Bran Black, Innes Willox and Andrew McKellar interview with Ross Greenwood, Business Now, Sky News

14 May 2024

Event: Bran Black, Innes Willox and Andrew McKellar interview with Ross Greenwood, Business Now, Sky News
Speakers: Ross Greenwood Host, Business Now; Bran Black Chief Executive, Business Council of Australia; Innes Willox Chief Executive, Australian Industry Group; Andrew McKellar Chief Executive Officer, Australian Chamber of Commerce and Industry
Topics: Competitiveness; 2024-25 Federal Budget; Future Made in Australia; investment; interest rates; productivity


Bran Black Chief Executive, Business Council of Australia: We think that it's so important to focus on a key theme this Budget and that's how we improve Australia's competitiveness. I spoke about that a number of times over the course of the last few months. But what we're pleased with, with what we've seen so far in this Budget, is that there are some initiatives that will make a difference for business. We look at the changes with respect to FIRB. We look at the changes with respect to the removal of nuisance tariffs, the Future Made in Australia. There are some points that I'd like to come back to in that regard. But we've called for an Australian response to the IRA, and that is significant. However, what we need to see, what we hope that we can see moving forward, is that these important steps that have been taken in this Budget, are used as a basis for moving forward with further changes that really drive competitiveness. And that's what I'm talking about in terms of tax reform, industrial relations reform, changes to our regulatory settings. And of course, federal support for states to go about changing their planning systems as well.

Ross Greenwood Host, Business Now: So, Innes do you get a sense that this Government has a thirst for reform? The type of reform that Bran is talking about, that can move productivity forward in this country into the future?

Innes Willox Chief Executive, Australian Industry Group: Well, that'd be one of the first things we look at Ross, in the Budget, is to see how many times the Treasurer mentions the word productivity in his speech. We hope that he mentions it regularly because that's going to be the important driver to make our economy more competitive. We're facing a tightening labour market at the moment, we're facing really sticky inflation, we've got business conditions that are tough. Our R&D spend is at the lowest it’s been in a very long time. Productivity is going backwards. So, this in many ways is a fork in the road Budget and we would hope that the Government is able to grasp some of the opportunities here. Now we've heard a lot from the Treasurer about so called ‘new economic orthodoxy’ after almost 30 years of growth. We need to really see what that looks like. And the other point here is there are some, you know, some would say heroic, others would say questionable, some would say doubtful, assumptions that have come out around inflation. At the moment, we need to see what the Government is going to put in place in terms of measures to suppress inflation.

Ross: Just very quickly, if there's one piece of low hanging fruit that the Government could undertake in the Budget, that could improve our productivity. What do you imagine that would be?

Innes: Well, we have to get the fundamentals right and the Budget is just part of that. And I don't think we're going to see anything structural in terms of this Budget around productivity. We're not going to see anything related to workplace relations reform. There'll be some infrastructure and the like. Where we think the Government will make some significant improvements around productivity, which are really welcomed, is going to be in the education and training skills area. Where the Government has put quite rightly a really significant focus coming out of the University Accord, big focus on apprenticeships and training, and learning for the future. We think that has a lot of potential. That’s longer term and that will give us that longer term boost. Shorter term, that's where we're looking to see that we don't have any anti productivity measures.

Ross: Indeed, so Andrew, your members, of course, right now, many of them, manufacturers, many of them small and medium sized businesses, they are suffering from a lack of competitiveness right now. In fact, the number of companies going broke right now is rising in many of your key member areas. So, what can the Government do to improve their lot? While they're handing out energy rebates to families. While they're handing out childcare subsidies or childcare wage increases. What is it that your members could potentially have in their favour?

Andrew McKellar Chief Executive Officer, Australian Chamber of Commerce and Industry: Well Ross, the thing I would say is that the first principle of the Budget should be do no harm. So, the thing that will best facilitate lower interest rates, take the pressure off interest rates, that is to do nothing that will increase inflationary pressure in the economy. So, I think that is going to be a major focus. We've heard about the measures that have been spoken about in advance of the Budget in terms of relief on cost of living pressures. I mean, they’re one thing. They might detract from the headline CPI, but they don't really have an impact on core inflation and that's what the Reserve Bank will be looking at.

Ross: That's just the punt isn’t it that they throw the inflation problem out beyond the next election? That's what people are saying. Now the Government's rejecting that at the moment, but that's the reality of what they’re doing.

Andrew: And that's going to be the test. I mean, that it's going to be the ultimate test. The Reserve Bank will be the judge on that in the coming months. But if we want to really address some of those pressures that you're talking about, the best way to do that is to enable interest rates to be reduced sooner rather than later.

Ross: Okay, so there's the potential for another year of having the instant asset write off of up to $20,000. But I make the observation that if you're not making any money, you don't need a tax deduction.

Andrew: Well, that's true and to be able to claim that it's going to be passed into legislation first. So look, I think, by all means, those are some useful things that can be done, let's get the legislation passed. We think it could be broadened, we think it could be expanded to pick up a broader range of businesses. Business investment has been very weak now for some time, that's part of the productivity equation that we are talking about. So, look, I think those things would be useful, but let's get those fundamentals right.

Ross: Okay, so Bran, go back to an investment allowance. That's the other big one that could potentially be in the Budget in key areas. So, in renewable energy in some areas of that, certainly, in some parts of the mining industry, potentially, for nickel, and also potentially for lithium miners and producers as well. Is this the sort of initiative that is welcomed by industry to try and provide the incentive to invest in the right areas for our economy?

Bran: It absolutely is, it's important I think for us to remember that these are areas in which we do have natural advantages. So, we do have natural advantage in terms of critical minerals, we do have a natural advantage in terms of renewable energy. So, we should be looking to support those natural advantages, wherever we can. What we would always suggest, though, is that it's useful if we can extend these types of allowances or depreciation arrangements, so that they are more broadly applied across the Australian economy. You know, at the end of the day, you want all boats to rise, you don’t just want the boats to rise in a particular harbour. So, for us, we always advocate for those broader measures be it in terms of tax changes, allowances if you will, industrial relations, regulatory reform, and so forth. That's what we collectively believe is so useful for us to be thinking about in terms of a broad-based reform agenda. But I do stress that small steps, important steps such as this are useful, so we are pleased with them.

Ross: So, Innes, the issue here about the Future Made in Australia policy is, yes there are some key industries that have been chosen by Government. There are a lot of other essential industries that are simply being left behind that might say, well, we're struggling to compete, our energy bills have gone up, our wages bills are going up, we're now starting to struggle a little bit to maintain our workforce, what's been done for us?

Innes: So, indeed, so this is going to be really interesting to see what happens in the Budget around the Future Made in Australia, that wouldn't be surprising at all, if that was a catch cry for the Budget. But what we sort of were really interested in Ross, is whether the Future Made in Australia policy is actually a policy that can work, it doesn't just pick winners in quite specific industries, but it provides broader support for industry. Or if it's just a bucket that everything gets thrown into in terms of industry support measures and broader economic measures. So, this Budget has got to be about prosperity, it's got to be about productivity, it's got to be about resilience. Now, where Future Made in Australia fits in is going to be really crucial to the economic outcomes over the next few years. Yes, the Government needed a response to the Inflation Reduction Act. But there's still a lot of questions out there around is this the right way?

Ross: But a Government’s a Government right, the Government wants to be reelected. And then what happens after the election, maybe a totally different sort of answer. But right now the Government's priority is having policies that will also see it re-elected

Innes: Totally, we are a year out from the election, whether we, you know, we'd like it one way or not. And this will be perhaps the last full Budget before the next election. There may be a mini economic statement before the next election. So this is really setting the scene. That's why I said earlier, this is a fork in the road Budget because it has the potential to set us up for the next five years. With Future Made in Australia it can have some significant success points but there's already this concern among industry about crowding out, about Government picking winners, picking perhaps the wrong subject areas. We've put almost $1 billion into Quantum, the UK has put 150th of that into the same company. So have we overreached? And I will pitch that's what this Budget is going to be.

Ross: Fascinating. The other thing also is about structural spending, because one thing is that eventually these surpluses the Government's enjoying right now, which give it economic credibility, to be sure, they expire. And the problem is then, with those deficits mounting, the spending mounting, structural spending mounting, whether that also has an impact on the business community. But it seemed to be, if you like, the answer to some of the taxation problems that the Government might face in the future.

Andrew: Well, that’s absolutely right. We would say that the Government doesn't have a revenue problem. It has a spending problem. So, one of the things we'll be looking at tonight is what is that medium term trajectory that the Government is putting forward? Are they putting us on a pathway where we are closing that structural gap that we know that is out there. Are we able to reduce net debt as a proportion of GDP over the medium term. So that's the kind of story that we will want to see. That the Government has a credible medium term fiscal strategy and it's undertaking the repair that it needs to. That it's addressing those double digit areas of spending growth. So at the moment, that's public debt interest, obviously, that's fueled by higher interest rates. It's the NDIS, that needs to be got back on track. It's areas like health spending, aged care spending, defence, these are the big areas where there is growth and expenditure. We have to have a credible story about how we're going to keep some of those areas under control in the future.

Ross: Andrew Keller, Innes Willox and Bran Black, many thanks for your time today. We'll find out very shortly exactly what is in that Budget.


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