Event Interview Fran Kelly, RN Breakfast, RN
Speaker Jennifer Westacott, Fran Kelly
Date 7 March 2019
Topics Economy, minimum wage, industry super
Fran: Jennifer Westacott is the chief executive of the Business Council of Australia, which represents Australia's biggest 100 companies. Jennifer Westacott, welcome back to Breakfast
Jennifer: Thank you very much.
Fran: The economy has slowed sharply and growth per capita, effectively our living standards, have slowed for two quarters running. Ordinary workers are missing out in this economy, aren't they?
Jennifer: Well this economy, and last time I was on your program I think I said the GDP numbers were weak, I think I've said that every time I've been on. I think yesterday's are a real wake up call. I mean these numbers, two consecutive quarters of slower growth, these are wake up calls for everybody. Now we have to now find a way of making sure that doesn't get any worse and we've got to double down on investment. That is the crucial thing here. Investment, notwithstanding it kind of popped up a little bit in the non-mining sector, across the board it's still very low. It's still kind of Fran, at levels that we were at in the 90s, so we've got to do that. Now if the parliament doesn't have the wherewithal to do a broad-based company tax cut then for goodness sake, can we do something like an investment allowance? We've got to double down on getting rid of the red tape, the kind of difficulty of investing and we've got to make sure we don't make things worse. Don't add more regulation, don't create a credit squeeze. Don't burden companies with unstable policy settings so that they're deterred from investment. So you know, these are wake up calls. We are still a very strong economy in terms of the fundamentals but gee, we'd better pull our socks up and get some stuff done.
Fran: Well, how strong are we in terms of the fundamentals because not only has the economy already slowed as we saw yesterday, the OECD has downgraded future expectations for our economy by 0.2 per cent for 2019, forecasting it to grow by 2.7 per cent and predicting growth lower 2.5 per cent in 2020?
Jennifer: You know, I mean, I've been saying this for ages, that it's weaker then everyone says. I think the problem we've got ourselves into is we talk about, "we've had 27 years of economic growth."
Fran: 28 I think we've got to now.
Jennifer: 28 okay, what that means is we haven't had a recession. What it doesn't mean is that growth has been very strong and we've been looking at numbers for a long time now in the twos, the numbers that were in the threes that have been the average over the last 40 years, they're the numbers that got us higher wages, better living standards. Now, you know, I've been saying for a long time, you've got to get back into those threes. Now, that's all of the things I've just said; double down on making things competitive; get rid of the tax burdens on businesses; get rid of the regulatory burdens; and if you can't do a company tax cut because you haven't got the kind of political wherewithal to do it, then do something like an investment allowance to get investment going.
Fran: What about doing something like bringing in a living wage for the lowest paid because Bill Shorten didn't rule that out yesterday. Everyone is interpreting that he's hinting that that could be part of Labor's policy, he is promising this will be a referendum on wages growth. Could that help get wages growth picking up again and feeding back into the economy?
Jennifer: Well we all want wages to go up and I've been calling for years for us to really look at why wages growth has been slow, but you've got to get sustained growth across the economy. Now on the living wage stuff, I think the first question is, is this going to replace the minimum wage setting scheme that we've had?
Fran: Well, I gathered that's the proposal.
Jennifer: We don't know any details. It's been a very effective scheme of an independent organisation listening to employers and and employees and working out whether or not the economy has the capacity to absorb that.
Fran: Just to interrupt for a second, in effect the minimum wage is around $37,000 a year, which is very, very low.
Jennifer: It is very low. But you've got to ask how many people are on that as well?
Fran: It's 2 million isn't it?
Jennifer: No, I think that it's a smaller percentage of the economy. So, let’s just make sure we're very careful about this because what we've got to do is make sure that we don't create a sugar hit in the economy and then see that the result of that, particularly in small business, is less people working or higher prices for consumers. We need a plan to raise the wages of all Australians, particularly those on low incomes. I'm not going to argue about that. Now let's just unpack a couple of things. If you say the overall wage price index increases is 2.3 per cent, just to use the numbers, for people on enterprise agreements, it's 3.2 per cent. So let's not throw the enterprise agreement system out because it has actually produced high wages for Australians. Now if there are things that need fixing in it, and I think there are, there's too many things in them, it's too complicated, it makes it too hard for companies to change. Let's get that right. But let’s not throw the baby out with the bath water there.
Fran: On the enterprise agreement thing, I mean, what the union movement is arguing, is that it's stopped working for some of the lowest paid for cleaners for instance, who are dealing at an enterprise level. They're dealing with a labour hire company. For childcare work who aren't really dealing at an enterprise level because they're part of a bigger corporation, they have no direct power.
Jennifer: There are brackets in the economy, particularly where women are overly represented, where we do need to say, how do we get those wages up? But we've got to be very careful that we don't create a system where small business really takes the full brunt of it. Or where you actually kind of create a circumstance where you haven't actually solved the problems across the economy. Or if you kind of go for these kind of pattern bargaining or multiemployer agreements across the economy, you remove the very thing that has got productivity and wages running together.
Fran: Well, except it's not working right now and even a reserve bank governor, for some of the lowest paid.
Jennifer: And the challenge with all public policy is to solve the problem that you have to solve and not create a system that then creates a whole lot of problems, which sees, actually the economy deteriorating. It doesn't kind of preserve the kind of fundamentals of the enterprise system, which is employers, employees at an enterprise level working out how they can be more successful and the increased wages and benefits that come from high productivity. But I think we do need to do something about those occupations where, which are overly represented by women, where people have not had the benefits of the enterprise agreement system. I'm not going to argue with that. I'm just saying, be careful that you don't throw the baby out with the bathwater here and you don't create a system that actually makes it, across the whole economy, things much worse.
Fran: You're listening to RN Breakfast our guest is Jennifer Westacott, she's the head of the BCA. Can I talk to you about superannuation? Because a row has broken out. Basically, there's allegations of investor activism of some superannuation industry funds. The industry super funds. The Treasurer says it was important the public have confidence that the superannuation trustees, are discharging the duties in accordance with the legal obligations. Do you have confidence in the super funds trustees?
Jennifer: Well, I think we've got to be careful with this. I made some comments about it this week. Let's just go back to back to basics here, superannuation, what is its purpose? It's purpose is that it is providing satisfactory retirement incomes for people who put the money in it. The second thing about superannuation is it's compulsory, Australians don't have a choice about whether they do superannuation. So that's not the same as if I choose to buy into an ethical investment fund, where I'm very clear what they're going to do. The third thing is, of course people are entitled to say, we are going to make these ethical investments. We're not going to invest in this. But the difficulty is when you get the thin line, the fine line, is when you start getting into political activism that starts to run the risk.
Fran: But is there any sign that's happening with our super funds?
Jennifer: Well, let’s look at some of the decisions that people are making, I mean this is the problem with all these things. People say, well now we want to tell you, you know, where you're going to put your workers. Now we want to tell you-
Fran: Let's take the Glencore example. Okay. Glencore was influenced by a group known as Climate Action 100+. And I think Australian Super, which is I think our biggest super fund, was part of this discussion as well into capping its coal production. Now, is it not the role of an investment fund to look at future risks?
Jennifer: Well of course, if that's the reason for doing it.
Fran: But would there be any other reason?
Jennifer: Well, you know, this is where I keep saying surely people who are in these super funds are entitled to see the fine print of these sort of decisions because, where does it stop, Fran? So then you say, well, we're not going to invest in anyone who sells cigarettes?
Fran: But Heather Ridout, the chair of Australian Super our largest super fund, a very successful fund for its members. And we've only got a minute to the news, but she says that the government should stop politicising super. She says the superannuation trustees leave their hats at the boardroom door.
Jennifer: Well, let's see if that's the case.
Fran: Is there any sign that's not the case?
Jennifer: Well I think if you start telling people who they've got to have on the boards and you start telling people what they can invest in.
Fran: Are they doing that?
Jennifer: Well, you know, there's a fair bit of evidence that people were telling people about, you know, increasing women's representation. And of course boards should increase women's representation. But you know, if you start, it's the fine line, Fran. It's the fine line between are you doing the stuff for your investors who've entrusted their money with you or are you doing political activism that has a potential to devalue things? If it's the fine line, I want to see the fine print.
Fran: Jennifer Westacott, thank you very much for joining us.