Sky News Australian Agenda Interview with Brendan OConnor 10/6/2012

Interview with Brendan OConnor, Small Business Minister Australian Agenda program, 10/6/2012

Peter van Onselen: We are joined now out of Melbourne by the Small Business Minister, Brendan O'Connor. Minister, thank you for your company. Brendan O'Connor: Good morning, Peter. Peter van Onselen: I just wanted to start by asking you about your reaction, I suppose, to some research by Dun & Bradstreet. Now, their research apparently shows that small business bankruptcies have jumped by 48% and start-ups fallen by 95% in the last 12 months. That sounds pretty extraordinary. How do you respond to that? Brendan O'Connor: Well, that's contrary to the advice I have had. I have to say that we are aware that consumer confidence has been down and, in turn, business confidence has been down, and that's why in the Budget we announced specific measures to provide tax relief to small business - the loss carry-back scheme and the instant tax write-off, both well received by small business - and, indeed, increasing the tax-free threshold from $6,000 to $18,200 also provides some relief for unincorporated small businesses. So we're looking to respond to those concerns in what is a very important sector, employs almost 5 million Australians and is, indeed, the engine room of our economy.

Australian Agenda

10/6/2012

Brendan OConnor

Paul Kelly: Minister, if we look at that sector, what happened in the Budget was that the corporate tax cut was cancelled and became instead cash payments to households. Presumably that was a defeat for you; I assume that you wanted that corporate tax cut to go ahead? Brendan O'Connor: I certainly wanted to see a reduction in the company tax cut for small business taking effect from the 1st of July. Unfortunately, the Greens Party and the Liberal Party joined up to oppose company tax cuts for this and next year, and we wanted to ensure that we were able to provide some relief by providing benefits to families and to people generally, which we believed would enhance consumer confidence and, in turn, enhance business confidence. And I think it's also important to add that those two initiatives I referred to, the instant asset tax write-off for small businesses and the loss carry-back for incorporated businesses, provide $1.7 billion, $1.7 billion of revenue, much of which is being provided because of the implementation of the Minerals Resources Rent Tax, something, of course, that Tony Abbott opposes. But here we have a Liberal Party leader, for the first time that I'm aware, opposing tax cuts for business -Paul Kelly: We're all aware of that, but I'd like to come back to small business. Now, a lot of small business is not incorporated and therefore won't get a number of the benefits that you're talking about. What's your response to small business that is not incorporated? Brendan O'Connor: Yeah, well, they wouldn't have got the tax cut that you referred to, Paul, because they're not incorporated. That's why the instant asset tax write-off initiative, which allows for businesses, incorporated or otherwise, to purchase assets of up to $6,500 each and the amount of assets that are limitless - that allows them to actually get the instant depreciation after one financial year, so that's a very good benefit, and so far as cash flow is concerned. It also reduces the amount of depreciation schedules that have to be filled out, again a reduction in paperwork. And, indeed, for those unincorporated businesses, which, indeed, are the majority of small businesses, they receive the benefit through the increasing of the tax-free threshold.
Australian Agenda 10/6/2012 Brendan OConnor

So there were two initiatives, both designed to help unincorporated businesses, and they've been well received and they were recommended by the Business Tax Working Group and by COSBOA and other bodies representing small business. But we've got more to do. Matthew Franklin: Minister, may I just ask - obviously Tony Abbott will say this until the cows come home, in the circumstances that small business face at the moment, this is the worst time to be introducing a carbon tax. Isn't it the case that small businesses, many of them, the smallest are at the end of very long supply chains and that the suppliers will all have the effect of the carbon price in their inputs and they'll pass that down the line? So why shouldn't small businessmen, people, believe that they're about to be smashed? Brendan O'Connor: Well, I think that's - even just using the term "smashed", you must have got that out of the lexicon of Tony Abbott. Matthew Franklin: No, no, I got that out of my own lexicon. Brendan O'Connor: Okay, fine, that's good to see. Well, look, Matthew, I disagree with your contention that businesses will be smashed. I mean, it's the sort of language we've heard from the Opposition. They said that we're going to have towns wiped off the face of the earth, that the coal industry is going to disappear. We've seen such ridiculous sort of claims being made, and I think they will be found to be untrue from the 1st of July. What we made sure of in relation to the impact upon small business is that they did not have any obligations to account or report on carbon emissions, there was no paperwork at all. The actual impact, the cost impact, on small business is modest to negligible. There is, of course, a cost to energy. We - Treasury, that is - has modelled - has calculated the energy costs of an average small business to be 2% of their overall costs. We believe there will be just under 10% increase to that 2%, so that's a 0.2% to overall cost for small business. Matthew Franklin:

Australian Agenda

10/6/2012

Brendan OConnor

So you're not too worried that -Brendan O'Connor: It's true to say that - I'm sorry? Matthew Franklin: You're not too worried that they'll face a big increase in the costs passed down the supply chains? Brendan O'Connor: I think that the costs have been factored in and the costs are modest. As you know, Matthew, Treasury has modelled the cost to CPI to be 0.7%, and it's not only the Commonwealth Treasury, we've had the West Australian budget recently rely upon the same figure, and, indeed, we are now seeing our calculations confirmed by other bodies, Government and non-Government. Now, I think that cost is manageable. I mean, let's be clear here, this is a Government that's, you know, increased or has created over 800,000 jobs. We have $500 billion invested in the pipeline; we have the lowest official cash rate, lower than at any time under the Howard Government; we have contained inflation; we have low debt. We are in very good shape. And if this is not the time to introduce important reform, when is it a good time to introduce good reform? And we think it's -Paul Kelly: Well, I'd like to take you up on that point, Minister. You've painted quite a rosy picture in terms of the Government's initiatives for small business and the overall economic environment, so I'd like to ask you: do you concede at all that there are genuine difficulties facing small business and that in fact a lot of the small business sector is struggling? I mean, what's your actual assessment of where small business is? Brendan O'Connor: I think there are significant challenges for small businesses and businesses alike in the country. What we know is that there are some sectors going very well. We also know that the high Australian dollar is causing businesses to struggle with a number of things. And, for

Australian Agenda

10/6/2012

Brendan OConnor

that reason, we've sought to, you know, spread the benefits of the mining boom through some of these initiatives. I mean, we could not return the budget to surplus and, indeed, create these initiatives for small business without finding the revenue from the mining sector. It's the right decision. And we've done that because we are conscious of the fact that small business have indeed been confronting some significant challenges. There's been low consumer confidence. Consumers have instinctively sought to hold on to some discretionary expenditure so that they can pay down household debt. I think that's as a result of them viewing what's happening in Europe, and even, of course, to a lesser extent, the United States. That causes them concern. That in turn reduces the expenditure of households. But the national accounts came out this week, and I think it's fair to say that the household consumption is higher than what most people expected. And I think one of the reasons for that, Paul, is that the actual way in which - the things that people are now spending money on has changed, and therefore whilst there are some areas that are concerned about the - you know, that their goods are not being purchased at the same level that might have been the case some years ago, there are other areas, services in particular, where the consumption is high. Paul Kelly: Well, I'd like to -Brendan O'Connor: So we are seeing changing patterns of consumption, and I think people have to therefore properly analyse the figures to properly calculate the consumption by households. Paul Kelly: I'd like to move to another area of your portfolio, which relates to the homeless. You've had quite a bit to say about this over the course of the past week. The Government has an objective of halving the number of homeless by 2020. Will you get to that target? Brendan O'Connor: That's our intention, and that's why we want to make sure --

Australian Agenda

10/6/2012

Brendan OConnor

Paul Kelly: Will you get to the target? Brendan O'Connor: Well, that is our intention. It's 2020, it's a goal. I can tell you this, Paul, it's something that is an important goal for this Government. We wouldn't have foreshadowed it if we didn't want to reach it. The aim is -Paul Kelly: But isn't the fact that the number of homeless has increased since you announced the target? Brendan O'Connor: Well, we're talking about the rate, of course, the reducing the homelessness -Paul Kelly: Yes. Brendan O'Connor: -- in proportional terms. But can I say that the ABS data on the last census has not been released yet. That will provide us the most accurate picture on the project we've made. Paul Kelly: But aren't you actually going backwards so far in terms of getting this target? Brendan O'Connor: No, I don't accept that at all. I don't accept that at all. I know that, because of the investment we've made - you know, $5 billion on homelessness and the fact that we have provided more services working with State and Territory Governments and not-for-profit organisations - we have relieved many who have been either homeless or at the risk of being homeless, but there's a lot more to do. And what we need to get, of course, is the ABS data that we based on the last census to get a true picture of the progress of
Australian Agenda 10/6/2012 Brendan OConnor

those goals, and we'll continue to work with State and Territory Governments to bring about the reduction. I think it's a blight on this country which we've ignored for too long when you have up to 100,000 Australians homeless, in - you know, and that's not acceptable, and that's why we'll continue to work to those goals. Peter van Onselen: All right, Minister, we are right out of time. We appreciate you joining us on this long weekend. Thanks very much for your company. Brendan O'Connor: Thank you very much.

Australian Agenda

10/6/2012

Brendan OConnor