Event: BCA Chief Executive Bran Black interview with Matthew Pantelis, Mornings, FIVEAA

Speakers: Mornings, Host Matthew Pantelis; Business Council of Australia Chief Executive Bran Black

Date: 19 November 2024

Topics: Productivity, industrial relations, company tax

E&OE

Matthew Pantelis, Mornings Host: Bran Black is CEO of Business Council, and he joins me now. Bran, good morning.

Bran Black, Business Council Chief Executive: Good morning, thanks for having me on the show.

Matthew: Do you think that is a factor the recent IR packages that were passed by the Federal Government earlier in the year?

Bran: Look, I certainly do. Productivity is a funny thing in the sense that, unfortunately, there's no single silver bullet that you can use to solve the problem. There are lots of different levers that ultimately need to be used. I guess that's a bit of mixed metaphors there, but industrial relations is a key component of what we need to do in order to address our lagging productivity, and we have seen changes recently that certainly don't help us in that regard.

There are some positive things that we've seen the Federal Government has done in recent times. The reduction of tariffs is a good thing. The single front door is a good thing. And last week, we saw the Treasurer speak to a new National Productivity Fund, which effectively mirrors proposals that we've been putting forward for the better part of a year. So there are things that we've seen that are very useful, but to your point, in terms of industrial relations, these changes do not assist us at all.

Matthew: Okay, do they impact on employment?

Bran: Well, certainly they've got the capacity to do that because if you are spending more money as a business on compliance, and if you're not sure what your obligations and your responsibilities are going to be long term with respect to your workforce, you might be less inclined to bring on new employees. So yes, there is certainly that scope there, and that's the experience and feedback that I get when I talk to my members, but also when I travel around the country, and I talk to other businesses as well. So, we do see challenges in that space, and what we're saying, fundamentally, with respect to industrial relations, is that we want to see a greater balance restored.

We know the system is out of balance broadly, because we have poor productivity rates, because we're not seeing business investment at the levels that we have historically. It's about 12 per cent now of our GDP, the long run average, is about 14 and a half percent. So if we want to try and lift it and those percentage points really matter, that we've got to deal with whatever we can and to our minds pulling back industrial relations, just so that we've got the balance right between employer needs and union needs. That's all that we're shooting for in that regard.

Matthew: Okay, there's a couple of key points, I think, in a report out on shifting the momentum of productivity, towards growth, and undertaking education reform to enhance workplace skills and capabilities. I'm sure here in South Australia, federally, too, they’d point to work they've done in that regard, particularly, I suppose, in regards to AUKUS coming to SA in a big way, assuming it goes ahead of course.

Reforming our tax system as well to better support business investment is pretty key, I reckon, to the whole thing because the more money in people's pockets, corporate and individuals, well the better off everyone is, ultimately, in terms of spending and feeling good about life in general.

Bran: I think that's absolutely right. And the key thing is that when businesses are not being taxed in the way that they are right now, if there are more competitive tax rates, then that does lead to more investment and it’s ultimately that investment that drives productivity. There's a chain. If we can be more competitive in terms of the settings that we have across the board, be it through taxation, or regulation, or planning systems, or education, or how we go about on taking the transition to net zero by 2050. If we can be more competitive with respect to those settings, then we attract investment, and that investment, in turn, drives productivity, and it also produces jobs, and it also produces taxes for the Commonwealth

So, it is a good thing for us to be more competitive. And directly to your point on tax, what we're seeing now is that there are potential challenges ahead of us with respect to the incoming President Trump administration, and proposals that have been spoken to there to reduce their headline company tax from its existing 21 per cent down to 15 per cent. And that's remembering that it used to be 35 per cent before President Trump had his first term in office.

Matthew: And we saw the results of that, I mean, the economy just exploded into activity didn't it once that came down.

Bran: Well, that's absolutely right. When President Trump reduced the company tax rate when he was first in office, Australia became a net exporter of capital to the United States, and we remained in that position for five years. The last time we've been a net exporter of capital for five consecutive years was 1912 so these things matter. They really matter, and companies very carefully watch these settings, because in a world where electronic transactions are so easy to undertake, capital is mobile, and companies will increasingly look to see where they can get the best return for their investors, for their shareholders, and ultimately for the communities within which they operate.

Matthew: Net exporter of capital. What's that mean in layman's terms, just explain that for listeners.

Bran: It means that we are essentially exporting more money than we are importing in terms of investment into the country. And so it's an important concept, because it speaks to how attractive we are as a destination to attract capital and therefore investment into the country.

Matthew: Do you mean in terms of trade, the goods that we're sending out with the money coming back. Is that what you're referring to or just money in general?

Bran: We're talking about investment in enterprise. So it's distinct from trade, which is, of course, a separate measure, but in terms of our investment to the United States and their investment in us, as I say, that's a separate and distinct measure. And what we're saying is that what we want to see, ultimately, is being a net importer of capital from many countries all around the world, because that ultimately means that that's a stamp of approval for Australia is a good place to invest.

Matthew: What should the corporate tax rate be in Australia?

Bran: There's been a lot of study in this regard. But what we've advocated for for a long time now, has been consistently about 25 per cent and that's consistent with the OECD average. So there are quite a few countries that have a lower company tax rate than 25 per cent but there are only two company countries in the OECD now that have a company tax rate that is higher than ours.

So in other words, we have the third least competitive company tax rate in the OECD. We're ahead of only Portugal and Colombia. Now that's not because we know something that all the other countries don't. It's that the other countries have realised that they want to be competitive, and they want companies that are thinking about investing in their jurisdictions to think to themselves, well, the tax that I’d be paying here is broadly equivalent to what I paid with another OECD in jurisdiction. So I might as well invest here, and that means that I can contribute to jobs growth. It means that I can contribute to taxes in that jurisdiction, and ultimately to growing prosperity in whatever country that is. And we hope that companies are making that choice with respect to Australia.

Matthew: Yeah and Colombia might have a little side hustle going on under the table in terms of getting money coming in and out of the country as well, but that's another story.

Alright, so this is for the government to take up and consider. I mean, they're the ones who introduced the red tape as you say, they're the industrial relation packages you'd like to see eased up, you wouldn't be hopeful of anything changing in that regard?

Bran: What I should stress here is that the challenges that we're facing with respect to productivity are not short term. This has been a challenge that has essentially come down the pipeline over the course of a number of decades. So, since the 1990s we've seen a steady decline with respect to our productivity. It's sitting at point five of a per cent now. The long run average for Australia is 1.2 per cent.

So when we talk about the recommendations that we've made in our report, what we're saying is that we want all sides of politics, everybody involved in politics, at all levels, state and federal and at the territory level, of course, as well to be thinking about productivity when it comes to putting together policies, when it comes to preparing budgets, and, of course, ahead of elections, as we're getting into now, at a federal level.

These are the types of changes that we regard as being critically important, whether or not they're in the workplace space or in the taxation space, or the climate space, or the skills space. As I said before, every change makes a difference. There's no single silver bullet, but if we fire enough bullets, we're certainly guaranteed of making an improvement.

Matthew: Yeah, absolutely, appreciate your time today Bran, thank you.

Bran: Thanks so much for having me on the show.