Ross Greenwood: Audit report poses threat to small business industry assistance

IT’S not likely recommendation 32 in the audit commission’s report will get on to the most-read list. But if you run a business, you must take the time to read it, writes Ross Greenwood.

Jose and Maria Pereira from Sunshine Meats smallgoods in Milperra, NSW

IT’S not likely recommendation 32 in the audit commission’s report will get onto the most-read list. But if you run a business, take the time to read it. Scrapping industry assistance is one recommendation likely to be taken up in the Budget with a gusto.

The Government now spends around $5.1 billion a year on industry assistance, according to the Productivity Commission.

Of 22 existing programs, the Commission of Audit recommends getting rid of 17; merging two and reducing funding to another four.

That leaves just one form of industry assistance the Commission sees merit in: the Murray-Darling Basin water recovery program.

Also recommended for the scrap heap are: the automotive transformation scheme; ethanol production subsidies; the steel transformation plan; the small business advisory program; Enterprise Connect; Austrade and Export Market Development Grants.

The Commission says industry assistance should be limited to areas of genuine market failure; where the benefits of Government intervention clearly outweigh the costs.

SPC fought one of the few successful anti-dumping cases ever brought in Australia, against Italian canned tomatoes and South African peaches. But the Commission of Audit recommends anti-dumping protection should not be considered, expect in cases where the benefits to producers clearly exceeds the costs to other industries or to consumers

This is worrying given the number of small Australian businesses that struggle to compete against imported goods.

Jose, from Sunshine Meats, is a smallgoods specialist

Dumping is the practise of selling an item more cheaply in Australia than the company sells it for in their home country.

But the Commission’s thinking is: if the foreign company is stupid enough to sell their goods here more cheaply than in their home country, let them go right ahead and while consumers enjoy the advantage of the cheaper goods.

In the process Australia could save a potential $1.1 billion on net tariff assistance that supports local companies against imports.

I’m not sure that many small businesses, or their workers, who have suffered at the hands of imported dumped competition will see it that way. But these are the challenges for business that come from these recommendations.

And as Tony Shepherd, chairman of the Commission of Audit and former president of the Business Council of Australia told me this week: “I might never be invited to another business function ever again.”

But don’t tell Jose and Maria Pereira that Australian industry is given $5.1 billion a year.

“We got zilch,” says Maria who along with her husband runs the smallgoods business, Sunshine Meats, in Milperra.

Their business grew through their own ingenuity, and occasionally desperation.

It starts when Jose, a waiter arrived in Australia, aged 28, from Portugal. His first job was cleaning a butcher’s shop in Redfern. But the butcher encouraged Jose, and within six months sold the business to him.

But Jose could see things changing in the meat business. The big supermarkets were muscling into the area; local butchers were going broke.

“It was in the last recession. I tried to survive by making some chorizos and smoked meats. I experimented with different flavours of smoked chicken. Nobody was really doing it then.”

Maria says: “It was a Christmas and we had quite a few turkeys and pork loins left over and he started experimenting with it all. If he hadn’t I don’t think we would have survived that recession.”

When they started with the smoked chicken, Sunshine Meats sold five kilograms a week. It now sells more than 1000 kilograms a day.

Eventually the business grew so large a new factory with larger smokers was found, first in Marrickville, and now in Granville.

“I fell in love with a butcher,” Marie says. But that butcher became a businessman who now employs 17 people and supplies sausages for Qantas first class.

And all with never a handout from the Government.

Not bad for a Portuguese waiter.

Jose and Maria Pereira from Sunshine Meats smallgoods, Milperra.