We need a SME led jobs recovery

Yes, I do know the Libs are making this part of their election strategy and I definitely don’t want to be seen as endorsing either side’s policies in the lead up to 7 September 2013.

However, it has to be said that the monopolies and oligopolies that dominate most Australian industries are seemingly making no effort to put on more employees, and have demonstrated they are content to continue to cut staff numbers and outsource jobs whenever they can.

Take a look at these vital stats:

• There are two million SMEs** in this country
• They represent 99.7 per cent of actively trading businesses
• Employ almost three quarters of the Australian workforce
** According to SME Association of Australia CEO Dr Caroline Hong, there are many varying definitions of SMEs, however SMEAA’s definition is based on employment size and breaks down the sector into micro businesses (0-4 employees), small businesses (5-19 employees), and medium enterprises (20-199 employees).

Given the obvious importance of this grouping, how can any government (Liberal or ALP) actually encourage the small business sector to lead a much need post-mineral boom bust? Well, we can start by looking at what exactly are the problems to be faced by SMEs, and there’s at least six I can quickly think of:

1) Lack of capital
2) Labour costs
3) Exchange rates
4) Cheap imports
5) Compliance costs
6) Consumer confidence

Five out of the six factors identified above can be addressed at a government level, (although with varying degrees of likely success), but there are a couple that scream out for attention.

The perennial problem for all small businesses is lack of affordable capital and at times like this it gets worse since when the economy is tight the banks put up interest rates because they argue the loans become more risky and are less likely to be paid back (apparently charging them more actually helps this situation). Surely a nationally funded insurance fund that covered this discrepancy would be a big help for both sides.

As far as venture capital is concerned (and I know this area well) there simply isn’t any in this country. This is an on-going innovation funding problem which should be addressed as a matter of urgency. Why even a very small percentage of our massive Super Funds could not be channeled into this start-up area rather than artificially pumping up our share-market valuations has to make sense on a bunch of levels.
And the exchange rate is not helping. It’s drifting downwards, and the recent interest drop by the Reserve Bank will also push the dollar further towards previous levels.

As far as our work ethics are concerned there was a time when Aussie workers were considered by many of our international competitors as being a holiday-obsessed bunch of cricket lovers and the very notion of a hard day’s work was the last thing on our minds. Oh, how things have changed.

Consumer confidence (lack of certainty) will pick up whoever gets in come 7 September so we can leave that aside for the moment anyway.

The whole question of cheap imports is easy to understand but almost impossible to address easily since everyone likes the idea of buying cheaply (i.e. it helps hold the cost of living down) and whether it makes any sense at all to be building diesel-powered submarines at enormously inflated prices simply to maintain jobs in South Australia’s rust belt is another.

Closer to home producing steel with some of the oldest and least efficient steel-making technology in the world certainly extends the life of a mature industry, but long term its prospects must be seriously questioned. You would think since we dig all the constituent parts out of the ground right here in Australia we surely must have some competitive advantage, but the lack of scale, distance to end-users and a small domestic market as an opposing trifecta can’t help.

When it comes to agriculture I simply can’t see why we can’t compete internationally. The main competitive disadvantages, viz. lack of water and distance to market (the Ord River problems re-visited) would surely be overcome by situating the producers in the Northern Territory or Northern Queensland. They are close to potentially massive Asian markets and they have plenty of H20. I know it’s easy to say … but we simply have to make these big picture projects happen to secure our children’s and grandchildren’s future.

I can’t help thinking our focus on short termism in Australia is perhaps our biggest hurdle. The NBN springs to mind (regular WOL readers will know this is a hobby horse of mine). The biggest infrastructure ever contemplated in this country is dogged by people who have absolutely no vision or concept of its potential.

In conclusion I believe Australia is at a cross roads. We have dodged the worst of the GFC (mainly through luck) and whether we now get our act together on the jobs front will be because our elected leaders will be compelled to make some hard strategic decisions.

I think one way or another this coming federal election will provide a direction, not because of the politics involved on either side, but simply because the important under-lying issues cannot be avoided any more.

EDITOR – Andrew M Connery: A pioneer in social media and active online since early 2001 heads up the Editorial team. Andrew is currently undertaking doctoral research at the School of Computer Science and Software Engineering at the University of Wollongong. A B2B marketing practitioner by profession his specialty area is local search and until July 2011 he was a Senior Trainer for the Federal Government’s Small Business Online program.


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