The NAB SME research report is chilling. My conclusion from its contents is that if we retain our current practices that discriminate against small enterprises, Australia will have unemployment of between 7 per cent and 15 per cent for at least a decade.
What’s amazing is that the innovative character of ordinary Australians has somehow got around the hideous rules set by public servants and large organisations to suit themselves. These rules are totally unsuited for small enterprises.
Yet two-thirds of jobs are in small and medium-size businesses, which comprise 99 per cent of all enterprises.
And 80 per cent of the workers in construction, professional services and hospitality are in small firms, while in agriculture and real estate it’s more than 90 per cent.
Not surprisingly, in the years leading up to the COVID-19 crisis, small businesses were starting to be weighed down by the hopeless award systems, slow payment of bills, lack of digitisation in small enterprises and government, lack of government procurement, and mountains of unnecessary regulations led by tax complexity.
NAB chief executive Ross McEwan says we have a wonderful opportunity to get it right in the wake of the COVID-19 crisis. If we do, the rise in productivity, employment and rewards to the total community will be mammoth.
The NAB report bristles with suggestions on how to embrace the task. I am going to select a few for comment.
NAB is a believer that there should be a simplified SME business award to take away the complexity of hiring and paying staff.
I agree totally with that conclusion and talks are under way. Sadly, I don’t think the unions will agree to it and we will end up getting nowhere.
The only way to get agreement is to explain to all the parties that if there is no agreement, the government will promote individual contracts using the existing so-called “Howard rules” legislation.
A vast number of employees can have their jobs modified so they can be classed as contractors and escape the award morass. It simply needs a government advice arm and strict instructions to the Australian Taxation Office that they must obey the Howard laws.
Vast areas of employment can be turned into contracting jobs within the law. Either way, we get simplification and employment creation.
On The Australian website under the heading “Speeding up business payments to suppliers vital for coronavirus recovery”, I explain that the government has legislation before the House that requires large companies to list their payment policies and small enterprise payment times.
The benchmark is 20 days from receipt of the invoice. The government has promised to go one step further and mandate that no organisation that secures a government contact will be allowed to take longer than 20 days (not 30) to pay suppliers and contractors.
One of the disappointing aspects of the small enterprise scene is the lack of digitisation. But sadly, state and federal governments are not much better.
The NAB report highlights that small businesses only receive a quarter of all government contracts despite being more than half of all production. Clearly, public servants like to deal with their contemporaries in large organisations.
But the problem is deeper than public service policy because a large number of small enterprises simply don’t know how to access government contracts and miss out because they didn’t register their interest and abilities. The government systems don’t help but they are not impossible.
I would suggest that a good starting point is an all-out campaign to teach small enterprises how to seek government contracts. But the small enterprises need to have systems that can communicate with government.
List of problems
On the list of the problems faced by small enterprises is the perennial “excess regulation” that governments have been trying to reduce for decades. I normally pass over such recommendations because they never get anywhere. But NAB has isolated the fact that 67 per cent of the regulation problem involves taxation.
My regular readers know that I have documented countless examples where the ATO has unfairly persecuted small enterprises. The ATO relies on the complexity of the tax act. It won’t be easy, but at least we now know where to go to reduce regulation and it’s a problem that extends beyond the ATO into the states.
It would certainly help if the government converted its current temporary asset write-off allowances into a permanent allowance to allow longer-term planning and digitisation.
At least we now know where to focus in reducing regulation.
One of the most difficult areas to solve is the injection of capital into smaller enterprises given the inherent high risk.
NAB under Andrew Thorburn and Anthony Healy was an Australian leader at developing techniques for cashflow financing and linking the bank to real-time business cashflow figures using software systems.
Sadly, it was not mentioned in the list of recommendations and I think it got buried by the countless layers of the old NAB bureaucracy. Ross McEwan needs to dig up the work and see whether it can be implemented quickly.
COVID-19 has presented us with many challenges, but it also presents us with an opportunity. There is an old saying, “never waste a crisis”. We can repair vast amounts of the small enterprise landscape, but there’s no time to waste.