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Wednesday, 17 October 1984
Page: 1870

Senator MAGUIRE(4.15) —I oppose the matter of public importance which was brought on for discussion this afternoon by Senator Robert Hill. The matter of public importance reads:

The Government's failure to recognise the importance of small business to the Australian economy and to implement policies that will encourage growth and employment opportunities within the sector.

One of the most important things brought about by the present Government to boost the economic fortunes of small business has been the general improvement in the economic climate in this country. The general expansion of economic activity under this Government has been the single biggest factor which has led to a rise in the economic fortunes of small business. Small business is benefiting significantly from the expanded economy. Turnovers are up; business surpluses are up, and small businesses are sharing in the record 10 per cent real growth which occurred in Australian in the 12 months to June 1984. That was the fastest growth in this country in 25 years and the fastest in the Western world in the last financial year. More economic planning in Australia as a result of the establishment of the Economic Planning Advisory Council will boost economic growth in Australia in the next financial year. It is important to note , as Senator Cook pointed out this afternoon, that small business has a formal role in EPAC. The economic growth which we will see in the coming financial year will mean higher production for small business, higher turnover, higher surpluses, more jobs and better capacity utilisation by small business with fewer idle plants and fewer idle resources.

The prices and incomes accord with the Australian Council of Trade Unions makes it possible to have an expanding economy because that accord enables expanded economic activity with lower inflationary consequences. One result of the prices and incomes accord is that at the moment small businesses are not facing wage increases because of the low consumer price index results for the March and June quarters of this year. They are not having to pay out wage rises at the moment and that is of enormous benefit to them. The reason they are not having to pay out wage rises is partly the policies in the Budget, whereby employees, instead of receiving a money wage rise, are getting a tax cut to boost their disposable income. From 1 November employees will receive a $7.60 a week tax cut which is equivalent to a 4 per cent wage rise which does not have to be paid at this time by small business and other businesses.

Another important factor from which small business is benefiting is the reduction in Australia's rate of inflation. When the previous Government was in office inflation was running at an annual rate of 11 1/2 per cent. That rate has been cut in the 12 months to June this year to a mere 6 1/2 per cent. The lower inflation rate means big advantages for small business. Planning by small business is better. It enables more accurate planning of investment decisions. It enables better calculation of rates of return on investments. Production decisions are more accurate. Decisions to hold stocks are more economically based and less waste is involved in stock holding. One of the key reasons why small business will benefit from the lower inflation rate relates to Australia's trade with other economies. The lower inflation rate in Australia means that Australian small businesses which are trying to export overseas, or those which are competing with imported goods into Australia, are in a much more competitive position. When the previous Government was in office our inflation rate was well above that of our trading partners. Now our inflation rate is on a par with that of other countries, if not below it.

Another influence of lower inflation rates on the economy is the impact they are having in reducing interest rates. Of course, small business depends very heavily on borrowing funds. Borrowing is one of the key ways in which small business finances its activities. Many small businesses have overdrafts. It is very interesting to look this afternoon at recent interest rate trends in areas in which small businesses are involved because under the previous government-the Fraser-Howard Liberal Administration-very large rises in interest rates had to be paid by small businesses. I refer to interest on overdrafts of less than $100 ,000 which would be held by those in small businesses. Interest rates on overdrafts as at July 1980 stood at 10 1/2 per cent. In July 1981 there was a 2 per cent jump to 12 1/2 and in July 1982 a further jump to 14 1/2 per cent. This is a 4 per cent rise in interest rates paid on small overdrafts in the space of just two years under the previous Government. I am pleased to say that that interest rate spiral has been flattened out by this Government and that interest rates are no longer rising for small businesses, and as a result their cash position is much improved.

The proprietors of small businesses will also be among those who will benefit from the tax cuts which will be introduced on 1 November. Those proprietors who are individual traders will benefit from the tax cuts which apply to all incomes from 1 November. Those earning incomes to $28,000 will receive $7.60 a week in tax reductions and tax cuts will also apply above that level. There were, of course, other taxation changes in the Budget. Businesses can now transfer losses between companies or businesses in the one group for taxation purposes. I think that move will have a significant effect in improving the cash flow position of a number of Australian small businesses. More importantly, it will cut the paperwork involved in shuffling profits and losses between the various companies in an associated group.

The Budget also provides for higher depreciation allowances for non-residential buildings. Instead of the previous rate of allowance for depreciation of 2 1/2 per cent per annum, the rate has been increased to 4 per cent, which will allow a quicker write-off against income tax for income producing buildings. Like other Australian businesses, small businesses are benefiting enormously from the reduction in industrial disputes in this country. They are benefiting from the greater degree of consensus in the community, the lower levels of confrontation and the greater levels of harmony. No longer are small businesses facing disruption from industrial disputes to the degree that they were under the previous Government.

As a result of the various measures I have mentioned this afternoon-the strong economic growth in Australia; the rise in labour productivity and the lower inflation rate-the Budget is able to forecast an increase in business surpluses for this financial year. The share of business surpluses in gross domestic product will rise by a full percentage point from 15 per cent to 16 per cent in this financial year. It is very important to note that some key small business sectors of the economy are doing very well indeed at the moment. It is important to note that small business dominates particular sectors; it is not spread uniformly across the economy. It is not represented in the oil refining industry , for example, or in the motor vehicle industry but it is heavily represented in the retail trade and it is very heavily represented in the home building sector. It is very important to analyse what is happening in those sectors because that analysis will give us a clue to what is happening overall to the small business sector of the economy.

Earlier this afternoon Senator Cook referred to some of the trends in the home building industry. That industry was one of the foci in our Budget last year. It was one of the areas we decided to stimulate because we could see that by doing so it would create many more jobs in Australia. The first home owners scheme which was introduced by this Government has had a major effect in stimulating home building activity and therefore in improving the fortunes of small business because small business tends to dominate the home building sector. In the financial year which has just ended, 1983-84, there were 150,000 approvals for new dwellings. That was an increase of 34,000 over the previous year, or a rise of 29 1/2 per cent. So a major boost was given to the small business sector as a result of the policies of the Hawke Government.

Let us turn to the retail trade area because retailing and commerce are key small business sectors of the economy. In the 12 months to June retail sales for the first time in a long time actually outpaced the inflation rate. Real retail sales grew by over 7 per cent in the 12 months to June, compared with an inflation rate of 6 1/2 per cent. So for the first time in a long time we have seen real growth in the Australian economy, and real growth in turnover for small businesses, including shops. I am pleased to predict that following the introduction of the income tax cuts in November there will be a significant rise in retail sales. We will find that, from 1 November, these cuts will give a real kick-along to retail turnover as people go out and spend and further boost the economy.

Under this Government small business is expanding. We have given leadership to the economy. I refer simply to an opinion poll released this morning which indicates that Mr Hawke is preferred by something like three-quarters of the people as leader of this country. His rival is preferred by about 14 or 15 per cent of the people. They know we are giving leadership. They know we are giving direction to Australia and they know that the business climate in this country has improved. It is absolute nonsense for the Opposition to talk about small business dynamism and opportunities for small business resulting from its policies. One has to look only at the record of the period from 1975 to 1983, to which Senator Richardson referred today by interjection. In that period, under the Fraser-Howard Government, unfortunately small business was faced with negative dynamism. The fact is that bankruptcy in this country soared under the previous Government.

I put on record some of the figures which indicate just how many small businesses in this country went to the wall under the previous Government. They went to the wall in record numbers. The previous Government caused business failures, wrecked investments and wrecked employment opportunities and the savings of many Australian families who had invested in small businesses were wiped out. Let us look at the bankruptcy figures which show the downward spiral in the economy which occurred under the previous Government. In 1981-82 there were 4,500 bankruptcies. In 1982-83, the last year of the Liberal Government, there were 5,100-an increase in that period of 12 1/2 per cent. I am pleased to say that in the financial year just ended, 1983-84 for the first time in a long time the number of bankruptcies in Australia was reduced. Under the Labor Government in the last financial year bankruptcies were reduced from 5,100 to 4, 800-a reduction of 5 per cent.

Earlier this afternoon Senator Missen referred to his unfortunate State of Victoria. It just happens that in the last financial year Victoria was the leading State in bankruptcy reduction. A 15 per cent reduction in one year in bankruptcies in Victoria and in my State of South Australia is a pretty good achievement. It certainly makes nonsense of the claims made this afternoon by Senator Missen. In the Liberal Government's whole period in office, from 1975 to 1983, there was only one year in that seven-year period in which the number of bankruptcies fell. I ask honourable senators to make a comparison between that year and the last year of the previous Labor Government. In the last year the previous Labor Government was in office-1975-76-there were 1,900 bankruptcies in this country. In the last year of the Liberal Government, to which I have just referred, there were 5,100 business bankruptcies-171 per cent rise in business failures under the previous Government.

I think that this afternoon we can take with a grain of salt the concern expressed by the Liberals for small business. It was recently said in this place that under the Liberal Party there was only one growth industry in Australia and that was the tax avoidance industry. I am not happy to report this afternoon that there were in fact two growth industries in Australia under the Liberal Party from 1975 to 1983-tax avoidance and bankruptcies. Never before did receivers or liquidators do so well. It was a growth industry. The rise in bankruptcies under the previous Government was appalling. Three sectors were hit particularly hard-building and construction, transport, notably road transport, and commerce. I am pleased to say that as a result of the policies of the present Government the level of bankruptcies in Australia is now declining.