What business needs from government in 2023

Garreth Hanley:
This is With Interest, a business, finance, and accounting news podcast, brought to you by CPA Australia.

Dr Jane Rennie:
Hello, and welcome to With Interest. I'm Dr. Jane Rennie, General Manager, Media and Content at CPA Australia. One of the peculiarities of the Australian political cycle is the budget submission process. Each year, hundreds of organisations submit a budget wishlist to the federal government. In theory, this allows the government time to review submissions in light of its fiscal priorities. That said, in practice, some expenditure is allocated very late in the piece, even only days before the budget announcement. CPA Australia recently made our own budget submission complete with some 44 recommendations and joining me to explain the issues underlying those recommendations and why they're a priority in 2023 is senior manager of business policy at CPA Australia, Gavin Ord. Welcome to With Interest, Gavin.

Gavan Ord:
Thanks, Jane. Thanks for having me.

Dr Jane Rennie:
Gavin, I'm going to get straight to the hard-hitting questions. Do governments really care about the thousands of submissions that flood their inbox every year?

Gavan Ord:
That's a really good question. Do they really care? I think they are conscious of it to some degree, but they're not going to review every single submission in great detail. They obviously take key elements of submissions and they obviously take submissions from larger organisations more seriously than maybe submissions from smaller organisations or individuals.

Dr Jane Rennie:
Just on that, can anyone make a submission? Could I make a submission to the government?

Gavan Ord:
Well, you could, but like I said, will they really consider it? Probably not in any great detail, but you shouldn't be discouraged. I think as an individual, your best way to raise issues is through your local member because they obviously have a direct line to government and a direct line into the public service to raise issues that you're raising with them.

Dr Jane Rennie:
I know from time to time though you do see some odd or peculiar announcements made on budget night. Could that be the result of someone having put in a submission that just happened to attract the attention of the government?

Gavan Ord:
Probably very unlikely. I think it's more to do with what I said before, that they've raised the issue with a local member. The local member has raised the issue with a minister or the Prime Minister. It could be something that, for example, a minister is going into that electorate and they need an announceable. As I said before, I think if you are a small organisation or an individual and you want to raise an issue for your local tennis club or scout troop, it's best to raise it through the local member and try your luck that way.

Dr Jane Rennie:
Right. So, I did have a few good ideas about what the government could do with its money, but what you're saying is I needn't rush out, put pen to paper, and write to the government with those ideas.

Gavan Ord:
Well, at least not write to them in the pre-budget submission area, but definitely write to your local member for your revised greyhound racing track or a walking track around your local park.

Dr Jane Rennie:
When it comes to the budget, submissions aren't all about spending requests, are they?

Gavan Ord:
No, they can be around stopping something. You might want a government to stop spending on something. It could be around encouraging the government to do a review. In our pre-budget submission, we've asked the government, and we've asked the government for many years, to conduct a review of the Australian tax system. So, it's not necessarily about expenditure. It could be about revenue raising as well. There's any number of examples which people might talk about of how the government could improve revenue raising or how the government could be more efficient in revenue raising as well. So, there's any range of issues you could bring up in a pre-budget submission and we bring up a full range of issues, not just spending, but also efficiency in government delivery, efficiency in revenue collection, and ideas for reviews.

Dr Jane Rennie:
Now, I've been talking about the government in quite an amorphous sense, but it's not actually going to be, say for example, the treasurer, Jim Chalmers, reading these submissions, is it? Who will these submissions ultimately be read by?

Gavan Ord:
The submissions will ultimately be read by someone relatively junior in treasury, and their job would be to then split the submissions up and find, "All right, that's an education recommendation. We'll send that to the Department of Education. That's a recommendation on innovation. That goes to the Department of Science, Innovation, and Resources," I think they're called now. So, there'll be somebody who will do that. And then within those departments, there'll be people that will be considering those recommendations and then they might provide a summary to their minister or they might pick out the recommendations they like and include it in their own budget proposals, because every department has to put up their own budget proposals to the government to get approval.

Dr Jane Rennie:
I wanted to ask you about some of the specific recommendations in CPA Australia's submissions and what problems you're hoping to solve here. You've called on the government to make financial advice fees to be tax-deductible. What's the issue underlying this?

Gavan Ord:
The issue underlying financial advice is the very small number of Australians that can access financial advice at this point in time. Now, it's not just a monetary issue, but it's also about the number of people that can offer that advice. So, we think part of the solution and not the entire solution is to improve the affordability of access to advice by making it tax-deductible in the same way that the tax agent advice fees you pay is currently tax-deductible.

Dr Jane Rennie:
Well, not to put too fine a point on it, Gavin, but the people most likely to be able to afford financial advice, and that can run into thousands of dollars for a financial plan, are I would assume the wealthy. So, aren't you actually proposing an additional tax break for the wealthy?

Gavan Ord:
Well, anyone can access advice and what we're seeing, as you say, is people with more resources are accessing that advice. Making it tax-deductible might make it a little bit more affordable for people who are not currently accessing advice, so people on lower incomes, but also, I don't think that's the only solution. I think for those on lower incomes, it could be a UK-type scheme where the government could help pay for some of the advice for lower income earners. So, it's not just the tax deductibility, that's part of it, but it's also maybe the government providing some sort of payment to help lower income earners get access to financial advice. With the ageing population and more and more people heading into retirement, we really do need those people to get access to advice because it is complicated to retire. There's so many issues to consider, and they need to speak to a professional to set themselves up so they can have a relatively comfortable life in retirement.

Dr Jane Rennie:
In a nutshell, it's making financial advice more affordable, so that the people who really need it, who might be on lower incomes and need to work out how to get by on that income in retirement so that they can access it.

Gavan Ord:
That's right. As you said, it's to make it more affordable. Obviously, there's other elements to it that we're looking at it through the quality of advice review, which is a separate review.

Dr Jane Rennie:
Well, what would this cost the government in terms of lost tax revenue?

Gavan Ord:
I can't put a figure on that, but what I would say is that the benefits to the community, the benefits to the individuals, would far outweigh any lost revenue from the government. Jackie Blondell: If you're enjoying this podcast, you should check out our in-depth business and finance show, INTHEBLACK. This month in our career hack series, we're talking with recruiters, job market experts, and career coaches to get their advice on the best way to navigate 2023's employment and workplace landscape. Search for INTHEBLACK on your favourite podcast app today. Now, back to With Interest.

Dr Jane Rennie:
The last federal budget was in October 2022 and I think it's fair to say that small business needs were overlooked. Our new submission makes it clear that this should be a focus this time around. CPA Australia has called on the government to provide small businesses with financial incentives to access digital advice. What I want to know is why can't small businesses just pay for this themselves?

Gavan Ord:
Well, they can and many do, but what we find is that many aren't. Particularly on the advice side is when they get into difficulty. Our members tell us that clients become less talkative. They become more reluctant to seek advice, and the consequence of that is that they're not seeking advice, their problems get worse, and their options for saving their business get smaller and smaller and smaller to the point where someone else, like a creditor, will make a decision. So yes, they can pay for it and many do, but the problem is that many aren't and that is impacting their growth. That's impacting their recovery options.

Dr Jane Rennie:
But you're talking individual small businesses here. I mean, how does that relate to the economy as a whole? The budget is about spending measures for the economy as a whole. What's the link there?

Gavan Ord:
Well, small businesses make up around about a third of the nation's GDP. If that sector is underperforming, and our research continually shows that the Australian small business sector is underperforming, that's actually having an impact on GDP. If they can get access to advice, we think that that will actually improve their performance, improve their innovation, and improve their productivity and that'll clearly flow through to improvements in the economy overall.

Dr Jane Rennie:
A bucket of money has already been put to this. I recall in previous budgets, it might have been the last one or the one before that, but money was put to improving businesses' digital capability. Why wasn't that enough?

Gavan Ord:
There's a couple of elements. There's the technology investment boost, which is going on at the moment, which is pretty ambitious and that's ending soon. But there are other projects like what's called the ASBAS programme, and I can't even remember what the ASBAS stands for, but it provided around about $20 million to small business to access advice. Now, you're looking at maybe a few hundred businesses, maybe a thousand? There's 2.4 million businesses. The clear lack of ambition in government programmes, both sides of government, to supporting the digitalization of business is palpable. If you look at Singapore, Singapore's spending around about $500 million on trying to improve the digital skills of their small businesses. Now, the Singapore economy is around about the size of New South Wales economy. It's about 25% of the Australian economy. The Australian government must have much more ambitious programmes that are designed for much larger number of businesses to access it, not the one or 2000 that they're currently providing.

Dr Jane Rennie:
It's not a new request. You have made this request several times before and it keeps falling on deaf ears. Do you think you might find a more sympathetic audience this time around with the new government?

Gavan Ord:
I think hope springs eternal, and with the newer government, hopefully they'll be looking at this. There are examples. So, in August last year, the Victorian government provided a similar scheme of $2,000 per business. There are examples and governments always like to draw on precedent. Hopefully, we will see something come out in this budget and also add that the New South Wales government also announced a similar scheme in the last few days. Details are still scant, but yeah, governments are now starting to listen to this argument and they are starting to realise the clear small business economic benefits that flow from such a scheme.

Dr Jane Rennie:
One of the other business-focused recommendations in the submission is for the government to increase funding to ASIC, so it can visit companies early that are showing signs of hardship. Why is that a priority for this year?

Gavan Ord:
Well, our members in insolvency are telling us that they expect there to be an increase in insolvency this year. We can see that through the economic data as well, that margins are hard-pressed, costs are going up, interest rates are going up, the economy is expected to slow, and businesses are also carrying large debts into this period, lots of deferred rent and deferred taxes from COVID. So yes, there are quite a number of businesses under stress, and if ASIC could come in and at least help the businesses understand their directed duties and understand their options, hopefully, that'll then direct those businesses to the options that could help them either save their business or make the right decisions around the future of their business, which could involve insolvency because I just want to say, and sometimes we don't get this clearly from government, insolvency is a legitimate business option and for some businesses is actually the best option for them because it allows the business owner to go off and do something else and maybe do something better next time.

Dr Jane Rennie:
It sounds like what you're describing is a form of risk-based regulation, to get in front of the issue to see if we can prevent the insolvency. So, are you saying that spend by government that it actually saves much more in the longer term?

Gavan Ord:
I love what you said about risk-based regulation because often, regulation is based on after the fact and we try to clean up the mess after it's happened. This sort of proactive regulatory intervention in the economy I think is necessary and it's consistent with Jim Chalmers' recent essay around about values by capitalism and being a more interventionist government. I think this is part of it. If we can intervene and help a small number of businesses do better and make better decisions, I think that's better for everybody, including the regulator itself.

Dr Jane Rennie:
Turning now to action on climate change, another recommendation is for the government to allocate money towards minimising the impact on people, communities, and small businesses who are most likely to be negatively affected by the transition to renewables. What can you tell me about this?

Gavan Ord:
Action on climate change is imperative, first of all. However, there's potentially a human cost to people who are reliant on, for example, the coal industry and related industries. Now, they need to be supported through this approach so that it is a just transition. We don't want a situation where industries, people, or towns unnecessarily suffer, and we don't want to see a rust belt emerge of towns which were reliant on the coal industry. Governments, both state and federal and local, need to invest in those communities to ensure that they are ready for a different economy. They need to invest in individuals and their skills, so they can transfer to new jobs, and also help them in placements in those new jobs.

Dr Jane Rennie:
How much would it cost to factor a just transition into Australia's budgetary spending?

Gavan Ord:
I don't have the figures, and what we've asked for is the government to model that and to put those figures up. But it's necessary to have a just transition. You need to help those who may miss out. In saying that, again, we need to have this transition, but you need to support everybody so that nobody misses out and nobody is left worse off or significantly worse off by this transition.

Dr Jane Rennie:
CPA Australia is also asking the government to help not-for-profits and charities to increase their business capabilities, and we're asking them to do this urgently. Why do we need urgency?

Gavan Ord:
Well, the not-for-profit sector is a substantial provider of services to the Australian community, whether it's health, education, other forms of community support. Now, we know that that sector is going through problems, particularly around attracting and retaining volunteers. There's been a volunteer drought, for want of a better description, that's really impacting their ability to deliver support to the Australian community. So, what we need is additional support for that sector to help manage this volunteer drought, so they can still provide services to the community, and we also need to improve their capability, not just their capacity, to deliver those services, so it's in the area of technology, in a very similar way to small business. Both, small business and the not-for-profit sector, need help to improve their level of digital uptake.

Dr Jane Rennie:
They also need help on simplifying and streamlining regulation, don't they? I know this is something that small not-for-profits or charities can really struggle with.

Gavan Ord:
That's exactly right, particularly not-for-profits that might trade across state borders. There can be situations where there's different regulatory regimes in different states. For example, fundraising rules or financial reporting rules. Now, for one state-based body, they only operate in one state, that could be okay but if you choose to work across the Queensland, New South Wales border, to have to do two sets of books, for example, it's just a waste of resources. In a time where they're already hard-pressed on resources, they're already finding it hard to find volunteers, to have to devote resources to meeting unnecessary regulatory requirements is a poor policy and it's poor for the Australian community.

Dr Jane Rennie:
Let's face it, I guess, in these days with online fundraising, it's going to be a rare not-for-profit or a rare charity that would only be operating specifically in one state and only accepting donations within that very state. Well, Gavin, that's all we've got time for today, but thanks very much for taking us through CPA Australia's 2023 budget submission. A link to that submission is provided in the show notes. With Interest is a weekly podcast. If you like what you've heard today, why not subscribe on your favourite podcast app? From all of us here at CPA Australia, thanks for listening.

Garreth Hanley:
You've been listening to With Interest, a CPA Australia podcast. If you've enjoyed this episode, help others discover With Interest by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in the latest finance, business, and accounting news. To find out more about our other podcasts and CPA Australia, check the show notes for this episode. We hope you can join us again for another episode of With Interest.