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Wednesday, 12 September 1984
Page: 948


Senator BOSWELL(7.21) —Tonight I want to make a few remarks to the Senate on small business. Small business is the way to go to ensure Australia's future prosperity. It is crucial that we do everything to encourage the small business sector to grow. The fact is that nearly 16 per cent of the workforce are self-employed, conducting their own businesses. As well as that, they employ a further 40 per cent of the private sector workforce. It is worth noting, too, that over 90 per cent of the growth industries start out as small businesses, not as new ventures by large public companies.

Small businesses proliferate competition. They depend on new ideas and require high levels of effort to achieve productivity. On the other hand, large enterprises oppress then consolidate markets. While this may achieve economies of scale, job levels are drastically reduced. Small business is a job creator. Last year small business in Queensland created 45,500 new jobs. Queensland's percentage increase is 4.6% compared to the national average of 3.7%. The jobs were not created in manufacturing or mining; the majority have been found in the small business sector. Politicians must be realistic and face up to the fact that the manufacturing industry will not create jobs, at least not in the short term. In the past year, there have been 71 major plant closures. In 1973-74, the metal and engineering industry had a workforce of 620,000. Last year the workforce stood at 470,000-a loss of 150,000 jobs in 10 years. Despite all the attempts to cloud over the situation, the outlook for the heavy engineering and construction industry is grim.

The problem is that we have saddled our manufacturing industry with crippling costs which make it all but impossible to compete in the world markets. Cost after cost has been heaped upon the manufacturing sector. Labour add-on costs have grown in New South Wales from an additional 21.8 per cent in 1970 to 40 per cent in 1982-an increase of 82 per cent in on-costs per wages dollar in the two- year period. This makes the costs of the worker to his employer much greater than the salary he receives. On-costs have grown to the extent that they are one of the major barriers to new employment. They include leave accruals, public holidays, holiday loadings, sick leave and bereavement leave, State payroll taxes and surcharges, workers compensation premiums, accident pay insurance and other labour related insurance expenses, such as public liability and life insurance. If a company employs a worker on a salary of $300 a week, the real cost of the employee to that company is $409. Looking at the development of on- costs since 1973, it is easy to see where increases have occurred. Annual paid leave has increased from three to four weeks and holiday loadings have been introduced, as well as bereavement leave. The latest add-on costs came courtesy of the Australian Conciliation and Arbitration Commission. Last week it approved very generous redundancy payments.

The so-called sunrise industries have been put forward as the great hope for the future. We can only wait and see what they will achieve. However, we can already see what is happening in the United States. Many people have been impressed by the creation of new employment in the United States. From November 1982 to the present, 6.3 million people have found work in the United States and unemployment has fallen from 10.7 per cent to 7.5 per cent. These are not cosmetic jobs created under community employment programs funded by the taxpayer ; they are permanent jobs. The jobs created have been in small business. The job surge has been in new fast food and other restaurant positions. Nearly two million jobs have opened up in this area alone. The point is they are jobs and they have come from small and medium sized companies.

The United States, with its privately sponsored Olympic Games, is supposedly the land of big business employing thousands of people. Yet according to Fortune magazine the top 500 industrial forms have shed 2.2 million jobs. That is more than 10 per cent of the US work force. America's job growth has been in the service sector, ranging from neurosurgery through to car park attendants. Another aspect of the American economy is that Americans have priced themselves into jobs by accepting lower real wages. Labour costs in America have actually fallen by 2.8 per cent since 1982.

The message to Australia is, firstly, that small business can lead a job revolution and kill off unemployment, which we all agree is our biggest problem at the moment. Secondly, to do this it needs a reduction in labour costs and an environment which encourages the small businessman. Unions should get off small business's back with claims for penalty rates, superannuation payouts and portable long service leave.

Thirdly, governments must bend over backwards to help small business. They must cut payroll tax and other charges which cripple small businesses. Governments are learning slowly the importance of small business to the economy and are at least beginning to pay more attention to its needs.

Small business has flexed its political muscle in Victoria, South Australia and Western Australia. It can show very decisively, exactly its attitudes towards government philosophies and policies. Governments must respond by reducing the tax burden of the small businessman. Last week I attended a national small businessmen's conference in Sydney, and the plight of one small businessman attending graphically illustrates the tax burden under which small businessmen labour. This gentleman started a business, investing $10,000 of his own money and borrowing $90,000. In his first year of operation, he lost $15,000. In his second year he made $15,000 profit and, in his third year, made $100,000 profit.

However, out of that $100,000 he had to pay $46,000 company tax and $33,000 personal income tax. This left him with an income for the three years of $21,000 . In the meantime, he had made sales of $2m over the three years. This had produced $650,000 in revenue for the Government. He was also saddled with payroll tax which amounted to $90,000 for the three years operation. So he had $ 21,000 to show for three years of very hard work and the Government had $819,000 courtesy of his effort. This will not encourage small businessmen to invest. Governments must reduce the level of tax on the small businessman to provide the incentive to start a small business.

However, there is only so much governments can do. Take another excellent example of small business-tourism. From 1971 to 1982 Queensland jobs in tourist related activities grew by 3.3 per cent a year-faster than the 2.5 per cent growth in total Queensland employment. The Australian Bureau of Industry Economics calculated that one job is supported in the tourist industry by every 20 international visitors. Altogether tourists put $872.8m into Queensland's economy last year, and there is potential for even more spectacular growth.

I am sure all honourable senators agree with me in saying that Queensland has outstanding tourist potential. I conclude by saying that small business is the way out of Australia's job problems.