It’s ACTU thinking in need of change, not the rules

21 March 2018

This opinion article originally appeared in The Australian on 21 March 2018.

The irony of the ACTU’s latest “change the rules” campaign is that the union movement is so resistant to change offering no ideas on how to grow the economy to benefit us all. 

It seems stuck in an industrial paradigm of class struggle — workers against big businesses — that’s a generation out of date and benefits a few at the expense of the many who want collaborative workplaces with the flexibility and rewards to benefit from their own initiative in an increasingly competitive, disrupted world.

Meaningful jobs and growing income is important for us all, but there are radically different views as to how this should be achieved. And recent economic data shows how regressive and out of touch is the ACTU.

The national accounts reveal that while Australia continues to grow, it is well below what we could achieve. If real GDP had continued to grow at its average rate of the past 20 years of 3.1 per cent instead of 2.5 per cent as it has over the past five years, the accumulated difference would be additional GDP of around $150 billion. Of this Australians would have received about $85 billion in additional income and federal tax receipts would have been about $40 billion higher.

The benefits of economic growth flow through to income and tax receipts because with greater value added, people are paid more and more are employed. Recent US employment data confirms precisely how this formula operates.

Our US counterparts tell the two factors contributing most to these outcomes is the reduction of regulatory constraints on businesses and reduced corporate taxes — these encourage investment which drives jobs and income growth.

Productivity improvements are the only sustainable way to support wages growth and additional investment in business activity means more hours are worked and jobs created.

Herein lies the differences in approach. 

The Business Council of Australia advocates for policies that promote economic growth and the better outcomes for us all this growth will foster. We know that appropriate regulation is important and that excessive regulation drags like an anchor on business investment. We also know that if business is to attract the capital to fund investment we must provide competitive returns on that capital. 

That is why we support policies that reduce unnecessary regulation to increase flexibility in our economy and deliver a company tax rate that keeps us competitive. 

The ACTU seeks the opposite — a more regulated, less flexible economy and higher taxes on business, justified in their mind by a series of grievances not supported by the facts. 

You would think that the ACTU would welcome the 403,300 jobs that business helped to create over the last year, and the 4.8 per cent increase in total wages paid to workers. Or the fact that female workforce participation is at a record high. Many of the BCA’s members already have in place family friendly policies of the type the ACTU seeks.

Contrary to union claims about casual employment increasing, it has remained steady at about 20 per cent of all workers for more than two decades. We have a strong safety net and a minimum wage that is the OECD’s second highest. 

The unions’ endless refrain that business does not pay its fair share of tax is wrong. Australia’s reliance on corporate tax is the third highest in OECD countries as a share of total tax revenue. Australia has one of the strongest tax compliance regimes in the world and the level of tax compliance is high.

As we know, companies pay tax on profits. Those paying no tax could be doing so for several reasons — they may be investing heavily in future growth to create jobs, or might be struggling to be profitable in a challenging business environment. 

Companies should strive to expand, and reinvest in their operations, as well as being given every chance to stay afloat. While they are doing this, they are maintaining a workforce, paying wages, paying bills, supporting small businesses along the supply chain — all this helps grow the economy. 

The ACTU’s dislike for big business ignores economic reality. Business employs more than 10 million of the 12 million Australians with a job. Three-quarters of the jobs are in small and medium enterprises but half the revenue of these businesses come from a big business — they need each other to thrive.

Small businesses know this. Peter Strong, the CEO of the Council of Small Business Organisations of Australia, has highlighted that the company tax reduction already passed on to businesses with revenue of less than $50 million will become meaningless, sooner rather than later, unless the tax change is passed on to all businesses.

In smaller businesses after-tax profits are the wages of the business owners. To argue against tax cuts is to argue against income growth for many Australians. This may not concern the ACTU as the majority of Australian workers are owners and employees of small to medium businesses and unlikely to be among the declining number who are members of a union. 


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