Small business needs support - not another tax

August 30, 2011

I have often said that small business is the engine-room of the economy. Even Sir Robert Menzies, the founder of the Liberal Party and former Prime Minister spoke of small business owners in his famous ‘Forgotten People’ speech and vowed that our great party would always stand up for people whose entrepreneurial spirit and drive encourages them to engage in the free enterprise economy.

Why did Menzies speak of small business people as ‘forgotten’? You only have to look at how small business is struggling to survive in the current economic conditions and the Government’s response to know why.

The Labor Rudd/Gillard Governments inherited from the Liberal Howard Government an economy that was the envy of the developed world: a $20 billion budget surplus, zero net –Government debt , and the best terms of trade for a generation.

Now, after only 4 years of Labor back in power, we have an accumulated national debt of $150 billion. It took 10 years for the Howard Government to pay back $96 billion of Labor’s debt from the Hawke-Keating years.

But the most concerning impact the Gillard Government has had on small business is the decimation of consumer confidence. A combination of global financial shocks and a lack of confidence in the Government have combined to see a drop in consumer confidence of 3.5% in August after a 8.3% drop in July according to Westpac-Melbourne Institute of consumer confidence.

A lack of consumer confidence means that people are keeping their wallets shut and not spending money. This does not bode well for the nearly 5,800 small businesses in the electorate of Hume that employ 20 people or less.

Remember, one of the major reasons consumers aren’t spending is because the cost of living has gone through the roof.  The introduction of the Gillard Government’s proposed Carbon Tax in 2012 next year, which is aimed at increasing the cost of electricity in a vain attempt to get Australians to use less of it, will see electricity prices for businesses skyrocket – all of which will be passed on to the consumer.

And there will be very little relief for small business under the proposed Carbon Tax arrangements. Under the Government’s own example, a cash-strapped café owner would need to find $6,000 for some new equipment to receive a one-off earlier tax benefit of $1,800. Any additional one-off tax benefit will not relieve the ongoing and unavoidable increased operating costs due to escalating electricity costs under the proposed carbon tax.

But being the go-getters they are, small businesses are not going to wait for Government to find a solution. Across the electorate communities are rallying behind small business owners and are coming up with ways to kick-start local economic revival.

At every opportunity, Government needs to get out of the way, and certainly does not need to introduce a new Carbon Tax.

Australia needs individuals to play active roles in shaping their communities.  We need entrepreneurs to pursue new businesses and we need these businesses to employ people, innovate and explore new markets to grow.

How can this happen when the current Labor Government has introduced over two hundred regulations for every regulation it has removed?  This burdensome approach not only prevents business growth and stifles the economy, bur it deters individuals from taking a proactive role in our communities.

Regulation is a “necessary evil” but this necessity does not justify an approach which along with draconian industrial laws stifle individual autonomy, effort and responsibility.

Good regulation defines boundaries for economic and social activity as well as facilitating enforcement mechanisms where necessary – not through a “nanny state” system designed to control every aspect of our lives.

We need to be honest about the costs of this regulatory state.  It does not come cheap.  The productivity commission estimates that the economy-wide cost of compliance is in excess of $80 billion a year.  For small business owners, red tape compliance costs over $1300 per week.

Government should try to eliminate needless burdens on small business.  Less paperwork means higher profits, increased sales, more stability for employees and ensure small business is given the opportunity to remain financially viable so that they can continue to contribute to the economic stability of towns such as Cootamundra, Cowra, Crookwell, Grenfell, Young, Yass, Harden, Picton and Goulburn.

I was particularly pleased when Tony Abbott in his May budget speech committed to tackling the “red tape” problem by reducing the regulatory costs to business by at least $1 billion a year.

Rolling back the regulatory “nanny state” is a key challenge in once again freeing up the capacity of all Australians by restoring our growth in productivity and providing for our future prosperity for small business in particular.

Governments of the day should heed the words of Sir Robert Menzies so many years ago.  History has turned a complete circle, to the extent small business - which is indeed the engine room of the economy - is once again experiencing what it means to be “the forgotten people”.