Thursday, 3 September 2020
Payment Times Reporting Bill 2020, Payment Times Reporting (Consequential Amendments) Bill 2020; Second Reading
I rise to speak in support of the Payment Times Reporting Bill 2020 and the Payment Times Reporting (Consequential Amendments) Bill 2020. In my previous life at the Transport Workers Union of Australia, the largest organisation representing small businesses in Australia—namely, the thousands of owner-drivers in the country—I frequently dealt with the ongoing issue of payment delays. The committee reviewing this bill heard evidence that 98 per cent of trucking operators are small or family businesses. Many operate with tight margins, often under incredible pressure, with high upfront costs, ongoing debt and unsafe working conditions. These conditions are made all the worse by the repeated behaviour of retail and mining clients at the top of the supply chain who are pushing out payment times, often resulting in these small businesses waiting 60 days, 90 days or even 120 days plus. Truck drivers and their companies are not like publicly listed companies. They cannot borrow at the rates the larger companies can. They cannot sell equities or issue debt bonds when they're not paid on time.
When the client at the top of the supply chain, often with millions of dollars in financial and legal assets behind them, decides not to pay, what recourse does a contractor or owner-operator have? What recourse does this bill propose to allow them? Nothing. The bill will require companies with turnovers greater than $100 million to report twice yearly how regularly they pay their companies and contractors. We understand that will be roughly 3,000 Australian businesses, which is a drop in the ocean of the number of companies that need to be held to account for payment times.
The government's Xero 2019 report that prompted the bill estimated that late payments from big businesses cost our small businesses up to $7 billion a year. We know from the 2016 research by Dunn & Bradstreet Australia that large companies in Australia can be 20 per cent slower in paying their bills than smaller companies. The Australian Small Business and Family Enterprise Ombudsman in 2017, inquiring into payment times and practices, found that average agreement payment times in Australia were 26 days late.
Only significantly large companies that regularly pay late, creating cashflow problems for small businesses, will be, under this bill, effectively named and shamed for their behaviour. This bill is a positive step in that regard, but one that will create some minimal transparency around this practice. Where this bill fails is that it relies entirely on this name-and-shame tactic to drive change. Similar programs in other parts of the world have fundamentally failed. This bill can really be described as a 'no-help no-harm' bill. It provides no actual help for small business and causes no harm to the larger businesses who do the wrong thing. The bill does not mandate or enforce maximum payment times. Instead, this government's relying on companies to have an ounce of shame or regret in how they treat others in their supply chain. It is really optimistic, as corporate self-regulation always is.
As the Australian Small Business and Family Enterprise Ombudsman, Ms Carnell, told the committee that reviewed this bill—and I'm quoting from the report:
… some large firms simply ignore bad publicity about their practices.
That's why Labor will be proposing its own amendment to this bill to provide a fail-safe against late payments, an amendment that will deliver greater financial security and certainty to small business. While those opposite often trumpet that they are the party of small business, when it comes to actually ensuring fairness for small businesses the Liberal Party instead side with the largest of companies. As for the Nationals, I hope they will follow suit in the spirit of the great National senator John Williams, who backed the 30-day maximum payment system.
In some markets and industries, small businesses cannot shop around for other clients or other work because the market power is held by the top of the supply chain. Moreover, naming and shaming businesses with bad payment times will likely do nothing to stop the market power exercised by these firms, and that's the experience overseas. Small businesses already know which companies are good or bad operators. If Aldi builds a reputation for not paying contractors or small businesses in its supply chain, does that erode any of its market power to set the rates in the supply chain and continue its practice? The answer is: of course not. This bill on its own will do nothing to prevent these companies from riding roughshod over smaller operations.
This bill in its current form will also do nothing about the disturbing trend of supply chain financing, where small businesses are forced to engage a third-party financier to pay invoices owed to them, often for free. This is a process that sees desperate small businesses at their wit's end taken advantage of by these financiers, essentially payday lenders for small business. They're losing money in order to be paid on time. Big businesses and companies that never seem to have a problem paying their executive bonuses or their shareholder dividends can for some reason rarely be bothered to pay those in the supply chain on time. The practice of supply chain financing is unacceptable and a by-product of this government's failure to curb the practice.
There are 3.4 small businesses in Australia, many suffering the consequences of intermittent cash flow due to a delay in payment times. Instead of telling them what they already know, this government could take decisive action and mandate a maximum 30-day payment—a mandate that should not result in companies that pay in less than 30 days pushing out their payment times but, instead, ensure that companies practise payment times that treat others in their supply chain fairly. A 30-day maximum payment mandate is a proposal backed by the Australian Small Business and Family Enterprise Ombudsman, the Institute of Public Accountants, Self-Employed Australia and, in a rare moment of unity, the Australian Trucking Association. As the ATA made clear in their submission on this bill, late payments are a chronic problem in the road transport industry, and there is a great deal that the government could to.
However, I will not hold my breath, because it was this government, only one Prime Minister ago, that abolished the Road Safety Remuneration Tribunal. The tribunal was brought in because the client economic pressure at the top of the supply chain is overwhelmingly the biggest factor contributing to the high rates of injuries, deaths and collapsed companies in the trucking industry. And poor payment terms are one of many features of this gross economic power that are strangling the transport supply chain. This was a finding of the National Transport Commission's 2008 report:
… the overwhelming weight of evidence indicates that commercial/industrial practices affecting road transport play a direct and significant role in causing hazardous practices.
That is a finding that had been confirmed by countless inquiries, reviews and reports, including coroners' reports.
Legislating the Road Safety Remuneration Tribunal was a shining achievement of the Gillard government. It took action to support the tens of thousands of small businesses operating in the road transport industry. The tribunal's first order—yes, the very first order—issued in December 2019 mandated 30-day payments. If this government had not abolished the tribunal in 2016 then 30-day payment times would be the law of the road transport industry. Countless small businesses might not have gone bankrupt waiting for payment of their invoices. Drivers would have been able to maintain their vehicles and not suffer the indignity of injury or, of course, the tragedy of their death for their families and friends. The government abolished that tribunal and replaced it with nothing, and they're replacing it with nothing now. They repealed a body that was providing safety, ensuring that small businesses were paid on time, and replaced it with nothing.
In preparation for this speech I reached out to industry leaders, including Peter Anderson of the Victorian Transport Association and Hugh McMaster of the New South Wales branch of the Australian Road Transport Industry Organisation and the Transport Workers Union, and asked them questions about late payments. I was informed that among eight companies that were surveyed in the past 24 hours there were 23 invoices already 60 days late on payment, six invoices 45 days late, two invoices 90 days late and five invoices that are now 120 days late—all from clients of major companies that are serviced by the transport industry, many of them servicing multinationals. Some of these clients even have the audacity to ask for discounts in exchange for improved payment times, let alone payment on time.
This is the state of the industry post the repeal of the Road Safety Remuneration Tribunal as described by Frank Black, a representative for owner-drivers who contributed to a 2017 report; Macquarie University Associate Professor Louise Thornthwaite; and Sharron O'Neill of the University of New South Wales. Frank Black described the effect of repealing the tribunal as follows:
Things are going backwards and the pressure on drivers is growing. The Government can't be surprised at the high number of deaths and injuries on the roads.
The Australian Small Business and Family Enterprise Ombudsman, in their September 2016 review into the RSRT, examined the issue of payment times and terms and talked to owner-operators in the industry. One driver remarked:
BP requires me to pay my fuel bill at least fortnightly. But I can wait up to four months to be paid for my work. That means I often have to pay for fuel with a credit card.
Another driver pointed out:
Cash flow is the most important weapon with small business, it ensures accounts are paid on time, financial security. Many large companies are pushing their payments out to 60 and 90 days. No-one can survive with those sorts of terms. Fuel, wages, superannuation all have to be paid within a 30 day period.
These drivers raise an important point: there is one practice for small business and another for their clients. Small business cannot afford to miss payments to their suppliers. Delays can put them out of business, while the clients—the ones that have the market power and supply chains—can do what they want. Transport companies are not price makers; they are price takers. They are at the mercy of the client's gross economic power.
As an official with the TWU for 30 years, I've heard what that pressure sounds like. It's the pressure of struggling to make ends meet while an owner-operator goes 100 days without payment for his or her work. It's postponing overdue maintenance on your vehicle in order to make those ends meet. It's burning the midnight oil driving through the night to make an extra delivery—an extra run to earn just a little more. And it's the sound of carnage on our roads. Since the Road Safety Remuneration Tribunal was abolished, there have been some 706 deaths from accidents involving heavy vehicles.
While passing this bill won't do any harm, if the government is serious about addressing payment times to improve fairness for businesses at the mercy of powerful clients, to stop the callous practices of those at the top of the transport supply chains and to ease the financial pressures that contribute to deaths on our roads, then it should listen to the industry, the drivers and the opposition and support our amendments. As I've said before, I reach out to the Nationals in particular, and I will reincarnate, in senatorial terms, Senator 'Wacka' Williams: get off your backsides; do the right thing; turn around and support small businesses in your regions and in your towns. Yes, many of them are trucking businesses, but many are in the supply chains of those retailers—those ruthless operators—and non-mandated requirements on codes and nonarbitration are screwing them every day of the week. Stand with all of us—stand with the opposition and, most importantly, stand with your constituency.