive technology is changing the traditional markets every day.
That raises the very real question of whether our economy is agile enough to reap these opportunities as they arise.
For one, we need to make sure our tax system is not putting obstacles in the way of our ability to innovate, to adapt and to diversify.
The Tax White Paper process which began earlier this year has already highlighted widespread agreement on the need for tax reform. We need a tax system that is sustainable, competitive, efficient and simplified. Importantly reform of the tax system should not increase the overall tax burden as a percentage of GDP, but create opportunities for business to increase their competitiveness and grow Australia’s national income. It should also create more incentives for individuals to work, to save and to invest.
At the moment, among the OECD, only Denmark has a higher reliance on income taxes than Australia.
Our corporate tax rate and top personal income tax rate are high in comparison to many of our competitors. These high tax rates can discourage investment, entrepreneurship and innovation.
Tax reform offers one of the ripest opportunities to improve our prospects and to encourage growth and innovation.
We all agree on that: the next step is how we turn that consensus into action, into change that works.
At this moment, many circumstances point to the need for change: falling mining investment and rising services; an ageing population and burgeoning new technology; and clunky tax system that is no longer fit for purpose.
We could see all of these things as roadblocks, or as opportunities for reform and innovation.
The Government sees opportunity.
As our economy is disrupted and diversified, the opportunities for innovators, entrepreneurs and start-ups abound. And, as I have said, our greatest asset is our people.
We already have one of the highest rates of entrepreneurial activity in the developed world, but we need to continue to foster our entrepreneurial culture, and reduce regulatory barriers that prevent good ideas growing into commercial successes.
Australia produces excellent research, but in translating that research into commercial outcomes we lag behind comparable countries.
We are working on this through a number of programs designed to connect businesses and researchers (like Industry Growth Centres, Cooperative Research Centres and the Entrepreneurs’ Programme) and we’re also conducting a Review of Research Policy and Funding Arrangements.
The Prime Minister and the Government are very alert to both the challenges and the opportunities of the future. Whilst the Government is of course focussed on Australia being more productive and more competitive, we need to ensure we push to become more technologically sophisticated, more innovative in the years ahead, and we have already started down this path.
The last Budget included measures to allow small business to immediately deduct the professional expenses of starting up, rather than writing them off over five years.
We’ve streamlined the business registration process, and improved the tax and administrative arrangements for employee share schemes.
We’re also developing legislation that will remove obstacles for businesses using crowd-sourced equity funding. This will complement the emerging peer‑to-peer lending market which is helping provide small businesses with greater choice and access to lending products.
It’s not the government’s role to pick winners, but it is our job to create the right conditions for start-ups and small businesses to thrive.
To help business to thrive, the last Budget saw the Government produce our $5.5 billion Growing Jobs and Small Business package – the biggest small business initiative in this nation’s history.
We have lowered taxes for all small businesses – with a 1.5 percentage point cut to the company tax rate for small companies and a 5 per cent tax discount for unincorporated entities.
All small businesses can immediately deduct every eligible asset costing less than $20,000 purchased between Budget night and the end of June 2017. There are also measures to help people find work and employers to find workers.
There are so many opportunities for small business, and the Government wants to do all we can to help them take advantage of those opportunities.
I’m very excited to have the Small Business portfolio in Cabinet, and I’m a passionate believer in the vitality and importance of small businesses, family businesses and start-ups in this country.
Small businesses account for four in every ten jobs, and contribute over $340 billion of economic output. Around 85 per cent of ACCI businesses are small and medium enterprises.
Small businesses and family businesses can start small but can also become major global disruptors. They can be in agriculture or manufacturing or health or law. They are a big part of our expanding services sector, so there are vast opportunities for them to break into new markets, particularly as the middle class in China and India swells to more than 2 billion in the next 15 years.
In the light of this potential, small businesses are set to gain from the new free trade agreements that we have successfully negotiated with our Asian trading partners.
The China Export Agreement represents huge possibilities for Australian businesses.
When it’s in place, the China Export Agreement will eliminate tariffs for Australian exports like beef, wine and dairy. This means Australian businesses selling to China will be more competitive than ever before.
Take, for example, the Old Colonial Cookie Company, which makes Butterfinger biscuits. After being introduced to buyers from China’s food and beverage industry at a showcase in 2014, they’ve seen their orders from China pick up.
The China Export Agreement will mean that the current Chinese tariffs of 15-20 per cent on biscuits such as Butterfingers will be eliminated within four years of the free trade agreement coming into-force, meaning that Butterfingers and other Australian biscuits will be more competitive than ever in the Chinese market. And existing Free Trade Agreements are just simply the start.
Lower import prices will increase Australians’ purchasing power. And Australian services providers will benefit from new access to China’s growing services sector. We’ll see more Australian firms, like the one we’re in today, in financial and professional services, law, education, health, aged care, construction, engineering and communications moving into Chinese markets.
China is already Australia’s largest services market, worth $8.2 billion last year. With the new agreement in place, the opportunities for Australian businesses and industries will flourish.
As well as the China agreement, on Tuesday morning, my colleague Andrew Robb, the Minister for Trade and Investment, announced the conclusion of the Trans-Pacific Partnership negotiations.
This is a regional agreement of unprecedented scope and ambition. It will deliver enormous benefits for Australia.
The 12 countries that negotiated the TPP account for almost 40 per cent of the world’s GDP. Importantly, the agreement’s open architecture allows for other members to join in the future, which will only amplify its benefits.
The TPP will help us to harness the enormous opportunities it presents as we look to build a modern Australian economy that can face the challenges of the 21st century.
As you can see, the Government has undertaken a two-pronged strategy to foster growth for small business. We have changed domestic policy settings through the tax system and by reducing compliance and red tape and we are fostering new markets for growth which means more jobs and wealth creation for Australians.
ACCI and many others have expressed concerns that regulation has grown rapidly over recent decades and is creating substantial costs, risks and complexity. It’s also throwing up barriers to innovation and agility.
Small business feel especially burdened by regulation because they usually lack the dedicated resources needed to comply. In ACCI’s 2015 survey, you found that one in four businesses spent more than 10 hours a week on red tape. This is unprecedented.
Since the 2013 election, the Coalition Government has announced reforms that would result in annual savings of over $2.45 billion in regulatory costs for businesses, community organisations and individuals.
One good example is the change we made to the Pay As You Go tax thresholds, which removed almost 450,000 small businesses from the system and will save small business around $67 million each year in red tape.
But of course, there is still much more to do. And your practical suggestions are most welcome.
Our prosperity is not predestined.
With the mining boom cooling off, and the challenges in our population and our workforce putting pressure on government budgets, we need to take all opportunities which present themselves to reform and innovate.
This government is committed to helping small and large businesses, entrepreneurs and innovators, job creators and job seekers. Because they’re the ones who’ll take our economy forward – beyond the mining boom, into the age of disruptive technology and a growing Asian market for Australia’s exports and services. They’re the ones who’ll lead a growing and diversifying and adapting economy that supports the Australian way of life, a life that we value, and that makes the next 25 years as prosperous as the last. Our greatest resource is our people and our entrepreneurial spirit, and we should liberate them both.