13 January 2015
Transcript - #2015003, 2015

Interview with James Daggar-Nickson, Sky News Business

SUBJECTS: Japan FTA, China FTA, South Korea FTA, EFIC, Export Market Development Grant program, Employee Share Schemes, Harper Competition review

JAMES DAGGAR-NICKSON:

Small Business Minister Bruce Billson joins us now from our Melbourne studio.  Minister Billson, thanks very much for your time today. 

Let us start with Japan FTA; it comes into effect on Thursday.  How significant is this for small business?

MINISTER BILLSON:

It is a huge opportunity; there is no substitute for customers.  These Free Trade Agreements open doors across China, Japan and Korea - hundreds of millions of potential new customers, small businesses from Australia – nimble - offering a good quality product, high value, higher sophistication. 

This is a great opportunity. Japan in particular, our second largest trading partner, more than $70 billion in annual two-way trade, $50 billion being exports from Australia.  

A great opportunity, particularly for the food sector in seafood, professional services, telecommunications as well as the traditional areas where we can grow our beef exports, our energy exports, iron-ore and the like – really exciting, delicious opportunities there.

JAMES DAGGAR-NICKSON:

Does it very much pin-point where you believe the future of trade and growth for us is going to come from, that is the Asia Pacific region?

MINISTER BILLSON:

Yes, it does. It reflects the priorities of the Abbott Government.  Who would have thought, in the space of one year, we would have nailed these substantial opportunities?  Opening new market potential with Korea, with Japan and we are on the cusp with concluding the China deal. 

That is a very exciting area for our economy but particularly for our small businesses. 

Your viewers know scale can generate efficiencies, it can support innovation.  We have, within our region, a real hunger for what it is we do well, and not just traditional commodity exports. 

In the food and beverage area we are globally recognised as clean, green, premium providers and in our professional services area - 70 per cent of our domestic economy - but only one in seven of our export dollars – what a great potential there is there as well.

JAMES DAGGAR-NICKSON:

You mentioned before in terms of the likes of food, beverages and so forth… a lot of people have lauded New Zealand a bit earlier particularly in regards to China in getting an FTA. Now brand New Zealand, when it comes to food and beverages, is highly regarded. 

Do you see that as being the same for Australia, in particular for those small businesses, who are looking to export agriculture and so forth into Asia?

MINISTER BILLSON:

Very much so. I recently had a second visit to China where I was initially with the Prime Minister and hundreds of Australian businesses including small businesses and the message coming out of the China market place was that there was a high premium available for the clean, green, fine product and quality that we offer in Australia.  This is the same in Korea and Japan. 

Our food producers can pursue often niche markets because in some of these markets you have to be careful what you wish for; you secure a market entry into what we would consider a mid-size city market in China and the production volumes might be three times what you would do for the entire year. 

So here is a chance to really target the premium, good margin end of the market place and profit from our clean and green reputation. 

That is the message that is coming back as the Prime Minister, myself and Minister Robb is in India at the moment, all about building awareness of these market opportunity for our own businesses and also building the message in these target markets that Australia is open for business. 

This is key to our economic growth and employment prospects and we are all systems go to make the very best of them.

JAMES DAGGAR-NICKSON:

For small business owners who might be watching this at the moment and have been reading and hearing about the Free Trade Agreements and potential opportunities it might present their businesses, is it fair to say though that it is a long term benefit as opposed to realising immediate returns?

MINISTER BILLSON:

Yeah I think that is right, my message to small businesses that I partner with in trying to build opportunities in these new markets is, if you approach these new markets as some kind of summer romance where it will all be spectacular and wonderful and it might be a narrow window, but it will be terrific, that is not the case. 

Here it is about building relationships.  We have seen joint venture models being very successful, we have seen Australian small business people already active in these markets and we need to celebrate those current success stories as you do on this program, to show the pathway that they have pursued and what others can do to follow in that same journey. 

It is about the longer term, it needs to be inculcated in the business strategy.  It is where a lot of effort and energy needs to be applied but the rewards are there.  They don’t come easy, there’s no free sloppy profit to be found but there are markets that are hungry for what it is that we have to offer good, profitable business opportunities but there is a need to work for it and we want to play our part. 

That is what Austrade is about, that is why we have re-shaped the Export Market Development Grant program, to have it more aligned to the needs of small business. 

That is why EFIC, the Export Finance and Insurance Corporation, we have tweaked its charter as well to make sure they are very focused on SMEs looking to new markets, to build jobs and growth through export channels and making sure our toolkit is brought to that task as well.

JAMES DAGGAR-NICKSON:

One of the other issues facing small business is the Employee Share Scheme, in particular the fact that the Abbott Government has been looking at ways to reform it. 

How far away is an announcement with regards to any changes?

MINISTER BILLSON:

We have made an announcement through the Industry Innovation and Competitiveness Agenda that we will be making changes to the Employee Share Scheme framework that operates in Australia. 

Three key parts to that, one; turning around the damaging changes that the previous Government put in place in 2009 that brought forward the taxing point on options to when they were issued, not when they were actually activated. 

So you found a lot of people attracted to an Employee Share Option model, finding that they were being touched up for a substantial tax liability at the front end of that scheme, even though there was no material capacity to generate the resources to pay it.  That has really cruelled Employee Share Options as a model and that is going to be changed. 

Second part, we have said that this is such a great way of aligning business objectives with the employees’ objective, particularly if there is not a lot of cash around to pay a really attractive salary, having a stake in the business can be a real incentive for work class talent to be a part of these enterprises.  Where those options are issued with a discount, we are facilitating a discounting of the tax liability once it materialises to up to about 15 per cent as a further incentive to reactivate this area.

Finally, the paperwork; I am told even for businesses that are interested in Employee Share Ownership some of the burden for prospectus and information declaration seems to assume the employee has no idea of the business that they are actually working in. 

We think we can streamline that a little bit and actually get the red tape and regulatory burden off.

We are committed to doing that, I have got some draft legislation that we are working through at the moment to implement those changes.

It is not without costs.  This is a $200 million initiative from the Abbott Government, showing how we are so driven by jobs and growth and bringing that to the table, this is part of our suite of measures that is all about a renaissance in enterprise and giving confidence and support for that job creation section of the economy that really needs our best game to support their best game.

JAMES DAGGAR-NICKSON:

In particular the start up space, it is a burgeoning space in Australia but there has been criticism that particularly around the taxation of options and when that is paid has really been stifling that source of funding. 

MINISTER BILLSON:

Yeah and that is that first point that I touched on, the taxation point.  The previous Government in 2009 brought that forward, so when an option was issued saying to somebody ‘Be a part of this enterprise – here is an option but we will tax you at the time the option is issued, not when it is exercised’. 

We are saying have that taxation point at the time it is exercised so that the beneficiary actually has some material resources, or the opportunity for material benefit, before they are being asked to pay tax.  That is one of the key changes. 

The incentive, the discounting, that is the second part and then the red tape and regulatory burden reduction is the third part. 

But sitting alongside that is another important piece of work that I am driving and it is of great interest to your viewers – and that is around crowd source funding, again an area that is developing, an area bringing equity into start up enterprise in particular. 

Our infrastructure and regulatory environment is not world class.  It needs to be and that is another focus and we have made announcements about changes there as well. 

I have valued the consultation and input of people who have got real life lived experiences with areas that need to change and suggestions about how we can make the Employee Share Ownership scheme and crowd source funding more attractive in our economy so that that talent and enterprise lands here and develops here and sees the benefits in our economy rather than being attracted to go somewhere else. 

JAMES DAGGAR-NICKSON:

Plenty to talk about, unfortunately we are running out of time but I wanted to get your thoughts on the Harper Review into competition.  It is due in March. 

No one doubts Professor Ian Harper’s ability to produce a comprehensive report for policy reform.  However, there are questions being raised about the Government’s courage to implement it. 

MINISTER BILLSON:

It is an interesting one. 

As the Shadow Minister for Competition Policy and Consumer Affairs I have advocated the need for this root and branch review about competition laws, the institutional framework and the policy settings for many years. 

Many said to me “Bruce, this won’t happen”.

It has happened because it is important. 

We need competition policy and our institutions supporting efficient businesses big and small, being able to thrive and prosper, where that competition in the market place is based on merit not just on pure muscle. 

These are the frameworks within which we are undertaking this review.  Many submissions, good recommendations so far in the preliminary report but I am certainly waiting for the Harper Report in its final form and I am very keen to act quickly and decisively on its recommendations. 

We need to build the best place to grow and start a business in Australia.  That is my mission and my goal and getting competition policy, the institutions and the laws right to support that ensures that enterprising people can have a fair and red hot go to thrive and prosper. 

That is why this work is so important.  A key microeconomic reform piece of work and I can assure your viewers that there is a huge appetite from me and from the Government to implement sensible and well-argued reforms in this place and in this policy space to make sure we continue to be an attractive economy, where people see reward and opportunity and know the environment and the rules within which they operate.

JAMES DAGGAR-NICKSON:

Alright Bruce Billson, unfortunately we do have to leave it at that but a pleasure to have you on the first programme of the year and hope to speak to you throughout.  Thanks very much.

MINISTER BILLSON:

Great to be here James, thanks for having me, we have got franchising reforms, unfair contracts, plenty happening.