Has the big end of town snowed Labor on IR?… e-Business trends… Business tourism blow… Surplus bonanza spend on tax cuts?… Small cap results… Winemaker goes under… Telstra leaps legal hurdle… Market takes a breather


Has the big end of town snowed Labor on IR?

The good news is that it appears increasingly likely that the time and money the business community has spent trying to persuade Labor to soften its hardline opposition to all aspects of WorkChoices will result in some sort of policy shift before the next election.

The bad news is that SMEs will miss out. There are worrying signs that the only beneficiaries from any change will be the very large corporates – in particular, big mining companies operating in the northwest of Western Australia.

We are likely to see Kevin Rudd modify the party’s policy to allow people earning more than $100,000 a year to keep their AWAs, a Labor insider has told The Australian Financial Review.

Such a policy shift would be virtually meaningless for most SMEs. Across much of the economy, employees earning around the $100,000 mark already work under common law agreements, so the existence or otherwise of AWAs is irrelevant.

In the booming north of Western Australia, however, intense demand for labour has driven the wages of blue collar employees up to the $100,000 mark and beyond. Their employers, primarily big global mining companies such as Rio Tinto and BHP Billiton, are desperate to keep them on AWAs, and in recent weeks have been lobbying Rudd to make it happen.

VECCI head of workplace relations David Gregory confirms that a Labor policy shift to allow high wage earners to keep AWAs would really only benefit the mining sector.

“In non-mining areas, the only people who would tend to qualify would be senior managers on common law agreements, so they’re not interested in AWAs. If such a change were to occur it would be something for the mining sector, and would mean very little for any other industry area,” Gregory says.

So what is the top priority for most SMEs when it comes to IR? According to Council of Small Business of Australia chief executive Tony Steven, it comes down to one thing – keeping the SME exemption for unfair dismissal.

“That’s the big one. We strongly encourage the Labor party to do away with their policy of scrapping exemptions to unfair dismissals,” Steven says. “A change to allow high wage earners to keep AWAs would have an infinitesimal impact.”

VECCI’s Gregory says he has spoken to Labor recently on unfair dismissal, but received no indication it would consider any shift on the 100-employee exemption.

“We’ve been worried that the more informal system they’re proposing might open the door for everyone to have a crack, like the bad old days. We told them there needs to be some barriers to entry that keep the system focused on genuine applicants, and they accepted that. They agree there were some problems in the past and they don’t want to go back to that,” Gregory says.

The bottom line, however, is that the exemption on unfair dismissal will be gone – and for SMEs, the option of being able to offer AWAs to employees who earn more than $100,000 provides poor compensation indeed.

Mike Preston


e-Business trends

Many small businesses are not making full use of the internet and are slowing down their adaptation of new services online.

The annual Sensis e-Business report of the online experience of small and medium business shows that the latest usage of applications has showed very little change over the last year and in some critical areas has fallen backwards.

The report found that 78% of SMEs look for information of products and services online, compared to in 82% in 2007. And those using online auction sites fell to12% from 16% the year before. Accessing directories such as the Yellow Pages fell back slightly to 70% of SMEs, from 72% the year before.

Fewer businesses are using email marketing: 25% compared to 27% last year. Author Christena Singh says caution about spam rules might have caused the fall.

The use of online catalogues also fell, although using the internet to get reference information on research data rose slightly.

The largest rise was using a website to advertise or promote a business, which increased to 53% from 50%, and to receive payments for products and services online, which jumped from 52% to 55%.

All in all, it is a depressing picture for small and medium business. While most use the internet to communicate via email, do internet banking and get reference information, only half promote their business on their website and only 38% use the internet to monitor their competition.

Amanda Gome


Business tourism blow

Australia is failing to attract big spending business travellers. The number of conventions held in Australia has fallen 31.5% since 2001. And the number of delegates has fallen 11% since 1996, according to the European-based International Congress and Convention Association, reports The Australian Financial Review.

In response to the figures, the Business Events Council of Australia has called for more funding from Tourism Australia.

Jacqui Walker


Should the surplus bonanza be spent on tax cuts?

Business groups are divided over whether the Federal Government should use its bumper $17 billion surplus to cut tax for businesses and individuals.

Federal Treasurer Peter Costello yesterday announced a final 2006/07 budget surplus of $17.3 billion, a result $3.7 billion higher than that predicted in the federal budget in May.

Costello says the Government will put $2.5 billion of the surplus into a new health and medical investment fund, the earnings from which will be used to pay for medical infrastructure. A further $7 billion will go to the Future Fund and $6 billion to the Higher Education Endowment Fund.

Although politically savvy – locking the money away in long-term funds in the lead up to the federal election makes it harder for Labor to use – it also rules out substantial tax cuts for the sector that produced much of the tax windfall; the business community.

Of the extra $3.7 billion the Government has found it has, around $1 billion came from an unexpected increase in company tax receipts.

The Australian Chamber of Commerce and Industry and The Business Council of Australia both argue that the budget bonanza means the Government can now afford comprehensive tax reform to take the burden of business.

ACCI says cuts to the top personal income tax rate to match the company tax rate and a cut in capital gains tax are the changes that would deliver the biggest benefits.

“The arguments for the Government to run such large surpluses are weak. Significant tax reform will enhance the productive side of the economy by encouraging investment and workforce participation,” ACCI chief executive Peter Hendy says.

But Council of Small Business of Australia chief executive Tony Steven says any tax cuts could threaten to overheat an Australian economy already facing significant capacity constraints.

“Tax cuts should be delivered at a time of low economic growth – if they were to do it right now, you might find there would be pressure on inflation and that would seriously tempt the Reserve Bank of Australia to put up interest rates, so cuts need to be carefully timed to the right stage of the business cycle,” Stevens says.

What do you think? Should the Federal Government give some of the surplus back to business in the form of tax cuts, or would that just lead to higher interest rates? Your Feedback will be welcome.

Mike Preston


Small cap results

Mortgage Choice reported strong profit growth of 9.7% to $19.6 million for 2006/07, with earnings per share 16.6 cents, up from 15.2 cents. The ASX-listed franchised mortgage broker’s loan book now stands at $29.6 billion, up 15.4% on 2005/06. The results were boosted by strong growth in Western Australia and Queensland thanks to the resources boom.

The company predicts consolidation ahead for the industry, and is looking for acquisition targets. In his results briefing, CEO Paul Lahiff identified the US short term mortgage funding liquidity problem as a cloud on the horizon that will drive a flight to quality, funding cost increases and consumer anxiety over re-drawing from their home loan.

Specialty Fashion Group, the owner of Miller’s Fashion Club, Katies, Crossroads and Autograph, posted a net profit for 2006/07 of $32.1 million, compared with a loss of $13.81 million the previous year. The company, formerly Miller’s Retail, is attempting a turnaround after selling its discount chain. “Trading for the first seven weeks (of 2007/08) was in line with expectations and is showing growth on the previous corresponding period,” CEO Gary Perlstein said.

MYOB Limited announced a fall in net profit of 17% to $8.7 million for the first half compared to the previous corresponding period. The company said the fall was in-line with guidance and it is on track to achieve full year growth in revenue of 12% to 13% at an underlying EBITDA margin of greater than 38%, as previously indicated.

First half revenue grew 14.7% compared to the first half of 2006, and EBITDA grew 17%. The company said the performance was slightly stronger than anticipated following a very robust final two weeks of June in Australia.

 Mike Preston


Winemaker goes under

Winemaker Evans & Tate has gone into administration after a rescue package was withdrawn by another winemaker, McWilliam’s Wine. The deal fell through because contracts were not in place and finances were not satisfactory. Directors had spent the last 18 months trying to restructure the company. Shares in the company were suspended yesterday.

Amanda Gome


Telstra leaps legal hurdle

Telstra has taken a further step towards getting its hands on confidential Government documents dealing with Communication Minister Helen Coonan’s decision to award almost $1 billion to an Optus/Elders consortium under the Government’s Broadband Connect program.

Federal Court judge Peter Graham yesterday said he believed there was a case for Coonan to produce documents for Telstra, the only issue being just how much the telco should get, according to an Australian Financial Review report today.

Telstra is trying to build a legal case to challenge Coonan’s decision to award tender to build rural broadband networks to the OPEL joint venture. The matter is scheduled for a full hearing on 13 September.

 Mike Preston


Market takes a breather

Australian sharemarkets have something taken a break from the massive volatility of recent days, with the S&P/ASX 200 up, recovering from an initial 25 point drop, to be up 0.6% to 6024.5 at 12.15pm.

The Australian dollar has come off slightly after nudging above US80c yesterday to be trading at US79.83c at 12.15pm.

The market wobbles don’t appear to have had much of an affect on the labour market, however. The Department of Employment and Workplace Relations’ Skilled Vacancies index increased by 0.7% in August, driven primarily by a 3.8% increase in vacancies for associate professionals like paralegals and a 1.3% rise in vacancies for tradespeople.

And unless the volatility feeds into the real economy, it appears likely economic growth is only likely to increase in the months ahead, according to the Westpac-Melbourne Institute Leading Index of Economic Activity released today.

The index, which indicates the likely pace of economic activity three to nine months into the future, increased 7.1% in annual terms in June, well above its long term trend of 4.5%.

Westpac chief economist Bill Evans acknowledges the credit crunch may have an impact on economic growth, but even so he predicts that Australia is likely to achieve strong economic growth of 4% to 4.5% in 2007 and 2008.

Mike Preston




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