Event: Interview with David Penberthy and Will Goodings, FIVEaa Breakfast Radio
Speaker: Jennifer Westacott
Date: 14 March 2018
Topics: Company tax, regulation, investment, business reputation, big and small business working together, VET
David Penberthy, host: Jennifer Westacott, the chief executive of the Business Council of Australia, and right now the biggest debate that's happening federally goes to the question of corporate tax cuts and whether it's unfair on the average worker to be showering businesses with tax relief at a time when so many of us are struggling to get a pay rise. Or conversely, whether logic and history would suggest that if you give businesses tax cuts they're going to be in a better position to give workers pay rises. Jennifer Westacott, welcome to the show.
Jennifer Westacott, chief executive of the Business Council of Australia: Thanks very much.
David: So how does that debate play out? Because a lot of workers, particularly at a time when there's very sluggish and for a lot of people, zero wages growth for two, three, four years. A lot of those people look at business and say, this is all about them getting extra money.
Jennifer: But who is a business? Like, what is a business? This is where I think the debate has gone off the rails. A business is people. A business is the 10 million people of the 12 million Australians who work. 10 million of them are working in a business. A business is a shareholder, mum and dad investor. A business is an employee. A business is a customer and I think this idea that somehow a business is not those people. So, when we say business will benefit from a company tax cut, you bet they will, and who will benefit? The people who work for them. The people who will get higher wages. The people who will keep their jobs, get better jobs, get new jobs. This is the point, that people want to, kind of, demonise business. They want to say business is villains. So Bunnings is a villain? Really? Most men I know want to be buried at Bunnings. You know, is business a villain? Seriously, that's the problem. That's the problem in this debate. The people have got this kind of hatred of business, this class warfare.
David: Well, presumably you talk there about Bill Shorten?
Jennifer: Yeah, and lots of other people who say business is bad. I mean what kind of country do we want to be?
David: But for the person who is listening to the show though, who's going 'yeah that all makes sense, but I haven't had a pay rise. I haven't had a proper pay rise for years’.
Jennifer: Why haven't they had a pay rise? They haven't had a pay rise because what drives wages increases is when productivity goes up. That is when we do things more efficiently. Not when we make people work harder for less, but when we do things smarter, more efficiently. Productivity is driven by investment. Investment is driven by tax. That's what drives wages. When productivity was in the two per cent, I don't want to get in all the technical stuff, wages went up at the same rate. So, if you take that over a decade, real wages went up by 24 per cent. Productivity has now got a one in front of it and so we've got this kind of flat-lining wages growth. Now the last results are a bit better. Now the only way you can get people's wages to go up is this, you get a new job and a better job, you get more hours, you go from being unemployed to being employed, and all of that requires the business community to be successful.
Will Goodings, host: The difficulty in prosecuting that argument about the manner in which tax cuts translate to wage growth has led to policy responses like in Japan where they've actually pegged tax cuts to wage increases.
Will: Is there any merit in a policy like that?
Jennifer: Look, it's very difficult to do that. Particularly, you know, we've got to remember what the plan is. It's a 10 year cut. It's going to take 10 years. This is the thing I find staggering about this debate. That somehow we're giving a windfall gain to companies. The big companies have got to wait 10 years to get the cut. They've got to wait 10 years to get to 25 per cent. The Americans have just gone to 21, instantly, instantly. And when I was there a few weeks ago, you know, the companies I talked to, big investments, one off bonuses, wage rises, but that's an immediate reduction in the tax rate by 14 points. Now we're talking about 10 years to get us to 25 per cent which will just keep us at the average for the OECD countries, to use that technical expression. Asia is 22, the UK is 17, the French, my God are, you know, talking about lowering their rate. So, either we keep ahead or we'll fall being as a country. You come to South Australia, there's not a lot of business investment, there's not a lot of activity. Unemployment is higher than the national average. If we can't get people to come to Australia, they won't come to South Australia. That's just the basic reality of the world we're living in – if we can't keep ahead, we'll fall behind. Now the wages to tax cut, you know, I just don't think in a 10 year plan you can ask companies to say well we'll give an immediate pay rise. And, what you want is companies to make decisions about investing and growing and that is what drives higher wages.
David: Is business losing this argument, though? I mean, 28 newspolls in a row now, Labor has been leading the Coalition. Bill Shorten, a lot of people compare him to the British Labour leader Jeremy Corbyn with some of his, sort of, anti big corporations rhetoric. Why is business so far behind in this debate? You know, we've got a banking royal commission underway at the moment. The NAB and the CBA were getting smashed yesterday as the hearings began. How, given that logically that, you are absolutely right Jennifer, you know business employs millions and millions of people, it pays our mortgages. Why are you on the nose?
Jennifer: Well, I think some of it is something of our own doing. I think, you know, we've not, kind of, built the community's trust. I also think, we've not been strong enough reminding people, which is one of the reasons I'm here in South Australia, that it is business that creates the wealth of the country. It is small and big business working together that create jobs. That build vibrant communities. That allow the country to thrive. We've got to do a much better job at communicating that. I think, you know, some of the things that companies have done have not been right and one of the things that we've done in response to that is the Business Council, one of the things when we talk to small business, we talk to the community, they said we really are cranky about the way you pay small business. How long you should take to pay them. So, we've introduced a code that says you've got to pay a business in 30 days and we've done that with the Small Business Council. And that's got now 400 billion dollars of revenue being paid under that code. We've also said to companies, you've got to pay your tax. You've got to show that you're paying your tax. Sign the code that shows how your tax arrangements are done. So, I think some companies have done things that have got the community pretty cranky and we've got to turn that around and companies have got to turn that around but we've got to be very careful about letting this anti-business agenda get a real run on because people have got to be careful what they wish for. Sometimes I wonder what kind of country we want to live in? We say we don't want companies to be more profitable and employ more people, and be more successful. We don't want people to save for their retirement. We don't want them to get a rental property that builds up a nest egg. We don't want them to get a job. I mean what kind of a country do we want to be? I want to be in a country where business thrives, people thrive, we got a good safety net, people are looked after. You can't do that if everyone is working for the government or being paid for by the government.
Will: We're three days away from, as a state, deciding what we want to look like as a state for the next four years. You mentioned a moment ago, you’re in part, the need to get investment into South Australia. Lots of measures by which you can, sort of, evaluate the strength of an economy – state final demand, retail sales, unemployment, all these sorts of measures. Of course we're hearing it all in the lead up to an election if the state's going in the right direction or it's flagging. What's your estimation of South Australia?
Jennifer: Well, South Australia has not being going well for a long time. And you know it's energy prices, it's retail prices – 20 per cent higher than the rest of the country. It's investment lower than the rest of the country. It does not have a big investor. Santos is the last really big company to headquarter here and you do need big and small working together. It's interesting, Peter Strong from the Council of Small Business said without the big business tax cuts, the small business tax cuts are meaningless. So, you need big and small working together. But you've also got to have the national settings right so people come to Australia and they come to South Australia. You've also got to have a regulatory system that makes it easy to do business. If it takes you six years to get a planning approval, to get a mine going or to get a big project going, you're not going to come here. You're going to do the maths on that as a company. You're going to say you know we're going to go somewhere else. You've got to make it easy to do business. You've got to lower the cost of doing business. We've got to lower energy costs in this country but here in particular and we've got to make sure that we've got a magnet for big invest. And finally, you've got to invest in skills. And we in this country have let the VET system fall apart and we have got too many kids going to university, not enough people are going to VET. We've let the TAFE system fall apart and, you know, that's the system that's actually going to get us through this big transition in the economy.
Will: Jennifer Westacott from the Business Council of Australia, thanks for coming in and enjoy your stay in our fair city.
Jennifer: Thanks very much. I will. Thanks a lot.