Rex Patrick (SA, Centre Alliance) Share this | Link to this | Hansard source

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.

Tony Sheldon (NSW, Australian Labor Party) Share this | Link to this | Hansard source

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.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I'd like to align myself with the comments in the contribution that Senator Sheldon has just made. I rise too to speak on the Payment Times Reporting Bill 2020 and the Payment Times Reporting (Consequential Amendments) Bill 2020. I want to say at the outset that without amendments to this bill, and specifically the payment times reporting scheme, this bill should not be supported.

The Payment Times Reporting Bill introduces a new payment times reporting scheme which requires approximately 3,000 large businesses and government enterprises with annual turnover of $100 million and above to publicly report biannually on their payment terms and practices for their small business suppliers. It's an important piece of legislation if we are to get Australia moving again. After all, businesses, and in particular small businesses, are the backbone of Australia's economy. Labor understands that the policy to ensure these small businesses are supported is important work of government. There is no more important time than right now as we are emerging out of the health pandemic and the economic recession that we have found ourselves in.

Small businesses in Tasmania are the backbone of our state's economy. There are over 40,000 businesses in our community, and 95 per cent of those small businesses employ, on average, between one and 19 employees. These businesses are made up of local people; they deserve our support, because we are a close-knit community that supports one another. As we emerge from this crisis, it is crucial we support local small businesses in our cities, suburbs and regions. It would be really good if the Department of Finance, for instance, ensured that electorate office accounts were paid in a more timely manner, because many of those are local small businesses.

The objective of the scheme outlined in the bill is to improve payment outcomes for small businesses by creating transparency around payment practices of large business entities. The government argues that, by providing access to information on large business payment performance, small businesses will be able to make more-informed decisions about potential customers. The government argues that greater transparency on payment practices and performance will also create pressure for culture change to improve payment times. The opposition agrees.

The government-chaired Senate Standing Committee on Education and Employment handed down its report on 30 July, and it recommended passage of the bill with the additional recommendation of a statutory review after two years. The report included additional comments by Labor senators, drawing attention to the majority of witness testimonies to the Senate committee arguing that the bill will not have a tangible effect on reducing payment times from large businesses to small businesses. As stated earlier, this bill should not be simply waved through without amendments that change the Payment Times Reporting Scheme. As noted by Labor senators, the Payment Times Reporting Scheme is in reality a transparency initiative to support self-regulation.

The efficiency of self-regulatory regimes is usually poor to questionable unless backed by the genuine threat of heavy-handed regulation. In principle, the transparency regime should be given a limited time to demonstrate its efficiency. Labor senators are of the belief that complementary back-up measures are necessary to ensure that the Payment Times Reporting Scheme improves general payment times to small businesses. The committee's evidence was consistent. Most witnesses argued for mandated 30-day payment times, or clarification that the object of the bill was to achieve payment times of 30 days or less. These witnesses were not any old witnesses. They were witnesses that those opposite should be listening to. You don't reform without consultation with a sector or with the Australian people. That is when policy fails. That is something this government just doesn't understand, because they don't like to hear an argument that they don’t agree with. These stakeholders included the Australian Small Business and Family Enterprise Ombudsman, the Australian Trucking Association, the Australian Institute of Public Accountants, Self-Employed Australia, and Chartered Accountants Australia and New Zealand. These are informed witnesses. They deal with these practices every day.

We know the world over that self-regulation does not work, and certainly business is not going to start self-regulating during a global pandemic, when budgets are weakening, investment is low, business confidence is low and wages are stagnating—they were before the pandemic. Many people are in insecure work, and that has only increased due to the pandemic and the government's policies. Labor supports accountability and transparency measures. Without them, we cannot support these bills. So we are urging the government, the crossbench and the Nationals. The Nationals come into this chamber, day in and day out, talking about regional Australia. They should be standing with us and supporting our amendments. That is what is in the interests of small businesses around the country, but particularly those in regional areas of this country and in my home state of Tasmania.

The payment times fail-safe mechanism, by introducing the following features, is intended to provide an incentive for reporting entities to collectively improve their payment practices or run the risk of more stringent regulation. The regulator is required to report to the minister, after each reporting period after the first three reporting periods, on the median and average times taken by all reporting entities to pay small businesses' invoices. The reports are to be tabled in both houses of parliament. The payment times fail-safe mechanism is triggered if, after the first six reporting periods, the median time, reported by all reporting entities, to pay small-business invoices for a reporting period is more than 30 days. The regulator must report these factors to the minister.

We've talked in this chamber, over the past two weeks that we've been here, about the true impact of the pandemic both from a health point of view and from an economic point of view. We've seen the recent figures which, unfortunately, see us plummeting into recession. The last 29 years of growth in this country have now been set aside for the worst recession I've seen in my lifetime, and a lot of that rests with the government and the decisions that they've been making. Firstly, they should support our amendments. Secondly, they should ensure that government agencies are using best practice by ensuring that they pay their accounts within that 30-day period. Many of them, as I've outlined before, are with small business as well as with larger businesses.

If we are to work together, we will see better practices throughout the country. The first instance of this is those opposite, the government, supporting our amendments, if they truly want to make this bill work more effectively and see transparency. If they won't support them then we call on the Nationals to do the right thing. It was interesting to hear Senator Sheldon, in his contribution, refer to former senator 'Wacka' Williams. He was a straight shooter. He knew what was needed in the regions in his home state and around the country. So I'm calling on Nationals senators to get with the program and support our amendments.

Michaelia Cash (WA, Liberal Party, Minister for Employment, Skills, Small and Family Business) Share this | Link to this | Hansard source

I'd like to thank all senators who've made contributions to the debate. As noted by many, late payments have negative impacts on small business and produce flow-on effects throughout the economy. That is why I now commend the bill to the Senate.

Question agreed to.

Bill read a second time.