Accelerating economic growth

13 August 2019



Australian-British Chamber of Commerce, Business Lunch


Jennifer Westacott, chief executive, Business Council of Australia


The Westin, Perth


12.55pm (AWST), 13 August 2019

Good afternoon. I too would like to start by acknowledging the Traditional Owners of the land we're meeting on today. The Noongar people and pay my respect to their elders past and present.

Thank you very much Deborah for that incredibly kind introduction and thanks to Steve and the chamber for inviting me to speak here today.

And of course I'd like to acknowledge one of Australia's business icons, Sam Walsh who is here today who was a marvellous member of the Business Council. 

It's great to be talking here in Western Australia, a state that has seen the benefits and risks of fluctuating economic cycles. And much of what I've got to say today goes to the issues that affect all Australians, but they are particularly amplified here in WA.

Now, people will have their own views about the election result, but there's no doubt that it has given us an unusual period of political certainty. This throws up a welcome challenge about how do we use this period to set the country up for the next wave of prosperity. And for me that centres around improving our productivity. And that's the focus of my speech today.

The Prime Minister recently called on us to help identify the roadblocks that are imposing the largest costs on key sectors of the economy and serve as a hurdle to investment. He's also said that business must make the case for change. And so, I hope today this speech begins that process.

Business needs to come together around some practical bite-size measures we can take now to drive higher living standards and increase wages growth. Now we've got to bring the community along with us and focus on the things that really matter to them and our job is to convince the community at the grassroots level.

So instead of talking about how we punish people who get ahead, we should be talking about how we reward them. Instead of talking about the casualisation of the workforce, which of course the data doesn't support.

We should be making sure that every single Australian has a meaningful job and that they've got the skills to keep working for as long as they want. Instead of talking about some nebulous concept of a living wage, let's actually do something about lifting the wages of every single Australian through lifting our productivity.

Instead of pitching Australians against one another, we need to bring the country together, particularly focusing on our regions. And above all, we need to act to make ourselves a productive nation. It's by being a productive country, not just the lucky country, that we can continue to be resilient in the face of global forces, competitive and locking higher wages and better living standards.                                 

So, if we are to focus on the right things, we must also use the right language.

Nobel prize winning economist Paul Krugman said: “productivity isn’t everything, but in the long run it is almost everything’’.

We know productivity matters, it matters for all of us.

Increasing productivity though is not about people working harder for less.

Instead, it is about people working smarter and more effectively by making the most of every single ingredient that goes into producing our goods and services.

Productivity happens when employers have the capacity to invest and innovate in expanding, in training workers, in updating machinery, and adopting new technologies.

They’re able to produce, sell more, export more, allowing them to employ more people and pay them more.

Think about this, nurses currently spend 50 per cent of their time currently on administration and paperwork.

Think about the benefits if we're able to get the best technology to allow them to spend more time with their patients at their bedside.

Improving productivity can be investing in innovation – whether that’s developing a medical device like the Cochlear ear implant, MYOB software for accounts, or phone apps to book your Qantas and Virgin flights.

Mango growers Manbulloo, who operate out of Queensland and the Northern Territory, are currently trialling the use of block chain technology to provide real time monitoring and the quality of their fruit.

This is going to reduce the costly and time-consuming duplication of quality checks along every single stage of the journey from the farm to the shelves of Coles and of course to overseas markets at a premium price.

But if we are to have an honest conversation about productivity and innovation we do need to acknowledge that it does produce changes in the labour market.

We can’t pretend that it does not result in some jobs disappearing.

For those affected, the personal toll is terrible and we must do all we can to help them get back on their feet but more importantly reduce the risk of them losing their jobs in the first place.

But let’s get the facts on the table.

We commissioned some research from AlphaBeta last year and they found two really important things. 

The first is that forced redundancies have almost halved over the last two decades.

The second is that our focus will be on task change, not job losses.

So, we have to recognise that adopting technology and innovation are essential to allowing companies and workers to compete and survive in a global economy.

If we don’t recognise this, we will put our national prosperity at risk.

Anything that holds people back from changing their skills. Anything that holds business back from adapting to change is actually the greatest risk to somebody’s job.

So why does it matter, this concept of productivity?

The best barometer of living standards in Australia is the long-running Household, Income and Labour Dynamics in Australia survey, which of course, thankfully is shortened to HILDA.

Recent data from that survey was released and it showed precisely what a lack of productivity meant for Australia.

It showed that the income of middle Australian families, after taking into account taxes and inflation, was lower in 2017 than it was almost a decade ago.

I don’t use slides very often in speeches but this one tells a very powerful story.

It shows what is behind our stagnation in living standards.

It’s a lack of real income growth. 

Real incomes can be driven by external factors, such as higher commodity prices, which are by their nature are volatile.

Or it can be driven by productivity growth.

Now if you look at this slide, in the 1990s, productivity growth ran at an average 2.2 per cent a year.

This was also the pace of real income growth.

In the 2000s, real income growth ran at about the same rate, but slower productivity growth was offset by the record terms of trade.

Now, the terms of trade boom is over.

Productivity growth has been around 1.2 per cent a year since 2010.

And real income growth has also slowed at the same rate.

Until the Morrison government’s welcome income tax and bracket creep changes, bracket creep had eroded those modest increases to real incomes.

So you've got to think about it as money in people's pockets not a nebulous economic term. 

And you've got to think about it like this. Right now, we have the 11th highest GDP per capita in the world.

What happens if we slip to 30th? And the 40th? And the 50th? 

What does that tell us about the living standards of Australians?

To improve our productivity we need to take action on a number of fronts.

-    lifting business investment

-    getting an infrastructure pipeline flowing

-    giving Australians access to the skills and training they need

-    making sure workplaces operate in the interests of employers, workers and enterprises

-    attacking unnecessary red tape and regulation

-    and, getting our energy and climate change settings right.

Let me go to investment because it is the first and very important problem to solve. 

It is through investing in new plant and equipment, expansion, technology, innovation, and skilling people that employers and workers can become more productive.

But investment is falling.

New business investment fell 1.3 per cent over the year to March.

And, as a share of GDP, business investment is at its lowest level in 25 years.

We need to dispel the myth that lower interest rates alone will lead to greater investment.

It won’t.  It hasn’t.

Instead, it’s about improving the rate of return for every single investment decision for every single business, that will drive change.

And, the best way to do that is to change the after-tax return on a project.

At some point, our parliament will have to come to terms with the drag effect of our company tax rate of 30 per cent.

The rest of the world of course is moving to reduce their rates and we are stranded with the second highest effective marginal company tax rate in the OECD.

And of course our bizarre two-tier company tax system will hold back smaller businesses from growing.

Given the Senate’s resistance, we’ll leave this fight for another day.

Instead, we can – and should – consider introducing a permanent broad-based investment allowance.

For any eligible business that makes an investment, it can immediately deduct a proportion of the asset’s value today.

This is on top of depreciation.

Say we have a banana grower in Cairns looking to invest in a few sheds for packing, packaging and grading bananas.

The whole fit out might come to $1 million.

While this can be depreciated, with a 10 per cent investment allowance they would also get a $100,000 extra deduction this year. Now that's $100,000 they can re-invest in their company, employ more people, grow more and so on.

Let me go to infrastructure and there's obviously a lot of discussion about it today as Infrastructure Australia's audit has been released. 

It is a huge enabler of productivity.

Whether it is a major road or rail project, a port or airport facility, improving infrastructure means we can more effectively get our goods and services around the country, and move them to those incredibly lucrative export markets.

Fresh produce from the Margaret River, the Atherton Tablelands or the Darling Downs can suddenly get onto the tables of Japan, South Korea and China.

And of course Australians get from A to B without being stuck in transit.

We know from that HILDA survey that commuters are spending longer travelling than they were fifteen years ago.

The median time people spend commuting each day has increased 60 per cent over this time – up from 30 minutes a day to 48 minutes.

That’s time they’re not spending with their families, that's time they’re not at work because of traffic delays. And if you're sitting in one it's incredibly frustrating. 

Nationally, we are making huge investments in infrastructure and improvements with NSW leading the way but we can and we have to do more.

An initial step would be having the Commonwealth and states agree on the extent and sequencing of national public infrastructure projects.

Also we could start talking about a strategic pipeline which is developed from the ground up from a community level that can deliver what a place needs to unleash it's economic potential. 

And of course we must also act to reduce the amount of time it takes for a major project to be approved.

If I turn to skills.

This is the most important ingredient to manage the task change I have talked. We have to rapidly upskill people as the world of work changes.

This is why we are constantly, as Deborah said, calling for a rethink of the post-secondary education and skills system.

We have to remove the cultural and funding bias that treats vocational education and training like a second-class system.

This is a big area for reform so how do we break it down?

For starters we should establish a single information point for post-secondary education and skills.

Students would have all the information they need at their fingertips about courses, cost and career prospects.

We also plan to collaborate with VET and higher education providers to identify the barriers that are stopping them from fast-tracking what's called micro credentialing.

Where a more modular approach would allow workers to dip in and out of study, get the skills they need quickly without having to leave the workforce.

And finally, we need to fix some very basic things in our education system – but they are incredibly important and they are holding us back.

It is a huge national failing that 90 per cent of employers say they are affected in some way by low levels of literacy and numeracy.

It’s one of the greatest obstacles for Australians getting jobs and being productive.

So the Business Council has been talking to employers and we have prepared a guide for teachers, students, employers and employees about the literacy levels and skills they expect and need.

We want young workers to be able to look at that kit and go to a page or a screen or an app and get real-world examples of what people are looking for.

We're going to launch that work soon but it hopefully it will allow us of start the process of better matching people's skills to what employers need. 

Giving workers access to the right skills and training is one thing, but we also need to have workplaces that operate in the best interests of employers, employees, and enterprises.

Integrity is the foundation of constructive workplace agreements.

But we also need to recognise that our current workplace relations system is too rigid and it is too hard to employ people.

We’ve spent the past two years travelling around the nation through our Strong Australia Network, talking to local businesses, talking to local communities.

Everywhere we go the story is the same.The system is too hard. The system is too rigid. It makes it too hard for us to employ people. 

We can't go on like this.

We continue to believe that enterprise agreements are the centrepiece of the relationship between workers and businesses, but we need to do them better.

Here's the facts, workers on EBAs get paid more.

Non-managerial workers earn on average around thirteen dollars more an hour than workers on awards.

But as we have identified in some work we've released recently; we now have the lowest number of active federal enterprise agreements in twenty years.

EBAs - as they're called - are the best tool for employers and employees to figure how to be more productive, and then mutually benefit from it.

To get the system working, we need to unscramble the complexity of EBAs. 

These have become like a Downton Abbey laundry list, with way too many items that are unnecessary. 

This bogs down negotiations, agreements take too long to conclude, and it stifles the ability of both employers and workers to respond to rapidly changing circumstances.

We also need to act on what's called the Better Off Overall Test - the BOOT as it's called -  it is a productivity killer.

As the Productivity Commission found it “discourages enterprise bargaining, it creates uncertainty during the agreement approval process’’.

The test was originally intended to mean that your workforce was better off overall than under the award.

In 2016, the Fair Work Commission found that the test effectively meant that every individual worker and every prospective worker had to be better off in every circumstance than the award.

In practice, to meet every individual circumstance that might arise, an employer may be in the situation where their EBA may need to be better than the award in almost all aspects.

And that is simply not practical.

If you have a complex workforce that offers flexibility and choice to your workers, you’ll have casual and permanent staff.

But casual and permanent staff have different requirements, and they trade off different things for different benefits.

The problem with the way the BOOT test is operating now is that it prevents those trade-offs.

A company that cannot meet demand quickly, a company that cannot change what it’s doing, and is strangled by an inability to make trade-offs, is a company that cannot thrive.

When it cannot thrive, fewer people are employed and some will lose their jobs.

We support the Productivity Commission's call for a no-disadvantage test.

The other thing that can be fixed with the enterprise agreement process is that they last the life of a project. The Labor Party proposed this at the election and we agree with that. 

That it matches the life of a greenfield project and that is hugely important in states like Western Australia where you have these enormous projects that go over a long period of time. 

We can’t allow the EBA process to die the death of a thousand cuts.

If the union movement is serious about lifting wages, they’ll get serious about working with us to fix the EBA process because it does and it continues to deliver higher wages because it delivers the foundations for higher productivity.

So why would you want to pull down the very system that Labor Party created? It beggars belief.

And of course, none of things can be done if the system has no integrity.

None of this can be done if the system is dominated by a culture of bullying and intimidation.

Nobody can negotiate in that kind of environment.

So, the first thing we need to do is to get the integrity of the system back on track.

This is why the government’s bills that are in the Senate at the moment - the Ensuring Integrity Bill and the Proper Use of Worker Benefits Bill  which require all sectors - not just the union movement - all sectors to operate with the highest standards are crucial first steps.

Those two Bills are absolutely crucial first steps. 

Unions should be subjected to the same transparency and standards that businesses are.

And, of course businesses have an enormous role to play in making sure the system has integrity and we give a fair and safe workplace for all.

The Senate should pass these Bills without delay so that we can begin to get the important enterprise agreement system back on track.

Now, let me turn to the deadweight silent cost of red tape and regulation.

Australia is in a global competition, yet we make every race a steeple chase.

We keep putting barriers up. We keep making it harder to do things.

Here are some examples:

A major project in Western Australia that will create thousands of jobs can be tangled up in green tape by a group in Melbourne that decides that's their issue du jour and they are going to appeal against it.

Under the Environment Protection and Biodiversity Conservation Act, they can launch an appeal against those project approvals. When they are not impacted by the development.

We agree projects that these major projects need rigorous assessment and stringent environment assessment. 

But you do have to question whether the current system is working for all Australians.

We propose removing appeal rights for non-impacted third parties under the EPBC Act to speed up major approvals.

Here in WA, the state Environment Protection Authority is considering state based carbon emission guidelines.

We propose that a better way forward is that we work constructively with environmental regulators around the nation to work out how we offset the emissions from large projects.

In Hobart, the local council will ban single use plastics by businesses that provide or sell food in packaging that can be taken away and consumed by 2020.

If you are a global company, you do not have manufacturing base in Hobart. That decision requires a change to your global supply chain. 

So instead of that kind of regulation, what we propose to do is to lead a conversation about how we can reduce our reliance on plastics and how the regulatory environment can drive that change without adding unnecessary cost to consumers.

On red tape, proposed changes to the rule of governing the supply of chemicals is impeding research and innovation.

You can’t import sufficient quantities of chemicals to make ongoing research commercially viable with administrative and verification costs continuing to be prohibitive.

Or, the situation where Australia’s approach to approving medical devices – including the timeframe for approvals – is affecting the ability of our medical technology industry to grow and compete in global markets.

We propose recognising world-class international standards from the US and Europe to speed up approval times to register medical technologies and vital agricultural products.

And, of course, let's go to retail shopping. Shoppers can go online 24-hours, seven days a week.

But as you’re painfully aware in Western Australia, shops still have archaic trading hours.

Go down Rundle Mall in South Australia, in Adelaide, on a Sunday morning and see how lively that place is. 

This trading hours issue has just got to stop. We have got to come into the 21st century. 

And the argument that is put that local businesses, particularly locally owned family cafes need to have time to sell before the big operators open is a nonsense. Because people come to those cafes because they are going to Woolworths and Coles and Bunnings to do their shopping. That's why they'll go to the cafe. 

When international people come to Australia and they see this in operation, truly they just can't believe it. 

Finally, let me turn to energy and climate change. Now we've got to find our way through this as a country and we've got to get our electricity and gas bills down.

When we were in Bathurst for one of our Strong Australia events, we heard how shopkeepers are forced to wear beanies and parkers in the winter to stay warm because they simply cannot afford to turn the heating on in their shops. That's just not on. It's not acceptable.

We need investment certainly and an end to the policy wars that have plagued us for a decade. Now, focus should be pretty simple. We focus on an energy mix driven by technology change and innovation that delivers reliability, that delivers affordability and reduces our emissions. And part of this is opening up the supply of gas, and this is a crucial fuel for the transition to a lower emissions economy.

We've also got an array of policy mechanisms, schemes, funding arrangements. Why don't we draw them all together to try and achieve those three simple objectives?

Today, what I've outlined is a relatively straightforward to-do-list. It's not without its complexity, but it is doable.

But we need governments and political parties across Australia to come together to say, how do we use this next 12 months to position our country for the future? Surely the purpose of public life isn't just endless point scoring. It is to act in the long-term interest of the country.

Surely over the next 12 months we can get things done instead of the elites nit-picking with each other over data, arguing that their idea is better than my idea.

I'm happy if someone's got better ideas than the ones I've put forward today.

I just want to hear them and I want to see that they can be done quickly and I want to see that they're going to address our productivity and our competitiveness problems because I want to stand Australians in the eye and say, "I tried to help get your wages to be higher."

And I want business to come together on these pretty simple propositions and mobilise:

  • their employees
  • mobilise their shareholders
  • mobilise their suppliers, and the communities they operate in because we have got to start taking action.

Because it's business that will drive productivity and business cannot as employers lecture governments, we cannot demand things.

Subeditors demand things as you can see in the Financial Review today. We don't demand things. We ask politely for things, but we ask politely because it's our job to try and make sure our country is progressing.

Our collective responsibility is to bring the community with us. I call on the business community today to come together on this issue. And of course, in doing so, remind Australians about our greatest virtue.

Don't get me wrong, companies are absolutely entitled to run on social issues.

As employers, we represent 11 million of the 13 million Australians who turn up to work every day.

We are expected by those employees to stand for something and to stand for the greater good.

But we should never overshadow our true social license to operate.

The virtue we should signal is the millions of people we employ.

The virtue we should signal is jobs we create that mean Australians can get ahead.

The virtue we should signal are the supply chains in the small businesses we support.

The virtue we should signal is the tax revenue we contribute that pays for the services the community needs.

The virtue we should signal is that enterprise breathes life into communities.

The virtue that will underpin stronger productivity growth.

The virtue that will increase living standards.

The virtuous circle is governments, businesses, civil society coming together now, once and for all, to get our productivity back on track, and then we can be proud that we showed the collective leadership to give Australians greater opportunity, better wages and allow them to get ahead.

Thank you very much.

Steve Scudamore, Western Australia committee chair, Australian British Chamber of Commerce: Thank you Jennifer for your insights. You've covered a lot on that. I think we went from productivity but then into infrastructure, investments, climate change and a whole range of things. 

So all good topics for the west as well. So, questions. This is a great opportunity. Jennifer is very happy to take questions. 

So if you have one, we have mics and if you could say who you are and from what organisation, that'd be great. Thank you.

Audience member: Hello, this is Paige Taylor from the Australian. Thank you for your speech Ms Westacott. And thank you for your comments about workplace relations. 

I wonder if you could talk to us a little bit more about the Integrity Bill, and if the BCA is going to publicly support that Bill, how do you do it in a way that avoids feeding into the stereotype that it's big business against working Australians?

Jennifer Westacott, chief executive, Business Council of Australia: That's a great question. Thanks, Paige. 

So there's two Bills before the Senate at the moment. The first is the Ensuring Integrity Bill and the second is about workers' benefits. Let me go to the first one.

So, it's basically saying, that people who hold office cannot hold office if they act unlawfully. So it's really about good character and good conduct. And people forget that of course ASIC can deregister someone from being a company director because they have a pattern of acting inappropriately or acting in a way that is not acceptable. So why can't unions? And these things came out of the Royal Commission, don't forget, which found a culture of corruption, of lawlessness, of bullying and intimidation. 

So it's perfectly reasonable to say that people at the negotiating table have to be people of good character, and that patterns of wilful lawlessness should allow the government to say that person cannot hold office. 

So that's the first Bill.

The second Bill, which is around workers benefits basically says that workers and employees, and workers and unions... sorry, employers and unions, cannot do deals that are not for the workers' benefits. They cannot do deals trading off money to get an EBA through in its most simplest form.

Now those two Bills are pretty much the foundations of getting this all on track. If you are turning up as a delegate for a trade union and you are being bullied and intimidated by a culture of bullying and intimidation, then how do you actually properly negotiate in terms of the employment workers benefits?

How do you seriously expect the EBA system to have integrity if people can do side deals with money? 

And that goes for employers and the trade union movement. 

So this is... these two Bills and not just about the unions. They're about everyone lifting their performance and behaving appropriately.

Audience member: Thank you very much Jennifer, for I think what was an iconic speech about what Australia needs to do to accelerate growth and accelerate our wellbeing. 

I have a question that sort of goes back to the beginning of your speech. 

We all rely on surveys to determine public opinion or community values or whatever. 

However, during the last election process, we saw that the polls just simply weren't working. What's going wrong, and is it fixable?

Jennifer: Well, I'm not a pollster. Two things that are happening, and our chief of staff Phil Hudson at the back there is much more expert on polls than I am. 

But a couple of things I think Sam that are really important, that I think stood out in the election. 

I think if you think about just the polling methodology, as I understand it, jump in here, Phil, if I've got this wrong, people are still using a methodology of calling people at home. And of course most people, a lot of people now don't even have phones. I don't have one. So that's the first thing. 

I think the second thing, there were some quite technical things that have gone wrong there. 

The other thing that's wrong is that when people made assumptions that young people would vote for the Labor Party. Those people who assumed that they weren't answering a landline.

So I'm not a polling expert. But where have we got this wrong and where we got it wrong in the US and in Brexit? 

And I think it's a couple of really important forces. 

The first is, I think we have just ignored regional Australia. So we've been doing this Strong Australia thing for a couple of years. And the people in regions, Cairns, Toowoomba, Busselton, Toowoomba, Townsville, Geelong, Hobart, they do not feel that the voices of Sydney and Melbourne inner suburbs represent their views and aspirations. 

And they are sick of being lectured to by those communities. 

And I think we have really become kind of out of touch with what regional Australia wants and needs.

And so when I was in Townsville, the idea that an inner city suburb of Melbourne was going to tell that community that it could not have the Adani mine that had gone through rigorous environmental assessments, because people in that marginal seat had decided they shouldn't have it, without turning up and explaining to those young people  - where youth unemployment is very high - how they're going to get a job. 

That I think has gone awfully wrong. And I think part of the challenge now is to get back on track with listening to people in the regions, listening to the broader community. 

And when I say regions, I'm talking also about places like Western Sydney and the western suburbs of various cities around the country.

People just have stopped listening to people who are trying get ahead, who are very aspirational, who want to succeed and who don't want to be punished for getting ahead. They don't want to be told they're fat cats. They're not. They're just trying to get ahead. 

And I think that language of division and anti-business sentiment, we've been out all the time, you just don't get it, you don't get that language in the regions. 

When we went to Adelaide, someone said, ‘I'll tell you what's wrong with big business in Adelaide. We don't have any’. 

That's the problem. We've got this really disconnected society, I think Sam. And I think one of the challenges, including my policy list, is to heal that bridge over the next 12 months.

Audience member: My name is George Berman. I've been doing some work on the comparison between California and the development of Western Australia. And infrastructure is obviously of great importance. We've got pretty well more than California has got in pretty well at every direction here. 

So I wonder why the state government and the federal government don't get together and issue infrastructure bonds, thousand years, really do some major infrastructure development here as they did in California?

Jennifer: I think that's one way of doing it. I think the first thing though is to get the planning and prioritisation right. 

So Infrastructure Australia has done a good job at this kind of macro list that gets produced by the states. 

What we would sort of suggest they think about, having done all this regional work we've been doing, is you go to somewhere like Cairns and you look at: what is the economic capacity of that region? What is going to unleash their economic development? And what is the social infrastructure that's needed to support the community?

And so you don't just pick out projects around the country and put them on a list. You actually then say, this community, this region. Particularly what I call the second tier cities around Australia needs these sorts of things in order to unleash its economic developments.

So Cairns, great example. They need another pass over the Atherton Tableland so that they can get produce down to the port out through the Cairns airport into international markets

So that's the first thing I think we have to do. 

The second thing is that the states and the Commonwealth have to kind of prioritise that. 

The third is that governments have to de-risk projects. If you're a major investor and you've got seven years of environmental approvals staring you in the face, you are probably not going to put your capital at risk.

And then finally look at the kind of infrastructure financing and funding, the sort of thing you're talking about.

But unless we've got the pipeline right, unleashing the money is not kind of the end game, I think. 

Another point to make is there's lots of capital around, but companies aren't easily investing in it because they don't see that the risks have been taken away. And that governments change these big projects like that. They say, ‘yes, we know that $600 million has been spent on that project, but we're getting in... we're not going do it’. 

So there has to be more of an uncontested list of prioritised projects so that the private sector particularly has some confidence about what it's investing in.

Audience member: Hi, Conrad Liveris. I've just got a question about... so you laid out that policy list and you know there's obviously some detail behind that. And then just before you were talking about how there might be conflict with unions and other organisations. So where do you see the points of collaboration?

Jennifer: It's a great question. Thank you. Look, the points of collaboration are surely we all care about whether people's wages are going up. And we've got to then have an honest conversation and get the right facts on the table about why they're not. 

Now, I think whenever Australia's just divided into these ideological tribes, we don't get stuff done. And I share the union movements concern about people's wages. I just believe, not because of a belief, but because it's factually true, that the only way they're going to go up in a sustained way is if we change our productivity. And the only way you're going to do that is to unleash investment to make our industry more efficient. And anything that holds that back, it's just going to be a drag on productivity and we're going to have this sustained period of low growth and low wages.

And that's the conversation we've got to start with. Not a conversation that's about conflict, but a conversation about we all share in a common goal that we want people to get ahead. We want them to feel that when they turn up for work, they're safe, that they've got a sense of advancement, they can get the skills they need, and they've got an environment in which they can be more productive. 

Surely we share that aspiration and I think the language of division has to be put to one side and start working through these real problems, particularly how we save the enterprise bargaining system, Labor's great system, that basically set the country up for very high productivity.

Audience member: So I've got a question. With the US and China, obviously has big implications for us. There's been a lot of discussion in the last few days around that. How do you see that pattern [inaudible]?

Jennifer: It's a complex issue, isn't it? So on the one hand, we've got our greatest friend, our strongest ally, and our biggest investor. On the other hand, we've got our biggest trading partner. We cannot afford not to trade with China. And of course we can't afford to trade at any cost to the country. So it's a very delicate balancing act. 

I think companies have got to keep doing what they are doing. Governments have got to be vigilant in the way ours is. I think we've got to have some faith in our institutions, for our major intelligence bodies. I mean, these are run by some of the smartest people I've ever known. I think Mike Burgess' appointment to ASIO is a magnificent appointment, a serious, technologically driven person. But I think we also have to say, you know, we can't control a lot of this.

So what do we do? We do the things I'm talking about today. We make our country more resilient, more productive, less vulnerable to these forces. Because it's sort of like being on the wrong side of... if you've done this in your life, a relationship bust up. People eventually work it out and then you've got two less friends. And we've got to be super, super careful about how we navigate. And language is really important. The language of caution, the language of moderation, the language of optimism. But we can't deny there are problems as well.

So Australia is in a very difficult position. I think our institutions are up to that, but we as a country should also say, hang on there are lots of things we can't control here, but we can control our destiny in terms of the competitiveness of our economy, the skills of our people, the robustness of our regions. Particularly in northern Australia where I was last week in Darwin, it's a very strategic location. Cairns is a very strategic location. North-western Australia is a very strategic location. Don't just think about them as regional communities. Think about them as strategic assets for the country because that's where we can strengthen ourselves.

Paul O'Hagan, general manager, Australian British Chamber of Commerce: Paul O'Hagan, general manager for the chamber. Jennifer, thank you again for joining us today. When we speak to members about what they would actually like out of the UK-Australian relationship, they... after Brexit and with a free trade deal, many of them speak about their willingness or their hope that employees would be able to work in both countries more freely. And I think that's a result of the 457 restrictions here. And then also restrictions in the UK. 

But more broadly on the topic of immigration and its effects, it's actually on productivity of the domestic workforce. I was wondering if you could speak a bit about that please.

Jennifer: Yes, it's a complex issue. You come to a state like WA, and we had a session with all of our companies last night. And one of the big issues is, we need more people. We need population growth. If I was having the same event in Melbourne and Sydney, they'd say 'we're full, we can't deal with any more people'. 

And you get this all around the country.

So in Cairns people say, 'we need more people need more workers'. In Busselton, where Bindi and I were last year, people said 'we need more people, we need more skilled workers’.  

So somehow we've got to get a national population policy that incentivises people to go to the regions. Now we should look at things like economic zones and I'm not talking tax here, by the way, because that is way too complicated to start having differential tax zones. But there must be things we can do to really encourage people to go to regions.

So a couple of things that I think the government is doing, so what's called the DAMA status, the regional migration status, that where certain regions around the country are designated to take certain migration levels. I think the government is looking at versions of that would give more and give a faster track to permanent residency. And all of this has got to be matched to the skill needs of course. 

And then this global talent arrangement that they've come up with where the companies can get pre-approved longer-term visas. 

I think also though we've got a collective responsibility to make sure the community conversation changes around this.

So it was right for the government to correct some of the lack of integrity in the system. People saying they are a CEO, 'how many people do you employ?' 'My wife'. That is not a company. So setting that floor at 180,000 to say, 'that's a skilled worker,' for CEOs, I think is spot on. But I think we have to try and get the community more comfortable with this issue of international workers coming to Australia. So there's a few things there.

First of all, we have to fix the skill shortages. We have to fix it. And the skills system is not doing that. And that's my remarks about the skills system. 

The second is we have to remind people that bringing in skilled labour is often about innovation. It's often about, improving everybody's circumstance because you brought in that talent, that expertise, that knowledge that lifts the performance of a university or a company. It's not about, 'couldn't fill this job'. It's not always about that. It's often about, 'we need these people with this particular expertise’.

And then what are the classes of workers that we might want to give some, like cyber is one, where you might want to give some very special attention. I don't know a single company that doesn't tell me that they can't get the right cyber skills. 

But you know, it kind of starts with getting our skills system right. But I think the idea that you're going to reach a point where you don't need skilled migrants to come into Australia, it's just not going to happen. 

Particularly as, on the temporary side, these major projects, peak and trough, but more importantly you do need... and I'm sure everyone would agree with this in the university, you do need people coming in that bring that innovation, that bring that extra talent, that bring that skill-set, that lift the performance of the whole company. 

But it would be good to have that conversation, I think in a rational way as opposed to an emotional way.

Audience member: Energy one, you touched on that, we were [inaudible] 10 years ago we thought this was the start of a sustainability and climate change and all that legislation. You see we're back there 10 years later and we haven't gone forward very much. So where do you go now with this discussion?

Jennifer: Well, I think we've got to do a couple of things, Steve. One is just to be really practical about what are we trying to do here? We're trying to get prices down. We're trying to get reliability to be better and to be secure, and we're trying to reduce our emissions footprint. And whether people like it or not, they have to be done together. 

So when I hear people saying, 'well, affordability is the price we're going to have to pay'. Well you tell that to somebody who can't meet their electricity bill. You have got to get this balance right.

The next I think is to try and drive technological innovation. And of course, some of the companies in this room have been at the forefront of that. And because it's really technology and energy mix that's going to drive the three goals that I've talked about.

And the final thing is to be honest with people about cost. So, whenever I see people standing up and saying, ‘this won't cost us any more money’, you think that's just simply not true. There is an adjustment that has to be done here and it costs. And I think we've misled the community. I mean, Vanessa will have a view on this. We have misled the community that all this can be done without any cost or any transition or any impact. It can't be.

And finally we've got to make sure that we do not make our economy uncompetitive. And that's the kind of balancing act that I think a range of policy measures have to be brought together to achieve those three goals and make sure the country can stay competitive. And I would love to see that in the next 10 years, we do not have an acronym-led debate. Because I can't think of the number of acronyms that have led this debate. The NEG, the CPRS, the EIS, the ES. And the community must be just bewildered by this. And so I think this is a delicate balancing act. 

I think we've got this period of political stability now. I think hopefully we can come together around some practical ideas, but boy, we've got to be honest with people about the cost and implications of things.

Audience member: Thank you very much Jennifer. Fantastic presentation. Thank you very, very much. Andrew Darling from Treasury in Western Australia. A decade ago, we were seen to be suffering from reform fatigue. I think closer now is to reform forget. We've sort of forgotten how to do it.

Jennifer: Let's deal with that.

Audience member: Apart from me getting my violin out on a Friday night, lamenting about what we did in the past, thinking about how we take on these things and actually have them show up in our lives, which I know you're very committed to and I hear that in your presentation. 

You did also talk about... and there's lots of ways in which we can do that and you've mentioned lots of them. You did talk about collaboration, fantastic. Working together with the unions and others in communities, fabulous regional communities. Terrific. 

Is there a particular way in... how can you be a champion to actually make the institution... actually I don't want to say institution, I just mean the manner in which it comes together? It needs to be tangible because we seem to be talking about collaboration and everyone always seems to. And then they walk away and don't do it.

Jennifer: Yeah.

Audience member: When are we going to go to people in the room and say, 'you cannot leave this room until you've done something'. And even if the list is, we've got a bunch of green items, you can traffic like this green, yellow, red, 'I'm not going to do red'. And you fight about and you don't do it, and the case goes out and you go for the whole public debate, and you get more research, and my team could do more modelling and someone else can do more something else. Terrific.

But this, we all agree on a lot of stuff, right? Even at the moment in terms of reform, just sort of take that, leave the ego on the doorstep, have a little ego and ideology as you were talking about before. Put that in the bin before you enter the room, get on with it and then walk out and say, 'You know what? We've collaborated on this. We disagree on this and this and we're going to go to debate those. But get on with the bit that we do agree with'.

Jennifer: I think that is the recipe. What's stopping us? I'm not entirely sure. I think we've lost the art of this. I really do. I think a couple of things, I'll tell you what, we have lost the art of, is asking what problem we're trying to solve. So sometimes you hear people talking about things, I think to do what? I mean if you were presenting Sam with a business case, he would've said to you, 'What are we trying to fix here'?

And so, I think across public policy we've lost that art of asking what is it we're trying to fix here? That's the first thing. What's the evidence then? People don't use data anymore. People just say things and you think, well, that's just not true. Where did that come from? And I think all of us who believe in economic growth, who believe in a better society have got to be the... I don't know, the data disciples, you know, to kind of hold true the faith that facts actually do really matter.

I think the conversation that Sam and I were having earlier about the kind of dichotomy between our regional communities and our city communities is really important to solve. Because I do think there's this quite big resentment that I think has grown up in our society. But not just in Australia, in the United States. And I think we've got to stop calling people deplorables, or they're stupid, or they got it wrong and that's outrageous. Respectfully treat people with different views and listen to them and as you say, 'I'm not going to agree on X, Y and Z'.

And then policy process is hugely important, and we've lost our way on that. We don't do regulatory impact statements in the way we used to. Heaps of them get exempt from the process because people don't want to know. Transparency in process matters. Even if you make a decision that, that you say on judgement basis.

So say with a lot of the infrastructure projects that you would do in regional Australia, they may not pass the cost benefit analysis tests that you had said. Quite rightly, but we shouldn't abandon that test. We should know that we are going to trade that off, because we have a more strategic issue in mind.

So I think there's piles of things. I think COAG has got to get on with some really substantial reform. But I do think the elites, of which notwithstanding, I grew up in a housing commission estate, people would say, I'm now one of, have got to stop nit-picking on stuff. Throughout the company tax debate, the number of people who would write op-eds saying, 'well, you know, I think the rate of return is point, blah blah blah' and we shouldn't do it’. You think, hang on. If we're not going to do this, how on earth are companies going to be competitive?

So I think it's all those things. And I think agencies like yours are hugely important. I mean the treasuries are still the last vanguard of hope around Australia for what is the right thing to do. Because you are looking long-term, you are thinking about these issues and I encourage you to kind of keep going with your policy work. 

Because notwithstanding when I was a public servant, I ran the housing department. It was always begging money from people in Treasury. You guys have been responsible in large part... and I say this not just because you asked me this question, people in the treasuries of Australia have actually... should take a lot of credit for the prosperity we have today.


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