Australian Small Business and Family Enterprise Ombudsman Bruce Billson interview with Deb Knight.
Money News
Subjects: COSBOA Summit, energising enterprise
Deb Knight
Bruce Billson is a former federal minister for small business and now the Small Business and Family Enterprise Ombudsman, and he was involved in the COSBOA summit. He even facilitated one of the sessions and he joins me now. Bruce, welcome back to Money News.
Bruce Billson
Deb, great to be with you and your enterprising audience.
Deb Knight
Yes, they are indeed. Well, a lot of them are small business owners, too. And I know that this summit is held every year by COSBOA, but these would have to be some of the most challenging times wouldn't they for small businesses in this country?
Bruce Billson
Yeah, they are challenging times but one of the things I marvel at though is some of the leading indicators still point to the optimism of enterprising men and women. I think positivity amongst small business men and women is the greatest renewable resource in our country. But they do also report challenging times, input costs pressures. The reduction of discretionary expenditure through interest rate increases and the like is really hitting hard on some businesses and they're working hard to try and stay in the black.
Deb Knight
Well, it's hard to keep that momentum and that optimism going when you do have the headwinds that keep on coming.
Bruce Billson
I think some of that optimism is despite hard evidence suggesting it is tough at the moment. We've seen insolvencies up. We know some of the practices during COVID that saw lenders and the Tax Office go a little bit softer on people that owed money is shifting. It's into a more regularised arrangement so we're seeing more activity on those fronts.
We're still seeing a lot of businesses just finding it hard to get paid. So, they provide the goods and services that were asked of them, they've incurred the cost and they've deployed their teams to do it and they are just wanting to be paid. So that's another consideration. And I suppose the other thing is the compliance regimes that are around are getting more demanding. More is expected of small business owning men and women. It's a big responsibility owning your own business. But some of the changes in the regulatory space can be pretty hard to navigate if you're a small operation without a specialist HR department or compliance team that a big a corporate might have.
Deb Knight
Which brings us to the government because you did have some heavy hitters in attendance at the summit. Some big-name speakers, including the Prime Minister. Does Anthony Albanese and his government have a full understanding of the challenges that small businesses are facing, do you think?
Bruce Billson
I don't think you can help but be respectful of the connectedness that the Prime Minister spoke with. He seemed to really understand the small businesses, particularly in his own electorate, and that that gives him a lens. That was encouraging.
Deb Knight
I guess it's encouraging that the PM's even there speaking about business because for a Labor government, it's about workers and upping their wages, isn't it?
Bruce Billson
Look, I think it was an important sign that he was present because I think at times a lot of the broader political debate - and you've touched on some around wage rates and the like - I think small businesses, particularly those employing people, might have thought why are they not talking about my circumstances. So, I think it was important that the Prime Minister was there and he spoke about what he'd seen and what he gleaned through his own working life and in his own electorate. I think that was reassuring.
I think there was a good discussion over the two days about more things that could be done. So, you know, there's still pressures in the economy that small businesses are looking for pathways through. And it was good to see the Prime Minister touch on some of those as well. But also the Opposition Leader, Peter Dutton, who spoke very, very passionately about his own small business journey and I think the audience really responded to that.
We had some of the crossbenchers in town as well, Deb. They were really talking about their engagement and their own journey. The 'I see you' message was strongly throughout the presentations from our political leaders. I know from the discussion that people are looking for more specific, direct action on a range of fronts where they really got pain points and pitch points.
Deb Knight
And the prime minister did indicate when he did speak at the summit that energy bill relief for households and businesses will be one of the things extended as part of the May budget. Is that something that will make a big difference?
Bruce Billson
Look, I think it will. And I think he also pointed to the number of small businesses that have taken up incentives around solar photovoltaic systems and batteries, and that can be another measure.
It's important to realise the other steps about reducing the bills themselves, you and your listeners would know many small businesses don't occupy their own premises. They occupy someone else's. So, when talking about an investment in a photovoltaic system and batteries, well, that's something the landlord might be interested in. The tenant is saying, hey, can you help out here? I hate to use the jargon, the split incentives is how the policy makers describe it. The asset owner is different from the business as the occupier, and that can present some challenges. So, I think that was reassuring. And it's one of a number of pain points. You mentioned shifts in labour rates that's always having an impact and a concern.
Insurances Deb, oh my goodness. I mean, the difficulty too many small businesses are having accessing the insurance they need and then the eye watering price increase.
Deb Knight
Well households too, it's across the board, isn't it?
Bruce Billson
It is. And that's something I keep reminding the insurance industry about. They're regularly talking about households. And that's right. But, you know, consumers sometimes make choices. I would say courageous choices but understandable choices if the budgets are tight to maybe under-insure or not insurer at all or self-insure. Deb, you and I know, and your listeners would know, for many businesses, you don't have that choice. If you don't have certain essential insurances, you can't engage in trade and commerce. When they're talking about multiples of premium increases, again, that's a that's a hit to the bottom line when margins are very tight.
Deb Knight
What about wages? Because we know that the wages umpire will be making a decision shortly. We've got the claims coming in from the unions and from businesses. How much do you think small businesses can cope when it comes to setting the limit for wage rises?
Bruce Billson
Look, I don't think there's a single answer to that, Deb. I mean, the regulator, the Fair Work Commission, will make the decision around wages. But the story is very different depending on what part of the economy you're operating in. We've seen just through insolvency rates, the hospitality sector are finding it really hard and extra price pressures are going to be, for some, just too much.
In the construction area, again, where there's pressure points, small businesses are having to pay way over the odds in terms of award rates to attract staff. So, they're already well in advance of those wage determinations. But that will land differently. And it will be in another area that a business owner who, is the last to be paid, needs to navigate in these economic times.
Deb Knight
There was an interesting address from the RBA Assistant Governor Brad Jones, who said small and medium businesses are driving a lot of the innovation that's needed to boost productivity, which we know isn't at the levels it should be. And they're spending a quarter, 25% more on R&D than the larger businesses are. The RBA, though, critical of the banks for not lending to entrepreneurs, not taking risks? How much is that holding the country back?
Bruce Billson
Look, access to finance for enterprising men and women continues to be a challenge. I mean, too often the conversation is show us your collateral debt. You haven't got a house to underpin it - and it's 50% of all small business lending is underpinned by someone's private home. So, you can see how invested business owners are not only for the roof over their head but their own enterprise. In many cases, their identity is interwoven into their business.
But it also points to a bigger trend. It wasn't so long ago the third of the economy that's made possible by small business was much higher than that. About 41% of GDP was generated by small business back in 2006.
And you think about that narrative, which I think is true, how innovative and what a driver of wealth creation and opportunity small business can be. Now we're seeing the bigger end of town tending to grow fast, to be more profitable, maybe better placed to navigate the complex regulatory environment than small businesses. And my call out was, well, let's not just try and reduce the headwinds that small businesses face. How about we all get together to put some wind in the sails of enterprising men and women and really give the best prospects. Let's energise enterprise to make sure that full potential can be met.
Deb Knight
It's such an engine room of the economy. We want to make sure that they can fire on all cylinders.
Bruce Billson
And let's not take a cylinder out either. You look at some of those numbers about share of private sector employment, the profit trajectory. Even the aging profile. The average age of a small business owner now is 50. And there's only 8% of business owners that are under the age of 30. It was nearly twice that in the '70s.
So, something is happening. I think it's all about getting that risk and reward balance right, making small business and entrepreneurship a really attractive option for people, then creating a supportive ecosystem to give them the best chance to be successful.
Deb Knight
You bet. We need them to be successful for all of our benefit. Bruce, always great to talk. Thank you so much.
Bruce Billson
Thanks, Deb. And best wishes to your enterprising listeners.
