Small business key to avoiding recession

13.Small business key to avoiding recession

Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)

New research suggests the Abbott government’s small business-focused budget has only scratched the surface of what is needed to bring the sector into the 21st century.

A report by Deakin University and the Institute of Public Accountants believes the mining boom provided “adequate cover” for the failings of the economy and that business collectively is barely more efficient now than at the start of this century.

“It is clear that lifting productivity in the small and medium-sized business sectors will hold the key to our chances of avoiding recession and directing Australia into a new era of prosperity,” the report released on Wednesday says.

There were worrying signs in the two-year study:

* Australian firms have been going backwards since 2007 on seven key indicators – product differentiation, profits, productivity, exporting, outsourcing, training and IT expenditure.

* Only one in seven businesses consider innovation as important.

* Only one in eight have an international market presence.

* Many medium-sized, well established businesses with the potential to expand into international markets consider only the national market as their end goal.

The paper attempts to shift the focus away from the federal budget and towards the small business sector and how it can assist in lifting Australia’s productivity.

It focuses on three key pillars – human capital (people), financial capital (investment) and technological change (innovation) – to achieve the end of goal of building a more productive and dynamic small business sector.

IPA chief executive office Andrew Conway said the tax cuts for small business and initiatives in the budget were a step in the right direction.

“However, these changes do not go far enough,” he said.


* Increase availability of affordable loan finance through a state-backed loan guarantee scheme.

* Federal government should introduce a publicly supported venture capital fund to ensure that risk capital is made available to high potential young firms.

* Rethink public policy surrounding innovation in the SME sector, including government support for R&D and tax breaks for companies acquiring new technologies not developed in-house.

* Revamp education and training to address the significant skills deficit in the economy.

* Government must continue its efforts to reduce red tape with businesses hobbled by poorly designed, poorly targeted or excessively enforced regulations.

* Review Fair Work laws and competition policy, including making award system more flexible.

* Taxation policy needs to drive business activity and entrepreneurship that will encourage growth, productivity and employment.

* The federal government should prepare an an overarching trade policy strategy that identifies impediments to trade and investment.


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