Private Members Statement - Regional Government Procurement Policy
I speak tonight on government procurement in regional New South Wales. Last financial year New South Wales government agencies spent around $28 billion on goods, services and construction and over the past five years spending has increased by an average of $2.2 billion per annum. In addition, the Government has committed $87.2 billion over the next four years for critical infrastructure. That is a good thing. I recently joined the Deputy Premier to announce $5.8 million in funding for projects in the Barwon electorate. Under the Drought Stimulus Package, projects have been fast-tracked to provide stimulus for towns during the protracted drought. I have spoken at length about the need to get money circulating back through our communities—the importance of cash in people's pockets. Money injected into our country towns will change hands many times. In the NSW Government: Small and Medium Enterprise and Regional Procurement Policy, the Government's policy to support small and medium enterprises through government procurement, Minister Barilaro said in his ministerial message:
Small businesses play a key role in creating jobs, educating our workforces and supporting local economies throughout New South Wales. The New South Wales Government is committed to ensuring that the 736,000 small businesses across this State work seamlessly with government through procurement.
This policy states that the Government has the option of purchasing goods and services valued up to $50,000 directly from a small business. It also allows agencies to purchase up to a maximum of $10,000 from any supplier even where a whole-of-government arrangement—a contract—is in place. These exemptions mean that government agencies have the ability to purchase things like stationary, printers and office furniture from small local businesses. However, the policy does not go far enough to support small businesses. It should say that State government agencies are "required" to buy from small local businesses. In requiring government agencies to buy locally, any pushback from Treasury would be voided.
It is vital that Treasury realises the positive impact spending in small regional businesses would have for those communities. If government agencies were required to buy from local small businesses the policy would ensure much-needed cash flow to small businesses in regional New South Wales. However, the policy does not cover procurement related to construction projects, which is where the funding under the Drought Stimulus Package is to be spent. In a recent meeting with one of the 13 local councils across the Barwon electorate, the general manager raised with me an issue regarding contractors working on a highway upgrade outside of town. A search of the contractor's business name showed that the company was registered in Queensland. How will those projects benefit local businesses and help them weather this protracted drought when councils come to me with stories such as this one? What makes that example more concerning is that an interstate company is getting the work and the New South Wales taxpayer dollars in front of companies or even councils in this State.
When people buy from locally owned companies significantly more of that money is used to purchase from other local businesses and service providers, which further strengthens the economy of the whole community. Imagine what would happen to our regional communities from the cash injection that would come with a government contract being awarded to a local business? A number of studies around the world have shown that when a good or service is purchased locally there is a multiplier effect.
The multiplier results from the fact that independently owned local businesses recirculate their revenue. In other words, going local creates more local wealth and more local jobs. The multiplier effect is comprised of three elements: direct, indirect and induced impacts. A direct impact is spending by a business in the local economy to operate its business, including inventory, utilities, equipment and to pay employees. Indirect impacts happen as the local business spends dollars at other businesses as they re-circulate. An induced impact is the additional consumer spending that happens as employees, business owners and others spend their income in the local economy.
Recently I attended a local rugby game in Brewarrina. It was not the name of a large nationwide company on the front of the players' jerseys or hanging on the sign of a fence; it was those of the local businesses. When we invest in local businesses, they invest in the community. They sponsor local footy teams, kick the tin to sponsor local charities, employ people and make our communities good places to live. I ask the Government—and it is now more important than ever due to the dire conditions in regional New South Wales—to immediately put in place a policy that biases local companies. Any policy needs to provide an environment where local contractors and the council have a bias to ensure that Drought Stimulus Package money genuinely stimulates the local communities that are being hit hard by this protracted drought.