Jennifer Westacott interview on CNBC Squawk Box Asia

03 March 2021

Will Koulouris, host: Very pleased to be able to welcome Jennifer Westacott. She's the CEO of the Business Council of Australia. And she's joining us live now from Sydney. Jennifer, thank you so much for being here.

Jennifer Westacott, Business Council chief executive: You're welcome.

Will: We've seen these numbers and an incredible boost to what we were already expecting to be a boost. And very pleased to have you. In terms of what comes next, and I suppose in particular, the business side of things, we've seen this remarkable amount of stimulus coming through. A lot of measures being introduced by the government to really drive it home, I suppose, incentivise investment. Do you think enough is being done so we can see a business investment, a business spending led recovery for the rest of 2021?

Jennifer: Look, these are great numbers. There's no doubt about that. Better than everyone expected. And it shows that the economy is on its way back. It does show that investment is up, which shows that things work. Things like the expensing that was done in the last budget, they work. It shows though, that a lot of the growth is driven by consumption. And obviously some of that is driven by stimulus, which obviously has to kind of come to an end in terms of JobKeeper. So I think really the challenge is how do you build on this incredible strength and resilience in the Australian economy? Get that investment deepening. So our argument is making it available to all companies, really unleash the balance sheets of the big miners, the big supermarkets, these bigger organisations. Start thinking about a permanent investment allowance to send a message to international investors come and put your money in Australia. And of course, it does, I think, signal that you've got to stay the distance on opening the economy and lifting the restrictions because once you do, it's pretty clear that the consumer comes back pretty fast and they start the kind of patterns of consumption. And that drives a lot of economic activity. So good news, got to keep going.

Will: I wanted to actually discuss part of what you were just saying there as well, Jennifer. In terms of what we've seen for the domestic borders, because obviously not only is business travel something that you can correlate directly to GDP growth at the same time, but we've just seen a lot of uncertainty when it does come to businesses. I know you've been incredibly vocal about the need for some kind of uniformity to the rules. Do you think that we're almost there from the conversations that you've had from the discussions that you've been a part of that we could see that relatively soon considering the vaccine rollout that is currently underway?

Jennifer: That's a good question. I think we're certainly saying as the vaccine rolls out. Surely, that's the time that you start to tie further release of activities in the economy to the vaccine rollout. So lifting the caps on venues, permanently keeping open our state borders. And then as the vaccine moves beyond vulnerable people to the wider population, starting to think about international students, huge part of the economy, starting to think about skilled migrants in terms of those highly skilled workers that many companies now need to sort of continue their growth trajectory.

Jennifer: We're sort of saying tie that. Look, I think there's an appetite for that amongst the east coast states. Western Australia is still saying that it's too early. The trouble with that is they have benefited from the continued mining investment and continued mining activity. You've got to ask the kind of common sense question, how long can that state continue to be estranged from the east coast? There's a kind of personal element of people visiting their family and friends, but there's an economic element about how long can that go on for before it starts to hurt Western Australia. But I do feel that the vaccine rollout and the way the government has thought it through, which is very careful, is the opportunity now to say, well, okay, now we should release more restrictions and start to send the signal particularly to international students who could of course go to somewhere else. Big part of our economy, big part of our recovery.

Sri Jegarajah, host: Jennifer, good morning. Globally, the conversation still is about slack in the labour markets. Are you getting any insight from your members as to when that starts to tighten, when you guys can start hiring again, and ultimately when wages rise? Because it's wages and wages growth that is ultimately going to kick off this virtual cycle of inflation, isn't it?

Jennifer: Absolutely. What we're hearing from our companies is that many of them are still hiring. Certainly, the big supermarkets have hired five or ten thousand people extra. They're continuing to have a lot of demand, so they're continuing to increase their staff load accordingly. But to your point on wages, I mean, this is our big bugbear here. You can't get wages going up if you don't increase productivity and you can't do that if you don't drive investment. If we don't get those big transformative investments, whether it's in renewable energy, whether it's in further expansion of mining and resources, whether it's in manufacturing, we don't get that wave, that productivity that comes from investing in new machinery and new technology.

Jennifer: That's why I'm sort of calling for government to lift this $5 billion cap on the expensing arrangements and to consider a long-term investment allowance that would make those kinds of investments. Obviously, give a deduction for investment. We've got to do more than just a short-term temporary measure. We've got to signal to the world that we are a better place for destination for capital. We've got to end this capital shallowing that's been happening for the last few years. That's about permanent changes, not temporary changes. And it's about acting across the whole economy, because you've got to get those big projects by big companies to start. Really, I think, creating that productivity surge that to your point, is the key to unlocking wages.

Martin Soong, host: Yeah. Jennifer, following on from Sri's question, and that is look, all of this investment, how companies specifically are going to pay for it? We note that the Australian central bank had to do a surprise intervention to keep the short end of the yield curve, three-year bonds, calmer or tamer. If the situation persists, how much is this going to hurt corporates and their ability to raise money by borrowing to fund investment and expansion, whether it is cyclical, getting the cycle going, or whether it’s much longer term and strategic?

Jennifer: I think it's longer term and strategic. I think we certainly looked, when the pandemic started, looked hard at whether or not there was enough liquidity in markets. There was general view by the Reserve Bank and others and the Treasury that there was, and that people weren't having any trouble accessing the bond market, which was the anxiety that people had. Everyone's keeping a really close watch on that. But I do think that if you look at the top ASX businesses in Australia, you’ve still got some extremely strong balance sheets there. You've still got very strong balance sheets in the banks. You've still got big balance sheets on the miners in the two big supermarkets. So there's balance sheet strength, but it is something that I think people are going to have to watch pretty carefully.

Martin: Okay. Jennifer, excellent talking to you. Thank you so much for spending time with us. Appreciate it.


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