Event Jennifer Westacott interview with David Speers, Sky News

Speaker Jennifer Westacott

Date Tuesday, 2 April 2019

Topics Budget 2019, wages, skills and climate

E&OE

David Speers, host: I'm joined by Jennifer Westacott, the CEO of the Business Council of Australia, and Michele O'Neil, the president of the ACTU. Thank you both very much. Let me just get a general view of the budget that's been announced. What do you think, Michele?

Michele O'Neil, president, Australian Council of Trade Unions: Well, we think it's a fail. We think it's a fail and that it doesn't deliver fairness and it doesn't deliver fair wage increases. So tax cuts just are not the same as delivering a real increase in wages for working people.

David: It's still money in the pocket, though.

Michele: It's money in the pocket but over time it's less. So the benefit of actually getting real wage increases is a compounding benefit where a tax increase, decreases over time. And the other problem of course is you see a reduction in the tax base. So the amount of money that is available to go to services that people rely on who are on low and middle incomes gets affected too. This budget actually cuts $158 billion over ten years out of what we need to fund services. 

David: What do you think?

Jennifer Westacott, chief executive, Business Council: I think it's a pretty good budget. I think it's responsible. It's good to see us, kind of, getting back to surplus and getting back in a credible way. I think people forget just how important that is if something goes wrong. I think there's some good pro-growth spending – $100 billion on infrastructure, particularly in regional communities. You and I were in Townsville last week, really important to, kind of, keep those city deals going. The big tax cuts, they are pro-growth, they are targeting low and middle income earners – that's money in people's pockets. That's dealing with the fact that people's wages haven't gone up. There's the beginnings of a good skills package. Of course, there's some good stuff for small business. Just on the wages though, look you know, I agree we've got to get wages up. I've been talking about this for years – we've got to get wages up for people. 

David: How do we do it?

Jennifer: But we've got to do that through productivity. You can't do that unless you drive investment, unless you drive productivity, unless you drive innovation and of course you've got to do that through skills. Now, the thing that's missing in the budget is that economy-wide investment driver and, you know, that's the thing that we think is the missing link in the budget.

David: Is that the big business company tax cuts?

Jennifer: Well, it's either an investment allowance. I mean, the senate gave up on Australia's competitiveness and they've surrendered that to big businesses in other countries. But, you know, you could at least do an investment allowance to, sort of, try and drive...

David: Like Labor's offering?

Jennifer: Well, Labor's one is small but they've put it back to 2020-21 so let's hope we see it delivered but, you know, that sort of thing is really important and we've supported Labor's investment allowance. But wages have got to go up through sustained investment by companies who employ 11 million out of the 13 million working Australians.

Michele: But the problem with that. Yeah, the problem with that theory of course is that we've seen productivity increases – sustained productivity increases and none of that is being delivered back to workers in wage increases. So this is the problem, we actually have the lowest share of labour as a share of GDP than we've seen since those figures have been collected by the ABS more than 60 years ago.

David: So how do you think we get there?

Michele: Well I think that make a difference in terms of wage increases that would be sustainable in the long term is two things. One is, I think, having a living wage enshrined in legislation so that you actually have those on the lowest wages not living in poverty-

David: You're talking there about 60 per cent of the median wage?

Michele: That's right. 

David: The minimum wage being 60 per cent of the median wage?

Michele: That is one way to do it and that's the proposal we've put in the current system. So under the current laws which really don't properly consider this, that's a proposal we've put for this year’s increase.

Jennifer: I just want to pick something up, Treasury released some information last year that said the labour share hadn't changed for two decades, so I think we've got to make sure we're, kind of, having the right factual conversation here and of course productivity-

Michele: I am talking about going back over six years. So over that period of time, absolutely the labour share of GDP is less.

Jennifer: But if you look at the last 20 years, and this is Treasury's data not mine, but also productivity has been flat. Multifactor productivity has been flat and that's what drives wage increases. So, we all want people to get higher wages.

David: It sounds to me like you're talking about different time frames. You're saying over six years we have seen productivity?

Michele: No, what I'm talking about was in terms of labour share of GDP, the report I'm relying on is the Australian Institute report that came out late last year.

David: [crosstalk] productivity needs to improve?

Michele: We think there's productivity improvements and improvements in profits. Neither of which are delivering wage increases. So the second thing that I was going to say to you that would deliver wage increases is a change in our system in terms of capacity to bargain. So again, we've got fewer and fewer people covered by enterprise agreements.

David: You're talking about industry wide bargaining?

Michele: We're talking about multi-employer bargaining and the capacity for different groups of workers to come together with different groups of employers and negotiate a fair deal. Take for example, child care. It's impossible at the moment unless you have in the room those people that fund child care services as well as a number of services to lift some of the lowest paid skilled workers in the country.

David: What would be wrong with that?

Jennifer: Well first thing, the enterprise agreement system has delivered higher wages than the wage price index.

Michele: For a shrinking number of people.

Jennifer: Yeah and we have always said we have got to fix the enterprise agreement system. Make is simpler, make it easier for companies to adjust, make sure the productivity benefits are passed to workers. I agree with Michelle, I think people in the none government sector, people in child care, people in some of these emerging industries. Particularly where women are a dominant part of the workforce. We need to, sort of, say does the EBA system work for that? 

David: Would you support multi-employer bargaining?

Jennifer: Not across the economy.

David: For those child care-

Jennifer: I think that's something we should talk about and I think that's the sort of thing that people who want to see those people have better living conditions.

David: So, you're not closed to the idea?

Jennifer: Well, no we should sit down and talk about that. My concern is throwing out the EBA system and having-

Michele: Nobody is proposing that.

Jennifer: Yeah but I think some of the rhetoric goes to that Michele. But to keep the EBA system, to keep the integrity of it, to make sure that an enterprise can sit down with its employees and make sure they can adjust to the economic circumstances. They can do more, export more, and that their workers get the productivity benefits. I agree with that.

David: There sounds like there is a little more agreement on that than I thought. We’ve got a little bit away from the budget here per se but this is a really important election debate no doubt about it. Tonight, in the budget we also saw though, on the skills front $525 million package, 80,000 new apprenticeships we’re told in industries with skills shortages. The government wants to double what’s calls the incentive payment for employers to take on an apprentice to $8,000. Will that make a difference?

Jennifer: I think that’s actually a very good initiative because what’s happened, is the employer incentives have dropped away and so we’ve seen the apprenticeship system really fail. We’ve seen the number of commencements really fall away, almost to half I think. And we’ve seen tremendous kind of confusion about definitions of traineeships. So, this looks like a start in fixing this big problem. I mean, we’ve also got to fix some cultural problems. It’s good to see there’s a career counselling initiative in the budget. I’ve been saying this for years, we’ve got to make sure that apprentices, the VET system, is an attractive option for a young person, they’re not always channelled into a university qualification.

Michele: Just on the apprenticeships, the problem is that it is far too little too late. We’ve actually seen 150,000 less apprentices over the period of time of this government. And it’s not even, I think it’s trying to look at putting half of those back, and of course we’re six weeks out from an election now the government is paying attention to this one. Where under their watch we’ve seen such a dramatic decrease in the number of apprentices in this country. It’s I think a cynical thing to try and do this at this point when they’ve done nothing over that period of time. The other thing is that the money that they’re talking about going into the overall system, the large figure that you talked about, I understand that only a small proportion of that something like $55 million is new money, the rest of it is not new money.

David: It’s been rolled over from other programs.

Michele: That’s right.

Jennifer: It’s as I understand it, some of the states didn’t sign up. But let’s not underestimate the importance now that finally, after so long, we’ve got both political parties talking about VET. I mean, I think you and I would agree on that.

Michele: Look, I’m glad they’re talking about it. But I amazed that really under their watch this government for six years has done absolutely nothing about it.

David: Let me ask you finally, before we run out of time, about yesterday’s announcement from Labor on the climate front. In particular, it wants 250 Australian companies to face a more stringent requirement to get their emissions down by 45 per cent. Are you worried on behalf of the ACTU, what that might mean for them, their workers, we’re talking about a lot of-

Michele: No, I think what is important and what we’ve seen in terms of commitments from the Labor Party is their understanding about the need for a just transition as well. So the importance of, I think they are very good measures that have been announced-

David: We haven’t seen a lot of detail, though.

Michele: No, but-

David: Who’s going to get compensation, who’s not.

Michele: I think that’s right and we of course want to see that detail and it’s really important in any consideration about what happens in the energy sector that we think about the real impact on workers. But not just workers, but families and communities, it is that stone in the pond effect.

David: So, you’re not too worried about steel workers, aluminum workers-

Michele: Of course we are, we’re worried about any transition in the economy and what happens for those workers and at the moment we’re seeing nothing in place about any long term plan that requires serious investment to actually make sure that those workers are supported and assisted and that we don't have industries that are left to abandon people. So we're concerned about it but we think that the conversations and the support that is being shown by the Labor Party about the level of understanding of the need for a just transition is a good start.

David: Well Jennifer, what do you think?

Jennifer: Not a single one of the big questions has been answered yesterday. You know, how will this be apportioned across the economy? What sectors will have to do what? What will be the impact on those sectors? What will be the impact on jobs? How will the electricity sector get to that target? Is that the NEG? Which NEG are we talking about now? Are we talking about the NEG that Malcolm Turnbull was talking about? We are not going to carry over the Kyoto commitments, now in the most recent modelling, that has an enormous impact on the economy. So, some of the things were settled, they allowed international permits – good. But the big fundamental questions of how this will actually affect people in the regions, certain sectors of the economy, are not answered. And I think we've done this so many times, we've made false-starts. We get started on this stuff and then half way into it we go 'oh my god, there's the steel industry finished. Now we've got to have a compensation package for that'. I just think we've got to answer these questions.

David: Well, great to talk to both of you, Jennifer Westacott and Michele O'Neil, thank you very much for joining us.

Michele: Thanks David.

David: I would love to talk again during the election campaign because these are, yeah, some big issues beyond just the budget tonight that we’ve touched on.

Jennifer: Absolutely.

David: I appreciate that.