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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-10-15 Daily Xml
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SMALL BUSINESS

The Hon. R.P. WORTLEY (14:35): Is the Minister for Small Business aware of the challenges facing small business in South Australia amid the global credit crisis?

Members interjecting:

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (14:36): Let it be recorded—

Members interjecting:

The Hon. P. HOLLOWAY: It needs to be recorded that there was a lengthy delay because opposition members were laughing. Obviously they think that the plight of small business in our state—

The Hon. R.I. Lucas interjecting:

The Hon. P. HOLLOWAY: And there he goes again! The Hon. Rob Lucas is the cheerleader in all this. Obviously he thinks the conditions facing small business in this state are ludicrous. You should be ashamed of yourself! They do not care about small business in this state; they laugh at it. They are only interested in themselves.

I thank the honourable member for his important question. I am sure he is aware of the financial uncertainty that has swept the globe in the past few weeks, beginning with the collapse of the subprime mortgage market in the United States. It says a lot about the interconnectedness of the global financial market that mortgage foreclosures in the United States have led to a credit crunch that has undermined Wall Street investment banks, triggered trillion-dollar rescue packages and shattered the confidence of world stock markets. All this uncertainty has rippled through the financial system to the point where banks are no longer prepared to extend credit to each other, which in turn has pushed up the cost of borrowings and made it difficult for businesses to secure financing. It is not a laughing matter.

The credit squeeze comes after many small and family owned businesses in the state have struggled in the face of higher fuel costs and rising prices from their suppliers. It was welcome news that the Reserve Bank of Australia at its recent monthly board meeting agreed to provide some relief to small businesses in the form of lower interest repayments, and that the 100 basis point interest rate cut announced by the central bank will help ease the burden on small business, and I hope that local banks and other lenders are able to pass on as much as possible to their business borrowers.

South Australia's economy is sustained by the work of small business operators, who make up 96 per cent of all businesses in this state. These firms employ about 235,000 people—again, not a laughing matter—representing 46 per cent of the state's private sector workforce. Any interest rate relief that can be passed on to small and family owned businesses will be very welcome in this ongoing climate of financial uncertainty. The federal government's decision to guarantee deposits and bank lending, together with the Reserve Bank of Australia's efforts to ease the liquidity squeeze, will hopefully cushion South Australia from the impact of the global financial crisis. Locally, it is hoped that any measures to reassure the banking community might also reduce pressure on small businesses as they look to roll over lines of credit with their bankers.

This government acknowledges the valuable contribution small and family businesses make to the local economy and is strongly aware of the obstacles and challenges they face. A full percentage point cut in official interest rates, building on the quarter percentage point cut earlier this year, will go some way towards easing some of the financial challenges faced by small business operators in this state. Reducing interest repayments faced each month by businesses is just one way to relieve the pressure on small business.

It is also with the benefit of hindsight fortuitous that this year's state budget provided yet more tax relief to South Australian businesses. This government's 2007-08 budget again cut the payroll tax rate and further raised the threshold at which firms are required to pay the tax. South Australia's payroll tax threshold was increased on 1 July this year to $552,000 from $504,000, and we will raise it even further to $600,000 next year, on 1 July 2009. At the same time, South Australia's pay-roll tax was cut to 5 per cent, from 5.2 per cent, from 1 July this year and will be cut even further to 4.95 per cent from 1 July next year.

These measures, combined with the lower interest rates announced by the Reserve Bank, should help ease the financial pressures faced by businesses throughout South Australia. This government is committed to assisting businesses in South Australia to grow. This government also recognises that one of the other banes of small business is red tape, and that is why we set out to reduce this burden on business by 25 per cent by July 2008. Having set a target to save business $150 million a year through reductions in red tape as a proxy for the government's commitment to easing this burden by 25 per cent. I am delighted to report that an independent audit by Deloitte found this government had delivered $170 million in savings.

As Minister for Urban Development and Planning I also point out that Deloitte's audit did not take into account the estimated $50 million in red-tape savings expected to flow to commercial developers as a direct result of the government's planning and development review. Interest rate relief, tax relief and relief from the burden of compliance are some of the actions being taken to help small business, and keeping the small business sector healthy and confident will be a key part of this government's industry strategy as we face down this new challenge created by the global credit crisis.

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