Thursday, 3 September 2020
Payment Times Reporting Bill 2020, Payment Times Reporting (Consequential Amendments) Bill 2020; Second Reading
I rise to speak on the Payment Times Reporting Bill 2020 and the related bill. I spent a career working in and with small businesses and I understand how important they are for local economies and the national economy, and how difficult it can be to run a small business. Let me tell you, cash flow matters. It doesn't matter how good you are at what you do; if your customers don't pay on time, you simply cannot survive with a small business.
For small-business people, landing a contract with a large firm feels like you've made it. It gives you a kind of security that you don't have with other contracts—security that you've got a buyer for your products, security that you have money coming in, security that you can pay the salaries of the workers who are depending on you. But, once that feeling passes—and, believe me, that feeling generally passes very quickly—you learn that a contract with a large firm can also give you a very high degree of insecurity. If one-quarter or one-half of your business is with one customer, you are completely dependent on them. If they drop you or if they scale back, you have to let go of employees and you might even have to shut up shop. When you're dependent on one big customer and they tell you they're not going to pay their bills right away, you're in no position to argue or to renegotiate with them at all. They are the ones who hold all of the power.
This bill will require those big customers to publicly report on their payment terms and their actual payment periods for their small business customers, and that is very much a good thing. At the very least, this will allow small businesses to check out the practices of potential larger customers and decide whether or not they're willing to take on that exposure. Of course, small businesses will take on that exposure regardless because they would see it as representing a large chunk of their business. It's going to be a useful tool for many businesspeople. The government also says that the register will create an incentive for large businesses to improve their payment performance. I'm somewhat sceptical about this for a number of reasons, but I do hope that, in the end, that will actually be of benefit to small businesses. The reason large businesses can push around small businesses is that there are plenty of small business suppliers but only a small number of large customers in any market. That's what gives the big players market power. Unless those power dynamics change, there won't be many big players changing their payment performance.
Transparency alone will do little to make things better. Indeed, my main concern with this bill is that transparency may actually make things worse for some small businesses, particularly those in concentrated markets like the banks, petrol stations, supermarkets and telecommunications. The register will allow big businesses to see the payment terms of their competitors, which is something that, I think, very few people have thought about. Moreover, it will allow some of the better performers to scale back their payment terms in a race to the bottom that can only hurt small business. Unfortunately, I don't see a way to amend these bills so that we can capture the benefits of transparency without incurring the harm. The benefits outweigh the harm, so Centre Alliance will support this legislation, but reluctantly. We encourage government to look at this as one step in a journey towards making life easier for small-business people. This means adopting some of the other recommendations of the small business ombudsman, such as the regulation of the use of supply chain finance products. But, more than anything, we need to find ways of dealing with a market power enjoyed by too many large businesses in Australia. Market power hurts small businesses, and it also hurts consumers and employees. If the government is serious about a productivity based recovery, market power itself is where the government needs to focus.