Farewell Address by Tony Shepherd AO, Outgoing President of the Business Council of Australia

This address by outgoing President, Tony Shepherd, AO was made to the Business Council of Australia Annual Dinner, held on 27 March 2014 in Sydney.

Check against delivery

It’s my great pleasure to start this evening by congratulating and welcoming the new President of the Business Council of Australia, Catherine Livingstone.

For those of you who were not at this afternoon’s council meeting, it will come as no surprise that Catherine received unanimous endorsement from the membership as the board’s recommended candidate.

Catherine is the first female president of the Business Council of Australia and undoubtedly the right person at the right time to lead our organisation. Catherine has a great reputation as both a CEO and a chairman and will bring her considerable skills and experience to the role.

Let me also thank the Minister, Eric Abetz, for being here tonight. Minister, please pass on my thanks to the Prime Minister for his warm message [for the video].

As I reflect on my two and a half years in the role, I believe we have become stronger as an organisation.

Our policy advocacy, in my view, is second to none, our membership base has widened and the level of engagement with our members and the wider community and other business groups is outstanding.

However, despite our best endeavours, I believe in many ways our country has gone backwards. Perhaps it would have gone further backwards without our endeavours.

We are facing a fiscal challenge that could lead to 16 consecutive deficits through to 2023–24 and accumulated debt of $667 billion.

The growth outlook is uncertain, consumer confidence has softened and business confidence since the election is only creeping above average.

Most concerning, we are losing our competitiveness on many fronts and there is no good reason for that.

Australia has valuable and rich natural advantages in land and resources.

We have a highly qualified, highly educated labour force.

We have a stable political system and the rule of law.

These advantages provide the foundation for enormous and enduring success.

Australia today has an unparalleled opportunity for prosperity – developing economies in Asia mean that the centre of global growth is on our doorstep, and demand for many of our products is strong and getting stronger.

We have every reason to be optimistic about our future.

However, we are going to have to work for it. There are no free kicks in the modern world.

Preliminary research from a major project the BCA is undertaking shows that Australia is less competitive than the United States in a number of sectors.

More worrying is the fact that over the last decade, we have not made any progress in closing that gap.

Indeed, in many sectors our relative performance has declined.

The BCA has long argued that we have become a high-cost country, and our productivity performance has not kept pace with many other advanced nations.

We have been one of the few countries to reintroduce rigidity into our labour market and other areas of the economy when what’s needed is greater agility and flexibility.

I genuinely fear that without real effort, we will squander our advantages and our extraordinary opportunities.

At every level of government, we need to refresh our approach to industry policy to back-in our many strengths.

What’s required is the kind of bold economic reform the Business Council of Australia set out in our Action Plan for Enduring Prosperity.

The action plan is right up there amongst the things I am most proud of over my time as president.

So is holding our ground on business tax, which we did under immense pressure.

If we hadn’t done that, if we’d capitulated to that pressure, the position our companies and our economy would be in today would be remarkably worse.

Where would we be without accelerated depreciation, or if we had lost ground on company tax?

I am proud that we have established a new Innovation Task Force. This has been essential in recalibrating the council for the 21st century.

I know it is an area which is very close to Catherine’s heart and an area to which she brings great experience, expertise and passion.

I am also very proud of what the Business Council and member companies have been achieving in our Indigenous engagement efforts. Though I believe we could and should be doing more.

This is a leadership responsibility that should be very straightforward for our members. For those who don’t currently have a Reconciliation Action Plan, I’ll be writing to each of them personally to put the hard word on.

I’m proud we have articulated an ambition to have 50 per cent of senior leadership positions in BCA member companies filled by women within the decade.

This is not just an equity issue, it is a productivity issue. In a country with poor productivity performance and an ageing demographic, we cannot have half of the potential workforce denied the opportunity to participate to the maximum of their potential.

I am also proud that we have reached out to other community groups and business groups and formed and strengthened relationships.

I am particularly proud of what the Business Council has achieved over the last two and a half years when it comes to the Commission of Audit.

We asked for it. We spelt out what it needed to do and the government acted.

For better or for worse, the price of that has been a very full-on five months of juggling BCA responsibilities with the audit. Be careful of what you wish for.

As my role with the commission also nears its completion, I’d like to take the opportunity to share some observations from the experience. Of course I will not rule anything in or out.

The audit puts into focus a very difficult long-term fiscal outlook for Australia if we are to achieve our key Term of Reference of a sustainable surplus of 1 per cent of GDP by 2023–24. A modest target and one which a country so richly endowed should be able to achieve in 10 years.

When our report is published, you will see that we have tried to be clear about the challenges Australia faces.

Perhaps the biggest challenge right up-front is having the community come to terms with the seriousness of our situation and accept the need for reform.

People need to understand what we will confront over the medium term, and they need to understand that we can’t keep kicking the can down the road.

Clearly, it’s up to the government how they use the commission’s report and we have given them a range of recommendations. The commission is not elected and it is up to the government to decide what to adopt.

However, I believe explaining to the community the problems we face is important.

First, because of the significant public education task that needs to be undertaken to make reform politically possible.

The community must understand the very real risk of us becoming a country of ‘haves and
have-nots’ and leaving our children and grandchildren to sort out the mess.

A terrible thought is that my grandchildren may not have it as good as I have.

One of my major concerns and priorities is youth unemployment in Australia. With 13 per cent unemployment amongst young Australians, we are looking down the barrel of something very frightening.

Tomorrow, it is no coincidence that Catherine’s first official role as president will be to lead a roundtable discussion on youth unemployment between our members and a group of young people from the Foundation for Young Australians.

I cannot imagine a more virulent social and economic disease than youth unemployment.

But if I’ve learnt one thing in my time as BCA President, confirming what I’ve come to believe over my life, it’s the essential good sense of the average Australian.

If they want good jobs for their kids and grandkids, quality services and infrastructure, and a meaningful welfare system that looks after the deeply disadvantaged and lifts people out of poverty, they will understand we have to stop governments making promises to every sector of the community.

That includes business.

It’s time to stop pretending that the piper never has to get paid and the budget is a magic pudding ... please excuse the mixed metaphor.

I also look forward to seeing the Commission of Audit report published because I believe the former government should be held to account for the budgetary decisions they made.

The long-term commitments, entrenched and legislated into future budget cycles that they must have known Australia couldn’t afford on any reasonable projections. Major programs with growth rates way above projected growth in CPI, GDP and tax revenue.

When organisations like the Business Council questioned those decisions in the past, we were pilloried. But I can tell you now from the inside that our warnings were absolutely moral and correct.

A final point I wanted to make about the audit is how important it is for the Business Council and all of our members to do all we can to counter the argument that fiscal discipline is somehow at odds with economic growth.

That somehow waste and inefficiency, unaffordable commitments and growth in government debt is good for the economy.

My rock-solid belief is that you cannot have the kind of sustained economic growth that we in the Business Council – and sensible politicians of all persuasions – have been advocating, if our starting point is a weak budget.

You can’t modernise the economy and keep Australia competitive when your hands are tied behind your back, fiscally speaking.

You won’t undertake proper tax reform through 16 years of deficits because proper tax reform requires proper compensatory arrangements ... as it ought to.

You won’t see governments sharing the infrastructure responsibility with the private sector when there’s no money to invest.

Nor will you see them embark on the next big skills agenda around VET and kids’ foundation skills.

If Australia takes this opportunity to correct the fiscal position, if we do it structurally and sustainably and in tandem with broader economic reforms, that’s what will give us the platform for growth.

We must also fix the federation and put the states and territories in a sustainable fiscal position. We cannot afford continued waste, duplication and conflict between the two levels of government.

This was the thinking behind the Business Council’s Action Plan for Enduring Prosperity, and my five months with the audit has convinced me that it was, and is, absolutely the right way out of the challenges Australia faces.

The action plan remains valid today and it will stand the test of time over the years to come.

The micro-analysis we are moving into now with McKinsey & Company draws on the ideas in the action plan to identify the areas and drivers of comparative advantage in our economy.

This project is going to be a real game changer because, like the Hilmer report did 20 years ago, it will point to reforms that could drive massive and sustained economic growth.

Of course, a major challenge for the new government, and for the BCA and business generally, is the potential of a continuing hostile Senate. We must continue to encourage and support the government in its reform agenda.

Most of what is required will involve legislation. It could not be a worse time for the government to be frustrated in the reforms it must undertake. One hopes the conscience and common sense of Senators will prevail.

Australia’s reform task can only be fulfilled if we can share a unity of purpose, across sectors and across the political divide.

In unity there is strength, as they say, and the BCA works hard to promote and build it.

I also believe that we are at our best when we uphold the principles of a free market, which has served us so well.

At times like this when good companies are doing it tough, it can be tempting to put those principles to one side. But I do not believe that is the right thing to do for the longer term.

We are at our best when we are solving our own problems in the business community. Business, like the broader community, has developed an over-reliance on government.

Of course, on the other side of the coin, governments must reduce the regulatory stranglehold and facilitate productivity to enable business to innovate and grow.

Jennifer and I both believe the Business Council could be doing more of this. That is, using the council as a way of bringing businesses together to collaborate and innovate without relying on government.

I look forward to watching how this agenda develops.

I want to conclude tonight with some heartfelt thank-yous.

I have been blessed in this role by the people I’ve been surrounded by and supported by.

By a board that is committed and focused. By committees and task forces chaired and supported by people with great expertise and vision who freely give up their valuable time.

By a small and remarkable secretariat led by Jennifer which has worked so hard and so brilliantly during my term. No request was unanswered and there is a high standard of professional excellence in everything they do.

Jennifer and I often say to each other that we wish people could be flies on the wall in our meetings, and hear the conversations – the intellect, the wisdom and the dedication to national interest.

The positions we take don’t always suit every member company. I know that.

But that’s not what this organisation is about.

Nor is it a networking club. It’s a place people come to contribute their knowledge, their experience and their imagination to making Australia an even better place.

In these last several months working on the audit, it’s struck me how much the country has been held back in recent years by a lack of imagination – in policymaking and, at times, in business.

We don’t seem to appreciate entrepreneurs with imagination like Rupert Murdoch, Frank Lowy, Andrew Forrest, the Pratt family and Kerry Stokes.

We have lost some of our pioneering spirit and become boring and conservative. We constantly ask “Why?”, rather than “Why Not?”. Our businesses tend to be driven by the quarterly report, and some fund managers regard 12 months as long term.

We won’t overcome the challenges we face or take full advantage of our many attributes by doing the same things in the same ways.

We talk about the importance of innovation and that is true but, ultimately, the great business transformations and the great societal transformations have been the product of imagination and the capacity to turn dreams into reality.

It’s what I admire most about the BCA and its members – their preparedness to imagine the future and their capacity to chart and explain a path to get there.

Let me finish by thanking two very special people in particular.

Jennifer:

When I first heard Jennifer was becoming CEO I thought interesting move  – former public servant and consultant. As I later told Graham Bradley, it was an inspired choice. The BCA presidency is a tough gig but working with Jennifer was a pleasure. Her drive, intelligence and her imagination are all outstanding. I have found a friend for life in Jennifer.

Thank you Jennifer for all that you have done. Catherine you have a great CEO.

Maryanne:

We all learn that volunteer jobs whether they be the BCA or a footy club are the most demanding. However, we overlook the impact on our loved ones.

My partner Maryanne has been a stalwart over the last two and a half years. Her counsel, patience, support and love made the difference. Thank you Maryanne.

Jennifer and Maryanne are two people who understand how ambitious I am for this country.

I fear that my words tonight may come across as negative. So let me be absolutely clear ...

I know Australia can do the things I’ve talked about and my confidence in the average Australian is rock-solid. I have a great feeling about the future.

My confidence in the BCA and the positive influence you’ll continue to have is equally solid. To my successor Catherine Livingstone, thank you for taking on this vital role at such a challenging time.

It has been an enormous honour to lead this organisation. Thank you for the opportunity.

Good night, and good luck.

Back to top