Doorstop interview, Launch of the Business Council of Australia’s 2021 budget submission

17 March 2021

Doorstop interview - Launch of the Business Council of Australia’s 2021 budget submission
Speakers: Tim Reed, president Business Council of Australia; Jennifer Westacott, chief executive Business Council of Australia; Alison Watkins Managing Director, Coca-Cola Amatil Group; Alison Kitchen, National Chairman, KPMG
Topic: Business Council of Australia’s 2021 budget submission


Jennifer Westacott, chief executive Business Council of Australia: Well thanks everyone. We're here today to launch the Business Council of Australia's budget submission. Can I introduce my colleagues, Tim Reed the president of the Business Council, Alison Watkins the CEO of Coca-Cola Amatil, and Alison Kitchen the chairman of KPMG. Today we're releasing a roadmap for Australians to get back to work, for Australians to have new jobs and new industries, and for Australians to have higher paid jobs. This roadmap takes into account a number of important things. The first thing we're calling for is that stay the course on reopening our economy as the vaccine rolls out. We cannot continue to have stop-start state border closures. The second thing we're calling for is to power up the private sector’s capacity to invest. It's the private sector now that has to do the heavy lifting as JobKeeper comes off and we need the incentives so that the private sector will expand its investment in energy, in infrastructure, in the digital economy. The third thing we're calling for is that we skill up Australians. That we give people a chance to get back into the workplace but also to get the jobs of the future by having the skills they need. And finally, we're calling for a very concerted action to get women to participate in the workforce by changing our childcare system to remove the cliffs and disincentives that make it hard for people to work and get the childcare subsidy. And, increasing the caps so that more people can get that subsidy. We’re also calling for a new paid parental leave scheme that would provide up to 26 weeks that would be shared between both parties. All of these things are about a stronger country, set up for the future, better jobs, more people working with higher pay. Tim?

Tim Reed, president Business Council of Australia: Thank you Jennifer. Look there's no doubt that our nation ,like those all around the world, has been challenged by the pandemic over the last 12 months. But the reality is, as a community we've come together and handled the situation extraordinarily well and that positions Australia now as a moment in time where we have the opportunity to invest in a better and brighter future. That investment is going to come absolutely through the investment that businesses make, and Alison will talk about that in a moment. But importantly, it's also about an investment in people. So there's some really tangible things that we've called for in this budget submission around a national skills guarantee that's ensuring that all Australians have the skills for the jobs of the future. And that's whether Australians are in school or they're currently in the workforce. We think that there should be government funding to make sure that all Australians have the skills they need going forward. Secondly, we've called for a digital apprenticeship. This is a trial of 1,000 digital apprentices that we would like to have. We do know that the nature of the economy is changing and what the pandemic has meant is that digital adoption has accelerated by anywhere from three to seven years. We need to make sure that we've got the people in our workforce for those jobs of the future and the digital apprenticeship is a big part of that. And finally, the national skills passport. This is making sure that as micro credentials take off, as people do reskill, it is easy for them to show that to future employers and for employees to be able to validate the training that has been undertaken. We think that if we take those simple steps you will help Australians be prepared for the jobs of the future. I will now ask Alison to talk about the business investment.

Alison Watkins, managing director Coca-Cola Amatil: We really do have a serious problem with business investment in this country. And it's been evident in declining investment over the last ten years. To the point where now business investment is at its lowest level since the early 90s, since the recession. And actually, we're even in the extraordinary position now as a country where we've seen capital flow out of Australia on a net basis. That's something that we haven't seen since the early 70s. So it's a pretty important challenge for us to address. And certainly, it's absolutely critical if we're going to get the private sector to do the heavy lifting to reverse this, to be able to create jobs, and particularly the kind of high paid jobs that we want to see here in Australia. And we think that we absolutely have a moment in time. Clearly, there's a lot of capital running around the world looking to be invested. We've done a great job here in Australia in managing the health crisis. We're really well positioned, and we've also got an exciting transformation going on with the digital economy, with the green economy. There's lots of opportunity to attract new industries here, for companies to invest here, to set up as their base, and to really get the major projects going that will underpin jobs and higher paid jobs for decades to come. So we're really keen to see the temporary expensing measure, which the government put in place last year, continue through to 2023. That's been certainly something that's stimulated investment in plant and equipment, in commercial vehicles and so forth, and been very helpful. But we need to make this also an environment that will attract sustained investment. And we think a 20 per cent investment allowance is a very pragmatic way of attracting those bigger projects, being an attractive place for those new industries to form and that's something that ought to be introduced. So that's like a bonus deduction, an investment allowance of 20 per cent we think can make a real difference here.

Alison Kitchen, national chairman KPMG Australia: Thank you. Early in the pandemic women faced more job losses and greater economic uncertainty than the general population and we know throughout the pandemic that women were a disproportionately of the carers of children, home-schooling, childcare and particularly for those of you like myself, who live in Victoria. So whilst we're pleased to see that women's employment has come back quickly as the economy has reopened and we have all worked so hard to get people back into employment and the economy opened up. There is an opportunity now to create a step change in childcare to remove some of the genuine inequities and barriers within the existing childcare system which stopped women from participating or stopped them from increasing their hours. So that's the first of two initiatives. Secondly of course during this period we've had more parents caring for their children at home. But we do know that paid parental leave is disproportionately and overwhelmingly currently taken by women. And we believe there is an opportunity to increase participation by both parents and importantly to create a structural incentive for the second parent to do more share of the childcare in order to even the burden and again create genuine opportunities for women to participate more equally in the workforce. Thank you.

Jennifer: Happy to take your questions.

Journalist: I was keen to ask about JobKeeper. I know in the submission you said that you were supportive of the phasing out that's happening. Are you concerned about a bump in job losses at the end of the year?

Jennifer: I think the Treasurer himself has said that there will be a bit of a bump here. But JobKeeper has to come to an end. It's had a huge distortion effect on the economy. It was an important thing to do, it was a nation saving thing to do. But we now need the private sector to start doing the heavy lifting on getting those jobs back, on getting those new jobs created, on getting wages up, and that's why we're calling for things like an investment allowance. We also know that the government has done the heavy lifting on those very targeted packages for transport, tourism, and aviation. So those sectors that are still suffering from being unable to open to customers because of border closures, the government has targeted that assistance. And all the way through this pandemic the government has shown it's willing to listen and act as circumstances change. But it's time for that to end, it's time for the private sector to now take up the heavy lifting, get people back to work, get them paid more, get new jobs created, and we're very supportive of JobKeeper coming to an end.

Tim: The only thing to add there is the importance of confidence in this. What the government is saying by doing this is that they're confident that where we are at with the vaccine rollout is that this is the right step to take. And I think that is something that needs to be shared by all of us in the community. As businesses we're confident that businesses can run, that businesses can get back up, that can serve their local communities. And we're very keen, as Jennifer said, to make sure that the state governments keep the borders open so that we really can make the most of this moment and build confidence from here.

Journalist: Jennifer, how would you rate the government's handling of the industrial relations bill? Have they done enough to get that through the senate? Are you concerned about a push by Jacqui Lambie and Rex Patrick to block everything except for the wage theft chapter?

Jennifer: Well let's just take a step back there and ask what people are blocking if they block this bill? They're blocking the right of casuals to become permanent and to ask their employer to allow them to become permanent. They're blocking the obligation on an employer to offer people permanent work after a sustained period of continuous hours. They're blocking the right of people to get extra hours at work. And most importantly, they're condemning our enterprise bargaining system to a slow and painful death. And that system has underpinned higher productivity, its underpinned higher wages, it's put unions with a seat at the table. It's the system that Hawke and Keating used to drive huge productivity and wage increases. So if people have to step back and say what are they blocking? What are they obstructing? We think the government has put forward a careful and modest set of reforms based on extensive consultation between unions and business. We need to get that done so that we can start the work that we're talking about today, get people back to work, create new jobs, create new industries, and start paying people more.

Journalist: On border closures that you mentioned, WA for example, the recent NAB survey found that it had higher business confidence than the national average. Doesn't that actually suggest that harder border policies had been effective in allowing businesses in states like WA to stay open?

Tim: I think that you've got to take any individual data point in the context of a broader set of circumstances. So there is no doubt that when people were nervous about the health consequences of travelling that they have appreciated the protections that firstly our federal government put in place by closing the nation's borders but second the premiers put in place. But if you also look at it, 52 per cent of people are cautious and apprehensive about booking travel not because they're concerned about contracting COVID but because they're concerned about state borders will be closed and they'll be locked out of their homes. And so confidence is a multifaceted concept. Where we are right now with the pandemic where the transmission rate in the community is so low, there is no doubt that the nervousness around state borders is creating a much, much bigger problem for confidence in our nation than is the pandemic itself. What we need to do is keep taking a risk-based approach. We've always put that forward. As the vaccine gets rolled out the risks come down quite materially and that's where we're saying in our rollout that we should get commitments from the states that as the risks come down that they will also make commitments to make sure that the borders stay open and that we become a single nation again.

Journalist: Jennifer you've been calling for a permanent investment allowance beyond 2023. Have you sort of given up on company tax? It's it achievable in this place? Although given you still believe in it, you've given up on that hope it will happen?

Jennifer: What we've always argued for is a competitive tax system. A tax system that drives investment into the country not repels it to somewhere else. And, you know, company tax was something we were strongly supportive of. This parliament has made a choice not to pursue that policy. But that's doesn't mean the problem has gone away. That doesn't mean the problem of capital leaving this country instead of coming into this country. What does that mean? It means that companies and businesses are not putting on that extra equipment. They're not putting their digital systems in. They're not expanding what they're doing. They're not trying to find new markets. That means they're limited in putting on extra people and paying them more. That's fundamentally what this is all about. What we want to see is a competitive tax system that gets money coming into this country. It gets businesses doing more, expanding, growing, paying people more, hiring more people.

Journalist: I had a question for Ms Watkins. You were talking about the investment allowance and how you would drive more investment. Can you maybe give an example of how your company would be able to use an investment allowance that would result in more investment? Because unfortunately, we've seen a lot of incentives but not a lot of investment.

Alison W: Yeah look certainly, as I've said, we've appreciated, and my company has appreciated the temporary expensing and we've certainly taken advantage of that to bring forward investment that we wouldn't have done otherwise. And quite significant investment as well in new plant and equipment that allows us to expand capacity. However I think there's also opportunities and companies such as us, and many other companies will have opportunities that are longer term in nature that are perhaps a little bit more risky in nature that would take us into new industries. So for example, recycling, waste, green energy. These are areas that not only my company but many companies that I talk to are attracted to. But a kind of temporary expensing allowance doesn't work so well for those because they're multi-year and they really are long, long term commitments. So those are the kinds of things where I think we should be focussing on as a country, attracting these sorts of industries. Because we really set ourselves up for a future. We know that green energy, for example, that's an area where we should have a huge source of competitive advantage as a country. We also know digital businesses; they can set up anywhere. But why not get them to set up here and build global businesses from Australia. Other countries are going to be thinking exactly the same way as we're thinking at the moment. So I think it really is important that we move decisively and swiftly and make sure that we're attracting that money here. Because that is ultimately what's going to underpin jobs, prosperity, and the kind of country that we want Australia to be.

Journalist: And just a quick follow-up. The RBA is critical of businesses having hurdle rates that are too high. They're expecting too much from their investments considering how low rates are they should lower their rates. What's your response to that?

Alison W: Well I think it all depends on the investment and of course for these longer-term risky investments you need to take a different view. Ultimately though the after tax returns are a really important driver. They're not the only driver, you know the regulatory environment is important of course. The skills are important. After tax return matters a lot.

Journalist: Sure but are hurdle rates too high?

Alison W: So that means factoring in the tax rates as well. Every company thinks about their own situation and the different projects differently. And you've got to take a long-term approach on that and factor in what you think are going to happen to rates over the long term. And the tax environment is an incredibly important driver.

Tim: Can I add something there though to answer the question directly. I don't know your experience Alison, or yours Jennifer or Alison. But every major investment decision I've been involved in on a board, you know, call it north of a few hundred million dollars, the hurdle rate is examined each time that investment is made. So if you're making a two billion dollar or a five-billion-dollar decision, you don't skip the step of checking whether the hurdle rate is the right or relevant one. And I think that's fairly standard practice for boards across the country.

Journalist: A question for the two Alisons. If you had a senior executive facing allegations of rape or sexual harassment, would you be standing them down while you ran an investigation?

Alison W: Look I mean I'm very confident in our processes at Coca-Cola Amatil. I couldn't comment on that as a sort of hypothetical situation. I think you need to understand the full circumstances. But I would say that certainly at Coca-Cola Amatil we're very, very focused on creating an environment where all of our employees are safe, and we are protecting their interests. We have very strong whistle-blower processes in place as well. It's part of an overall fabric that's difficult to comment on any sort of hypothetical question like that.

Journalist: But in general would you say that corporate Australia far outstrips practices in say this place?

Alison K: I would say that every corporate organisation in Australia believes in the health and safety in all of their workers. Certainly in my organisation, I'm sure in many, we see sexual harassment and sexual violence as a health and safety issue first and foremost so therefore it’s an issue we take very seriously. I, like Alison, don't want to comment on your hypothetical example but I think the other thing I would say is that we have a very victim-led approach to our investigation of these issues, and we respect the rights of both parties equally in being treated fairly and appropriately.

Journalist: Given the allegations that we are seeing around the culture in parliament house at the moment. Do you think that the government has what it takes to increase women's participation in the workforce?

Alison K: Look I don't know if the two are linked really. I think to cover the point on the allegations around parliament at the moment, I think again all of corporate Australia would say that the tone of any organisation is set at the top and the tone of our nation is set therefore in this building and we would like to see this building address and take these issues seriously. I think we're all very pleased to see the sex discrimination commissioner investigate these issues and we look forward to her report. In relation to childcare, gender participation in the workforce, I don't really see that those two issues are connected. I think it's very important that we all work on gender participation to remove the many ways in which women are structurally economically disadvantaged in this country.

Journalist: It was on the parental leave, what you said on parental leave. Just to clarify, is your perspective that men or secondary carers should be able to access the same amount of parental leave or generally primary carers?

Alison K: We would like to see complete flexibility in the ability of both parents to access childcare, parental leave. Indeed our proposal goes further and provides an incentive for an additional two weeks leave if carers access that jointly. We think that will assist women re-participate in the workforce given that currently over 90 per cent of paid parental leave is taken by women or the primary carer.

Tim: Thank you.


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