Event: Business Council CEO Jennifer Westacott and Cairns Chamber President Nick Loukas interview with David Speers, Speers, Sky News

Speakers: Jennifer Westacott and Nick Loukas

Date: Tuesday 23 July 2019

Topics: Surplus, regional Australia, investment, big and small business, superannuation guarantee, and Newstart

E&OE

David Speers, host: Wonderful to be here in Cairns, in Far North Queensland, tropical North Queensland. Look, I think that one of the questions, whenever we look at regional Queensland, still, is what happened in the election. Jennifer, what's your sense, having spent a bit of time here, why we saw this result? One of Labor's worst results, certainly in this state, and so decisively in the overall outcome?

Jennifer Westacott, Business Council chief executive: Yeah, I think the regions are the big story in the election, whether it's here, whether it's across the country, whether it's in Western Sydney. I think part of it, David, and you and I have been doing this for 18 months, getting around to the regions, that people feel that the conversation that happens in inner city Melbourne and Sydney is not the conversation that they want to hear.

David: There's a real disconnect.

Jennifer: There's a real disconnect. The kind of anti-business agenda doesn't resonate with people in the regions, because they say, "we love business. We would've loved big business to come here, because it means we've got jobs, we've got a diversified economy". The top end of town stuff, it just doesn't resonate with people in the regions. Because people are aspirational, to use that jargon. They want to get ahead. They don't want us to talk things down. And people here in Cairns, they know that without a strong business community they can't succeed. So I think people just misread the regional sentiment that you and I were picking up as we were touring.

David: Would you agree with that, Nick? How would you explain what happened here?

Nick Loukas, Cairns Chamber president: It was great, wasn't it. Yes.

David: Depends where you sit politically, I guess?

Nick: Well, I mean, great that we're getting heard.

David: Getting a loud voice.

Nick: Yes. A loud voice. I think that's important. Look, absolutely. We continually get the feeling, the business sense that Brisbane's not hearing us. Canberra's not hearing us. And this gave us a better voice, and it's made a lot politically stand up and listen, which is good.

David: Well, are they? This is the thing, are you getting a fair go. Are you getting the love from either Brisbane or from Canberra in terms of politics?

Nick: We've had a lot more visitors lately from Brisbane and Canberra, and they're certainly listening. I've got to give Labor federally, a pat...

David: Anthony Albanese's been up here?

Nick: Anthony has come here but we've had the Treasurer, the deputy leader...

David: Richard Marles, the deputy leader or the Shadow Treasurer?

Nick: Shadow Treasurer, Jim Chalmers. We've had Jim Chalmers up here. And he was listening.

David: Yep, from Queensland. And what's the message from business here, to federal Labor?

Nick: Look, I think it's similar to what Jennifer said, is the anti-business sentiment just went down really badly.

David: Was Labor's sentiment anti-business?

Nick: No. I don't necessarily mean that, but I think some of the discussion, from Shorten as a leader, was interpreted as anti-business. We're pleased to see that Anthony Albanese, as the new leader has come out and embraced business a bit more. I think that's important and its a good step for Labor to mend some of that business sentiment in the regions.

David: We'll come back to the discussion around infrastructure because that, in every region but certainly here in Far North Queensland, is very important as well, some of the economic need. But one of the impressions that I've picked up here, is that tourism is so fundamental to this economy but there's a bit of anger that well, everyone thinks the Great Barrier Reef is dying, dead, and what's the point of coming here to see it? That is certainly a perception in parts of Australia and parts of the world, I'm sure, but is it the reality? What's the reef like now, and how worried are local businesses about the perception of how that is?

Nick: Look, I think it's our number one issue at the moment. The reef is certainly in no way dead. It's actually thriving. Yes, we had some damage. No one's denying there was some damage. But we're seeing amazing regrowth in areas, and people going out now say it's never looked any better. The reef is alive. We have the best managed reef in the world. That is undeniable. And people coming and seeing it, and Jennifer's had the opportunity to see it, it is magnificent. And we've unfortunately not done a good enough job at answering the fake news and saying, "hey, it's not dead. There's been some damage. But we still have the best managed reef and the best reef in the world".

David: How important do you think that message is, Jennifer?

Jennifer: No, it's huge. You can't have people in Europe saying, "I don't want to go and look at the Barrier Reef because I won't see anything". Because the truth of the matter is you will see a lot. I was out there the other day, it was amazing. You can't have people saying it's dead. It's not. Has it got pressures? Well, yes it has. But to Nick's point, it's incredibly well-managed. I mean, the fishery changes have been incredible. I mean, I went fishing and caught a lot of fish. And I think we've got to be careful that we get the scientists' advice, and that we kind of feed that into..

David: But you can't hide the truth, you can't hide the reality of what's going on?

Jennifer: But we can't have that as fake news either that it's dead. We can't have it that it's a catastrophe. It is a very serious issue that we have to manage as a country. But the idea that we're sort of almost kind of cutting off our nose to spite our face by saying that, we deter people from coming, which of course, has this economic effect, which means we don't have enough money to really invest in making sure it stays healthy. This is an asset we're going to preserve, not just for Australians, but for the world.

David: Well, Nick, let me ask you. How much is the health of the reef tied to climate change, do you believe?

Nick: Look, there's no doubt we can do more with regard to climate change and the health of the reef. It is an ongoing thing forever. But we need to manage that asset a bit better than we have been. Unfortunately, I think some of the fake news has been that that climate change, The Great Barrier Reef has been used as a tool to say, "we've killed the Great Barrier Reef because of climate change". Which has really hurt us as a business, big time. So can we be better at managing the reef? Absolutely.

David: But is the damage that has been done because of climate change?

Nick: Look, I'm not a scientist, but I think that it's had an impact. But we're seeing wonderful regeneration of some of those areas we have. We've had crown of thorns starfish for many years, which has been managed well. There'll be something else, but we just need to make sure we continue to do the best we can.

David: The reef is critical to the economy here. Infrastructure is critical to the economy here, and look, in so many regional parts of Australia as well. Whether we're talking about better highways, better road access to ports and airports, better freight corridors and so on. Look, what are the pressures like at the moment in a place like Cairns, in this region of Far North Queensland, in regards to infrastructure?

Nick: Well, first of all, we've had an underspend of approximately a billion dollars over the last five years in regard to infrastructure.

David: For the state or the federal government?

Nick: Look, from the state and the federal, but we're mainly talking state infrastructure now. And that doesn't take into account that ABS statistics underestimate that population, so it's actually worse than that.

David: And we're talking about roads, dams? What are we talking about there?

Nick: We've got the Northern Australia policy, we've got all these things that say-

David: Northern Australia Infrastructure Facility?

Nick: Well, not even that. Just that the growing North of Australia has a federal policy, but we're not seeing any action on there. We need water, so we need Nullinga Dam cleared. Better infrastructure investment in roads. We've got so many business opportunities here, agricultural, tourism and all that. But we're not seeing it, you know a billion dollars over five years. Now that mightn't sound a lot for an area like a capital city like but that's a huge amount for us here. So we have to reverse that trend. And we're also playing catch-up.

David: Well, and the statistic that's so often used, but always gets me anyway is that Cairns is further away from Brisbane than Melbourne is from Brisbane, right? You're a long way north here. Jennifer, does that mean there's a particular need for infrastructure spending, when you're that removed from the capital city?

Jennifer: Absolutely. And when you're that important as a gateway to the rest of the world. Particularly into Asia. For security reasons, for tourism, for the economy. We do have to change our mindset about how do we make decisions about infrastructure prioritisation. We've got to start getting that regional focus. We've got to start thinking about building a nation, not just building two cities. As important as all of the infrastructure needs in Sydney and Melbourne are. We've got to get Infrastructure Australia to focus on what is it going to take, for a city like Cairns, to really perform at that global level? Because that's where the competition is. And what are the bits of infrastructure that are going to get agriculture down from the Tablelands onto the plane, into those Asian markets at premium prices.

David: Well, it's pretty clear what's needed in terms of which projects the local businesses want. It's a question of getting the money to pay for them.

Jennifer: Sure. I think there's a couple of ways of doing that, though. One is, I mean, there is a lot of money spent on infrastructure in Australia, the idea that we don't spend any is simply not true. I mean, Western Sydney is like, $20 billion being spent. It's about prioritisation, David. It's about saying, "look, we're going to put this project on the top list of priorities. We know that we've got quite a lot of money and we're not going to divert from that as a project".

David: So you're saying enough is being spent on infrastructure?

Jennifer: No, I don't believe so. But there's always going to be an argument about how long is a piece of string. What I think we have to do is stop chopping and changing. We have to get some serious national and state priorities, and that will also allow the climate sector to say, "okay, government wants this project to happen, and the community wants this project to happen". Businesses are pretty good at saying, "actually, a better way of financing this would be X or Y", but this idea that the absence of this sense of the prioritisation, the list if you will, linked to an economic strategy for the broader region. I mean, it can't just be a list of projects that sit without context.

David: But we are often talking about government. I mean, taxpayers, stare or federal. When we talk about roads and rail and ports and dams and so on. And there are many who say, right now, really cheap to borrow. Never been cheaper. The government should be borrowing more to invest in infrastructure. I mean, at the local level here, would you agree they'd like to see governments kick in a bit more right now?

Nick: Look, absolutely. You can't, the other thing is, you can't use the same metrics for investment and infrastructure in regions as you can in the cities. Some of things, nation building type. The dam, Nulinga Dam. Looking at a return for taxpayers' money, it can't be looked at the same as in a capital city. And unfortunately that has held back some of those bigger nation building type projects.

David: Well, I mean, if you can get freight and into those markets in Asia, Hong Kong and so on, that's going to be far more important in a region, like it is here, a region like this than adding another flight out of Sydney or Melbourne. But when we talk about spending more on infrastructure, investing more in infrastructure right now, where do you sit on whether the government should be protecting this surplus that's forecast for this financial year, or should it be prepared to spend a bit more and put that at risk?

Jennifer: I think, first of all, there are lots of ways of doing infrastructure financing and funding, so it doesn't all have to come out of government. I mean when Australia has the lowest interest rates in history, we're awash with new capital. The challenge is to give companies projects that they are certain government's going to take the risk out of it, through environmental approvals, through corridor preservation and so on. So that's one point. Look, I don't think the government should give up on a surplus. I think the surplus has been very hard fought, very hard won, and we've got to remember that, what we need is to get the economy to grow faster. We don't need a stimulus like we did in 2008. We need to get the fundamentals to get the economy to grow faster, and that's things like getting businesses to invest, which goes back to taxation. So if we're not going to do company tax, let's give a broad-based investment allowance to encourage companies to bring forward their investments. We could do a lot more on the skills agenda, to get people ready for the changes that happening to increase our productivity. We're going to do a lot more on deregulating the economy. Getting rid of the red tape, the ridiculous kind of differences in shopping hours across the country that are making it hard for Australian retailers to compete. These are really basic things. That's what we need, is reform, not cash splashes. That's not the solution. We're not in the 2008 situation. We're in a situation, we've got a hard won, hard fought surplus, we should preserve it, but we should do the reform to make the economy grow faster.

David:  Well, you're a supporter of increasing Newstart now, as well? Should that be seen in the context of stimulus or is that just a fairness thing?

Jennifer: That's just a fairness thing. And I think we've got to remember there are 23,000 people on Newstart, who've been on it for 10 years. Now of course, the best recipe is to get people a job. But if people are in a state of real poverty, and they can't afford the clothes to go to an interview, their health deteriorates, they're evicted from their house. They've got no capacity to kind of pick themselves up. It's not going to get them back into the workforce. So these things have got to be considered as part of budgets, not as one-off strategies, so you get the fiscal stuff right. But I'd be very concerned if we said, "look, it doesn't matter about the surplus". It matters enormously. Because people forget, when the GFC happened, we had a pretty big surplus. It saved us. As well as kind of a well-regulated banking system. Let's be very careful about that decision.

David: Back a bit longer term, that one of the things the economy needs is wages to start growing. And for business to do that, they obviously want a bit more economic activity to be able to do that, but let me just, while we're here, get your thoughts on the debate over superannuation guarantee. Do you think it should be going up to 12 per cent, or is it better to try and get that money into workers' pockets now?

Jennifer: Well, I think the government's committed to that. The Finance Minister's made a comment today that he's not changing the target.

David: What do you think?

Jennifer: Look, I think you've got to think through this very carefully. We've always argued that you need a proper inquiry into the superannuation and retirement income system. Because what we keep doing is we tinker with one bit, and of course, cause a problem somewhere else, and the Productivity Commission, I think, has made the same point. So we should be doing that. I think the question we have to ask is, in an economy where wages are not growing as fast as we want them, to take another three per cent of people's wages, in a compulsory super scheme that the Productivity Commission says it's not very well-run, I think we should think it through.

David: Better off trying to get that money into workers' pockets now?

Jennifer: And that's that's not just about super. That's about the sort of things that I've just talked about. You've got to get companies to invest. And to invest, they've got to have better rates of return, and we've got to do something about the skills agenda. Our TAFE system, our VET system, which you and I have talked about many times, we've got to get people skills so they can get access to those good jobs.

David: Yep. What do you think as a local employer here, how do you get wages growth in a place like Cairns? What's stopping local employers paying more?

Nick: First of all, I want to talk about the inequality between government jobs and the private sector, that's a major issue here, and the drain of jobs from private enterprise to government organisations.

David: So you really feel that here? Where are they going, into health and education work? And your competing against those wages?

Nick: And council. Absolutely. and of course you want people to earn as much as they possible can. but you have to remember that we have different constraints, we have to have a return. So that's a major issue regionally, and probably also in capital cities. Trying to get skilled labour where they're all taken up in government jobs, in my area, which is pharmacy, is an issue.

David: Is that stopping you increasing wages? Not just you specifically, but I'm talking about employers generally in a region like this. Because I would imagine the competition with the public sector would only push up wages, wouldn't it?

Nick: Yeah, look, it'll push up wages, but you've still got to be profitable. So the constraint is you can only increase the wages to a certain point. And what has been happening, even if we start touching on payroll tax, is there's disincentives for employment, because to get the overall wages at a sustainable level, you're employing less people.

David: This finally brings us to the question of how do you grow an economy like this one? The one thing that's come up here that everyone that we've been speaking to today has been population as well. Population growth used to be about four per cent. Here it's now roughly one per cent, or a little over one per cent. We've seen the government try and rein in population growth nationally, but try and divert more migrants to regional areas. What's your message to Canberra, to the federal government, about population growth?

Nick: Well, first of all we'd want to see an immigration strategy for the regions and our area.

David: You haven't seen that yet?

Nick: Not really. So what has been happening quite commonly now, is they're using regional migration as a stepping stone to get to the capital city. There needs to be other, longer requirements on them to stay in the area. Tax benefits. More, when they're looking for who's going to move here, that they want to stay in the region not just a stepping stone. If you've got family in capital city and they're only to be in Cairns for two years, of course they're going to be here for two years and then move. So the incentives need to be better for people to stay here, develop businesses and thriving economy obviously helps that.

David: Yeah, Jennifer. We said, time and again, the debate in the city of Melbourne understandably is about population pressures, but in the regions, very different story.

Jennifer: Absolutely. Just got to change a couple of these conversations. We've got to change the conversation to, "how do we get people to come and stay in these regions? How do we make them attractive? How do we get the economic activity"? But we should never forget, people create economic activity. Particularly in a services economy. People create lots of economic activity, and we do need to see some kind of comprehensive regional strategy that says, "how are we going to encourage people to go into these key areas like Cairns, and how do we put the infrastructure, the services, the education system in place to keep them there and give them a good life"?

David: Jennifer Westacott, the CEO of the Business Council of Australia. Nick Loukas is the President of the Cairns Chamber of Commerce. Thanks both very much for joining us this afternoon.