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Campaign 2020: Pay on Time: Background Facts

Morrison government 2019 election promise

The Morrison government promised four key initiatives before the May 2019 election to help small business cash flow. The commitments were
1. 20-day payment Government: To pay Federal Government contracts up to $1 million within 20 days. This to start from I July 2019.
2. 20-day payment large businesses: To require large businesses tendering for Government contracts to match the Government's 20-day payment terms.
3. Government contract for small business: To have 35 per cent of all Government contracts up to $20 million delivered by small business.
4. Big business reporting payment times: Require large businesses with a turnover of over $100 million, including Government agencies, to publish payment information on how they engage with small business.
Prime Minister Morrison first made this promise in a speech on 28 November 2018.  He said:
  • “97 per cent of Australian Government bills under $1 million are being paid within 30 days and we are taking this down to 20 days by the 1st of July 2019…” and
  • “….we have said is that anyone who wants to work with the Commonwealth Government, you’ve got to agree to those terms as well”. (That is, pay within 20 days.)
This commitment was repeated by Small Business Minister Michaelia Cash to us (SEA) in a letter dated 17 December 2018. Significantly the commitment included
  • “…requiring large businesses tendering for Government contracts to match the Government’s 20 day payment terms.”

What the Morrison government is doing

(Tick) 20-day payment Government: This was implemented on 1 July 2019. All Federal Government agencies must pay contracts up to $1 million within 20 days. If they don’t they must pay the small business interest on the unpaid amount. This has been confirmed to us by government sources.

(No action) 20-day payment large businesses: So far there is no word from the government on actioning this.

(Targets set, operating tick) Government contract for small business.

(Pending) Big business reporting payment times: : Draft legislation is in consultation phase.

Labor says ‘too little, too late’

The ALP has been on top of this big time. Since October 2019 at least, the Labor Party has been putting real pressure on the Morrison government to act and act fast. See here for the ALP’s media releases. It has slammed big business for delaying payments to small businesses and using ‘reverse factoring’ schemes, calling the process a ‘Rortocracy’.

The ALP’s criticism of the Morrison government's slowness is legitimate. Promises of action were made by the PM in November 2018. The Morrison Coalition was re-elected in May 2019. Nine months later (March 2020)
  • the reporting system is not due to start until early 2021;
  • there is no sight of plans to require big business who do work for government to pay within 20 days.
This is far too slow!

What the Small Business Ombudsman says

The Ombudsman’s newsletter of 28 February  provides update on events:

The Ombudsman released a paper Supply Chain Financing Review. “One of the major findings is that too many big businesses have extended payment times and then offered supply chain finance, forcing small businesses to take a pay cut to get paid on time. This practice severely impacts small business suppliers and is totally unacceptable.” The Ombudsman calls for:
  • Replacing the voluntary Payment Code with enforced Payment Times Reporting.
  • Supply Chain Finance should not be an alternative to appropriate payment times.
  • All businesses should be paid within 30 days, regardless of size.
And reports
  • Both Telstra and Rio Tinto announced they were moving to 20-day payment terms.
  • Greensill Capital announced it would stop providing its supply chain finance services to big companies that do not offer fair payment terms.

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