Business needs to lead the way for post COVID growth

This opinion article by Business Council chief executive Jennifer Westacott was published in the The Australian on Thursday 18 March 2021.

Now is no time to standstill.

Our success in managing COVID-19 has earned Australia a once-in-a-generation opportunity to be a frontrunner in the global recovery.

We have a window to build on our gains, reshaping our economy to create new and better jobs, equip people with world-leading skills and pay higher wages.

The danger, as always, is that we give into complacency. We hit pause on our progress.

The world doesn’t stand still.

If Australia does, we’ll squander the first mover advantage we worked so hard to achieve.

Other countries will bring the virus to heel, they’ll vaccinate their populations and aggressively reopen and modernise their economies. They’ll embrace innovation to fast-track their recoveries, adopt new technologies and rapidly decarbonise.

May’s federal budget represents Australia’s best chance to maintain our momentum.

It can’t be an unachievable panacea for the nation’s deeper structural problems, but it can begin preparing us to conquer the challenges ahead.

These include sustaining the fall in the jobless rate, beginning the process of increasing wages growth, and putting the conditions in place for long-term growth, not a short-term comeback.

Now is the time to begin reshaping our economy so Australia can better respond to technology, take our place in Asia and position ourselves for the next 30 years of growth.

To shore up the foundations for growth, the Business Council of Australia’s budget submission concentrates on four priorities: reopening the economy, putting in place the fiscal settings for recovery and growth, rebooting business investment and finetuning a workforce recovery strategy.

But first a reality check – without carefully, quickly and permanently reopening the economy, the other priorities become academic.

We cannot allow our success in managing the pandemic to become our Achilles heel. Reopening the economy can be safely and permanently achieved by tying the easing of restrictions to the vaccine roll-out.

A clear vaccination rollout plan means there are no excuses for knee-jerk reactions. Uncertainty is crippling confidence. Over 52 per cent of Australians say they won’t travel, not because of fear of the virus, but because they fear snap border closures.

When did risk aversion replace risk management?

It’s time for common sense. It’s time for a refreshed public health message, focussed on the number of people vaccinated and the levels of critical illness, not just the case numbers.

Until we shift the national mindset and sensibly manage risks, pockets of the economy will remain depressed and in need of further stimulus.

Our submission’s second area of focus is the importance of a fiscal strategy geared to recovery and sustained growth.

Australia needs to grow at more than 4 per cent per year until 2023-24 just to get back to our pre-COVID trajectory and to return the economy to full employment.

If we achieved this, we would generate an extra $170 billion in GDP and around $40 billion more revenue in today’s dollars. 

The best way to pay down debt is to grow the economy – not merely fall back on an over-reliance on bracket creep.

Our recovery and long-term growth needs to be driven by private investment, which is why our third priority is revitalising Australia’s shockingly low rates of business investment.

A sustained business led recovery is only possible if there is a recovery in private investment, whether that’s driven by tax incentives or cutting regulation and red tape.

Right now, business investment as a share of the economy is at a 28-year low, and capital continues to flow out of Australia.

An investment recovery can’t just ride on the ute’s back. Support is needed for the major projects with big multiplier effects through the economy that can position us for the next wave of growth.

By targeting investment incentives at the projects that can accelerate the transformation of our economy, we can be more internationally competitive, less carbon intensive, and adopt new technologies faster.

This means focusing on the digital economy and infrastructure spending, especially in the regional areas. It also means spending in the energy sector with a focus on green energy projects and decarbonisation so we don’t get left behind.

We also need to get on the front foot in commercialising R&D, especially where Australia has a competitive edge or can develop one based on existing or emerging strengths.

To encourage big companies to make large investments, we believe the temporary expensing measure should be extended to all companies until the end of 2023 and we should introduce a broad-based investment allowance of 20 per cent to change the investment equation.

Which brings us to our fourth priority, the importance of investing in our people.

We are calling for a workforce recovery strategy that gets people back to work. As we claw back from COVID, our economy won’t look the same.

A degree of restructuring is inevitable and we need to give Australians the skills – ranging from the basics to digital literacy - to cope with a changing workforce.

With the lowest population growth since World War I, we also need to increase women’s workforce participation. One way is to change the child care subsidy to reduce the disincentives families face by removing the cliffs in the taper rate where one more dollar of family income can dramatically change the support offered to families.

Australia’s leading chief executives have spent the past few days in Canberra demonstrating their commitment to Team Australia. It’s time for business to take the baton from government so we can help people get back to work, pay higher wages and keep the economy powering ahead.