Formalised family loans may be crucial for new generation jobs

Employment for our children and grandchildren is going to be vastly different to traditional employment.

Employment for our children and grandchildren is going to be vastly different to the traditional employment we currently take for granted.

Accordingly, we must prepare the next generation for an era where they will create their own employment.

The simple fact is that our banks, transport companies, the public service plus a vast number of similar industries are preparing to reduce their “same task” employment levels over the next decade by between 30 and 50 per cent.

Large segments of the education industry have not yet understood that their students will require different skills to gain employment to the skills that have been taught to past generations.

We already know the highest levels of underemployment are with younger people.

The good news is that Australia is one of the world’s leading nations in preparing the regulatory environment for this looming revolution. But it’s not easy. Each required change has been vigorously opposed by large vested interests and that is still happening.

There is no better example of what lies ahead than banks where their technology people are working on using about half the current staff levels to perform existing functions. The same techniques can be used in the public service and large accounting firms. Retail is set for a similar change while driverless vehicles will slash employment in the transport sector.

All this will be a reality for children now aged say 11, who will be 21 in 2027.

In my profession, journalism, we are trendsetters because technology has already ravaged our numbers. A large number of retrenched journalists plus those coming out of media schools are now operating as contractors using their skills where they find a market. A significant portion is helping large organisations cope with social media — a task that did not exist five tears ago.

In the decade ahead that entrepreneurial pattern will be used in most other industries, including the new ones.

But small start-ups without security will always find it almost impossible to get bank finance.

Very often it’s the family that provides the capital and that requirement is going to increase dramatically as part of the employment revolution.

Bank of mum and dad

From my experience, all too often family loans are badly documented and the consequential problems create great family disruptions.

But there are now groups who are experts in structuring and carefully documenting family loans. One such group is Credi Limited and its founder, Tim Dean. The marketing slogan for Credi is: “A company powering the bank of mom and dad” and the group specialises in formalising inter-family loans — the idea is to protect relationships and avoid disagreements.

I am sure there are others in the same business: it will be a growth area for small family legal firms.

Another area where Australia is undergoing fundamental change is large enterprise payment terms. I have been involved in business start-ups and you rarely plan for the long waiting periods for payments by large companies and governments.

But it’s changing. The Business Council has set up a voluntary code requiring 30-day payment and big retailers like Coles and Woolworths say they are paying in 14 days. The federal government says its arms will pay small suppliers in 30 days. If the big companies don’t change to 30 days they know legislation will follow.

We now have a lower tax rate for small enterprises and small capital purchases are tax deductible. The federal government allocated $300 million in the last budget to help state and local governments cut red tape.

While there are many good operators, franchising has been a hideous industry that requires cleaning up. The franchise council, having opposed fair contracts, now is opposing the clean-up legislation.

The next generation will want to use franchising to a greater extent than present so we need a clean industry.

But without doubt the biggest impediment in preparing the business environment for the changes ahead is the culture is the Australian Taxation Office.