Thursday, 3 September 2020
Payment Times Reporting Bill 2020, Payment Times Reporting (Consequential Amendments) Bill 2020; Second Reading
I rise to speak on this bill, the Payment Times Reporting Bill 2020. I note that on 28 November 2018, at the Australian Chamber of Commerce and Industry annual dinner, the Prime Minister announced as part of a strategy to assist smaller businesses that cash-flow measures would be introduced. He said:
Cash flow always starts with getting paid. If the invoices you issue are not being paid, that hurts your business, that makes it harder for your business. Businesses, small businesses should never be treated as a bank by governments or large businesses. We should all pay on time.
He then spoke of the government's track record on payments and plans to get Commonwealth payments down to 20 days, something he clearly expected to flow further into the supply chain when he said that—so, when the government pays primes, we want to make sure that payments make their way to smaller businesses more quickly. He also said this:
What we have said is that anyone who wants to work with the Commonwealth Government, you've got to agree to those terms as well. You've got to pay businesses on time, because the quicker the money moves around, the better the economy does, it's just common sense. So we are working to deliver that.
We are also requiring that more businesses with a 100 million turnover, that's 3,000 business to publish information on how they pay their small businesses. I want to see the score board. You need to see the score board if you are a small or family business. Who are the big businesses that pay on time?
All good words that were coming from the Prime Minister, and I note that the number has now changed in respect of reporting. We do need to make sure that we move to a situation where you are not in a position to get a government contract if you don't pay businesses on time. I have written to Minister Cormann recently about this, because it's within his portfolio responsibility, and he assures me that the government is moving down that particular pathway—although in my view not quickly enough, and in Kate Carnell's view, too, not quickly enough.
The federal government generally does pay well. The old system directs suppliers be paid within 30 to 45 days. I note Defence, for example, has really stepped this up during COVID and are paying suppliers within two to seven days, but not always. So we've got some good things coming out of COVID in respect of government making payments on time, and I congratulate the government on those. But I do throw out this concern. Whilst the government is paying people very quickly as a result of COVID—large defence companies—and that initially started with very short payment times to the small businesses, that has, apparently, turned around. And so I'd just draw the government's attention to the fact that, whilst it is doing the right thing, some large defence contractors are not.
That kind of frames where we are as this bill lands in the Senate today. There is other stuff the government is doing. I could sit here and say, 'You're not doing enough. You're not going fast enough,' and I think those words are true, but at least you are looking at the problem.
Kate Carnell, the small business ombudsman, said in February this year:
…late payments by large businesses to small businesses account for 53 per cent of all invoices; that's $115 billion paid late to small businesses – equivalent to $7 billion of working capital to Australian small businesses every year.
So this is really important legislation, focusing on reporting payment times to small businesses with a turnover of more than $10 million.
Whilst I'll be supporting this legislation, I will also be supporting Labor's amendments that place legal obligations on companies to pay small businesses on time. The time has come to stop large businesses using small companies as banks. That is just not an acceptable proposition. It causes great harm. It causes great stress to business owners, as Senator Griff was talking about. It causes companies to not have the cash flow to grow their own businesses. It's effectively removing money from local economies and that is simply not acceptable.
I want to use this opportunity to present a particular concern that I have, and this is something that the people of small businesses of Whyalla have talked to me on a number of occasions. I have been up to Whyalla to talk about this issue in December 2018, January 2019, April 2019, June 2019, November 2019, March 2020 and August 2020. Just recently I was up visiting my brother in Whyalla and took the opportunity to talk to local businesses again. There's a problem up there. The problem relates to the steelworks. The steelworks up there has been in significant financial difficulty for years. It was given a potential lifeline in 2017 when British billionaire Sanjeev Gupta bought the steelworks and unveiled a multimillion dollar redevelopment. Much of this is still to happen.
People will remember there was a fairly serious crisis on our hands, because if, indeed, the Whyalla steelworks were to close it would basically bring the city to its knees. We might recall that Mark Mentha was engaged as the administrator. We originally saw Mr Mentha making a decision for a South Korean company to take over the Whyalla steelworks. That didn't work out. Mr Gupta stepped in. Generally he's well regarded around town—although some of that regard is wearing off. As part of the arrangements that were put in place, the South Australian government—that was then Labor—made a funding commitment. I note that the current Treasurer, the Hon. Rob Lucas, said that he would honour that commitment. There are conditions associated with it.
In the meantime, what's happening is Mr Gupta is travelling around the world and he's buying up a whole range of steel related industries, many of them that are in distress. While he's doing that he's leaving people in Whyalla unpaid—good businesses run by good people who carry out good work, either producing good products or providing good services. He's contracting them. They carry out the work and then they don't get paid on time. His payment terms are quite lengthy already, but he's not meeting those. Mr Gupta, as much as I support you in terms of your ambitions for Whyalla—you'll see no-one standing closer to you when you advocate for support for your plans, because it will transform Whyalla from a city of 22,000 to a city of 80,000. It will be the cause of dual carriageways all the way to Whyalla. We'll see desalination plants. We'll see 737s flying in and out of Whyalla to and from Brisbane, Sydney and Melbourne. I did talk about this on Tuesday night and in a previous speech. It's very important. I absolutely support what Mr Gupta is planning for Whyalla, but you can't continue to do what you are doing to the businesses of Whyalla.
There's well over $1 million owed to small businesses in Whyalla, and it is causing great distress. Remember that many of these businesses were receiving the same treatment as they are receiving now when Arrium were running the company. It's been a long-term hard slog for these people. It's lucky we have tough people in steel towns, but it's not good enough. We have to do something about it. I want GFG to succeed, but they have to be good corporate citizens, and, right now, they are not. It is unacceptable. Mr Gupta, you need to step up and you need to pay.
Big businesses are much better positioned to predict their cashflow. They can see what money is coming in and what money is coming out, and they should never put themselves in a position where they place an order on a small business with the knowledge that they simply won't be able to pay that provider. What we see in many instances, because these businesses are in a distressed state, is that these companies then often come up to the smaller business and say, 'If you want to get paid on time, you need to trim your price, and we'll give you a guarantee that you'll get paid on time.' That's totally unacceptable conduct.
In some sense, it's a bit of a sad indictment that we have to legislate like we are today. I support the idea that we should be reporting companies that are not paying on time. I think, when you shine a light on things, often you get improvements. They say that the thing that people who operate in dark places fear the most is light, so we do need to shine a light on some of these companies that are simply doing the wrong thing, and that's why this bill is important. But I think we need to go a step further.
We need to push forward with punitive measures where businesses do not comply with payment times. Remember: these payment times are an agreement between two parties—between the large business and the small business. No-one forces anyone to do this, and so one expects that you go into these arrangements in good faith and in good conscious. Provided one party meets their side of the agreement, the other party must also meet theirs. So I support this bill, but I also support what Labor are trying to do with this, and that is to make sure that there are penalties associated with large businesses who don't conduct their business in a conscionable fashion. I commend the bill to the Senate.