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Thursday, 24 June 2004
Page: 31655


Mrs MOYLAN (12:51 PM) —Speaking of inconsistencies—and I am going to talk to the substance of the Workplace Relations Amendment (Protecting Small Business Employment) Bill 2004—the member for Hunter's words cannot go unchallenged about the inconsistencies, because here he is coming into this House and chiding our minister for bringing forward a bill that protects the interests of small business. He chides the minister for having dared to question a decision by the Australian Industrial Relations Commission and, yet, in the next breath he himself challenges the three High Court judges who came to a decision in the Boral case. If you go back to pre-1996 days, the then Labor government certainly did nothing to address the considerable concerns about the Trade Practices Act. We have had an inquiry—the Dawson inquiry—and there are plans. Our side does recognise the particular challenges that confront small businesses.

I want to say that, despite some of the difficulties of small businesses when they come up against very large businesses, it is unhelpful to set small business against large business. When I publicly supported Woodside against a takeover bid, the people in my electorate of Pearce and in Western Australia who rang me were the plumbers, the electricians, the gasfitters and the food suppliers—all small businesses, sometimes one-, two- and three-man or woman businesses—and they did that because they relied on a big company like Woodside for their financial wellbeing and for their businesses to be able to operate. It is often big business that affords small business the opportunity to grow, to thrive and to be economically viable. So we have to be very careful when we pit the small businesses against the big businesses.

I will come to the substance of the bill that we are debating today. This Howard government is a strong supporter of small businesses. It is evident from the Australian Chamber of Commerce and Industry's June quarter National Survey of Business Expectations that, although economic growth has steadied—we have had enormously rapid growth—it remains strong and the business community was very optimistic about the future. The survey of business expectations is, I understand, the only private sector survey in Australia that provides a comparison of expectations for firms of different sizes. I think it is important that the public understand and people in this House understand the definitions. Small businesses in this survey are those with between one and 19 employees; medium businesses are those between 20 and 100; and large firms are those with 100-plus employees. Small business was particularly upbeat about the general business conditions and its expectations over the next three months were cautiously optimistic. Employment growth has been very strong across businesses of all sizes and further improvement in business growth is anticipated by all categories of business. This is one of the reasons why we are here debating this bill today: to ensure that that vibrancy, that upbeat mood, that optimism and that commitment to continue to employ continue.

Employment growth has been very strong across businesses of all sizes, and the positive outlook of small business has been a particularly important feature in the battle that Australia has had to reduce its unemployment levels, particularly its youth unemployment. Since coming to office the Howard government has had a great commitment to reducing unemployment, especially youth unemployment, and the employment figures released just recently told the story. The rate has fallen to 5.5 per cent, which I think is the lowest in about 27 years or something in that order. To achieve this result, though, the government has had to carefully manage the economy, and in the eight years under the Howard government we have seen low unemployment, low interest rates, low inflation, increased real wages, industrial relations reform that has been very significant in freeing up businesses to ensure that they can grow and expand and have flexibility, and of course waterfront reforms. It is this climate of greater certainty and sound economic management at a federal level that has provided a key to our economic growth and prosperity. We have got many young, enthusiastic and innovative business people in Australia today. They are prepared to take reasonable risks because they believe in their own ability to build and develop a business that provides for their own financial future and for the people that they employ.

The small business community exists in a very volatile world and it is a world where small changes can have very dramatic effects on the operation and success of a small business. I was interested in the member for Hunter's recollections about unfair dismissal, because this is an area where Labor got it badly wrong and in fact the then Prime Minister, Paul Keating, was forced to come to the table to make changes. I was the shadow minister for small business and I made jolly sure that people out in the community understood how this unfair dismissal legislation was affecting small businesses at that time. I did some very public interviews on it and I also addressed the business community of Newcastle from the back of a truck in the Newcastle markets in the freezing cold. The Labor Party were not even going to be represented at that. The minister was ducking for cover because those guys in the Newcastle markets were furious and they were ready to have the then Prime Minister and his ministers on the plate for dinner, so he was not too keen on turning up. When I said yes, I would go up and talk to them, I understand the Prime Minister ordered the then small business minister to that meeting. There were television programs drawing attention to just how devastating this legislation was to small businesses and finally some minor changes were made to it. But we have tried I think over 40 times in this place to get further changes accepted exempting small businesses from those measures.

These kinds of changes, given the volatility of the small business sector, can be devastating to small business, so we need to be very careful about how we structure this. I understand this because I started my small business 25 years ago from the living room of my home. I know how difficult it is. I started with $500. My desk was the dining-room table and it had to be cleared off every night so that my kids could actually sit down and eat. That little business grew and grew and I employed quite a few people in the end and provided job opportunities for many who might not have been directly employed but who got work as a result of the work of my business. I know how tough it is at times and how finely tuned and finely balanced the day-to-day profitability can be. It can get to the point where you actually have to be checking the figures every day to make sure you can keep going. They were not easy times. So I understand how finely tuned this is, and having to pay out $30,000 in redundancy for staff some of whom may not have worked for terribly many years would have been a huge impost and in fact would have driven me out of business in those early development years. I think that is also why this decision by the commission could be so damaging to small businesses.

I must congratulate the ACCI because they recently put out a paper about policy positions and made suggestions to strengthen small business, improve workplace conditions and create more job opportunities. I do not think any of us in this House—and certainly none of the responsible business leaders—want to see employees being treated badly or not being given what they are entitled to. The ACCI put out their paper called Modern Workplace: Modern Future 2002-2010. It is a blueprint and a practical working document on how workplace reform can best be implemented. In a bulletin on termination of employment and redundancy, the ACCI outline termination of employment measures. The bulletin includes reference to both redundancy and unfair dismissal. The policy outlines what a redundancy is. The document says:

Termination of employment occurs when an employer dismisses an employee, or where an employee resigns from their employment.

Sometimes termination of employment occurs due to business restructuring or business failure. Where a job an employee is doing is no longer needed to be done or able to be done, and the employment is terminated, then this is a redundancy.

Redundancies often occur due to cost or competitive pressures on a business or from a general economic downturn. Often the causes of redundancies are beyond the control of both the employer or the employees.

The bulletin also went on to explain what an unfair dismissal is. It is probably quite relevant to bring up the distinction. It says:

`Unfair dismissal' describes a termination of employment that is `harsh, unjust or unreasonable'. Employment legislation gives some employees a right to sue employers for `unfair dismissal'. These laws differ around the country. Unfair dismissal cases are dealt with by industrial tribunals, usually through a conciliation process and (if unresolved) by a trial (arbitration). If a dismissal is judged to be unfair, re-employment, back-pay and/or compensation may be awarded.

Unfair dismissal cases are different from claims for unlawful dismissal. An unlawful dismissal is where termination occurs in breach of a specified law (such as dismissal because a person is pregnant, or dismissal without required notice periods).

We all know a lot about the unfair dismissal legislation in this place. As I said, we have tried many times to amend the unfair dismissal laws to ensure that small businesses—that is, business with under 20 people—are annexed from the legislation, and for good reason. The University of Melbourne research carried out in 2002 demonstrated the negative effects of unfair dismissal laws on small business. In essence, what the study shows is that the unfair dismissal legislation causes small businesses to hold back on employing new staff and it denies the unemployed about 70,000 new job opportunities. In a similar vein, the latest decision by the Australian Industrial Relations Commission to substantially increase minimum redundancy payments will have a very negative effect on small business confidence to employ.

For 20 years, small business has been exempted from paying redundancy payments, and for good reason. This is in cases where the business employs fewer than 15 people. The estimated cost of this change to small business is, according to the ACCI, around $190 million. Many small businesses only earn from $30,000 to maybe $100,000 at the top end. Many small business people earn a very basic wage and they work extremely long hours. When they are finished at the shop, they go home and do their book work at night. So $190 million spread over many small businesses is not an insubstantial amount of money. It would drive many of them out of business. We do not want to drive small businesses out. These are entrepreneurial people who drive this economy. They are the engine room of the economy, and they are big employers of young Australians.

The federal government opposes the decision by the AIRC. This bill amends the Workplace Relations Act 1996 to protect small business employers from redundancy payments that may affect employment opportunities, business viability and, indeed, future business growth. This bill has three effects. The first is to remove redundancy pay for small businesses with fewer than 15 employees from the jurisdiction of the AIRC. The second is to cancel the effect of any variations that were made by the AIRC to awards from the time of the decision until the legislation commences. It will not, however, affect any redundancy pay provisions that were in awards prior to the AIRC's decision. The third effect will be to prevent the flow-on of the AIRC's decision to small businesses that are constitutional corporations and that are covered by state awards. The Minister for Employment and Workplace Relations said in the second reading speech:

The small business sector is performing very well—it is very much the engine room of the continued growth and strength that our economy is enjoying. And without doubt many small businesses are profitable.

But we can't afford to confuse this profitability with an ability to make redundancy payments. Small businesses tend to be chronically undercapitalised and in general do not have the financial resources to cope with large, unpredicted commitments such as redundancy payments. Small businesses are twice as likely as larger businesses to go out of business in the earlier years of operation.

That is true: the pressure is really on in those early years of development of a small business—

Even after 15 years of operation they are still 1.7 times more likely to cease than larger businesses.

It has generally been acknowledged that small businesses operate in a precarious environment and are very sensitive to additional cost pressures. Many small businesses are established on a low capital base, often consisting of equity in the family home, and small business owners are much more heavily constrained in capital raising than medium-large corporations. That is a very significant issue. I cannot tell you how many times small businesses, particularly those located out of the central business areas of the cities, tell me just how difficult it is to raise capital, particularly if they do not have equity in their own family home. Building on this small capital base, the development of a small business often takes years and years of hard work, careful financial management and flexible employment options. Small businesses have the potential to become our medium and large corporations of the future, and with a solid foundation they can go on to provide greater benefits to employees.

Of course, the lack of black-letter law has not inhibited many small businesses in being excellent socially responsible citizens and offering many benefits to their employees well above anything that any black-letter law has ever required. This is often forgotten in these debates, as is the enormous contribution in goods, time and money that many small businesses make to their communities. That is very evident in my electorate of Pearce, where I see time and time again that when there is a social problem or disaster within the electorate it is the small business community that are called on to make contributions to fixing that problem. Very often it is done through the service organisations such as Lions, Apex and Rotary, but it is these many small businesses that contribute tremendously to the social cohesion of our communities. I suspect that is the case all around Australia.

One is always hopeful that all businesses will treat their employees fairly, and vice versa. But what this measure is likely to do is inhibit the opportunity small businesses afford many in the community to have access to paid employment. The decision by the AIRC was a retrograde step against the interests of small businesses and against the interest of job creation in the small business sector. I certainly congratulate the minister for having taken the decision to bring this bill to the House to improve the outcome for small businesses that employ fewer than 15 people.