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Monday, 26 February 2018
Page: 1868


Ms OWENS (Parramatta) (16:59): How on earth can this government, the Turnbull government, even think of itself as a government that supports innovation when it takes five years to get the legislation on crowdfunding to a usable form in our parliament? It's an amazing indictment of this government that this really quite simple piece of legislation, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017, has taken so long.

I say 'simple' because, even though equity crowdfunding has its complexities, it is simple relative to the kinds of challenges that governments need to face now when they deal with innovation—the changing ways that businesses are starting to work and the effort going on around the world to restructure our concepts of the economy and how business interacts to deliver social good. When you look at all the change that government's going to have to deal with in the very short term, this is not a really complicated one. This has actually been around in the US. President Obama introduced the US legislation in 2012. The word 'crowdfunding' is known. People know what it is, yet this government has taken literally years to get the legislation to a point where it can be passed by this parliament and finally implemented several months down the track, if you let this government go.

It's been a litany of disaster from the beginning. The Labor government, way back in 2013, asked the Corporations and Markets Advisory Committee to advise on the appropriate framework to allow equity crowdfunding to operate here. That was in 2013, a year after the US. The committee brought down its final recommendations to the Abbott government in May 2014—and then nothing. In 2015, nothing. In 2016, nothing.

Then finally, in 2017, we had a bill before this House—actually, I think it was late 2016—which did not meet the needs of the start-up community and was widely criticised. There was some delay as we on this side of the House attempted to negotiate amendments to make it more suitable, but essentially the problem with it was really simple: it required businesses that wished to crowdfund to become unlisted public companies, at incredible expense and with an enormous amount of red tape. Ninety-nine per cent of the businesses that might want to participate in the crowdfunding are actually private companies, so 99 per cent of businesses were not structured appropriately to use the legislation that was introduced and eventually passed in early 2017.

So the government was widely criticised, and criticised by this side of the House as well, for putting through a bill which did not actually achieve what it needed to achieve. We on this side knew then that it wouldn't work. In fact, the previous speaker, the member for Chifley, called it a dodo, saying it would be extinct within days, and in fact it was. He pointed out that now, a year later, there have been seven platforms launched under that old legislation and three completed crowdfunded projects. World experts on where the money moves estimate that crowdfunding is a field that will be worth about $95 billion worldwide by 2025, which is only seven years away, and we've got seven platforms and three completed crowdfunded projects, a year after the government's first legislation was introduced.

This new legislation addresses a lot of the botched parts of the previous bill. It actually meets the needs of the sector, and it will allow this sector to grow rapidly, which is a very good thing. But I just want to go back to what I said at the start of this: this is in many ways a simple exercise to get something right for equity crowdfunding and, again, five years is a long time to wait for appropriate legislation. The industry itself is complaining loudly, and quite rightly, that it'll have to wait at least another six months, if the government has its way, before it can actually use this legislation. We will be working hard to fix that for the industry and bring it forward.

Most of the speakers who will speak on the crowdsourced funding bill today—the member for Chifley, the member for Burt and the member for Griffith—are into tech. They are speaking today because they are great followers of new technology and innovation. My interest in it is different. I am interested in the changing relationship between customers and businesses and between business and business in my community and right around the world. I am interested in the efforts that are going on around the world to restructure the way we think about business in our communities to effectively allow communities to make better decisions about how their resources are spent.

You can see all sorts of examples of this. You can see the growing number of co-ops and mutuals where people decide that they want a medical centre in their small town and so they form a medical co-op. You can see in Europe where people are getting together and forming mutual insurance companies that are now so wealthy—essentially because they insure small business owners, and small business owners don't get sick very often—that they are expanding right across Europe, out of one country and into several others. Enormous amounts of money have been put together through co-ops, because that was the only structure that actually worked for them. You can see in the US where small towns are getting together and forming mutuals that build their own internet network or that build their own power companies. You can see people all around the world—some very smart people—trying to find ways to strengthen the consumer within a company so that that old relationship that we had with economies of scale where a big company had customers and there was no real interaction is actually changing and breaking down. We will see over the next 10 years or so a dramatic increase in that kind of activity and in the way that people approach their relationship with their customers and customer-owned businesses. Crowdfunding is very much a part of that.

Equity crowdfunding is one part of crowdfunding, but I imagine that, if you took the rules away, if you took the law away—and I am not suggesting we do take the law away, by the way—if you allowed it to flourish and follow its own path, you would find an incredible array of forms of customers coming together with money or businesses or investors coming together and forming different kinds of relationships with the companies from which they buy products or in which they invest. I suspect that we will see that anyway and that we will very quickly see platforms and businesses that are wishing to crowdfund bumping up against the legislation, even though at the moment it looks right. I suspect we will see that happen very, very quickly.

Crowdfunding isn't as new as people think. In Parramatta, my community crowdfunded its swimming pool just after World War II. They wanted one and so they got together and crowdfunded it. In the US, they crowdfunded the base on which the Statue of Liberty stands. There are many examples. Of course, co-ops and mutuals were a different legal form of a group of people getting together and deciding how they wanted their money to be spent and how they wanted their resources to be allocated. Again, we are seeing the re-emergence of new forms of those. In Belgium, there is a group called SMart, which takes people in the gig economy in the arts industry and collects all their fees and effectively pays them a full-time salary. It has an incredibly large amount of capital sitting there, with 80,000 artists on its books. That is a co-op. It is a new form whereby people get together to create the business that they want the solution from. So, effectively, it is not a business looking for a crowd but a crowd looking for an answer—the reverse of what we now see as crowdfunding, and we will see more and more of that.

It is not new here either. I read quite often that the first recognised modern crowdfunder was a British rock artist in 1997, who got together a whole bunch of his fans to fund his tour. ArtistShare created their platform in 2000. But I can tell you that the Cafe of the Gate of Salvation, which is a gospel choir, got its fans together in 1989 to crowdfund its CD, and I bought one. I still have it, I think. We paid for that CD a year before they made it. We knew we were doing that. I challenge this first recorded incident of the 1997 British rock artist who doesn't seem to be named anywhere. I name the Cafe at the Gate of Salvation as the first official crowdfunder. Go the gospel choir. They were very, very good.

I would also point to the Melbourne Theatre Company in the late 1960s and 1970s, which invented what we now know as subscription. They got all their fans and customers to pay a year ahead. In Australia we think that's normal, but it's actually not—it's only Australia and South Africa that do it. You have companies in Australia like the Australian Opera that have at times received 80 per cent of their income 12 months before they even produced a production. It's an Australian invention. John Finlay at the Melbourne Theatre Company invented it, and it's gone through virtually every Australian company. It too, in many ways, is an early form of crowdfunding, because it brings the crowd together to produce the service that they wish. It's crowd up, not crowd down.

So when I look at this particular piece of legislation and the great stuff that is happening, the wonderful new platforms that are coming out, and the great business ideas that we will see funded that way, I still think that there's another step to it. Over the next few years we will see a dramatic change in the way businesses and customers interact. We will see more customer owned businesses. We will see a whole range of new ways of business and customers and investors working together.

When this legislation comes into force and we start seeing more and more start-ups and other businesses seeking crowdfunding, I suspect it's not going to be as trouble free as we might like. We'll have quite inexperienced investors that have emotional attachment to the company in which they invest. We'll have a range of different kinds of relationships between the business and the investors because of the approach of the business or the investor. I suspect it won't be quite as neat as we think. There will undoubtedly be some that will hit a wall because of the different expectations of the different groups. That, in many ways, is exactly my point. We now have a growing number of people in our communities right across the world who are looking for a different kind of relationship. As our communities themselves become less and less capable of coming to common conclusions, because we no longer live and work in the same suburbs, but we jump in our cars and leave, there are people who are trying to find new structures that bring people together to make decisions about where they want their resources to go.

It's an incredibly exciting time. Quite frankly, we need a government that can work a hell of a lot faster than this one on this stuff. We're going to need a government that can respond when new ideas start bumping up against this. We're going to need a government that can respond when new forms of coops and mutuals start to get into kinds of crowdfunding of their own, as they already are. We need a government that puts its legislative power where its mouth is. It talks about innovation, it talks about game changers, but it's just not prepared to do the work. There's a phenomenal amount of work to do, because the opportunities out there for new ways of thinking and new ways of making things happen, for empowering communities to make decisions to solve community problems for the common good or for personal good, are legion. Every major university is into it and is trying to work out the new economic models. Every council knows they have problems they can't fix. Every community has people in it looking to do this. We have groups in Western Sydney who for years now have been collecting groups of people to invest in solar panels on the roofs of not-for-profits, because they believe that's where their resources should go. There are incredibly complex structures that these not-for-profits have to set up in order to do it. We need easier ways to do that.

Crowdfunding is not finished. This is just the beginning of it. We'll be astonished when we look back in 10 years at how far it's gone, around the world. Let's hope it goes here as well and let's hope we have a government that's capable of adjusting its laws, of looking at the possibilities and opening doors for those possibilities.