Event: Jennifer Westacott interview with Peta Credlin, Sky News
Speaker: Jennifer Westacott
Date: 19 June 2018
Topics: Company tax, income tax, deregulation, royal commission
Peta Credlin, host: Well, there is no doubt that tax policy is the talk of Canberra at the moment both for corporate Australia and ordinary wage earners. Both major parties claim that they have the plan that can deliver for you and of course the frequently fractured Senate crossbench is busy negotiate with Mathias Cormann and horse-trading their little hearts out. All of this makes a good headline but how much of it is in Australia's long term economic interest, you've got to wonder. Joining me tonight to give the perspective of some of Australia's biggest employers is the CEO of the Business Council of Australia Jennifer Westacott. Thanks for your time tonight, Jennifer.
Jennifer Westacott, chief executive, Business Council of Australia: You're welcome.
Peta: I expect you're coming to me from Canberra because you're down there busy lobbying and getting around and seeing in particular that crossbench. Before we start, congratulations on your gong in the recent Australia Day, Queens birthday honours, well deserved, well deserved.
Jennifer: Thank you, thank you, it was a great honour, I was very proud and humbled, but thank you very much.
Peta: You've got one of the best policy brains I've ever come across, so you know, if nothing else it's a good honour
Jennifer: Thank you.
Peta: You're the head of the Business Council, there's a been a lot of criticism in the past, pretty much the last 10 years that business leaders, I'm not talking about the Business Council, but business leaders that stand for a brand that have a shareholder base and a board, are quick to get out on issues of social lobbying or social justice but haven't been really been prepared to nail their corporate colours to the mast and argue for reform, argue for things like tax reform, certainly argue for industrial relations and that's been a criticism I've had of them in the past. You're very much out now on corporate tax cuts, what's been the shift, Jennifer, why is business really prepared to go out there and fight for these tax cuts?
Jennifer: Well, I think they really feel this like essential now for the national interest. Many of the companies who have taken strong stand have operating internationally, they can see tax rates going down in countries where they're doing business, they can see investment flowing to the United States, they can see their projects and how difficult they'll be to get up in Australia unless we make that change to lower our rate, unless we send the signal that it is going to be better return on investment in this country. So, I think reality is really started to bite, I think if the Senate leaves this reform on the table, they're leaving an $18 billion bigger economy on the table but they're really putting a ball and chain around our big companies, our medium sized companies and saying to them, notwithstanding we live in a competitive world, an international economy, you are going to start behind your competitors, and they they really now understand that. I think many of them have just started to look at some of their competitors and say, you know, I'm asking my teams, my employees to work for a company that's got a competitive disadvantage, and I think they really feel this is like make or break time for the country.
Peta: A couple of recent Newspolls have actually had broad base support, majority of support now for these corporate tax cuts. The Labor Party has gone hard against them from day one, they have really played I think a class war game, argued about the quantum of the cuts. Of course they're going to be significant cuts if they are for business and they are over a 10-year period, do you think you're making any headway with the crossbench?
Jennifer: Well, look obviously we got very close and, you know, you have to take your hat off to Mathias Cormann, he is a cracking negotiator. But I think, you know look, well let's see how it plays out. It's disappointing Senator Hanson pulled out of her agreement but, I give her credit for going, you know, taking the time and visiting businesses and really getting her head around it. But you know let's see how we go I think on the Labor Party it's tremendously disappointing that a party that supported these, that argued exactly the same arguments that we argue, now says, they don't matter, we can't afford them, now they say we don't need them, you know, who knows what the actual argument is other than politics but I'm really heartened when I see some of the polls because I think Australians get it, they get it that business creates jobs, they get it that we need to be competitive, they get it that we've got to get business a go, and they get it that without a successful business community we're not a very successful country. So, it's disappointing that a party that supports, you know, better incomes for people, more jobs for people, doesn't continue to support a policy that they once did to make our economy more competitive. It's very disappointing Labor's position on this, and very, frankly bewildering actually.
Peta: And where do you stand on the personal income tax cuts? We learnt today that the Labor Party will only support the first tranche, and then if anything else gets legislated, and they were to be elected at the next election, they have committed to repealing it or attempt to repeal, I'd say it would be pretty likely with the support of the Greens. Where do you stand on that?
Jennifer: Look, we supported these tax cuts. We've always argued that we needed both personal income tax changes and company tax changes and we needed to deal with bracket creep. Look, the government has embarked on really quite substantial tax reform. Tax relief for low and moderate income earners and then quite substantial reform by removing one of the tax brackets and giving us a flatter tax system, which of course removes some of the disincentives in our system where people are working a bit harder, they've got an extra job, a tradie is doing better, you know, they're hit by moving through these brackets and I'm bewildered that the Labor Party says it's going to reverse these in government. And I'm bewildered for the people who are sitting around their dinner tables tonight and they're trying to plan their business and, they're saying they're still not committing to whether or not they will support the tax cuts for businesses that have already gone through with a turnover of $50 million. So if you're one of those business, you say, gee how do I plan with that. If you're family, and you're thinking gee, we might able to get a bit ahead, gee well, that's going to get taken away from me, how do I plan for that, how do I plan for my retirement. I mean what kind of a country are we becoming where we don't want people to get ahead, we don't want them to get an extra property that they can rent, we don't them to kind of put their money into super, you know, we don't want them to have a flatter tax system, we want to hit them with higher tax brackets, I just, I don't understand where we want the country to go, Peta, I really don't. Because I want people to get ahead, I want people to feel like they're getting ahead, and there is a real incentive to work, and this nonsense that you know a doctor is going to pay the same rate as a plumber or something or whatever these examples are, it's still a progressive system, if I earn $50,000, I pay $8,000 in tax. If I earn $200,000 I pay $60,000 with the tax cut. It's a progressive system and I think there has been a lot of mischief with this - this is good tax reform, it should be passed.
Peta: Look, I agree with you on the point about it being a progressive system, the progressiveness of the system is maintained all the way through these three tranches of change but the government has not cut through on that. I think Labor has got ground on the idea that the higher income individual gets a better deal because they get more tax relief, well, that's of course because they pay more tax but the government hasn't made the communications argument. Jennifer, I want to ask you about deregulation, I've known you for a very long time, we've always talked about deregulation, you've always lobbied very hard for deregulation. It's one of the big wins of President Trump, deregulation has taken the shackles off the industry and business in particular in the United States. But the government early on used to have a repeal day, twice a year repealing as much as they could of legislation and it was trillions of dollars of regulation value-wise, was repealed. That day has now been scrapped, I went looking for the unit that did deregulation in the Prime Minister's department, that has now been moved out of Malcolm Turnbull's responsibility, I haven't heard a peep from business. Are you disappointed that deregulation looks like it's off the table?
Jennifer: Well, we certainly haven't been quiet about it, as you know we're always banging the drum on this and for very good reasons. When we were in the United States we said there were two big changes that companies talked about and these were resulting in more jobs in a stronger economy, one was tax, the other was deregulation. They had removed a swathe of red tape. And I want to see, not just the federal government, but the states take the deregulation agenda seriously. I mean to get a house built in some states, a house that's zoned in a residential zone, it takes, you know, forever. And people know this, they'll be watching going, yep I remember that was me, to get your planning approval. For companies, small companies, wanting to relocate, ages to get your planning approval, if you're a small businesses, the number of licenses you have to have, this is the sort of stuff that saps incentive and makes it really hard to set up a business. Now, one of the things we need to judge the economy by, and this is what the Americans are doing, is the number of new businesses that we create. Now, the more red tape you've got, the harder that is to set up a business, so I haven't stopped that agenda, Peta, I will talk to anyone who'll listen to me, and I've still got my list of regulation that is killing our country and I think not just the federal government, many of these regulations are controlled by the states as you know. But I want to see COAG address this issue again, and I'd like to see productivity payments...
Peta: But it's gone off the agenda, Abbott had a commitment for every regulation that came in, two would have to come out, and that commitment was met. I remember, he is now very high up in cabinet but when Josh Frydenberg was Tony Abbott's junior minister when he was the PM, Josh Frydenberg made huge inroads on cutting red tape, followed then by Christian Porter. It's fallen away, it's a big priority.
Jennifer: It's a big priority, now we're reengaging with the government, I think they're back to listening and we're pleased about that so you know we've started talking again about the prioritisation but I want the states to come to table too because so much of this is caught up in state red tape. One of things we want to do is benchmark each state government about how easy it is to do business in some of these states because you know to be fair a lot of this falls to the states but we've started to have some very productive conversations with Malcolm Turnbull's government about the need to reinvigorate that dereg agenda.
Peta: I think it's incredibly important because you look at how fractious the Senate is and how hard it is to get things through the upper house, most of this deregulation agenda can be done by government fiat, can be done by the executive, and I think that's where the focus in the short term has got to be. I want to just turn to the banks, there has obviously been some pretty horrific evidence come forward in the banking royal commission, you've got to ask, if all of these things were happening under the watch of banks and it's not just one bank sadly, it's all the banks right across the financial institutions. Either the regulators did know and they turned a blind eye and that's culpability or they didn't know and they're incompetent, so I'm interested in your view as someone who works in and around these sectors and regulators. Have we got systemic problems with our regulators, do we need to change the way we regulate these big institutions, do we need to change the personnel, or even the architecture?
Jennifer: Look, I think it is a great question, I'm hoping the royal commission really explores that. It's one thing to sort of have case after case after case, and there's no doubt some of this evidence is really shocking but if we don't get to the bottom about what are the systemic issues to your point that create these conduct issues in our financial institutions then we really will have missed an important opportunity in the royal commission to make sure that we end up with a stronger, better financial system. I mean the royal commission will start to look at superannuation, I suspect they'll find a whole lot of issues there as well, but they go to those issues of governance and I think obviously companies have to look into their governance and say, have we got enough control over conduct, have we got the right incentive arrangements. But then we need to look at the regulatory arrangements and say, are they really working to make sure these things don't happen in the future, but I will say this, the one thing that we mustn't do in the wake of the royal commission is end up with a weaker financial system, a weaker banking system, it has been the bedrock of our economy, our banks are very high performing but international standards. They were the bedrock during the global financial crisis, I know lots of people claim that win, but our strong banking system was a huge part of our capacity to survive that and to come out of that in a very strong way, so we've got to get the balance right between dealing with these issues but to your point, you're absolutely right, if we don't tackle the systemic issues, the role of the regulators, the question of the incentives, then we'll have missed the point.
Peta: Ah Jennifer are we going to find there is a tightening in the credit market as a result of all of these findings, or likely findings, are we going to see the banks really tighten up who gets credit, are we going to find you know lower income potential borrowers the hardest hit?
Jennifer: Well, let's see, I don't know, it's one of the risks that you end up with a credit tightening. You don't want that for reasons other than that people can't meet their credit obligations. You don't want that as a response to stories in the newspapers, it's got to be really about the credit metrics and making sure that those stay in place. I think we need to make sure in all of this that we don't end up with unintended consequences, small businesses not being able to borrow, people not being able to get the credit they need, and I think we've just got to keep perspective. You know our banks have been very very strong, the things that are coming out in the royal commission are shocking but we've got to be careful we don't punish the whole system, we don't punish the shareholders, we don't punish the guy who is the regional bank manager who has been helping small business and families for years. We've got to make sure we target the response to these very very serious claims in the right direction.
Peta: Jennifer Westacott, thank you for your time.
Jennifer: You're very welcome, thanks.