Second Reading Speech - Payment Times Reporting Bill 2020

Before question time, I began to tell the story of a tradesman from the Gold Coast. His name's Mark. His business is one in which he has hired apprentices and trained them through to being tradesmen themselves.

He has taken on subbies and held them for years. He's employed tradesmen. He's grown a business that contributes meaningfully to the community around him. His business works for head builders in residential construction. He's a contractor. But, even though his name might not be on the signs at the front of the homes that he contributes to building, he's really proud of what he does. In his career, he has seen the industry go up and he's seen it go down. He's seen it ride out the recession we had to have, so called by a former Prime Minister, and he went through the great hardship of that late eighties and early nineties period and prospered throughout the late nineties and through the early noughties.

He has some important feedback for the people who work in this chamber to take into account, and that is that whenever times get tough, whenever cash flow is tight, as a contractor it's always those further down the chain who bear the brunt. Too many times he has been on the receiving end of a situation where the residential builder to which he is contracted has extended out the payment period for bills that he's owed, little by little, until 30-day terms have become 60-day terms, 90-day terms or 120-day terms—without consent, of course. Never were the terms the subject of a consent to that kind of extension. Then, sadly, he can find that the builder goes under, taking with it, sometimes, hundreds of thousands of dollars. But, even when it's less than that, even when it's in the realm of tens of thousands of dollars, the hit to his business has been huge and, with it, has risked the livelihoods of every person who works for him.

It's put his house on the line. He tells the story of more than once being in a position where he and his wife had to be in regular contact with the bank to try and negotiate more time for payments because there just isn't any more room left to wiggle. He knows how very hand to mouth many of the people who have worked for him have lived. He has known how difficult it has been for them to bear it when cash flow gets squeezed in his business because of the manipulations of those further up the chain.

The Morrison government cares about people like Mark, listens to their stories and is prepared to act. The Morrison government recognises that cash flow is a key issue for small businesses like Mark's. I find, in my office, I am getting concerns constantly raised with me about the payment practices of bigger businesses, because businesses at the small end of the spectrum have staff wages, rent and other overheads that all have to go out and all have to be paid. A lot of them have a code of great honour about making sure they pay their bills on time, but it leaves them in a vulnerable position when those with greater means—those with bigger overdrafts, shall we say—don't do the right thing.

Ultimately, the time that small business owners have to spend chasing up bills to get paid is time that they're not investing into doing their job well, time they're not investing in training their apprentices and time they're not investing in the future growth of their enterprise. So this bill is really important. This bill means that there is a requirement for businesses with a total annual income of over $100 million—at that bigger end of the spectrum—to publish information about how and when they pay small businesses. So when the head contractor for Mark extends the time for paying his bills from the agreed term of 30 days to 60, that will be on the public record. When it's extended further, that too will be the subject of reporting.

Some people will say that doesn't go far enough—that reporting isn't enough to help someone like Mark; reporting alone won't solve this problem. I take on board that concern, but the idea of having transparency about how people are conducting themselves is twofold. It means a contractor like Mark knows what they're getting into when they start working for a business, and they can make an informed choice about whether that's the kind of business with whom they want to deal. Some might say that they don't always have a whole lot of choice about these things; sometimes they've got to take whatever work is on offer. I accept that too, but the way this reporting mechanism will make a big difference to people like Mark is that when that head contractor wants to tender for Commonwealth work, the fact of their good or bad reporting record will be a relevant consideration in whether or not they should be brought on board. It's a way that the Commonwealth can lead by paying its bills on time—one very important measure—and also by selecting people with whom to deal whose business practices reflect the values of the small business people in the community that we are here to fight for. I think that's significant.

We know that long payment times hurt small businesses. It stops them from being able to have the certainty of cashflow that means they can take a punt on a new member of staff. It stops them from being able to make significant investments. There's a flow-on effect across the economy when these kinds of practices are engaged in. If we can speed up the process of people getting paid so that it's done in a more timely way, the benefits are compounding throughout the economy.

There's another criticism that's potentially able to be made about this regime: if businesses at the top end of the spectrum aren't doing the right thing and aren't paying people on time, let's not just demand reporting; let's make it a requirement that they pay on time. I've heard that argument made by some in the community, but we have the benefit of observing the experience of the imposition of requirements like that in other jurisdictions. Some countries in Europe have introduced a requirement at law that a business must pay within 60 days. At first glance, again, that might sound good, but that had a perverse effect in many ways. It had the effect of making all of those businesses who were paying faster than that—say, at 30 days—change the norms by which they did business and to think that all they really had to do was 60 days. So keeping it flexible, keeping it based on reporting and staying away from imposing an inflexible hard requirement not only allows for the improvement of standards on something more of a voluntary basis but also avoids that perverse effect of providing a disincentive to those businesses who want to pay more swiftly.

So I commend this bill. It's a way of improving the norms by which people do business. It's a way of providing transparency for those businesses that do the right thing and a way of naming and shaming those who do the wrong thing. It's a way of giving tradesmen like Mark ever-improving cashflow, certainty about the bodies with whom they are doing business and optimism that they can expect consistency in the business practices in the market in which they deal so that they have the confidence they need to be able to take on more apprentices, train more staff and invest in the future of their industry. That's something from which we will all benefit.