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Wednesday, 4 May 1994
Page: 206


Senator KERNOT (Leader of the Australian Democrats) (3.24 p.m.) —I do not think we should be focusing today on how wonderful the white paper will be. This Labor government has had many opportunities to tackle the issue of small business and it has chosen not to. I wonder whether today's white paper will tell us where the jobs will come from. I hope I am wrong; I hope it will say that they will come from here.


Senator Boswell —They will come from small business.


Senator KERNOT —I am going to make that point. Obviously they will come from small business. Many of us have been arguing since 1992 for an urgent national response on unemployment. We did not need a committee to tell us that unemployment was in the situation it is.

  We argue that government has a responsibility and an obligation to do all that it can there and then—not when it suits the government on the electorate cycle—to address the huge needs of the long-term unemployed in particular. It is too big a problem to be left to the markets. In fact, a continuing and recurring excess supply clearly shows a massive market failure which requires some measure of government intervention. This government has been avoiding that responsibility.

  We have been saying that, yes, we acknowledge the government's willingness to take action now. But we want to make sure that it takes action in a way that most Australians can share in the fruits of the recovery. We have been saying that the way to do that is by concerted action on three fronts: firstly, by increasing our 40-year record low level of public investment in infrastructure; secondly, by developing a strategic approach to sectoral industry and trade policy; and, thirdly, by encouraging small business.

  There has to be a balance found between the role of government—particularly in income support—and the role of the private sector in generating new jobs. A government policy directed to small business is absolutely essential to any unemployment solutions because small business has a greater capacity to produce jobs than any other sector. In the last three years—and I do not think this fact is very well known—employment by small businesses has grown—


Senator Schacht —I have said it 50 times a year.


Senator KERNOT —Senator Schacht might know it; and he ought to know it. Employment by small businesses has grown by more than 136,000, while employment by larger businesses has fallen by more than 300,000. Small businesses now employ more Australians than do larger businesses, and policy must acknowledge this.


Senator Schacht —We do.


Senator KERNOT —But policy in the past—of both government and opposition parties—has actually pandered to the big end of town. Look at the tax break. Look at the way we have used the tax system to assist big business: the development allowance, the investment allowance, R&D tax concessions—


Senator Schacht —You are not opposed to them, are you?


Senator KERNOT —I am not opposed to them. There is also the export market development grants scheme. The problem is that all of them pander to big business, and small business has been left out. There needs to be a better balance. Big business received a six per cent cut in its company tax rate. But small businesses, 70 to 80 per cent of which are not incorporated and are subject to provisional tax, are still subject to the punitive tax rules of the 1980s. Provisional tax is subject to an uplift factor of 10 per cent, which is four times the current inflation rate. There are no breaks for small business there. Six weeks ago I presented to the government the budget submission of the Democrats. Before making that submission—


Senator Schacht —Did you see what Wilson Tuckey said about your submission?


Senator KERNOT —I do not care what Wilson Tuckey said. We consulted extensively with small business in developing that submission. The small business sector acknowledged that. We recognise that small business must be the key plank of any plan to attack unemployment. This contrasts with statements by industry minister Cook telling small business not to expect too much from the budget.

  We included a number of key initiatives geared towards unleashing the job creating potential of small businesses. Our proposals included: a 30 per cent additional tax deduction for employing additional workers in their first 12 months; the phase-out of payroll tax; and replacing the training guarantee big stick with a 10 per cent tax deduction carrot on training. I notice that this last proposal is a probability, and a welcome one. It has taken a long time to drag the government to that acknowledgment, though. We also suggested reducing the uplift factor on provisional tax from eight per cent to six per cent; and, importantly, providing a rebate on sales tax on exports. Just these minimum tax reforms—with the exception of the phasing out of the payroll tax—would have had the effect of removing major disincentives in the tax system, disincentives to employing more workers and to the expansion of export activity.

  We have also proposed a four-point plan to improve access of small business to finance, built around a loans insurance scheme designed to reduce the risk premium on small business loans. To improve the skills base of small business, we propose a growing business network program to encourage small businesses to combine their resources to attack common problems and barriers to growth. We also propose a management training program aimed at very small businesses to improve literacy, numeracy and general awareness of business constraints and opportunities.

  Our proposals were thought out and they have been strongly supported by the Small Business Coalition, which represents more than 1,000 small business groups and 400,000 small businesses. The convener of the Small Business Coalition, Mr John Martin, in a joint statement with me last month, reminded the government that it cannot afford to ignore the proposals; if it does so, it will run the risk of allowing the recovery to become stunted by difficulties which could easily have been avoided.

  I appreciate Senator Boswell raising this issue, but I do ask, as Senator Schacht asked: where are the opposition's policies on small business? I hope we will see the policies as opposed to the rhetoric. I also say to the government that next week we will have the 1994 budget. Surely it will not again ignore, like the 11 budgets before it, the special needs of small business. I guess that the political opportunity that is presented to us with this redefinition of the opposition's role is that perhaps there is an opportunity for us to find the common ground that I have heard Senator Boswell articulate this afternoon and use our legislative opportunities in this chamber to bring action for small business.

  If we want to get Australia back to work, there are already plans on the table. Sensible and responsible plans are ready to go. For example, thousands of small businesses in rural Australia will not survive without some commitment from the opposition, the government and the minority parties. They are not only farm families but also machinery dealerships, corner shops, pharmacies, et cetera. They deserve constructive and cooperative leadership from all of us. It is not good enough to rely on training schemes alone. I hope this afternoon's white paper will tell us what we know—that small business is where real jobs are coming from and will continue to come from in the near future as part of Australia's complex solution to unemployment.