Event: Interview with Fran Kelly, ABC RN Breakfast
Speaker: Jennifer Westacott
Date: 7 September 2018
Topics: Energy, company tax and political culture
Fran Kelly, Host: The economy and corporate profits have been picking up pace this year, but that's about the only thing that's been going businesses way. On the policy front, big business has hit a brick wall on tax cuts and in securing an enduring national energy plan with both policies dumped by the Federal Government last month, the Liberal leadership turmoil has also left business aghast with some analysts warning the political crisis and uncertainty is causing a big pullback in business investment. Jennifer Westacott is the chief executive of the Business Council of Australia, she joins me in the studio. Jennifer Westcott, welcome back to Breakfast.
Jennifer Westacott, Chief Executive Business Council of Australia: Thanks Fran.
Fran: The two big policies that the business community had been pushing for, we've talked endlessly about them over the last three years, corporate tax cuts and the National Energy Guarantee, gone. The BCA represents the Liberal Party’s, one of their main constituencies, big business. Have you failed or have they failed? What's your verdict?
Jennifer: Well, I don't think we’ve failed. I think we advocated for this very, very strongly. I think we made the economic case. If you take company tax cuts, it was always more popular than either political party. The last opinion poll I saw had it at over 60 per cent popularity. The Parliament has failed the Australian people on that front. You know, the people who say that they represent regional Australia have turned their backs on regional Australia. When I go to regional Australia, Busselton, Townsville, Cairns, you don't get an argument about corporate tax cuts. You get people saying, we need companies here. We need big investment. People who purport to represent South Australia, who turn their backs on that economy that's got a very, very stagnant economy that needs investment. I think our Senate has failed us and I think our political processes has failed us. Now business of course, reputationally, has got to clean up its own act. I'm not going to argue about that. But we have basically had 10 years of not being able to do a single thing on the fundamentals of our economy, our tax system, our energy system. And I'm just not sure how long we can go on like this.
Fran: It's easy to accuse others of failing. And of course responsibility for policy failure generally of any kind falls in a lot of places. But your membership are in a lot of trouble at the moment and the big banks, the big power companies, this is what people are looking at the moment, their behavior, they're hating it. People are angry at them in the Senate crossbench was not in the mood to do them any favours. I mean, is that what this came down to?
Jennifer: Well, maybe but I don't think so. I think this came down to just pure politics and I don't think people actually stood back from those things and looked at the national interest. Of course business has got to clean up its act and that’s why I'm not going to lecture people in Canberra, business has got to get its own house in order. But you know, the job of public life is to take a longer term view and to talk about the national interest. Not to punish people, not to kind of chest beat on certain companies. Sure, those things have to be fixed and you and I have talked about the banks before and those things have to be fixed, but fix the problems that exist. Don’t destroy the system, don't weaken the economy. I tell you who the big business winners are out of this, big business in the US, they are the winners out of this. Big business in Europe where governments have taken those decisions, but you know, if the Parliament isn't going to do corporate tax cuts, then it better do something because our economy is uncompetitive, our wages growth is low and the national accounts this week confirmed that. Wages growth is driven by productivity, productivity is driven by investment. This is just the hardcore economics of reality and we are totally dependent on what happens in the rest of the world and we have not taken over the last 10 years the steps to make our economy more resilient. So it's fine for people to chest pound and beat up on companies and there's a lot of material to work with, I'm not going to deny that, but the job of public life is to act in the national interest.
Fran: Talking about pure politics, talking about the longer term, the new Prime Minister Scott Morrison is, seems to be initially taking a more populous route anyway. Appointing a so called minister for bringing power prices down in Energy Minister Angus Taylor, taking all talk of emissions out of the energy debate. Is that a good strategy?
Jennifer: No, it's not a good strategy. I mean, I understand politically and let's be really clear. You've got to solve three things on energy. You've got to solve reliability, you've got to solve affordability and you've got to deal with the fact that we have an emissions reduction target. Now we have always, as you know, put them in that order, so I accept that, but the simple reality is the government signed up to a Paris agreement. Now, even if they pulled out of that tomorrow, the other side of politics supports that, we support the Paris agreement. We strongly support it. So people just saying, oh well, let's put that to one side. If I want to invest in baseload power, in upgrading my coal fired power station, in bringing on gas supplies, and I still don't know in 10 years’ time, in five years’ time how I'm going to treat emissions in this country, how am I going to get investment up?
Fran: Well, how will business respond to that? As you say, the carbon emissions target no longer embedded in energy policy, electricity sector is under no compulsion to cut their emissions because business as usual is almost going to get us to the 26 per cent.
Jennifer: For electricity.
Fran: For electricity only, that’s it. Do you think business will stop concerning themselves with cutting emissions in the face of this.
Jennifer: No, and we have to go back and talk to government and work with government very constructively on what do we do. But you know when people just say, “oh, let's pull out of Paris”, we don't support that, I don't think the community supports that either. But more importantly, just take a completely objective view of this, it wouldn't matter because the other side of politics does not agree with that, and so we have to have something that gives business investment certainty. You know if you look at the ACCC’s report, over 25 per cent of what’s caused the increases in prices, is wholesale. That's about supply. That requires investment. That requires certainty.
Fran: Okay. Well talking of certainty, Energy Minister Angus Taylor, says it's not possible to bulletproof energy policy. He says it's sort of naive to be talking about certainty. Let's have a listen:
Angus Taylor, Energy Minister: Frankly, I think there's some naivety in the idea that governments can largely eliminate uncertainty for businesses or should even try. But we can create an environment where there's sufficient confidence and incentive to invest. Re-establishing the confidence to invest will be a central goal of any energy market reforms.
Fran: What did you think of that? Is it naive to be talking about governments delivering certainty?
Jennifer: I think if you go to his second point, which is the right point that you do have to create a climate where there is greater confidence because what you've got now is not just the normal uncertainty that business deals with; currency, global markets, et cetera. You've got two diametrically opposed policies of the major political parties in this country. You've got an agreement that government has signed up to, which we supported. And for business, not being able to understand in the near term, not in the long-term, how emissions are going to be treated is going to chill investment. By all means, sort out reliability and affordability. Do that in a practical way. Be very careful about starting to run energy markets because that is not a solution to this problem, but you know, you can't ignore the fact that we've got global obligations and the community wants that and business wants that.
Fran: It’s thirteen past eight, our guest is Jennifer Westacott, the Chief Executive of the Business Council of Australia. Now that the dust has settled, have you had a chance to reflect on the leadership crisis within the government, how much damage is done to Australia's international reputation, as a stable place to invest for instance?
Jennifer: Well, it doesn't help at all. I mean, the good thing about Australia is our institutions are strong. You know, when these things happen, business carries on. The communities carry on. I was in Busselton when it was happening. Most people kind of just roll their eyes and say, you know, “whatever”, you know, I suspect someone will kind of start up a “why-bother” movement. But it's not good for our democracy. It's not good for our country's reputation. And I'm not going to lecture people in Canberra given the problems business has got itself. But the problem we've got Fran, is this has gone on for a decade and as a result of that, we just can't get anything done.
Fran: Well, you say we can’t anything done, but as one of the listeners has pointed out, we just got these great economic figures this week. So the economy is actually going strongly, growth above three per cent, strong jobs growth.
Jennifer: Well, let’s look at the detail. First of all that's one quarter, so that's not sustained GDP growth, but then look underneath those figures, weak wages growth, weak productivity growth – productivity that drives wages. Half of those figures are household consumption and government spending, government spending, in the past it's been terms of trade. Then you have to kind of add all that together, where we’ve got the highest level of household debt amongst developed countries in the world, we’re totally reliant on what happens internationally on interest rates. You’ve got to ask yourself, “how long can that go on”? We keep getting lucky, but you can't put luck in the bank, Fran.
Fran: Yeah but also, who do you blame for slow wages growth? I mean the latest reporting period shows that business is in rude health; very strong profits, spoils going to shareholders; wages not growing? When will, what will it take for business to start paying higher wages? That’s were it’s got to come from, right?
Jennifer: Let’s unpack that because you know, are we seriously going to start linking wages and profits because when profits fell in the GFC by eight per cent wages grew by three. Wages are sticky, they hold. Profits are very volatile. Now the RBA has said that they are starting to see wages growth starting to go up. The only way you can get wages to go up is through productivity, and I'm not talking about people working harder for less money, I'm talking about companies expanding, companies making things more efficient and that is about investments. So, if we're not going to do tax cuts, we’d better do something else that is going to drive investment and we better make that across the whole of the economy because if we just going to say we're doing nothing for big business, then we're going to do nothing for superannuation holders because funnily enough, they haven't invested in the corner shop. We're going to be doing nothing for the 4 million people who work for a big business. We're going to be doing nothing for the 5 million shareholders that have invested their money in a big business and, we're going to be doing nothing for the part of the economy that protects us from global competition. So we’ve got to be very careful. If we're not going to do something, we’d better do something else.
Fran: Okay, there is a fierce debate raging within the Liberal Party and beyond the Liberal Party, I think in all parties at the moment about the culture of Parliament and the behaviour exhibited. Some Liberal women have accused their party of bullying and intimidation. Julie Bishop weighed in saying she's witnessed behavior in Canberra that wouldn't be quote, “tolerated in any other workplace across Australia”. You spend a lot of time around Parliament House, in politicians’ offices and beyond. What’s your view of the culture there?
Jennifer: I think it is a toxic culture. I mean, you only have to watch question time. Occasionally you see people working really hard to cooperate and that's fantastic. And we've had great symbols of that, you know, remember when Tanya Plibersek and Julie Bishop stood together, to kind of try and plead with the Indonesian Government not to execute those men. That was a great sign of people coming together. The marriage equality stuff was a great sign of people coming together. But on a day to day basis, that is a toxic culture. And Julie Bishop’s right, I mean for all of its problems, I can assure you that corporate Australia has tried to stamp out bullying and harassment in the workplace. Now, I'm sure there'll be someone ringing in now sort of, with an example and that’s probably right, but you know, companies have very stringent policies and frankly if a boardroom operated like question time, the company would go broke. I mean we have to, as a culture, we say to our society, we do not accept bullying, we do not accept intimidation and surely, we should be setting a better example for young people that we want a culture, of a proper contest of ideas, but that is not about abuse and intimidation.
Fran: Jennifer Westacott, thank you very much for joining us.
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