The Treasurer has announced the agenda for the highly anticipated Economic Reform Roundtable, which will take place from August 19 to 21, 2023. This event aims to foster significant discussions surrounding economic reform, with preparations underway to engage a broad range of stakeholders. While the core group of 23 attendees will participate in all sessions, numerous submissions and roundtables hosted by various Ministers are set to capture input from a wider audience.
The public release of some submissions has already sparked dialogue, raising questions about the government’s willingness to embrace bold reform. One notable proposal comes from the Productivity Commission, advocating for a reduction in the company tax rate for small and medium-sized enterprises (SMEs). This initiative seeks to enhance entrepreneurship, investment, and competitiveness, with suggested funding derived from tax changes affecting larger corporations.
While the idea has merit, it is not without controversy. Stakeholders are questioning the distribution of benefits and costs, as well as the trade-offs involved. Concerns have emerged about the impact on the three in five small businesses that do not operate as companies, highlighting the complexity of the issue.
Cautious optimism characterized a recent small business roundtable facilitated by Small Business Minister Anne Aly. This gathering, part of a series leading up to the main event, included representatives from various sectors, including small business advocates, professional organizations, and financial service providers. Participants presented well-reasoned reform ideas, many of which, although not new, warrant further consideration and reinforcement.
During the discussions, attendees expressed a keen interest in the government’s economic reform ambitions and the individuals responsible for advocating these changes. This aspect is crucial for ensuring that small business policies are effectively implemented. Minister Aly’s opening remarks resonated positively with the participants, as she emphasized the importance of a comprehensive government approach to fostering positive change for the small business sector.
Small businesses form a critical component of Australia’s economy, comprising nearly 98 percent of all enterprises. They contribute about one-third of the national GDP, equating to nearly $600 billion in annual economic activity. Additionally, they employ more than 5.1 million people, or approximately two in five of the private sector workforce. Despite these impressive figures, the share of small businesses in overall economic activity has been declining, mirroring trends seen in other developed economies.
To address this decline and enhance Australia’s productivity, economic resilience, and budget sustainability, a more proactive approach is necessary. Turning the tide will involve improving operating conditions that foster entrepreneurship and support small business success. The Australian Small Business and Family Enterprise Ombudsman has proposed 14 actionable steps to invigorate the enterprise landscape, reflecting many of the themes emerging from submissions to the Economic Reform Roundtable.
The call for a commitment to reform, even for ideas that may not be new, is vital. Establishing a framework for action could shift the conversation from theoretical discussions to tangible progress. By doing so, advocates can transition from merely proposing reforms to inquiring about actual advancements, which would help build momentum.
Among the suggestions gaining traction is the idea of discounting small business company taxes during the initial three years of operation. This measure could alleviate the financial pressures that many new firms face during their formative years, thereby reducing the high failure rate—reported to be around 50 percent within the first three years. Enhanced provisions for instant asset write-offs, as well as tax incentives for investments in technology and digital transformation, are also being discussed to promote productivity and competitiveness.
As Australian small businesses lag behind their Asia-Pacific counterparts in adopting digital technologies, targeted support and education are essential. Helping small firms integrate digital solutions can streamline operations, bolster resilience against economic shifts, and enhance their competitive edge.
Recognizing that small businesses are not simply scaled-down versions of larger corporations is crucial. A renewed commitment to reducing regulatory burdens and compliance costs is necessary. Implementing a risk-based, small-business-first approach, along with a robust evaluation framework, will help ensure that policymakers consider the unique challenges smaller enterprises face.
Furthermore, incorporating a mandatory small business impact section in Cabinet submissions and performance assessments for regulatory agencies will enhance accountability and responsiveness to smaller businesses.
In this context, implementing digital reforms that facilitate the adoption of new technologies and artificial intelligence holds promise for simplifying compliance and regulatory processes. By harmonizing requests from various regulators and adopting a ‘tell-us-once’ approach, the government can significantly ease the burden on small businesses.
The United Nations recognizes small and medium enterprises as vital drivers of innovation and economic resilience. As the Economic Reform Roundtable approaches, it is imperative that small and family businesses remain a priority for policymakers. Energizing the enterprise sector through small businesses is not only a strategic approach but also a necessary step toward fostering economic recovery and growth.
