New research provides the blueprint for SMEs to kickstart Australia's economic recovery
- Written by: Jackie Dargue
Australian think-tank, Blueprint Institute, has today launched new research to address the impending crisis faced by small businesses. The report shows that by creating realistic policies such as HECS-style loans, ‘insolvency checkpoints’ and setting skilled migration targets, Australia can begin to lay the foundations for a small business-led recovery
Blueprint Institute’s new report - Kickstarting the Engine - Short-term support for Australia’s Small Businesses - includes in-depth research into the problems faced by small businesses as a result of COVID-19 through discussions with experts, consultation with local small businesses and analysis of pre-existing statistics.
“If the economy is to grow out of this recession, Australia needs a vibrant and resilient small business sector. Many otherwise-viable small businesses are suffering not due to poor business practice, but because of legally mandated lockdowns and the economic uncertainty wrought by COVID-19. Having done their part to help halt the contagion, the small businesses affected deserve the support of policymakers,” says Harry Guinness, CEO of Blueprint Institute.
“Small businesses are the engine room of the Australian economy and are going to play a key role when it comes time to growing Australia’s economy out of this recession. Although policies such as JobKeeper have assisted many during lockdowns, Australia is in need of more lasting solutions. This is why over the past few months, our dedicated research team has been creating practical solutions that can serve to enrich those currently in place.”
“Ideas such as public funded loans and financial health checks for private enterprises may seem radical, however, we are living in unprecedented times. Without access to capital, support to restructure, or appropriate skills, many small businesses will not survive the lockdowns.”
According the findings, three of the biggest problems currently confronting small businesses include access to capital, insolvency, and skills shortages, which can be resolved with three recommendations:
Capital on tap: the introduction of a HECS-style loan
HECS loans have been assisting Australian students gain access to tertiary education since 1989. Blueprint Institute found that a similar policy of revenue-contingent loans could support struggling small businesses, while alleviating the cost and burden of current welfare programs. This report outlines why HECS-style loans should replace the recently implemented Coronavirus SME Guarantee scheme that consisted of $20 billion of public spending. To protect taxpayer funds, loans would only be available to businesses that are viable, which would be determined by a financial health check administered by a trusted financial advisor — such as an accountant, book keeper or tax agent.
‘Insolvency Checkpoints’ for businesses
Insolvent businesses can also benefit from the creation of the financial health check. If a business is not viable and thus not able to receive the loan, an experienced advisor can provide advice on how to restructure the business to increase the chance of it surviving the crisis. This would also work in conjunction with the already implemented COVID Safe Harbour mechanism so that directors and sole traders have more time to restructure without risking liability. As part of the ‘Insolvency Checkpoint’ program, the report also recommends that COVID Safe Harbour should be extended, like JobKeeper, until March 2021.
The need for fast-tracked skilled migration
At the end of 2019, over 50% of small businesses said that availability of suitable labour was limiting their output. With borders currently closed, there is potential for skill shortages to be exacerbated. The Government could counteract this by setting a target for temporary and permanent skilled migration that encourages workers with skills in critical areas to enter Australia. Visa application fees and hotel quarantine fees could be waived or reduced to incentivise skilled migration, with applications from small businesses prioritised. The report notes that the exact cost of this program depends on the arrangement settled on by the Government, and whether costs are passed to businesses or taxpayers.
This research report aims to support struggling Australian small businesses by providing a framework for political reform throughout the COVID-19 pandemic. These measures will help to put people back to work, generate economic activity, decrease unemployment and increase public revenue. This represents a winning opportunity for the Australian Government and for small businesses.
About Blueprint Institute
Established in the era of COVID-19, Blueprint Institute is a bold think-tank aiming to develop evidence based pathways for reform on critical issues in light of the new economic and social context. The organisation has been created by senior leaders in the Australian business, politics and academic space, and is spearheaded by Founder and CEO, Harry Guinness.
