Greg Whiteley is a small manufacturing business owner and has had many a reason to navigate the interface with the Commonwealth Public service. Here he looks at the compliance task faced by Australia’s SMEs and laments the cost burden for manufacturers of dealing with governments.
Reality check: 99.5 per cent of all of the companies operating in Australia are small to medium enterprises (SMEs).
Anywhere else in the first world, and amongst our major trading partners, even our “Medium” sized enterprises would be simply regarded as “Small” businesses.
But regardless of the enterprise classifications, there are three other very important factors of scale which are always relevant to the proper understanding to the Australian enterprise landscape.
Firstly, there is the location of the island of Australia. As once famously described by the Hon Paul Keating, we are at “the arse end of the world”, and goods must get into or out of this country across the oceans by either plane or ship.
Secondly, there is a small population base of just over 25 million people dispersed across the continent.
The entire Australia population will virtually fit into any one of the cities of Greater Los Angeles, Mumbai or Shanghai.
And thirdly, we are a wealthy county with first world political stability, no sovereign risk and globally comparable statutory requirements outlining all manner of commercial and civil conduct.
None of that is a problem or to be somehow regretted.
In fact, our natural and human advantages are enormous and provide a wonderful platform for optimism and hope.
However, these features of modern Australia must be the foundation of any government policy discussions which might impact our Australian enterprises including issues such as manufacturing, logistics, export, integrated supply chains or even skills and capability.
Take for example the discussions on skills and capability shortages.
There is no shortage of smart, capable and well educated people in Australia, but having the precise skills required by any particular enterprise might be quite challenging with a small population base.
And even if the right person is available, can a SME sufficiently compete with the global multinationals and provide salary benefits commensurate with the global market?
The skills issue is seen best at the interface with Commonwealth Public Service (CPS) through government departments, agencies and authorities.
Large businesses of more than 200 employees have sufficient resources to employ highly qualified and highly skilled regulatory negotiators, sometimes as consultants, to engage directly with any proposed statutory issues that could affect their business.
Those people employed by the larger companies are normally very good at working with the public service interface, and not infrequently the results of consultations favour their negotiated stance.
Those SME’s who may be affected by a proposed regulatory change are often unknown, with regional locations, and they are easily swept aside in favour of the brand names. Meanwhile the public service records that the consultation was successful and included a wide array of businesses.
Any feigned attempt at a “Regulatory Impact Statement” (RIS) will demonstrate the benefit of the proposed change and the minimise to zero the impact upon the 99.5 per cent of Australian businesses.
In fairness to the Commonwealth Public Service, the interface skills held by the professional regulatory managers from larger corporations, make the discussions within any consultation far easier to manage.
SME managers are accustomed to robust plant management and may not have the training, skills or patience to negotiate their way through the channels of political correctness and Canberra-speak.
And so, the public service generally hate any consultation travel-a-thon’s where the riff-raff and ramshackle unruly SME mob turn out to have a say.
The point to make here is that whilst any one of these governmental bodies might have gone through its own consultation process, there is a sad reality for overall impact upon our local industry.
Every single government department, instrumentality or agency, at every one of the three tiers of government in Australia, behaves and acts as its own silo, without any tangible reference beyond their own statutory remit.
In fact, there is no single register anywhere in Australia that actually documents just how much compliance is required by Australian enterprises.
The burden of unbridled regulation is hidden within the compliance costs or overheads of doing business in Australia.
The compliance costs come from amassed regulations, for example the need to report on issues such as modern slavery, gender equity or mandated Financial Audits.
And that is before you include any Australian Tax Office compliance costs including items such as One Touch Payroll and the entire PPRS system, and just about everything related to employee superannuation.
Then there are the specific sectors with supervising authorities such as the TGA (whose licensing costs are 100 per cent recovered from the medical manufacturing industry), and others such AICIS and APVMR just to name a few.
And apart from these commonwealth agencies there are state based authorities such as the EPA, Workcover Authorities, Industrial Relation state bodies with all manner of statutory manifests and annual reports required.
The list goes on and on and on and whilst some of these compliance issues apply to every business, other business sectors get lumbered with malevolent government interference.
And if you are an SME manufacturer, then you probably get the lions’ share of the oversight and compliance burden.
Our local economic focus usually falls onto “uncompetitive wages and salaries”, ‘red-tape’ or other macroeconomic factors to explain our inefficiency.
The real reasons for manufacturing leaving our shores has not been the level of salaries for a very long time, and ‘red-tape’ gets interpreted purely as the forms to be filled in by industry.
Unrecognised compliance costs are what is killing our local industries.
Compliance issues are so much larger than any one part of government, which is why the Commonwealth Public Service ignores this as an issue.
Commonwealth departments, rather than pursuing a deeper understanding of the impacts of any policy change, prefer to benchmark their policy with our first world trading partners, without measured consideration of the real scale of Australian business.
We are an island nation, a long way from the global markets, with a small population and a high standard of living.
Yet, the compliance expectations for Australian enterprises are as severe as applies to nations with large populations and without our geographic limitation.
The challenge across the government and industry divide, is the recognition that Australia is a land of SMEs.
We need to start our policy discussions with a clear, rationale, fact-based assessment of where we are at, before any industry policy, let alone the push for integrations into global supply chains can even start to make sense.
We need an Australia wide re-assessment of the interactions with all tiers of government to map out what all this compliance really costs Australian businesses.
One good thing to come out of the pandemic is that the public servce has realised that it is out of touch with most of the broader details of Australian businesses.
Let us hope the next pandemic is still a long way off so that Australian governments can sort out the real issues from the imaginary versions of what manufacturing and business really looks like in a modern Australian enterprise.
Dr Greg S Whiteley is Executive Chairman at Whiteley Corporation. He is an industry leader and company director, an appointed academic, with many years of research collaboration within applied microbiology and public health. A former director of the Australian Business Foundation, Greg holds a PhD from the University of Western Sydney.
This post was originally published on InnovationAus.