The squeeze on middle and smaller enterprises by larger organisations with market power is both relentless and increasing. My guess is that this squeeze is a significant factor in the sluggish employment market. What Australia is doing is making it harder and harder for young people to start their own business. In the process we will kill innovation and once the mining construction boom is over we will be saddled with higher unemployment.
The current government appears to have little interest in the area while the opposition might have policies to relieve the squeeze, Tony Abbott shows no signs of making the Coalition's small enterprise agenda a centrepiece of his re-election strategy.
In coming years when the mining construction level is slashed, people will return to the big cities looking for work and it will be the small enterprises that must employ them. But that will not happen on a large scale while the current squeeze continues.
My former journalistic colleague John Gilmour, whose family runs a well-capitalised eastern states footwear retail chain specialising in comfort shoes, alerted me to the latest developments.
The fact that large organisations must now pay their tax monthly is causing more and more groups with market leverage to demand payment in shorter and shorter times. Telstra and Australia Post are among them. Effectively the government is sucking working capital not only out of large enterprises, but also out of their smaller customers (Killing capex one month at a time, January 2).
This is not the way to operate a business sector if you want non-mining growth. But it gets worse.
Last year the government introduced the Personal Property Securities Act. Prior to the act most suppliers had clauses in their terms of trade that retained their title over stock supplied. There was no need for registration. But now to enforce such a right over stock, suppliers must register the charge under the Personal Property Securities Register.
Unfortunately the act is badly drafted and registration is complex and so companies are requiring their customers to sign terms of trade agreements that potentially give suppliers rights over other suppliers stock – although that may not be the intention.
One wholesaler is demanding the right to enter the premises at any time to grab their stock and requiring the establishment of trust accounts for sale proceeds.
John Gilmour says that he is able to refuse to sign such draconian and unfair contracts. But others may have no choice.
The Coalition promises to introduce unfair contracts legislation to protect small and medium sized enterprises from the sort of unfair contracts, which suppliers are now peddling. But Tony Abbott does not push the cause.