Watch Matt's speech here
I will briefly note why we are debating the Senate amendments to the Payment Times Reporting Bill 2020 in the House today. Despite professing urgency in regard to this bill's passage, at the end of the last sitting, the government prioritised ramming through its Abbott-era environmental laws without proper parliamentary scrutiny. As a result, the House has not until now had an opportunity to debate, let alone agree to, this bill as amended by the Senate.
In the Senate, we supported the government's statutory review in its amendment and we supported Senator Hanson's amendment to ensure certain matters are considered by the review. While we believe the fail-safe mechanism is the only feasible way to reduce payment times in this parliament, we didn't object to the stronger terms of reference being imposed on a statutory review. Nevertheless, we should take this opportunity to note that such a review with the terms added by Senator Hanson would actually help fine-tune a fail-safe mechanism before it was set to begin, as in the amendment moved in the Senate by Senator Farrell. In the time between the last sittings and this moment, I hope the government has reflected on its opposition to our proposal and the commentary by small-business stakeholders in support of it. After all, this proposal has real-world consequences.
Imagine you've kicked off your own small business manufacturing a product and you've scored a contract with a major mining company to supply a critical part. You think you've hit the big time, but then that mining giant tells you that it will pay you what it owes in 60 days, and then maybe in 90 days, but that maybe that can be sped up if you can cut it some slack and trim down the invoice to a more palatable amount. You're out of pocket for the product, the labour and the materials, but they're a much bigger organisation than you. What can you do? You can't get your first big, major client offside, but you also can't afford to not be paid. You cop it and wait.
Imagine, perhaps, that you're a sole trader—a photographer taking shots for some of the nation's biggest retail chains. You spent hours—days—on the project. You've perhaps said no to smaller jobs in order to get this big one. Then these retailers tell you that they'll pay you in 90 days or so, and then it's pushed out to 120. You're taking a hit so that their cash flow will benefit. You feel like you're propping up their ASX listed business at the expense of your own microbusiness, helping keep their head above water while you yourself are drowning. But, once again, you don't have a choice. You're the little guy; you'll just have to wait it out.
Small businesses are at the mercy of large ones. Over the last 50 years, there's been a lot of focus on protecting consumers from business, but not enough on protecting small, vulnerable businesses from the power imbalances of dealing with larger ones. Small businesses don't have access to the working capital and financial options that larger companies do. Because of that, their cash flow is easily disrupted, and the experience of COVID-19 has certainly seen an additional example of how that can occur.
The amendments moved in my name seek to amend the amendments passed by the Senate, to include Labor's fail-safe mechanism. For the benefit of the House, Labor believes that this complementary backup measure is necessary to ensure the Payment Times Reporting Scheme improves general payment times for small business. Our amendment would introduce a fail-safe mechanism. This means that over the next few years, if the government scheme does not broadly improve payment times to small businesses to 30 days or less, then the mechanism will be triggered. The fail-safe mechanism can be triggered after three years of the scheme operating and will allow the regulator to force large businesses not paying small businesses on time to pay them within 30 days or face hefty fines. This will provide an incentive for reporting entities to collectively improve their payment practices or run the risk of more stringent regulation.
The fail-safe mechanism has the following features. The regulator will be required to report to the minister after each reporting period, with the reports being tabled in both houses of parliament. This will start after the first three reporting periods of the scheme—18 months after the commencement. The payment time fail-safe mechanism is triggered if, after the first six reporting periods of the scheme, the representative time to pay small business reported by all reporting entities is more than 30 days. The regulator must report this fact to the minister. Once the payment time fail-safe mechanism has been triggered, the regulator must declare any reporting entity that had a median payment time for small business invoices of more than 30 days for that reporting period to be a recalcitrant reporting entity. A recalcitrant reporting entity is required to pay all small business invoices within 30 days for two years and is liable for a civil penalty if it fails to do so. The rules may provide for exemptions from this requirement.
In effect, the self-regulatory incentive is that if, within three years of the transparency scheme operating, large businesses are not generally paying small businesses in 30 days or less then the firms not doing so will be mandated to do so. I want to be clear about why we aren't proposing to mandate 30-day payment terms across the board from the get-go. Labor understands there are rare instances where particular industries or business relationships may have longer or staggered payment times that are reasonable or fair. Some witnesses also noted in the inquiry that a blanket maximum 30-day payment term may incentivise— (Time expired)
The SPEAKER: The member's time has concluded, but he may seek the call again.
Mr KEOGH: Thank you, Mr Speaker. Some witnesses to the inquiry on this legislation noted that a blunt maximum 30-day payment term may incentivise large firms that currently pay well below 30 days to increase their payment times. The fail-safe mechanism addresses both of these concerns. To avoid the fail-safe being triggered, all businesses have an incentive to lower their payment times in general or to maintain existing rapid payment times. If the fail-safe is triggered, rare exemptions can be made for industries or business relationships where payment times above 30 days are still reasonable.
The government will likely argue that changes like the fail-safe mechanism can wait, though, until after the review. But a statutory review is another excuse for the government to delay real action on payment times and for big businesses to stymie reforms that will help our small businesses. Small businesses need the certainty that this scheme will improve payment times and, if it doesn't, that the worst offenders are brought into line. Getting large businesses to pay small business on time will aid small business survival and growth while increasing money flow through the economy, benefiting all Australians.
Let's get this right the first time. I urge the government to support these amendments and the fail-safe mechanism they'll introduce to help reduce payment times to small business to less than 30 days, particularly if this government wants its budget week to actually deliver real improvements to business cash flow. I commend the amendments to the House.
The DEPUTY SPEAKER ( Mr Zimmerman ): Is there a seconder of the amendment?
Mr Clare: I second the amendment and reserve my right to speak.
The DEPUTY SPEAKER: The question is that the amendments be disagreed to. There being more than one voice calling for a division, in accordance with standing order 133 the division is deferred until after the discussion of the matter of public importance.