15 May 2018
Event: CFO Forum
Speaker: Jennifer Westacott
Thank you Ayten for that introduction.
I want you to celebrate being the bean counters: The Chief Financial Officers of our nation’s leading companies.
You are at the centre of every core decision a company takes and many of you will be the Chief Executive Officers.
You are in one of the most difficult jobs at one of the most difficult times.
Our businesses are being challenged as never before.
Keeping pace with rapid technological change is a feat in itself with unprecedented connectivity and digitalisation.
Business models are undergoing enormous disruption.
Empowered consumers have come to expect instancy and unlimited choice as the norm.
They know no borders and no company boundaries.
They now have the tools of innovation in their hands.
Companies that fail to adapt to change and have cultures that resist transformation, will be short-lived.
Business, of course, is facing other pressures.
Our fundamental legitimacy is under daily bombardment, partly as a consequence of our own conduct.
Those who have always been against private enterprise, but rarely have a substitute for it, are now emboldened.
We must all remember that when one of us does something wrong, it hurts all of us.
The contagion doesn’t just undermine our reputation it also provides an excuse for our opponents to pursue populist and ill-considered policies.
We cannot allow economic policy to be metered out as a vindictive get-square.
The aim of economic policy is to build the social compact.
Prosperity and fairness - one cannot be achieved without the other.
Strong businesses deliver prosperity by growing the size of the economy so every single person can share in the increased value and creation of greater opportunities.
It gives people more money in their pockets.
I’m proud to advocate for strong businesses, and you should be proud of your success.
Prosperity ensures fairness through a robust social compact by providing government with the resources to pay for essential services and deliver a strong social safety net.
Business must also contend with the breakdown of trust in our institutions.
This is behind the crisis in community confidence and giving rise to feelings of frustration.
Slower economic growth in Australia is fuelling a seething undercurrent of discontent where people feel they’re not getting ahead.
Anxiety around the kitchen table is real.
Wages are not growing as fast as people want and their bills are increasing.
They feel the balance is wrong.
They worry about changes in technology, the future of their jobs, and changes in interest rates.
When they work hard, they are discouraged by a tax system with too many cliff-edges in it.
We have to understand it is easy to blame the business community.
The anti-business forces argue the solution is to hold businesses back and, at an extreme level, to see them fail.
But we know the proper remedy is to make business work
So today I want to examine how it came to this.
What’s at stake, and what we need to do to restore our credibility, our legitimacy and our strength.
We must ensure our contribution to the broader community is not ignored in the pursuit of ideologically driven point scoring.
To surrender now would be catastrophic.
The consequences would be failed businesses, failed communities and failed lives.
The victims would be the poorest Australians, not the richest.
The social compact would fracture.
The ultimate dividend of a strong economy is a stronger society that creates wealth in order to give back.
Business is the foundation of Australia’s prosperity.
It makes things possible.
It connects us.
It helps forge ambition into achievement.
It helps create the opportunities that can enable all Australians to reach their full potential.
Whether it’s the local store, the large mining company providing the backbone to regional Australia, or the technology company driving the new jobs in a more diversified economy.
Business is the 10 million of the 12 million working Australians.
It’s the almost 6 million Australians who own shares in Australian companies.
It’s where their superannuation is invested and their retirement depends on those businesses continuing to grow.
It’s the ecosystem of small, medium and large businesses that together generate $555 billion of economic activity, a year.
We create the jobs, the conditions for higher wages, and the revenue that underpins the social compact.
Business invests and innovates.
Twenty years ago, we couldn’t have imagined a future where you walk around with a smartphone able to search for any information you want, make purchases online, buy airline tickets, and do your banking.
This is business, and every single one of these quantum leaps requires someone to put their money at risk.
But by far the starkest illustration of what business delivers – how we make good on the social compact – is contained in this year’s federal budget.
By the end of the forward estimates, business will be paying $100 billion a year in company tax and over the next decade this will reach a cumulative one trillion dollars.
This is even after the full implementation of the government’s proposed company tax cuts.
The flow on impact from the success of private enterprise will help fund things like aged care reforms and personal income tax relief, starting where it is needed most with low-income earners.
It will go towards health and education, and help fund $24.5 billion in new infrastructure spending.
This increase in revenue means the Medicare levy doesn’t have to be lifted to help pay for the National Disability Insurance Scheme.
This is what economic growth fuelled by a strong business sector delivers for Australians.
It supports and creates employment.
It pays the wages that contribute to the collection of $260 billion in personal income tax in four years’ time.
We know that if the parliament has the common sense to pass these changes it can give something back to the Australians who are doing it tough.
Some families, with both parents working, will receive about $1,000 back to pay for the things they need.
If we block this, we are standing in the way of removing the incentive-sapping tax rates that are a hurdle to Australians getting ahead.
Today, 25 per cent of taxpayers are in the top two tax brackets.
In six years’ time, without change, 37 per cent of taxpayers will be in the top two tax brackets.
How’s that for fairness?
Those against a staggered, modest company tax cut of five percentage points over a decade, are against growing Australia’s economy by one per cent a year.
In today’s dollars, that’s an $18 billion permanent increase in the size of the economy each year that will be left on the table.
They’re against rising incomes which can only be delivered when companies are successful, more productive, can expand and compete, and small businesses are able to grow.
They’re against this nation staying competitive.
They’re against more jobs
They’re against a larger contribution to the community.
And, they’re against investing in future generations.
When people call for wholesale tax reform, I want them to explain what they mean.
I don’t want them to use the smokescreen of comprehensive tax reform as an excuse not to consider the sensible and meaningful steps we can take right now to benefit all Australians.
If you’re against lower taxes, you must be for higher taxes.
You cannot have it both ways.
If you are against companies being able to compete, you must be for shackling them with a ball and chain that prevents businesses from modernising and adapting to a changing world.
You are asking them to compete in the 21st Century with a company tax rate that hasn’t moved for 17 years and a promise to return to nineteen-seventies industrial settings.
If business doesn’t have the environment to compete then we will be forced to have a very different conversation about the budget.
Without successful business there is no pay-off.
There is no social compact.
We’ve all heard the saying that we don’t live in an economy; we live in a society.
True, but trying living in a society with a moribund or sluggish economy.
Without prosperity, you cannot give people a decent way of life.
You cannot protect the vulnerable.
So today, once and for all, I want to put paid to this absurd and futile debate that fairness is somehow at odds with economic growth.
Low-growth without a strong social safety net creates disparity.
Low-growth without support for the most disadvantaged drives inequality.
High-growth with a strong safety net is our best defence against inequality.
High-growth guarantees the provision of sustainable essential services.
Fairness can only be sustained through strong economic growth.
Business is at the heart of that equation because it generates eighty per cent of Australia’s economic output and 86 per cent of all jobs.
Without stronger economic growth, then 10 million Australians working in a business would be worse off.
How can it be fair if ten million Australians are unable to get ahead?
How can it be fair for small businesses to be prevented from expanding?
I’m going to spell out later exactly what it means to be anti-business but let’s be clear about one thing – an anti-business agenda will drive low-growth.
It will result in greater disparity.
An anti-business agenda is the antithesis of fairness.
So, how did it get to this?
Well, I think it’s because we wavered on our sense of purpose.
We allowed a raft of perverse incentives and, in some cases, a lack of direction to overwhelm us.
I believe we are here to enrich, in the proper sense of the word, the lives of Australians: our employees, our customers, our shareholders and the communities we operate in.
A sense of purpose will be different for each of your companies.
But I’ll tell you what it isn’t.
It isn’t a Return on Equity Target.
Just as balancing the budget is not the government’s sense of purpose, that’s not a vision for the country.
To restore trust, we need to return to our core reason for being.
This will require the business community committing to a clear sense of purpose, centred on the value we add to society.
With every product, every service we ought to ask ourselves who does this benefit?
In doing so, I’m not suggesting we start making a loss.
There’s no point to being unprofitable.
Ethical profits are the proceeds that underpin the social compact.
But by returning to basics, we can stop being crowded out by distractions.
It will require a laser-like and unwavering focus on what truly matters: our customers, our employees, our shareholders, our suppliers, and our sense of being a positive force in the community.
Let me start with our customers.
Businesses succeed when they prioritise the needs of their customers.
As we know some of the biggest mistakes that have unfolded in corporate history been because leaders have misunderstood, or didn’t bother seeking out, the views of their customers.
Companies that endure build trust with their customers and the community.
They see shared value as something more than corporate social responsibility.
They truly value their employees as assets, not numbers.
Our people are so important to us.
We need to nurture, inspire and invest in our people.
Think about your incentives, incentives drive behaviours.
Think about the systems you have and how they create cultures.
You cannot stand up and say, ‘this is the new culture we are going to be in’.
Culture is a creature of people, of values, of behaviours, of incentives, of systems and processes, and mostly it is a creature of leadership.
It will take a long time for us to turn this around.
If I now go to suppliers.
Successful companies value their suppliers as partners, not contracts.
It’s why the Business Council introduced the Australian Supplier Payment Code.
Imagine if you ran a small business with a turnover under $10 million and your customers decided to pay you on 120 day terms.
How would you survive?
We need to pay our accounts within 30 days.
And, when something goes wrong get on the front foot faster.
Deal with the people who have been impacted, and as former Canadian prime minister Stephen Harper said:
If you’re doing something wrong, stop doing it and fix it.
And, then don’t be timid about defending ourselves.
I know there are risks in getting on the public record but silence is a greater risk now.
Jettison the spin.
Be honest, genuine, upfront and transparent.
And when we can’t defend the indefensible - don’t.
But fix it.
Reputational damage costs money and it invites poorly conceived regulatory responses.
No one here today wants to see a return to the misguided notion that somehow State-based intervention is a panacea when history tells us it doesn’t solve these problems – and it won’t.
So, any measures we take to restore trust cannot unintentionally create an environment of sovereign risk.
That would be the ultimate own goal.
And, when we’ve done all of this, we’ll still need to go further.
It is clear business as usual is no longer good enough.
We cannot wait for cultural change, which takes time to work through, before we begin reclaiming our legitimacy.
As businesses, you need to mobilise your best resources – your shareholders, your suppliers, your employees, and your customers.
They are your best ambassadors; the people who understand and value what strong and successful businesses deliver every day.
You need to start explaining what you do: the true value you create, how many people you employ, how much you pay in wages, the suppliers you hire, what you give back, and how much tax you pay.
That’s why we want you to sign the Tax Transparency Code.
As a business community, a collective of organisations, we need to remind the community about the role we play in growing the economy.
Together, we have to be proactive in restoring trust in the way we do business to win back the community.
We need to be louder and more forceful advocates.
We need to coordinate for impact.
I want us to get on the offensive and put an end to the false narrative that business has no contribution to make to society.
That we are somehow irrelevant to the lives of Australians.
We are the wealth creators.
The job makers.
We don’t steal people’s wages.
We pay people’s wages.
And, we have to be willing to stand up and tell that story.
And as we advocate, we need to be united.
Companies benefit differently from policies.
If something doesn’t impact on you but is good for others, don’t torpedo it.
We’re just a bigger, slower target when we’re not united.
And, I can assure you the anti-business forces are waiting to pick us off.
We cannot afford to waver.
The stakes are too high.
The result is a dead end that sees Australia become a high-taxing country that:
- stifles aspiration;
- regulates ambition;
- restricts freedom and choice;
- limits opportunities;
- and seeks to undermine the value of private enterprise.
This, of course, is the dystopia that Jim McIlroy from the Green Left Weekly dreams of.
McIlroy – a declared member of the Socialist Alliance – wrote in February:
“… Jennifer Westacott complained of an ‘ideological hatred’ of corporate Australia sweeping across the country.
“… Westacott said the US is “an open-for-business country, while we have become a business-bashing, closed-for-business country”.
He then ended with “We wish!’’
Yes, that’s what they wish for.
Well, let them have the courage to go out into the western suburbs and preach that message to a teenager desperate for a job and explain why they’ve smashed the economy and sapped the nation of its drive.
Let’s pause for a moment and consider what being anti-business really means.
It starts with a refusal to accept with wilful blindness the legitimacy of the corporate system.
Not only do they disrespect the role business plays, they sneer at us.
If you’re anti-business, you are anti:
the former tradie who is back at TAFE to prepare for a second career;
the teenager on the checkout at one of our major supermarkets;
the Indigenous trainee at the airline;
the family with shares in a company to get ahead;
and the one-man outfit who runs a small business who never turns their phone off.
Being anti-business means not believing in private enterprise, private capital, or a minimal role for government.
If you’re anti-business, you don’t believe in the Aussie fair go.
If you’re anti-business, you’re against innovation and modernisation.
It’s a textbook ideology that doesn’t work in the real world.
It has never been updated to reflect the hard-won lessons of the past.
It’s an ideology that retreats from the shared belief, up until now a mainstay of mainstream politics, that for Australia to thrive, its private enterprises must be allowed to grow and prosper.
It means retreating to an old Australia, an era before the reforms of the Hawke Government flung open the economy.
That is an insular nation beset with the job destroying industrial militancy, high unemployment, high inflation and high interest rates.
I never thought we would ever have to recontest centrist policies about the role of business, the role of an open economy, and the role of a strong safety net but we are.
The anti-business forces are making a fundamental political point.
They do not accept our legitimacy.
They do not accept a modern economy that incentivises, rewards effort, and encourages aspiration.
They’re the ones that accuse us of only acting in self-interest when we advocate for policies to grow the private sector and grow the economy.
This is not self-interest, this is national interest.
Because business is not an abstract entity, it doesn’t operate in a vacuum.
We’re not removed from the community.
We are the community.
We are the 10 million Australians who work in a business.
We are the people in Bunnings, the supermarkets, the small-business owner, the shareholder, and the self-funded retiree.
We’re part of it.
We’re invested in it and the community is invested in our success.
The one thing I know about Australians is we’re aspirational people.
We’re smart, we want to do our best, we work hard, and the mateship that’s hardwired in us means we want to give back to our communities.
Australians know when they’re being fed a load of BS.
Australians who call regional centres like Townsville, Geelong and Port Kembla home have first-hand experience of what happens when businesses falter.
They’ve weathered the human toll.
They know the harsh reality of what it means when the factories close.
The corner store shuts.
Workers lose their jobs.
And, the welfare queues grow.
They also know how strong and growing businesses investing in their communities can turn this around.
For all Australians, no matter where they live, we need to aspire to be the best we can.
We can be a nation that delivers on the social compact for the benefit of everyone in our community.
We can be a nation that heals the divisions.
We can be a nation that creates the wherewithal, the capacity and resources to make sure that each and every day Australians are better off.
We can be an Australia that faces outwards.
A nation that holds its place on the world stage and competes.
A nation built on the bedrock of private enterprise.
A nation that values the money Australians work hard to earn.
Respects the first dollar a small business owner puts at risk, and supports companies investing in the future.
An Australia that applauds courage and rewards having a having a go.
A nation that is for business, not against it.
By staying united.
Believing in ourselves.
Explaining how we grow the economy.
And how prosperity is the key to fairness, equality and opportunity.
We can be a stronger nation.
A better Australia.
A fairer society.
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