Event: Interview with Ticky Fullerton, Sky Business
Speaker: Jennifer Westacott
Date: 2 August 2018
Topics: Company Tax, Banking Royal Commission, ASX Corporate Governance Council’s Principles and Recommendations, National Energy Guarantee
Ticky: Now one thing you can say about lobbying for big business, is that there is never a dull moment. In the last few days, especially following Super Saturday results, it seems the continued support of the federal government for big company tax cuts, what Labor calls "Malcolm Turnbull's signature economic policy" and a signing-off on the National Electricity Guarantee, the NEG, both seem on very shaky ground. Joining me now, Jennifer Westacott, Business Council of Australia, chief executive. Glass half full or glass half empty?
Jennifer: Well, a difficult glass to drink.
Jennifer: I mean it's a tough time, but I think if you stand back from Super Saturday, and I'll let political analysts deal with the politics, you'd sort of say, "well, what's changed? Something that was unlikely to happen didn't happen". And of course the rest of the world hasn't changed. No one has been sitting in our competitor countries waiting for the Longman by-election to make their countries more competitive.
Ticky: It's the spin that Bill Shorten and many of his colleagues were able to put on this. "Do you want to spend money, throw taxpayers money at greedy banks, or would you rather spend it on education like [crosstalk]?"
Jennifer: Of course this is a phoney choice.
Jennifer: Because you know where will the money for education and health come from, if we have less than a strong economy, if we don't take the opportunity now to make our businesses which employ 86 per cent of Australians and generate 80 per cent of the economic wealth -
Ticky: [Crosstalk] a catastrophic failure on the message. How can you get your message?
Jennifer: Well, we have been trying and we have been on social media and millions of people and CEOs have been out. I think the parliament has to stand back from this, including the government, I'm really pleased to see the Prime Minister re-commit to this, and say, "what will we be left with if we don't do this"? We'll be left with a two-tier tax system. That if you sort of just think about a company with a turnover of $50 million, when it gets that extra dollar, assuming a profit of 10 per cent, that's $125,000 of extra tax it's got to pay. We're leaving out companies like Bega Cheese, like Coopers Brewery in South Australia. We're condemning Australian companies to an uncompetitive environment, making it hard for them to invest, to embrace technology, to expand, to be more efficient, which means they can employ more people and pay them well.
Ticky: Well, this was -
Jennifer: They're an unattractive destination -
Ticky: This was an argument that was actually won, really, with the income tax, wasn't it?
Ticky: Because Labor tried to cut it off and we said "no, look at the trajectory. Look at how absolutely, small businesses can grow".
Jennifer: Absolutely. And if people think that this failure to act on the whole plan is only about punishing big business, they are living in a fool's paradise. Because you know, better than anyone, that small businesses benefit when big companies invest. And so we're cutting off investment to small companies. We're cutting off our capacity to adopt new technology. We're basically leaving ourselves at the mercy of global forces and I've just been overseas, and you know, people in Canada and the United States, they just shake their head about Australia. They say, "you people have had the benefit of a mining boom, but all those tailwinds are not going to always be behind you".
Ticky: What about small businesses, Jennifer, I mean is that a way into these electorates? To get the small business lobby groups together to actually try to push for -
Jennifer: Absolutely. I think we've certainly worked very hard with COSBOA on this and Peter and I, I think need to get back out, because when he and I are in Townsville and Cairns -
Ticky: That’s Peter Strong?
Jennifer: Yeah. And we didn't have much of an argument in Townsville and Cairns about the need for a company tax cut because they've got 14 per cent youth unemployment, 17 per cent in Cairns, higher than national unemployment rates, they know that when big companies pull out or slow down their activity, there's huge implications for small business. I talk to a lot of the mining suppliers, not the miners, who said "gee, you know when BHP and Rio slowed down their activity, I was at the wall". So we've got to make that point.
Ticky: So, this knock, knock, knock of big businesses, which is going on and very much polarised in the royal commission there, I'm just wondering what you make of for example, the EY report that's recently come out, really suggesting that the royal commission has driven some of this credit squeeze.
Jennifer: Yeah, well I think we've got to be very careful in these things, that we don't get unintended consequences. That we finish the royal commission with a stronger banking system, not a weaker one, because, you know, I'm always bemused when Australians say, "isn't it terrible that company made a profit". Well, live in a country where they make losses and see how terrible that is, for unemployment, for people's living standards. So, I just think this kind of phoney class war, this false kind of hatred of business, the reality is people are going to have to govern at some point. And governing means you have to come to terms with the fact that business is the engine of the economy and lumbering it with an uncompetitive tax rate, saying it can't compete, tying their hands behind their back, I just think it's irresponsible.
Ticky: We've got the royal commission kicking off again, for sure. A lot of these retail funds, many owned by the banks are going to be questioned about the amount of fees and perhaps extra fees, that they're fee-gouging, so are we going to have an even harder job to do?
Jennifer: Well look, I think the royal commission has made it difficult. And of course the things that they've reported have made -
Ticky: But some of these businesses have made it difficult.
Jennifer: That's my point. I think the royal commission is exposing some very serious things that business has got to get its head around and solve some of these things, and take them on and get them fixed but we should never apologise in Australia for having successful businesses and successful banks because, you know, you travel, I travel, you go to countries where businesses are not successful and it's the poorest people who are not the beneficiaries. And this idea that we've got ourselves into, that somehow business is a pack of blokes sitting around a corporate board table, when it's the workers, the 10 million Australians who work in one, the shareholders, the customers, the suppliers, that's who business is.
Ticky: What do you make of David Murray's shout out this week about really the regulators actually having a part in blurring the lines when it comes to corporate governance, between the role of the board and the role of management, and how that actually may have contributed to some of the governance failures that have been exposed in the royal commission?
Jennifer: Yeah, I think he's called, I think he's really belled the cat on this. I think you've got to have the primacy of the relationship between the board and the chief executive. And you've got to be very clear about not diluting that role. And I think the issue with the ASX guidelines, which I might come back on and talk in more detail, is that if the boards have got to double down on their core responsibilities, their conduct, the conduct of their companies, the fiduciary responsibilities, you know those hard-core things, they're really at the source of some of the issues that we're now seeing playing out in the media. And I think he's right to call that out and I think it's absolutely crucial -
Ticky: It certainly puts him at odds with David Gonski, who was chairing the stock exchange and created all these in the first place?
Jennifer: Well, you know, I think you've got to be very careful that if you've got a set of guidelines that start to add on to already existing legal obligations, or are very prescriptive about things that you and I could debate for hours the definition of, we've got to get corporate Australia back to focusing on its customers, its staff, its shareholders, the community.
Ticky: Yeah, well the suggestion was, it was the board interfering with the ... oh sorry, encourages the board to put feelers down into management, perhaps interfere, accountability is blurred -
Jennifer: Yeah and it's clear that a director on an ASX company cannot understand what somebody is doing. And of course they should be accountable. Of course they should make sure there are policies for accountability, but we've got to be very clear that that management has a responsibility, boards have got an oversight, they've got to make sure that we kind of re-established the primacy of that. But once we start diluting the role of boards into things that are not fundamental for the successful running of that company, we're just adding another pile of paperwork.
Ticky: Very interesting to get your views on that. Now. Before you go. This jolly old NEG, now we've even had the idea this week that farmers will have to kill herds, and that's going to go down politically very sweetly I'm sure, not. What do you think of all this? Josh Frydenberg has his work cut out.
Jennifer: He does. Look, our message is to COAG now. This is the first policy, Ticky, I've seen in my time in the BCA and this has been just one of those awful issues. The climate change and energy one, where every business, whether they're a retailer, whether they're a user, all say, "we can make this work, we can make this one work". And to me that says, "let's get this done" because it deals with the two things. Reliability as a result of all the renewable energy coming on, and telling people how we're going to deal with emissions. We can't get investment in baseload and dispatchable power whilst ever people don't know how we're going to treat emissions in 10 years' time.
Jennifer: And I think people want to muddle this up with the target, with all these extraneous issues -
Ticky: Well yeah, there's suggestions now that maybe the Victorian, as you say talk to COAG, that maybe the Victorian Government is going to try and kick this down the road because of the Green's issue or -
Jennifer: But this dithering that we've got ourselves into as a nation, we're dithering on, making our economy more competitive, meanwhile every country I go to, competitiveness, investment, that's what people talk about. When you're dithering on the NEG, when everybody who's looked at this, who's really got a stake in it says, "you know we can make this work". Well, let's make it work because what's another three months going to get us? It's going get us-
Ticky: Who needs to be convinced?
Jennifer: I think COAG in the first instance. Obviously the coalition party room and Josh Frydenberg's done a brilliant job of a very difficult policy area, getting something workable, getting something that business says, "we can make this work". But now really it's up to COAG to put politics aside and make this happen, because we have to have some certainty in business here because this is really about getting investment, getting things going and again at the end of the day, the people who pay the price for us not getting these things right, is someone who gets an electricity bill they can't pay.
Ticky: Jennifer Westacott, thank you so much.
Jennifer: You're welcome. Thank you.
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