Event: Jennifer Westacott interview with Ross Greenwood, Business Weekend Sky News

Speakers: Ross Greenwood, host; Jennifer Westacott, chief executive Business Council of Australia

Date: 20 June 2021

Topics: Labour market data; international borders; industrial relations; payroll tax; minimum wage rise

E&OE

Jennifer Westacott, chief executive Business Council of Australia: The unemployment number is fantastic. It shows the economy surging back. We've got more people working than we had prior to COVID. It's incredible. I think the only worry I've got now is what I'm hearing from farmers, from companies is the labour shortage side of things now. And we have got to get a way of getting skilled migration back into the country to fill these important jobs. Whether it's someone helping a farmer out, whether it's someone being a chef, whether it's a high paid IT worker. All of these things are needed to keep the economy really going along. But they're great numbers. The UK free trade agreement is a cracker because it puts us at the front of the queue for what is actually a very big market. I think the UK's our fifth largest trading partner, most people wouldn't get that. But also, that gives us access to their markets. And we've got this removal of tariffs and a lot of real innovation in that agreement too. And then you've got, obviously, just being at the G7 this week and the Prime Minister's leadership getting the west, obviously coordinated around China, around growth. All of those things, I think, have been a real win for the government.

Ross Greenwood, host Business Weekend: Certainly, Australia's employment market right now. Do you think that it's simply a case of opening international borders, or is it a case of finding more flexibility in Australia's industrial relations system? Of course, this is something that the Australian government put in the too hard basket. Were they wrong to have put it so quickly in that too hard basket?

Jennifer: I think the government took a modest well-thought through package that would have done things like rejuvenate the enterprise agreement system, which is crucial for productivity, crucial for innovation, crucial for high wages in the economy. So, I think the Senate put that into the too hard basket. I think it's a combination of both, Ross. I think you've got to carefully, gradually reopen bits of the economy. You've got to get skilled workers back in. You've got to get international students back in. They're a big economic force in Australia. And you've got to do that carefully and wisely and based on health advice, but to not do it is a real risk to the economy. It's a real risk that we lose those markets or that companies just stop doing extra things because they can't get the workers to do it. So they say, "well, I was going to do that in Australia. I was going to put that 100 million in Australia, but I actually need a combination of Australian workers and skilled workers from whatever country of destination. I can't get that. So look, actually, I'm going to put that in Singapore. I'm going to put that in Europe." So, I think it's a combination of that plus getting the IR system to drive that flexibility and, of course, making sure that flexibility is not about taking people's rights away. It's about a modern economy. It's about not taking eight weeks to change rosters when demands come and go for products and services, that sort of stuff. That's stuff of the Stone Age.

Ross: Okay. So just pick this up here because isn't one of the issues that Philip Lowe picked up this week, the reserve bank governor, that maybe businesses are not that willing to pay workers more money. That there has been a constant thrust, as he said, to continually cut costs because that's the way that they've been able to generate profits in a slow growth market? Now it's growing. Maybe, he says, it's time to consider better wages raises for workers.

Jennifer: We want people to have higher wages, but it's got to be meant to higher productivity. And that's where the enterprise agreement system was so important because it allowed you to sit down with your workers and say, "How do we make the enterprise more successful and, in turn, give you better wages and better conditions?" But if you haven't got that negotiating platform, if you're just relying on those old awards, complex, out of date, irrelevant to many midsize and large businesses and many small businesses. Then you're not going to get that productivity. I think you would see that large companies overwhelmingly pay people more and that their enterprise agreements have actually got threes in front of them, not ones and twos. But you've got to have that capacity to negotiate some productivity benefit versus just everyone getting a wage rise without getting that growth capacity. Otherwise, where does all of this end? At some point, if you're not being more successful, then how can you sustain those wage increases?

Ross: The minimum award wage as set by the Fair Work Commission this week was increased by 2.5 per cent. But it worked out that it's now more than $40,000, the minimum wage.

Jennifer: It's a pretty high minimum wage relative to other countries. And of course for small business, particularly in those sectors...to be fair, the commission has delayed it for some of those sectors that are still at risk. But for small business in some of those sectors at risk, it's a big impasse. And if money's not coming in the door and you're putting people's wages up, there's only one choice for you, employ less people. And that's the hard reality of these things. I thought the commission made a careful decision. I thought their decision to delay things was right. Of course, we want to see people get higher wages, but you've got to be careful that you're not adding risk when we're not sure what's around the corner at the moment. And some of these sectors, they're just getting back on their feet, and they've got to be able to get that momentum and to be able to sustain those wage increases, to sustain their business getting back on their feet. So I think it's right it puts a risk, particularly for mid-sized, small businesses. We've got to find a way back to making sure that workers and employers are sitting down, negotiating better productivity. And that was the old enterprise agreement system and Labor party innovation that they didn't vote for in the Senate.

Ross: One other aspect of the way in which wages employment works in Australia, payroll tax. Victoria increases payroll tax to help pay for mental health. Again, why have a tax on employers employing people at a time when you want more people employed?

Jennifer: Look, this is really poor policy. There's a few things. First of all, of course, we want mental health services to be properly funded. You do have to ask the question, why have they been allowed to fall into such a state? Then you get a Royal Commission. But is taxing jobs the answer to this? No. Many of these companies that are now going to be hit with very big bills, are the people who are spending millions of dollars on mental health, these are the people who paid their workers when there was no work to do in Victoria. They didn't lay them off. They paid them, and they really supported their teams. But there's also just a principle here, Ross. Nobody knows whether this is in perpetuity. I haven't seen a really detailed plan that's going to fix the mental health system. Is that going to solve the problems? And is it a good policy principle that you tax jobs? No, because what this will ultimately be, the Prime Minister made this point, and I totally agree with him, this will be self-defeating. Because if you're a company and you're staring down the barrel of an extra $20 million in some cases of tax in Victoria versus in New South Wales where the Premier has got a JobsPlus program where she is waving payroll tax if you employ extra people over 30, where are you going to put your money?

Ross: It's a very simple and very easy conversation to have. Isn't it? Jennifer Westacott, many thanks for your time.