DAVID KOCH:
Treasurer, appreciate your time.
JOSH FRYDENBERG:
Good morning.
DAVID KOCH:
How will these reforms work in practice?
JOSH FRYDENBERG:
Well Kochie, we know small business is doing it really tough through the COVID crisis and because of the health restrictions many have had to close their doors, but they are still very much viable businesses. As the liabilities have racked up, we want to prevent them going through a formal liquidation process and ultimately being wound up. So what we want to do is give these businesses more control to be able to repay their debts, restructure their business. So, how it will work in practice is that if a business has liabilities of less than $1 million, then it will work with a small business insolvency practitioner to come up with a plan, then it will put that plan to the creditors. Creditors will have 15 business days to vote on it and when creditors vote 50 plus one in favour of that restructuring plan, the business, their owners, the management, can continue to stay in control rather than handing over the keys and to trade out of the crisis. This is going to really improve their chances of getting through but also, it will improve and strengthen the dynamism across the Australian economy.
DAVID KOCH:
So, this is similar to America's Chapter 11 bankruptcy protections. Basically it says we will protect you as a small business owner and you trade your way out of it with the cooperation of your creditors, rather than you bring in a bunch of accountants who say, "get out of the business and we will look after it from here".
JOSH FRYDENBERG:
Well, 60 per cent of the businesses that go into the insolvency process don't come out the other side. We know that so many more businesses will be going through this process as a result of COVID-19. So we have taken the best features out of the United States’ Chapter 11 system. We have taken into account the recommendations and suggestions of the Productivity Commission, as well as the small business sector. We believe we have got the balance right here. We think it is going to be a really important reform and bearing in mind that 76 per cent of businesses that are going through the insolvency process have liabilities of less than $1 million and 98 per cent of those have less than 20 employees. So overwhelmingly, it is small and medium-sized businesses that will be helped by this reform.
DAVID KOCH:
Are there any strings attached for example, insisting a business has got to retain staff as a result of this?
JOSH FRYDENBERG:
Well, the business obviously needs to meet its employees’ entitlements but the key focus here is that it comes up with a plan, working with a professional. Then it puts that vote to the creditors and it can still work its way through, while staying in control. The key change here is the fees of the liquidators, the fees of the insolvency practitioners, the fees of the lawyers and the accountants are not going to eat away at the assets of that business. Rather, the business can stay in control and can come out the other side.
DAVID KOCH:
A lot of small business owners are going to be happy about that. While we’ve got you, from tomorrow JobSeeker payments will effectively be reduced by $300. The ripple effect on the economy, will that hurt the economy because there’s going to be less money for people to spend?
JOSH FRYDENBERG:
Well as you know, we put in place a $550 Coronavirus Supplement and that is now coming down to $250, so we have actually continued to provide more money into the economy than pre-COVID. But ultimately, what we want to do is get those people who are currently on JobSeeker into a job. What you will see in the Budget in just two weeks’ time is the next stage of that JobMaker plan, designed to help those people get into a job. So there will be no shortage of initiatives in the Budget to help people to get off the JobSeeker payment and into a job.
DAVID KOCH:
Okay. So, the Budget is in two weeks, 6th of October. We’ve had JobKeeper, JobSeeker. Now it’s all about JobMaker and it’s going to be schemes, what, incentives for employers to hire more people?
JOSH FRYDENBERG:
Well, again, you will have to switch on on October the 6th and no doubt, we’ll be talking that next morning, Kochie…
DAVID KOCH:
Oh, come on…
JOSH FRYDENBERG:
As we normally do. But, we’re leaving no stone unturned in getting people back to work. We did see in the most recent employment numbers some encouraging developments particularly 111,000 people coming back to work in the last three months. 458,000 jobs being created, 60 per cent of them went to women, 40 per cent went to young people. Outside of Victoria, restrictions are being eased and people are getting back to work and that is a very good development.
DAVID KOCH:
A big couple of weeks ahead. Treasurer, appreciate your time, thank you.
JOSH FRYDENBERG:
Good to be with you, Kochie.