The Institute of Public Accountants recently released a whitepaper on policy changes which would greatly improve productivity and profitability of Australia’s small business sector. We’ve summarised some of the key findings and you can read the full report here.
- Australia is on the brink of enduring a sustained fall in living standards.
The recent mining boom has effectively masked Australia’s underlying economic vulnerabilities, namely stagnant productivity. Survey data from the Australian Bureau of Statistics (ABS) has found some alarming statistics including that only 1 in 7 businesses consider innovation is important and only 1 in 8 has an international presence.
- There are 3 key elements or ‘pillars’ that need to be focussed on to overcome these challenges.
The 3 areas of focus are human capital (having a strong pool of skilled and talented people), financial capital (easy access to funds for investment) and technological change (investing in new technology and research and development).
- The first recommendation is a state-backed loan guarantee scheme, similar to what is currently available in most other developed countries.
Smaller firms, especially start-ups, have enormous difficulty accessing finance from commercial banks. This scheme would provide a limited, state-backed guarantee to encourage banks to increase loan finance available to small businesses.
- The second recommendation involved the Federal Government introducing a publicly supported venture capital scheme.
This scheme should be designed to ensure that risk capital is available to high potential startups. The scheme should be established with private sector VC firms exclusively for capital investment projects for small and medium-sized enterprises developing new research and development (R&D) products or services.
- Australian public policy needs to rethink its stance on innovation.
Currently there is very little cooperation between businesses in Australia and the government can play a role in removing barriers to the spread of existing innovations to a wider cross-section of organisations. Strategies include more government support for R&D, better cooperation between research universities and industry, support for firms to adapt existing technologies and tax breaks for acquiring new technologies.
- There needs to be a greater focus on education and training to address the significant shortage of skills in Australia.
Research shows 1 in 6 businesses face a skills deficit and a significant number of businesses are constrained in their efforts to innovate by a lack of skilled labour. Recommendations include integrating entrepreneurship programs into school curriculums, promotion of STEM (Science, Technology, Engineering, Mathematics) subjects at schools and offering a training allowance for SMEs who employ STEM graduates.
- Government regulation at all levels needs to be totally revamped.
While it isn’t practical to completely remove ‘red tape’, a new approach to regulation by all levels of government will help improve productivity.
- More clarity is needed around the Fair Work laws whilst more protection is needed with regards to consumer law.
The issue of whether a worker is a contractor or an employee is an area of Fair Work law that particularly affects small business owners. While Australian consumer law doesn’t do enough to protect small businesses from becoming victims of price gouging and price squeezing.
- Recent changes to taxation for small businesses are a welcome change but more can be done, especially in the form of tax incentives for entrepreneurs and innovators.
- An overarching trade policy is needed from the Australian government which identifies impediments to trade and investment and focuses particular attention on the problems small businesses face in developing export markets.
The whitepaper is well researched and definitely worth a read. The next step is to see if there is anyone in government willing to consider implementing some of these recommendations.