NATIONAL PRESS CLUB ADDRESS
1 July 2015
Business Class Warfare alive and well in 2015
Today I will present the argument that too often decisions that affect us all are being made
or manipulated by just a few institutions, businesses and individuals. We must change this
and ensure that the majority of us are involved in economic decisions and policy,
particularly those from the business community.
We have business class warfare alive and well in Australia. It is a struggle by most of us
against those who see themselves as above the rest of us, as more knowledgeable, more
able and better bred; or just more powerful.
COSBOA has been around since 1977 and was formed to present an unambiguous voice for
small business, we aren’t the only voice but we are able to articulate small business needs
without any belief that big business needs being more important than ours. For too long
small business and big business were considered an homogenous group where the same
policies and processes could be applied and all would be good. It doesn’t work like that and
never will. In the last twelve months we have seen a sea-change where small businesses are
considered differently and separately from big business, and don’t the business ruling class
hate it. Our 32 member organisations embrace some 600,000 small business people and
represent many and varied industry sectors and are run by people who are wise,
experienced, informed and too often ignored. We have to fix that.
Let me start by telling a true story to show the misplaced power we face.
I once owned a bookshop. We opened seven days a week and a young man, let’s say his
name is Nathan, worked for me on weekends and he could only work on weekends. He was
saving money to fund a gap year when he finished university. My shop was struggling due
to changes in the book industry but mainly due to carparks being moved from near my shop
to the newly extended Mall – the Canberra Centre.
A decision was made by the Fair Work Commission that penalty rates for Sundays would
increase from time 150% to 200% - double time. This was too much and Nathan knew this.
He knew I would have to close the shop on Sundays, one of only two days he could work.
He told me he was happy to keep getting the current wage and indeed he would have even
taken normal time.
So I had a problem, an ethical problem. Do I support Nathan and break the rules or follow
the rules and let Nathan down. I chose to follow the rules due to my position in COSBOA
but it made me think.
It seems that there is a group of people in Melbourne who know better than Nathan what
Nathan should do and they believe Nathan is better off sitting at home doing nothing than
earning time and half in my shop, even though that is what Nathan wants to do. They know
best. Do we thank them for saving Nathan from his own stupidity?
But I then discover that Nathan can work for Coles or Woolworths or McDonalds for time
and half on a Sunday. What happened? How come I have to pay more than the duopoly?
How come those same people in Melbourne who believe that Nathan should not work for
my shop, or for tens of thousands of other shops, newsagents, pharmacies, cafes and
restaurants, on a Sunday for time and half then says it’s Ok for the big players to do just
that? We will come back to the Fair Work Commission and the ACTU.
There is more to this story. We know that the union for retail, the Shop Distributive and
Allied Employees Association (SDA), is the largest union in Australia and dominates the
union movement. We know that over 90% of SDA members are to be found in Wesfarmers
and Woolworths or their subsidiaries.
The SDA fought long and hard to get double time on Sundays and then negotiated an
agreement with Coles and Woolworths that saw their members receive time and half on
Sundays. A decision that meant small businesses didn’t open on Sundays giving the duopoly
greater market share and increasing SDA membership.
So what does it mean when three big dominant organisations come together? Simply put
our economic health is decided by these three organisations. If penalty rates stay high or
increase with pay rises then many small business will close, at least on Sundays and public
holidays. As a result the Duopoly will increase their share of the market place through
attrition created by the actions of the SDA.
When opening hours for the duopoly were deregulated then the duopoly increased market
share and the SDA increased membership. This means that Coles and Woolworths have
increased their market share not by improved services or better, cheaper products but by
attrition and an ability to manage increased costs that competitors cannot handle.
The SDA also has strong influence on the Labor Party, being its biggest funding source and
with many of its MPs and Senators coming from an SDA background. The SDA is a highly
successful union but the potential for one large organisation to have inordinate influence
over government or potential government policy should not be an outcome of failed
competition policy and failed regulation of that policy. Competition policy managed by the
ruling class for too long.
The SDA is a noted conservative union, so will one union decide on our behalf whether there
is marriage equality or will society decide?
The SDA also pays Coles and Woolworths and others up to $5 million a year as "commission"
for the employers deducting union fees from members' pay packets. Really?
$5 million equates to 50 people paid $100k per year just to make payments from employees
to the union. They must be doing it manually. This needs to be investigated.
It gets worse – REST superannuation, the industry superannuation fund for retail, currently
has over $34 billion of funds under management. Its directors are from REST and big
business with an independent chairman. This will now change due to a recent
announcement from the Assistant Treasurer Josh Frydenberg that will force superannuation
funds to actually have more independent directors and better governance. But how did that
happen in the first place? That the directors of a multi-billion dollar financial institution
were chosen on where they worked not on what skills they possessed. Where was the
prudential regulator APRA? Are they also afraid of the SDA and the duopoly?
The impact on innovation and productivity is profound.
Late last year Coles was pinged for unconscionable conduct. The Court ordered Coles pay
combined pecuniary penalties of $10 million and costs.
Coles will also enter a court enforceable undertaking to the ACCC to establish a formal
process to provide options for redress for over 200 suppliers referred to in the proceedings.
The judgement stated that: “Coles’ misconduct was serious, deliberate and repeated. Its
conduct was ‘not done in good conscience’. Coles treated its suppliers in a manner not
consistent with acceptable business and social standards which apply to commercial
dealings. Coles demanded payments from suppliers to which it was not entitled by
threatening harm to the suppliers that did not comply with the demand. Coles withheld
money from suppliers it had no right to withhold.
“Coles’ practices, demands and threats were deliberate, orchestrated and relentless.”
“Coles’ conduct was of a kind which merits severe penalty.”
The duopoly is so big that this sort of behaviour kills innovation and productivity. This must
be fixed and fixed for good.
The Fair Work Commission or FWC is a very elite institution. Let me stop here for a minute
and acknowledge the current President of the FWC, Justice Iain Ross. Justice Ross is in my
opinion intent on reform of the FWC and has instigated some good changes to the way they
deal with small businesses, but he has an uphill task. Justice Ross will be at our National
Small Business Summit on 17 July to give a speech on “Small business and the Workplace
Relations System” and we look forward to what he has to say.
The FWC is a very large group of commissioners who lord it over all and sundry. They are
akin to the old House of Lords. They do not like to take reality into account. For example
they decided that if a school kid wants to work after school and that work is less than 3
hours then the employer has to jump through all sorts of hoops to justify employing them
for 1.5hours. Kids after school can’t work 3 hours – that’s the way it is – dear FWC get over it
and get with reality. The ACTU is currently trying to extend the minimum hours from 3 to 4.
No sense of reality there just a sense of power.
Who else besides the FWC/ACTU and the duopoly/SDA partnership – (as close as you can
get to being a cartel without actually being one) –rules Australia?
The biggest landlords are corporate parasites who manipulate urban planning processes so
that their malls are the only place you can shop. At their whim they will organise streets to
be made one-way, for carparks outside their malls to be moved under or next to their malls,
and for bus stops to be moved closer to their entrances. Do they contribute to our society
beyond that? No.
Westfields is a company who has been named and shamed for tax dodging. Research
showing that the “effective corporate tax rate” that Westfield paid in the nine years leading
up to December 2013 was 8% – significantly less than the current 30% company tax rate.
And the ethics of the big landlords are typical ruling class ethics. Whenever I complain
about their treatment of small business people it is explained to me that it is the small
business owners fault if they fail as they are obviously incompetent and inept. I disagree as
the onerous leases and bullying behaviours are more often the problem.
When massive landlords and developers are allowed to capture the high street and enclose
it in a business factory farm, burying the limited parking places underneath, feeding
consumers into their lair, then the small business retailer is forced to sign in blood to access
customers who use to be free range. Suddenly the High Street is again owned by a medieval
lord.
I once highlighted a common situation to a representative of these biggest landlords and
asked for comment. The situation I highlighted is that a small business person will negotiate
a lease with someone like Stocklands. The lanlords representatives will know that this
particular small business will not survive the term of the lease and will close down within
say 3 years. They do not inform the new lessee of that fact, he or she signs the lease and
their fate is assured.
The landlords’ representative saw nothing wrong with this and replied “well they signed it,
what can you do?” The business ruling class always see problems as other peoples, ethics as
something they find on the day they need it and if a person is trusting and optimistic well
more fool them. That first time business person is doing many things besides negotiating a
lease; they are selecting staff, contacting suppliers, preparing for a fit out, negotiating a
loan, maybe finalising a franchise agreement. The landlord’s representative has one task: to
get the lease signed on what will be the best terms for Westfields even if that means the
person will lose their house and their health.
The fact is that you do not go into business unless you are basically trusting and optimistic,
Westfields and many others abuse that trust and that optimism. Bruce Billson - that once in
a lifetime small business minister - is trying to change that and these lowlifes will fight him
all the way to make sure they can still rip off the hardest workers of this country.
When a small business person fails it is more than a business failure, it is more than likely a
family home that is lost, personal health that is lost, relationships and marriages that are
lost and sometimes a life.
Paradoxically when a big business gets it wrong then often not a lot happens. An example
being Federation Centres. They used to be called Centro but changed their name due to the
embarrassment of losing over $6 billion of their investors’ funds. The then board had
misread a financial spreadsheet and a huge loss for shareholders was the result. ASIC took
the Centro board and management to court, the company, using shareholder funds, argued
that they did nothing wrong and blamed others. A court found directors of the Centro
property group had breached their duties. The outcome? The CEO was fined $30k, the
equivalent to 20 hours pay, and no Director was fined. The Judge involved felt that the
shame and embarrassment was punishment enough.
The message here is loud and clear if you are a tenant in a big shopping mall and cannot pay
your rent then go and tell the manager of that mall that you are embarrassed and shame
faced and they will of course, based upon the precedent made in court, forgive you.
The mining companies do not have a direct negative impact on small businesses, indeed
they often have a good day to day relationship; but they and their owners are very much the
ruling class. They basically dig fancy dirt and rock and send it away to be made into goods to
be sent back to Australia. While BHP Billiton and Rio Tinto are Australia's biggest taxpayers
– last year they paid almost $18 billion between them in Australian taxes and royalties. Does
that sound like a lot? The total tax collected in 2013 was $433 billion, so these mining
companies contribute around 4% of tax. So they should, many think it should be more as
they remove valuable resources and do not add value to anything. We are led to believe
that without them Australia would be a backwoods economy. But they are only part of the
economy, a part that is notoriously slow in paying their suppliers, on average over 50 days
and some at 120 days. That isn’t good corporate behaviour.
They certainly bring in a lot of export dollars but they don’t like to share those dollars and of
course many of the mining companies dodge tax through places like the Singapore and
Luxembourg. BHP, once referred to as "the big Australian", is paying an effective tax rate of
just 0.002% - effectively zero - on the hundreds of billions of dollars in sales of Australian
resources it directs through its Singapore "marketing hub".
Now some special mentions - The ACCC for ten long years (pre Rod Sims) was also part of
the ruling class and treated small business people with contempt. This is one of the reasons
that the Duopoly/SDA partnership was allowed to blossom and grow to all our detriments.
But the current Chairman of the ACCC, a modern day William Wilberforce, Rod Sims, has
bought professionalism, intellectual depth and a backbone to the ACCC, and don’t the ruling
classes hate it. As mentioned before he pinged Coles for particularly appalling behaviour,
behaviour that they were allowed to do for far too long. Interestingly an apologist for the
old now discredited competition regulations said that this proved that the system works –
really? I think it showed that the system didn’t work. Sadly I am sure that Rod Sims time will
not be extended to two terms as those who believe they rule will want his metaphorical
head removed with a metaphorical guillotine.
The Prudential Regulator – APRA – needs to get out of its ivory tower and down in the
streets with the rest of us. They did a fantastic job before, during and immediately after the
GFC – a GFC caused by failed overseas regulators and failed big business – but resting on
laurels and hubris do not make a good approach to ensuring we don’t have another GFC and
not working with the business community – being aloof and ruling class like – isn’t good.
Our members, in particular CAFBA, have a lot of good policy ideas that will assist in making
finance for small business more accessible – come down to our level and let’s talk.
Underpinning ruling institutions are royal academics; too many economists in particular
enjoy the debate so much they ignore reality. Men and women who believe the world
should be run from a textbook and that the real world actually can’t exist because it makes
no sense. These academics believe in tooth fairies, flying pigs, that Elvis lives and that if
pharmacy goes into the duopoly that everything will be fine. Pharmacists will disappear but
that is OK because the consumer has chosen. Those academics fail to notice how the
duopoly and the landlords and some unions have managed things to make sure the
consumer actually doesn’t have a choice. In NSW and Tasmania there are moves afoot to
give lottery and lotto to the duopoly which would see the end of the newsagents. No
Pharmacy and no newsagents on the main street will destroy strip shopping and see the
only place to shop is a large shopping mall full of franchises and large supermarkets. I heard
recently that the duopoly also want to have hairdressers in their shops. Please not. Also
gymnasiums – please no - enough. Text book economists please go away and let’s have
some common sense based on reality.
In the end decisions on town planning are made by a small group of people in Melbourne
who will never visit your town. Decisions on WPR relations are made by a very few number
of people who believe it is better for you to be at home doing nothing on a Sunday instead
of earning good money. What you buy is decided by two large retail companies. The future
of the economy is decided by faceless economists with failing theories.
I don’t have time to spend on Amazon and the way it dodges tax all over the world and
contributes nothing to any economy, how they and others dodge GST and how our
economists and policy makers continue to support these people at the expense of our jobs
and our businesses. What is with the business ruling class?
Because it is true - we have business class warfare in this country, it isn’t big business versus
small, it isn’t unions versus business, it is those who believe they are born to rule and those
who are too big versus the other 96%. It is ideologues who live in past battles or old
textbooks who believe they know what is best for the 96%.
The solution?
Last year was a good year for small business and for the future of the economy. Bruce
Billson, the Small Business Minister, instituted many studies and reports that can create the
more flexible, innovative economy that we need. He has focused on competition policy,
contract law, regulator behaviour, franchising, financial services and red tape reduction
among many other actions as part of the Ministerial treasury team presented a small
business budget the likes of which had never been seen before. There is much hope to be
found with Billson.
But there is more we can do. Do we accept that for too long nearly all the important
decisions for our economy have been made by a small number of people least affected by
those decisions? My guess is about 50 people. The decisions have been made by those who
support big government, including representatives from big business and unions as well as a
handful of senior public servants. If so this must change and the people affected, the locals
have to be bought on board.
We must have a national program of Local Economic Development run by an independent
body. This is how we empower business communities to influence and work on the
direction and the management of their small economies. We need to remove the decision
making power given to far away developers and economists and let the locals make
decisions that affect them. Let the locals decide what training and skills development is
needed, and build on the work of Senator Birmingham. Let the locals be given the
information they need to deal with change, manage the down times and the closures and
create new opportunities and businesses. Then when our centralised decision makers
change interest rates, or modify education and training systems, or remove tariffs, bring in
new taxes and levies or whatever the major change is, the locals will feel they might be able
to make it work for them.
For a true empowerment of community to occur we need a change in attitude.
I was first engaged in local economic development when I moved to Canberra from
Goulburn in the late 1980s. I joined a group of public servants who were a small but
significant part of a large department. We worked with regions affected most by John
Button’s industry restructuring of the late1980s and early 1990s caused by the dropping of
tariffs for the passenger Motor Vehicle and for the Textile, Clothing and Footwear
industries.
But empowerment of local communities was always a process that would be resisted. Not
long after starting in this job I received a phone call from a senior person in the now defunct
Federal Office of Local Government. Geelong was a major centre of industry reform at the
time (nothing changes) and this senior public servant's opinion was that the people in
Geelong did not have the capacity to respond to the crisis and that we could fix Geelong
from Canberra. I told him firmly that our process of local empowerment was the best way to
deal with change. He wasn’t convinced and never would be.
In my time with this work, there was (and still is) an on-going and powerful tendency to
centralise decision making and project management into Canberra and other capital cities.
After the change of federal government in the mid-1990s the Howard government
understood the need to empower locals, but key public servants resisted that approach.
There were some sixty Area Consultative Committees (ACCs) scattered around Australia run
by local business people who volunteered their time to develop and influence local
economic planning to better their own communities. Funding for administrative support of
these ACCs was provided by the federal government. I worked with many of the ACCs and
found frustration from all of them with the way Canberra dominated their activities. I then
met the public servant in Canberra who was responsible for funding and management of the
ACC process. She told me she was frustrated because the ACCs “would not do as they are
told". One person in Canberra truly believed that she knew better than the hundreds of
business people involved in their own community’s development and welfare. This is
paternalistic centralism which must be overcome if we are going to better predict and
manage change.
It may be true that the centralised decision maker will have a better understanding of
macroeconomic reform and levers, but they are still remote from the effects and cannot
always apply microeconomic solutions from afar. A key to local success is that local business
people must be accepted as crucial stakeholders and drivers of local economic planning, as
they are the ones who will have access to the funds to risk.
The biggest landlords, Coles and Woolworths, the mining companies, developers and the
biggest unions care nought about Lygon Street, Newtown, Dubbo, Esperance, Alice Springs,
Ballarat, Devonport or Mackay – they care about their ideology, their bottom line and their
profits, if they destroy the culture of a town or a community on the way to that profit well
so be it, they won’t even notice. They must be told to be gone and let locals decide.
In the end what is at stake? It is innovation, productivity, jobs and the economy. The way
forward must be through the small business community. There are millions of us, it’ll work.
Thank you.
-
ENDS –
Registrations are open for the Vodafone National Small Business Summit. For more information
please visit www.nationalsmallbusinesssummit.com.au
In 2015, small businesses will be invited to attend the inaugural Summit Start Up on Wednesday 15th
July; a pre-Summit networking event where the community, culture, and diversity of small
businesses will be celebrated. The Summit Start Up will be opened by Hon Bruce Billson, the Federal
Small Business Minister.
-ENDS-
For further information or to register your attendance to the Vodafone Small Business Summit
please contact:
Debbie Bradley or Zoe Guest, Zadro Agency
E: Debbie@zadroagency.com.au or zoe@zadroagency.com.au
T: (02) 9212 7867
Notes to Editors
1. The Council of Small Business Australia (COSBOA) was founded in 1979 and was
incorporated in 1985.
2. COSBOA is Australia’s peak body exclusively representing the interests of small businesses.
3. The VODAFONE National Small Business Summit 2015 will be held at Doltone House Jones
Bay Wharf, Sydney on 16 and 17 July.
4. The VODAFONE National Small Business provides the small business sector with the
opportunity to discuss and identify relevant issues, promote innovation and generate ideas
to stimulate growth within the industry.
5. For more information about the summit visit: www.nationalsmallbusinesssummit.com.au
6. For more information on COSBOA visit: http://www.cosboa.org.au/
7. Interviews with Peter Strong, CEO are available upon request.
8. Connect through social media channels:
Facebook: /COSBOA
Twitter: @COSBOA
Hashtag: #NSBS15
LinkedIn: http://www.linkedin.com/company/cosboa
9. COSBOA is a long-time advocate of small business on issues from taxation and workplace
relations, through to competition law and retail tenancy.
10. The goals of COSBOA are to promote and support the development of small businesses in
Australia and the council recognises that it is a national imperative for Australia that the
needs of small business are on the national policy agenda.