Wayne Swan (Lilley, Australian Labor Party) Share this | Hansard source

I would like to say a few words about the important topic of small business and the role that small businesses play in our economy. If you read through the list that is there in the motion, the problem is that most of those policies mentioned in the motion are not going to do anything about the fundamental problems facing small business in our community and in our country. What we see is a repetition of a list of policies which can best be described as trickle-down economics, the centrepiece of which is a $50 billion unfunded corporate tax cut, which will do very little for small business in our community. It certainly will not be a generator of demand which will propel small business forward in our community, and it certainly will not be assisting them to create the jobs of the future. Twelve thousand or so small businesses in our community know, in their bones, that the most fundamental factor affecting their prosperity is the level of demand in the economy, and you would say at the moment that demand in our economy is anaemic. It is not terribly weak but it is not terribly strong either. Small business depends, critically, on the strength of demand in the economy and, most particularly, on the strength of the labour market. So, if we want to do something for small business in our community, let's go right down to what we can do to boost demand and strengthen the labour market so consumption can then be strengthened to boost small business. It is a virtuous cycle.

There is a myth peddled by those on that side of the House that somehow the problem in Australia is that businesses are cash-strapped because of excessive taxes and onerous regulations, wages are always too high and therefore we are not seeing the investment that we need to enhance productivity and drive job creation. Well, the very last thing a $50 billion corporate tax cut is going to do in this community is to boost employment in small business. This was recognised only last week by David Gonski, the prominent Australian company director, who simply pointed out that tax cuts, particularly to the top end of town—where most of them leak overseas—are not going to be the elixir for economic growth, most particularly for small businesses in our community.

Small business do it tough. They do need sensible tax policy from governments. And they got it from the last Labor government. They got the instant asset write-off, which was a huge boost for small business in our community—abolished when the Abbot government came to power and, fortunately, brought back after they realised the stupidity of what they had done. But they also knocked off some other policies that we put in place at that time to boost small business. One in particular was loss carry-back, which ought to be brought back by this government if it has a genuine concern for small business. But the fact is, what small businesses need, above all, is strong demand for their products, and what we are confronting in Australia at the moment is the twin evils of weak aggregate demand and a squeeze on low- and middle-income households. In Australia, labour's share of the national income is actually falling. This means that middle-income households are missing out on a growing share of our income growth, and they are being squeezed in their capacity to purchase services and to drive demand. Slow growth in incomes of low- and middle-income earners is the major impediment to small business in our community. Yes, they will benefit from a small-business tax cut—and good—but it will not provide the customers they need to drive their businesses forward.

As a policy option, we need to reverse this squeeze on middle incomes, and one way to do this is to boost public investment. Public investment is attractive as it not only boosts demand but it also deals with supply-side constraints in the economy and offers productivity gains. Only if we solve the problem of a lack of investment can we fix the lack of demand, so this is urgent. I certainly hope in this budget we see some action from the government to boost total demand, to boost public investment, to strengthen the labour market and to add to the consumption capacity of low- and middle-income earners in our community. But above all we need to boost public investment with the aim of lowering unemployment, which will produce a much stronger labour market.

Wage stagnation, or wage deflation, is one of the most damaging problems facing small business in our community, but the crew opposite do not understand that. They come in here and into the House day after day, giving us a prescription for lower wages. We hear them in here today claiming that, somehow, a cut in penalty rates is going to be good for employment growth. It is going to be damaging for employment growth, damaging for consumption and damaging in many of those areas—which we have spoken about before—that rely on the wages and income of the workers who are working on Sundays to boost demand and drive businesses in those communities. It is simply self-defeating.

See this speech in context