Pay award rate until fairness test in place: Howard… Small businesses left out of red tape alliance… Australia poor renewable energiser… Bloody Hell, a Japanese soapie…

Pay award rate until fairness test in place: Howard

Business should play it safe and pay new employees the award rate until the Government’s new AWA fairness test is put in place, Prime Minister John Howard says.

Howard announced on 4 May that a fairness test would apply to all new AWAs signed by workers earning less than $75,000. The test took effect on 7 May, just three days later.

“It’s very easy for employers to err on the side of caution in relation to something like this, and one way they can do that is to simply ensure that penalty rates and loadings are paid,” Howard told ABC TV’s Insiders. “I mean, that’s a relatively simple thing to do and they’re receiving advice to that effect.”

In a striking admission, Howard acknowledged one of the reasons why the AWA fairness test was introduced so suddenly was to avoid a stampede by businesses seeking to lodge AWAs before the regime changed.

“We had no alternative but to say it would apply from the time of announcement to prevent people doing perhaps not the appropriate thing in relation to their arrangements,” Howard said.

Employers have effectively had to put a hold on all new employment negotiations involving AWAs until legislation is introduced to give effect to the new fairness test regime later this month.

Meanwhile, Labor appears to have ruled out any change to its hardline commitment to abolish AWAs. Opposition leader Kevin Rudd spent the weekend touring the mining operations in Western Australia’s north that have led the way in the introduction of AWAs. But Labor IR spokeswoman Julia Gillard yesterday ruled out any shift in position, telling The Australian Financial Review “there’s no chance of a change on AWAs”.

– Mike Preston

Small businesses left out of red tape alliance

Small and medium sized businesses have no clear voice in a new alliance formed by the Business Council of Australia and professional groups to keep the Federal Government honest in reducing red tape.

Along with the BCA, which counts as its members Australia’s 100 leading companies, groups including the Australian Institute of Company Directors, the Finance Industry Council of Australia and the Law Council of Australia yesterday launched the Business Alliance for Red Tape Reform.

Despite the fact that SMEs are generally the business sector that can least afford the administrative burden imposed by government red tape, none of the business groups with substantial SME membership appear to have been included in the Business Alliance.

Council of Small Business Organisations of Australia chief executive Tony Steven says the impact of red tape as a percentage of revenue is much greater for SMEs than big businesses.

“It also needs to be recognised that the red tape small businesses go through in interacting with big businesses as suppliers can impose huge costs. Red tape when dealing with a bank is 10 times more than dealing with government,” Steven says.

Red tape has also featured in debate in the lead up to the federal election, with Labor leader Kevin Rudd promising that if elected he would allow “no new regulation imposed on business unless an existing regulation is withdrawn” in his budget reply last week.

The Business Alliance plans to measure all new laws and regulations introduced against a six point Business Checklist for Commonwealth Regulatory Proposals. Under the checklist, new red tape will only be justified when the Government:

• Establishes a case for action.
• Examines alternatives to regulation.
• Adopts the option that generates the best net benefit for the community.
• Provides guidance to regulators and stakeholders.
• Conducts regular reviews to ensure a regulation remains relevant and effective.
• Consults with stakeholders.

BCA president Katie Lahey says that while recent statements by the Government that it intends to reduce red tape are welcome, “history shows that government commitments to cut red tape are often not matched by action”.

Lahey says the Alliance is considering extending its red tape monitoring to state governments.

– Mike Preston

Bloody hell: a Japanese soapie?

Minister for Small Business and Tourism, Fran Bailey, plans to try a radical approach to entice Japanese tourists to Australia, as Tourism Australia drops the “So where the bloody hell are you?” campaign.

Bailey told SmartCompany she is considering developing an Aussie “soapie” featuring Japanese celebrities traveling around Australia. Producers are being approached and there is talk that the soapie, which might cost a few million dollars, will focus on adventure tourism including activities like wind surfing along the coastline.

Japanese travel wholesalers reacted coolly to the controversial “bloody hell” advertising campaign, which was launched overseas in March last year and successfully lifted awareness in other countries.

But in Japan, it was watered down to “So why don’t you come?” with the situation not helped by the rising Australian dollar.

The ideas behind the soapie is to ensure the Japanese wholesalers who control the market, take notice – and that Australia becomes fashionable again, especially with the “adventure” tourists.

Bailey says this is just one approach to address the decline in Japanese tourists at a time when visitors from other Asian markets, including China, Singapore and Malaysia, are rising.

– Amanda Gome

Australia poor on renewable energy investment

Australia ranks behind North America and most of Europe in the incentives it provides for new investment in renewable energy, according to the Ernst & Young renewable energy country attractiveness index for the first quarter of 2007.

The US ranks first in the index, thanks largely to world-leading renewable energy policies in California. India, Spain, Germany and Britain are next on the list, with Australia keeping its 14^th ranking from the previous quarter.

Ernst & Young partner Jonathon Johns says that strong policy measures by developing countries such as India and China means they will rank only behind the US in attracting renewable energy investment by 2012.

“Despite recent predictions by the International Energy Agency that China may overtake the US as the world’s biggest source of greenhouse gasses within months, the Chinese Government is showing a commitment to renewable energy sources. Its investment in renewable energy is increasing at an impressive rate, with the annual installation of wind turbines more than doubling in the last 18 months,” Johns says.

The Ernst & Young index measures a variety of factors including government incentives for investment, the presence of policy settings such as mandatory renewable energy targets and the efficiency of renewable energy and carbon trading markets.

– Mike Preston

Wine outlook dire

Almost one in two Australian wineries is losing money, with the forecast for the coming vintage dire. The effect of the drought, frost and heavy water restrictions will see grape production down 30% to 50% on 2006 levels, John Hart, partner at insolvency firm Ferrier Hodgson, told the Institute of Chartered Accountant’s Business Forum in Adelaide.

While the good news is grape prices are likely to improve by 20% to 30%, subject to variety and region, it will not compensate growers who have suffered reduced yields.

Hart says the key to success are long term supply agreements, preferably with minimum grape price thresholds. “However there has been a recent shift to bulk wine contracts to take advantage of the glut.”

Wineries also need to be far more attuned to consumers. “We visit wineries across all regions and time and time again we see they’re producing what they’ve got in their vineyards, not what the consumers want to drink.”

Hart says the following pitfalls or reasons for failure include:

• No established brands.
• Sales based on high volumes at low price points and heavy discounting.
• A lack of distribution channels.
• Cash flow problems with money tied up in non performing vineyards and stock.
• Onerous grower contracts.
• No business plan/or unrealistic forecasts.
• Poor management information systems.
• Unable to adapt to a changing market.

Economy round-up

Recent strong economic data has triggered renewed speculation about the prospect of a 2007 interest rate rise, so the market will be looking closely at tomorrow’s post-budget speech by Treasury Secretary Ken Henry for the slightest sign that he sees inflationary pressure on the horizon.

Moderate housing finance data today will help keep a lid on the interest rate mutterings, with new finance commitments falling 0.4% in seasonally adjusted terms in March 2007, according to new Australian Bureau of Statistics figures.

An increase of 1.3% in owner occupier finance approvals was offset by a 5% drop in investment housing commitments.

At 12.30pm the S&P/ASX 200 is up 0.8% on yesterday’s close to 6247.34 points, while the Australian dollar has picked up 0.11c on last week’s Sydney close to be trading at US83.37c.

– Mike Preston