BRUCE BILLSON:
It's a great pleasure to be here and I'd like to acknowledge all of you and particularly our local Chambers of Commerce representatives that are doing so much to provide that collaborate support for those courageous men and women that mortgage their house and often their first born, to be granted that opportunity to create wealth and opportunity and livelihood prospects for communities.
I suppose that's where my relationship came in. I was a refugee from the Bank of Melbourne when Westpac [indistinct] and I became a Westpac client and it was quite interesting. My wife and I on our adventure we went to Westpac and asked for some finance for help and they said, well, look you're not a bad risk [indistinct], so much better if you could just tell us nothing about what you planned to do with money and just say it's for private purposes and hang it off your mortgage.
This was an interesting insight that I gained quite early into the mysteries in the dark art of banking and I got a sense of what prudential regulation meant to different types of loans and what impact that had on the availability of a credit book across a bank and what it meant for pricing, and it was quite an interesting and enlightening experience. I'm still a Westpac mortgage holder but I must say most of that mortgage relates to our business and not our home and thankfully we do fully own our first born, which is great, so we haven't lost everything.
But to bring that kind of grounded experience to the role that I have today. I'm sure all of you in this room know how crucial small business and family enterprises are to our economy. You're probably all aware that 43 per cent of private sector employment is in a small business, that around a third of all of the private industry value add in our economy comes from small enterprises. They're impressive numbers. But what's motivated me and what's uppermost in the minds of the Abbott Government is those numbers aren't as bright as they were six years ago.
There's actually 412,000 jobs lost in small business over the last six years, 412,000. And you don't see that on the headlines of the newspapers or the television sets because it's one here, two here, it's sprinkled right across our economy. And I know for my wife and I, when we wound up our business letting our staff know that it's done, is a profoundly personal experience, particularly for the staff members without that opportunity but also for the employer. We had no human resource department to send out don't come Monday notices, [indistinct]. And you know vividly what's happening in the lives of the people that are part of your team and you know that you feel a sense of personal failure when the business comes to an end, but it is a profound sense of loss for your team as well. But it doesn't attract the headlines, but this has happened right across our continent.
Today the share of the private sector workforce provided by small business is 43 per cent. Six years ago it was 53 per cent. There are today 3000 fewer employing small businesses than was the case six years ago despite, you know, new trend economic growth, despite population growth. That kind of unwelcome trajectory needs to be arrested and turned around so that we put the business back into small business.
Finance is crucial to that. It is the oxygen of enterprise in so many areas. And was good talking with the team here at St George about their preparedness to engage with small businessmen and women about their ambitions and their vision and through what's been launched today putting bankers with authority to make decisions alongside small businesses so that you are talking with the people who can understand what's driving and motivating you and try and match your ambitions with the understandable credit and risk management requirements of the bank. That's a crucial part of what today's about, not to mention the large [indistinct] of change available for people to seek to support that enterprise with that further injection of $2 billion into your book available for small business finance - that's fantastic.
So we've got preparedness to land and a preparedness to get alongside small business. And I think that is part of a change we all need to be a part of. We need a renaissance of enterprise in this country to imagine what our economy the other side of the mining boom looks and we'll expect small businessmen and women and innovation and the resilience and the diversity of the economy to come through those people, but we need to be there with them.
It's that old joke, I'm here from the Government, I'm here to help you and people groan. The only thing that makes that more credible is when someone says I'm here from the bank and I'm here to help you. We both have a bit of an issue there but too often small enterprising people see us as barriers to their entrepreneurship. Whereas a government we want to get alongside small business and be working as hard for their success as small businessmen and women do and I see that in today's announcement, St George wanting to get alongside and be an ally and an advocate with the hub here.
We can't all spend $16,000 a year to be part of the executive coach program. Most small businesses don't have that. But the insights that are transferred through that program can also be transferred here in the hub where likeminded entrepreneurial people can share their insights and share their experience and share their ambitions and generate that kind of synchronicity that so many that feel they're out there on their own will be nourished by, knowing their bank is on their side and is an environment available to support their enterprise.
I could run through an absolute gripping and compelling list of policy commitments we've made because it is about a transformation of thinking, not only to government level but in an environment in which you operate. But part of it is in the banking space. Accessibility or affordable finance is important.
The spread above the cash rate has doubled over the last six years. It used to be 200 basis points, two per cent above the cash rate. [Indistinct] people were paying for a residentially secure variable loan for a small business with a house on the line, and that's more than doubled now, it's about 4.6 per cent. So that competition on service and association that we're celebrating today we hope will extend to price as well because small business loans are a good [indistinct] but they also carry the additional constrain of prudential requirements where the presumption of risk likelihood and cost of risk means lending institutions have to set aside more of their assets and more liquidity to cover a small business loan.
This makes lending for housing more attractive in terms of what you can do with your book. We think we need to work collaboratively with regulators and lenders to see whether we've got those settings right. You know when you've got your house on the line in a more conservative lending environment the risk of default's down and then cost of default that may arise is also down, where is that reflected? In the responsibilities that the prudential framework imposes. These are questions we need to work through.
Root and branch review of the competition laws where competition is on merit, not on muscle - that's good for small business. Extending unfit contract terms and protections so that an individual consumer has relief to take it or leave it contracts, but a small business doesn't. I know when I was a small business person, my wife and I had no more market power as a small business but as a consumer get those protection [indistinct].
The abolition of the carbon tax - no one's been hurt more by that tax than the small business community. No compensation, no carve outs, no hush money, told to suck it up or pass it on to their consumers when for many neither was a prospect in a very tight margin environment with customers not wanting to pay more because of their own cost consciousness. That's just some of those issues.
But what we really need to do is support a renaissance in enterprise. The success of our work and these initiatives will be when young people walking down Chatswood when asked if [indistinct] dead ball what they want to be, alongside as good as Sonny Bill Williams they might say I want to be a small business owner. And we'll know when that tantalising prospects of creating your own job and supporting the growth of jobs for others and prosperity in our economy is something people aspire for, we know we'll have the settings right then.
We've got much work to do. This is a very positive announcement today. I'm honoured to be here at the launch. I respect the role of St George and its allied banks have played in setting the tempo for the banking industry more generally, and the same day settlement on cards. What a cunning plan that is. In our business we did most of our work on weekends and over public holidays and to sit there knowing the cash is going out the door, that our purchasers' cash wasn't coming in the door until maybe the Tuesday, that was character building for our cash flow but you learnt the way on same day streamline settlement [indistinct].
Thank you for inviting me along here today. Thank you for your continuing innovation in this area in taking up the challenge of competition and the availability of finance and the partnership that you conform with your clients and customers, and thank you for being a part of that renaissance of small business. Together, we'll do what we need to do and that's get the business back into small business [indistinct].
[Applause]
QUESTION:
[Indistinct]
BRUCE BILLSON:
[Indistinct] GFC seen quite a consolidation in the banking sector. We think [indistinct] made quite a difference, so that's one of the key objectives of that finance sector banking industry review that [indistinct] spoken about.
Secondly, I touched on the credential [indistinct]. Now, we're not proposing any specific changes. We are keen to engage in a conversation about how the current settlements actually operate. Ten years ago, you and I walked down the street, we'd probably be lucky to get through Chatswood without someone throwing at overdraft at us, you know, and that environment of [indistinct] finance lending facilities being everywhere, that was then. There is now a new order. You could almost understand that the risk profile of low-doc, no-doc finance would add to a lending risk. You can understand that.
Today, there's a new loo, with credit and risk metrics and assessments that are undertaken by lenders [indistinct] that mean small businesses are talked about, you know, the 35 pages and we've had a very positive move to reduce that. Those obstacles to access those facilities are [indistinct] and I think about 80 per cent of small business loans are actually supported by a residential home. I spoke to Treasury about the shift of small business policy in the Treasury portfolio and was quite energised to share with them the view that policy settings have an impact on behaviour and that our job was to support that renaissance, and the Treasury secretary said, well, Bruce has just given the Peter Costello story a new perspective, where it was one for child, one for mum, one for the country and, because I've got four kids, one for the bank.
So, you know, there is a new normal in terms of that lending environment, and we will engage in a constructive, collaborative conversation about where those credential settings that make other forms of lending more attractive to banks and, I'll be honest with you, small business executives in many banks share with me their contest internally to get a piece of the loan book when other forms of lending can be more attractive to the bank overall, so we want to have a constructive conversation about that.
QUESTION:
The other thing that's obviously crippling small business, and it's been alluded to with regard to the credential regulation [indistinct] is red tape, green tape, all those [indistinct] all the fantastic legislation processes that have been undergone and happened over the last six years. How is the Government looking at streamlining that?
BRUCE BILLSON:
We know each other that's not a Dorothy dixerbut thank you for that question. There has been an explosion in regulation and compliance burden and a presumption, I think, when a big government talks to big business and big unions, that everyone's got a dozen people in the compliance department, and that's not the life of a small business. More compliance means more time on Sundays. More compliance means more effort and resources taken away from nurturing growth and prosperity and business opportunities for themselves and others in their communities.
We've made a commitment to reduce that red tape cost and green tape cost by $1 billion a year. We're systematically working across every area of the Commonwealth. Every department has a deregulation team operating in it. We've got a framework [indistinct] Prime Minister's Office to deliver on that outcome. We've got an objective assessment of our progress being done through the Productivity Commission. We've identified some specific examples, such as why does a small business need to be [indistinct] for the Government's paid parental leave scheme? The systems changes, the compliance burden, fines if you get it wrong, instead of [indistinct].
So that's an example of tangible change. The distribution of employee superannuation contributions [indistinct] tax office [indistinct]. So these are practical measures, and I welcome your insights and field evidence from the small business community about nonsense regulations that offer no good purpose, no public policy outcome and nothing to the peace, order and good government of the country is [indistinct] and we want to get $1 billion of that compliance cost out each year, and that's our commitment.
QUESTION:
[Inaudible question]
BRUCE BILLSON:
Well, I think it's been a difficult environment for small business, and I think a disinterest from the national government. I've faced six Small Business Ministers. At one stage, there were five in 15 months. Now, that kind of revolving door of the person in charge with the responsibility of being the advocate and the ally of the small business community, that doesn't build confidence or competence, and I think that's why you saw many examples of policy that seems to have ignored the small business implications in terms of what happened under the previous government. We want to change that.
Small business success is a vital contribution to our economy and our communities, needs to be front and centre. What have we got? We've got a Small Business Minister in Cabinet, not the Small Business Minister tagged on another long list of responsibilities, but that's my primary role. We've shifted the small business policy function into Treasury. Why? That's the economic policy engine room of the Commonwealth, where tax policy in the investment environment, the fiscal and economic strategy is being formulated. We don't want small business and family enterprise interests tacked on as an afterthought.
We want it embedded in those determinations and those judgements and assessments [indistinct] the Commonwealth, and through that we can help nurture the kind of positive environment that says to enterprising people we value and respect what you do, we're doing what we can to be a partner and an ally in your enterprise and entrepreneurial outlook, and we want to make it more likely that you'll succeed, not put up obstacles or appear to be, you know, almost - well, there are colourful words that small business people give me that are not particularly complimentary, but we'd like to see government policy being a net positive to small business prospects and success. We think that's good for communities.
My electorate - I like in Frankston. You've probably heard of that Southern Hemisphere capital right up
there with Santiago, Buenos Aires and Frankston. You know the place.
[Laughter]
BRUCE BILLSON:
It's 60 kilometres out of downtown Melbourne. Sorry, it's 40 kilometres. My home's 60 kilometres out. Small business and family enterprises, they are the economy. We don't have a mine, we don't have an office tower [indistinct] courageous men and women who take risks, create opportunities for themselves. It deserves more respect than it's had in the last six years, and I'll make sure that that respect is there.