2018 Crunch time for Australia’s economic renewal
30 December 2017
This opinion article by Jennifer Westacott was published in the Australian on 30 December 2017.
As many of us enjoy the holiday ritual of heading to the beach to unwind and recharge, we can reflect on a year that ends in better shape than it began.
Despite frustrating Senate intransigence and a revolving door of federal MPs tripped up by citizenship issues, many more Australians have found work and non-mining business investment is turning the corner. A national plan for reliable, sustainable and affordable energy exists, and our budget position is on the mend. Green shoots are appearing.
During the break we cannot afford to lose this hard-won momentum; we cannot rest on reform.
Next year, the Australian community is counting on us to develop the conditions to compete globally, create and expand businesses, generate the jobs of the future, improve productivity, help lift sluggish economic growth and deliver higher wage growth.
We cannot sleepwalk during the summer while other nations surge ahead, re-energising their economies after the global financial crisis.
This time last year I described US President Donald Trump’s platform of aggressive company tax cuts and deregulation as a global game changer. The Business Council of Australia has spent the past 12 months sounding the alarm on the dangers to the nation of a seismic tax shift in the US. Those risks are now a reality. Congress has green-lighted a drop in the US company tax rate by 14 percentage points to 21 per cent almost overnight. The modest plan for Australian business, which remains bogged in the Senate, proposes a gradual reduction in the tax rate of five percentage points across a decade.
Our company tax rate has been frozen for 16 years while the rest of the world has pushed us further down the international leaderboard. Without urgent action, our competitiveness is at risk; next year is crunch time for Australia.
The Trump tax cuts represent a de facto tax increase on all Australian businesses as we battle for global investment. Safeguarding Australian jobs, living standards and economic growth will require action to keep us competitive. The government’s enterprise tax plan will help do that. The International Monetary Fund and Treasury are clear: without reform we will see capital sucked out of the Australian economy.
The US is not alone in moving to supercharge its economy. Belgium is close to passing legislation to reduce its company tax rate and even France, which traditionally has put high taxes on business, has announced a significant reduction from 33 per cent to 25 per cent.
The average company tax rate across the OECD is 24 per cent and falling. The average across Asia is 21 per cent. Britain is moving to 17 per cent.
There is a plan on the table to ensure Australia doesn’t slip further behind. Next year, let’s just get on with it.
As we head into the new year, business knows it, too, must get its house in order. We will continue to tackle the lightning rod issues that bug the community.
With many Australians worried about the rapid pace of technological change, business understands we must take ownership of the transition already under way in our workplaces.
We need to explain the impact of new technologies and ensure workers have the skills for the years ahead. This will be a major focus of the Business Council during the coming months.
Another area of concern we worked through this year was addressing the complaint that big business failed to trade fairly with small business.
In response, we developed the Australian Supplier Payment Code. This voluntary industry-led initiative sets fair terms to pay small business suppliers within 30 days. The combined turnover of signatories so far to the code is $400 billion, and these organisations employ nearly 400,000 people.
The BCA and the Council of Small Business Organisations of Australia also signed a memorandum of understanding, committing us to work collaboratively on issues such as taxation and workplace relations.
We recognise the best policies are those that encourage the growth of all existing businesses and help create new businesses.
We must now remind Australians of the enormous contribution business — large and small — makes to their lives every day.
From the people serving at the checkout to the truck drivers and the workers on the front desks, business keeps the country running. We are pivotal to creating jobs, expanding the economy and delivering the wealth and economic prosperity the community shares.
Business employs 10 million of the 12 million working Australians. The tax businesses and their employees pay provides about $235 billion, or 60 per cent, of the taxes that underpin the services we want and expect. Business represents almost six million mums and dads who own shares in Australian companies that pay dividends and taxes. It’s where our superannuation is invested.
Business isn’t a villain; it’s absolutely essential to our economy.
Without business, the world would be a very, very different place. An anti-business agenda would spell disaster for the country. There would be little job creation, let alone wage growth. The best way to boost wages is through productivity improvements, a more competitive economy and a focus on growth.
This means creating an environment that allows business to thrive. We need to reduce the unnecessary red tape and regulations that cripple Australian businesses from responding and adapting to economic change.
We also need to be armed with a well-trained and highly skilled workforce.
Earlier this year, I took the unusual step for a chief executive of the BCA in calling for a new form of protectionism. By this I didn’t mean winding back the clock and retreating to trade barriers and inefficient industry subsidies. Instead, I want to see Australia protect our capacity to compete on a global stage, protect our ability to develop new businesses and expand existing ones that can export around the world. We need to safeguard our ability to innovate and to protect the creation of rewarding, high-paying jobs.
This new Australian protectionism can help ensure we are the most skilled, the most trained and the most resilient people on earth. Why shouldn’t this be our aim? Australians deserve nothing less.
As technology transforms the economy, we need to future-proof ourselves. But first we need to rebuild our tertiary education system, tearing down the silos between higher education and vocational education and training.
Next year, the BCA will continue to press the case for a single tertiary funding system to ensure no Australian falls through the cracks of a changing workforce.
The VET sector is the main vehicle for training workers for some of Australia’s biggest employers and industries. It will be crucial in retraining and expanding the skills of workers for the jobs of the future. By shifting to one tertiary funding system, we can help break the stigma that a vocational qualification is any less prestigious than a university degree. It is not.
I am proposing each Australian be given — and be in control of — their own portable lifelong skills account.
This would enable them to study short courses and modules from a university or a VET provider to build on their existing qualifications, essentially piecing together the credentials they need for the new world of work.
I am urging all parties to focus on the holistic reform of the tertiary sector to ensure it is more responsive to the demands of future workplaces and the skills mix workers will need.
As we enter the new year, we have an opportunity to build on the tentative signs of economic renewal under way.
The release last week of the mid-year economic and fiscal outlook confirms Australia’s revenue growth overwhelmingly is driving the improved budget position.
If parliament is unwilling to support the government in its efforts to restrain expenditure, then business will need to do the heavy lifting on delivering economic growth.
The outlook forecasts economic growth of 2.5 per cent in 2017-18, lifting to 3 per cent in 2018-19. We can no longer continue to accept annual growth with a two in front of it.
The IMF warned last month Australia’s economic recovery was lagging that of other major countries. Now, more than ever, we must pull out all stops to accelerate economic growth and boost investment to ensure businesses can generate revenue and stronger growth.
We cannot simply tread water. Let’s pick up the pace and make real progress in narrowing the gap with our global rivals. Let’s bring it home next year. Introducing a fairer, competitive company tax system that ensures Australian businesses are no longer forced to compete with one arm tied behind their backs is a good starting point.
Regaining our global competitiveness is not about statistics; it’s about protecting our quality of life.
It’s about restoring Australians’ sense of hope, rekindling their aspirations for themselves and their family. It’s about ensuring they have a good job and can build a better life.
We want every single Australian to have the opportunity to realise their potential. We want Australians to be rewarded for their hard work, ambition and drive, and to feel that together we are moving ahead.
Jennifer Westacott is the chief executive of the Business Council of Australia.