Event Interview with Ticky Fullerton, Ticky, YourMoney
Speaker Jennifer Westacott, Ticky Fullerton
Date 25 March 2019
Topics Economy, Federal budget
Ticky: We've heard today about some big health commitments, hundreds of millions being behind better hospital infrastructure, mental health services, research, and a new cancer treatment center in Victoria. Financial regulators will both be allocated additional funding, $400 million for ASIC, 150 for APRA. Also hearing the government is likely to bring forward the July 2022 income tax cuts on top of those already starting July 1 this year as part of a already legislated $144 billion plan. Well, joining me now is CEO of the Business Council of Australia, Jennifer Westacott.
Ticky: Jennifer, welcome.
Jennifer: Thank you.
Ticky: We've got the budget coming up, but I must just ask you about today, 'cause everybody's talking about the bond markets and both here and in the US and gloom and doom and recession's on the way.
Jennifer: Well, I think we saw some economic figures a couple of weeks ago that that really sounded a warning bell, and we should take it as a wake-up call. It showed two quarters of low growth, it showed that our big stumbling blocks are still stumbling blocks, our low rate of investment, our low wages growth, and I think this is where government has just got to get back on reform agenda around making it easy to invest in Australia, making it easy to do business.
Ticky: Do you agree with what I said about the New South Wales reform agenda?
Jennifer: Absolutely, and I'll come back to the New South Wales stuff, if you will, but I think people have got to kind of get some stuff done around growing the economy, around getting business investment, around making us more competitive. You can't keep on walking away from this 'cause it does eventually show up in the economic figures, and we saw that in these recent results.
Jennifer W: So I think it's about doubling down now on making ourselves more competitive, doubling down on the growth stuff, doubling down on infrastructure, doubling down on tax relief, and if we don't do that, eventually you can't kick these things down the road.
Ticky: So in that context, how does what we know about the upcoming budget sit with that, because people are calling it like a bit of a stimulus. What do you think about these tax cuts [crosstalk 00:02:16]
Jennifer: Well there's a couple of points to make about the budget. The first thing, it's really important to get back into surplus. A lot of people say it doesn't matter. It matters enormously, because in an economic slowdown, if your budget's in trouble, you've got no room to move. You can't do anything.
Ticky: But the winds have been behind the government.
Jennifer: Exactly, but the headwinds are coming and last economic data showed that. The second thing about the budget is let's make sure that we're doing everything we can to grow the economy. That should be the lens that everyone judges the budget. Apart from things that governments must do in terms of essential services and obviously doing the right thing in terms of health and education, infrastructure is crucial, personal income tax we've been calling for because they have a growth effect.
Ticky: Do you believe that the personal income tax cuts, that there'll be additional cuts to the ones already announced, and looks like they're [crosstalk 00:03:09]-
Ticky: Fast-tracking, exactly. And focused on the lower income end. Is this the right thing to do?
Jennifer: Well, for low middle income and I think is where people are feeling the wage pressure, people are feeling the cost of living pressure, and the wages, kind of getting wages up is a more complex, long-term thing. But the objective is get more money in people's pockets in the short-term, so-
Ticky: Why is that a better way? I mean, the government-
Jennifer: Well it's not a better way in the long-term. It's not a better way in the long-term. But you've got to give tax relief to people. We've been calling on that for years. We would love to see something like an investment allowance, if you're not going to do the company tax stuff, to try and drive some stronger investment.
Ticky: And at an individual level, you'd be for the Newstart allowance, wouldn't you?
Jennifer: Absolutely. Yeah, I've been calling on this for years…
Ticky: What are the chances of that happening? Why do governments of both sides have such a problem with doing something about ...? What is it, $40? It's rubbish.
Jennifer: And it's a very small number of people too, so we're not talking about hundreds of thousands of people who are in this category. Just seems to me like a basic sort of decency to ask people to live on this amount. It's not going to help them get a job.
Ticky: So we come back to whether you have tax cuts, which is what the government is suggesting. Labor's doing that as well, but they're saying living wage is a better way to go about this than tax cuts.
Jennifer: But have they defined what a living wage is or the policy by which you would do it? No. So a couple of things on wages. You can't get wages up if unemployment goes up. So, top priority: grow the economy, keep employment strong. And the employment data out last week is very good.
Jennifer: Second thing is, make sure that the EBA process, the enterprise agreement process, stays in place. Now, by all means tidy it up, but don't wreck that because it has given Australians higher wages. The wage price index 2.3%, EBA's 3.2. Make that work. But you've got to do the hard yards of lifting productivity. People may not like, in the fake news world, the kind of reality of data. When productivity improves, people's wages go up, that's how you sustain wage increases.
Jennifer: On the minimum wage, there may be something in the [inaudible 00:05:25] that the Productivity Commission said maybe the Fair Work Commission needs a better set of instructions to look at the capacity of the economy to absorb wage rises at the bottom end and the circumstances of low paid workers, but they do kind of put a warning that if you increase them, there are consequences, if you dramatically increase them.
Ticky: Well I think Labor, it was their suggestion that Labor would like some of those increased productivity commitments to the Fair Work Commission to be removed potentially.
Jennifer: And I think you've got to be careful that you don't do something here that has a kind of short-term effect but a long-term effect of seeing jobs reduced.
Jennifer: You've got to remember, this isn't really a small business issue, certainly not for the companies I represent 'cause they're mostly on enterprise agreements. But if you're a small business community, not a fat cat, a small business owner, and-
Ticky: Which is where most the employment happens.
Jennifer: Exactly, and you have to pay people more and your company doesn't become more successful, you've got three choices. You sack some people, you pay yourself less. Now, for a lot of small business people their wages are their profits and they're not very high, or you put your prices up to your customers and that makes it really hard for you to get ahead.
Jennifer: So, people say stuff, Ticky, and you think, "Yeah, that sounds great," but you've got to have a plan to do stuff, and that's what I think the New South Wales election shows, that when you've got a plan to do stuff and stuff gets done, people respond to that. I think it's not good enough to say, wages is a problem.
Jennifer W: I've been on your show hundreds of times saying wages is a problem. It is a problem, but the way to get them up is the hard work of skilling people, of increasing productivity, of making sure that productivity falls to people in higher wages and making sure the EBA process works properly and looking at low paid workers, of course.
Ticky: So, since we spoke last, this whole idea of the power of industry super, the influence and pressure of pressure groups, including unions, but when you look at welfare inequality, perhaps using super to pressure the fords of the big end of town companies to actually look at raising wages. Now, how do you see this whole thing playing out?
Jennifer W: I think this is a complete overreach by industry super. People forget a couple of things. Superannuation's compulsory, so when I put into my super fund, what I'm putting in is for investments that are going to pay for my retirement, and that's the expectation of all Australians.
Jennifer: Of course people are entitled to ethical investment. That is perfectly legitimate. But when you start crossing the line into political activism, which may in fact change the value of a company, you've got to ask yourself, is that really the job?
Ticky: But some people argue, that I've spoken to in industry super and elsewhere, that actually even though these sort of ideas and environment and deep diversity might look at long-term cost to the shareholder ... sorry, short-term cost to the shareholder, long-term, if these companies want to be around in the long-term, they've got to buy into it.
Ticky: Now, given welfare inequality is the great moral issue of our time-
Jennifer: Along with many others.
Ticky: Along with many others, yes, but isn't this actually going to be in that category?
Jennifer: There's a fine line here, isn't there? There's a line between we want to see ... and I think most companies have got the memo on this. You've got to be responsible, you've got to do the right thing by your customers, you've got to be transparent about use of data, you've got to be transparent-
Ticky: Rethinking executive pay?
Jennifer: You've got to rethink executive pay, you've got to rethink your relationship with your customers, you've got to rethink your products, and I don't know a company that's not talking about that.
Jennifer: The challenge is if you start doing political activism using the funds of people who've put their money in for their retirements, I think most people are entitled to see the fine print on that, because I'm not sure that's what most people have bought into super for.
Jennifer: By all means, do ethical investment, but when people starting saying, "We're going to force a company to do this industrial agreement," is that really what the superannuation schemes are actioning for? We've got an industrial relations system, by all means people should sort of make that work more effectively, but once you start getting the industry super funds to do the job of the industrial relations system, the whole question of accountability I think just falls away.
Ticky: Briefly, how do you hope that the budget will come out, particularly in terms of some of the concerns that they'll throw a lot of infrastructure at infrastructure, maybe there won't be the cost benefit analysis behind it.
Jennifer: Well, that's crucial that we get the right projects at the right time. I mean, I do think there's a case for maybe, and sort of conversation for another day, looking at the way some of these cost benefit analysis are done, because you wouldn't do a lot things in regional Australia and they're crying out for things.
Jennifer: But it's interesting, the lesson, I think-
Ticky: That's a very good point.
Jennifer: The lesson for the federal budget is the lesson of the New South Wales Government, that if you get your budget in order, if you get your public service in order, if you get your debt down, if you get your big infrastructure spending, albeit it's very disruptive, but gosh, it's better to start something than not start something at all, and I spent the days [inaudible 00:10:40] out at the Western Sydney Airport, people would just be staggered by the investment out there.
Jennifer: If you get your house in order, you can spend extra money on health and education, you can do those big projects that people are crying out for that are going to transform the way people live. That to me is the frame of the federal budget. Get our house in order, make sure we're investing in the things that are going to grow the economy, make sure we're putting all of the things we can do to make ourselves more competitive, but let's not take our foot off the pedal of getting that budget under control.
Ticky: Jennifer Westacott, thank you.
Jennifer: You're welcome. Thank you.