Event Jennifer Westacott interview with Barrie Cassidy, ABC 7.30

Speaker Jennifer Westacott

Date Tuesday, 2 April 2019

Topics Budget 2019, wages and tax

E&OE

Leigh Sales, ABC 7.30, host: Here is Barrie Cassidy again, this time with the Business Council of Australia chief executive Jennifer Westcott and the country's top union official, ACTU secretary, Sally McManus.

Barrie Cassidy, host: Thanks Leigh, well while we are on the subject of wages that's where we'll start. The forecast in the budget 2.75 per cent down from 3.25 per cent. What do you make of that, Sally?

Sally McManus, secretary, Australian Council of Trade Unions: And it's 3.5 per cent in the final year, so it's now, we have got 11 times, they've said that wages are going to go up in their budgets and they haven't gone up. We know at the moment the wages aren't keeping up with the cost-of-living. Wage growth is around 2.1 per cent at the moment. It’s just not enough. It’s not enough for working people because they are struggling, and it’s not enough for the economy either. Our problem with this budget is there is no plan whatsoever to deal with it.

Barrie: A lot of can economists are saying you are asking for too much and you’re asking for it too soon. And the fact is that Australia has one of the highest, if not the highest minimum wage in the world?

Sally: We have got one to have highest costs-of-living in the world and that is a big problem if wages aren't keeping up with costs-of-living, people stop spending. And because people are not spending, local businesses, small businesses, big businesses, they all suffer. 60 per cent of our economy is domestic demand. You would think in that case the government would have a plan for wages but they don't.

Barrie: Jennifer Westacott, what do you think, is this affordable is it desirable?

Jennifer Westacott, chief executive, Business Council: We have been calling for wage increases for ages. The question is how you get them. You get them through the economy doing more, you get them through productivity going up. I mean, the link between productivity and wage increases is not theoretical, it's factual. You can't get wages up if the economy is slow, you can’t wages up if unemployment is high. We have got to do the hard work of driving companies to invest. What I'm disappointed in in the budget is there is nothing on a kind of economy-wide effort to lift investment which as a share of GDP is at 1990s levels. So I agree with Sally, we want to get wages up, the question is how do you do it.

Barry: Are these the sort of levels you think are affordable?

Jennifer: The wage forecasts look in line with most of the economists' forecasts but you have got to actually do the work and both political parties have to do the work on this. They have to do the work on productivity, on skills, they have to do the work on driving investment. I mean, the only way you get productivity to increase is if companies invest in new machinery, in new equipment, if they expand, if they export more, if they do more, then they can pay people more. It can't be done through a magic pudding.

Barrie: Bill Kelty will say that productivity is important in these things?

Sally: Of course, of course it is. But the issue is, actually productivity has been going up. We just haven't been getting our fair share. At the moment, labour share of the GDP is at a 60-year low. So what that means is that profits are going up, productivity is going up and we’re just not getting our fair share of it and that’s the problem.

Jennifer: I think the economists would disagree that productivity is going up. The Treasury released some data last year that said the labour share had not changed for over two decades. The point is, we want people to have higher wages, we want people on low incomes to have better conditions. Now, the tax cuts that are in the budget today are going to give quite substantial relief to low and middle income households. But every political party ought to be thinking about how do we actually get a long term plan to increase the wages of all Australians. Not just for the 200,000 people on the minimum wage, for all Australians in that low and middle income group.

Barrie: You referred before to something that disappointed you in the budget. Is there anything that particularly pleases you, given there's nothing really around industrial relations, there’s no major tax reform?

Jennifer: Yeah, on the whole this is a good budget. It's responsible, it's great to see a surplus finally within our grasp. That's very important. People say it doesn't matter, it matters enormously, it matters enormously if something goings wrong. A balanced budget means we can afford the things like health and education and infrastructure. There is some terrific infrastructure spending, pro-growth, $100 billion, great emphasis on regional Australia, you and I were in Townsville last week, those people are crying out for some big infrastructure projects. What looks likes the beginning of a bit of a skills package and a focus on VET, I've been saying for years, get VET in order. What is missing in this budget is this whole of economy investment focus which is the only way we are going to drive productivity.

Barrie: We’re almost out of time.

Sally: Do you know what else is missing, is making sure that everyone pays their fair share of tax. So, at the moment, we know that 69 people earned a million dollars in one year, paid no tax, 700 big companies paid no tax. Where are the changes to make that happen? They say they are giving money to the ATO, they have cut money out of the ATO. And even if they did that have got to change the laws so we make sure we have a fair tax system because if we just have a $158 billion tax cut, that's money lost to our schools, our hospitals, our pensions, it will destroy a tax base, which will all depend on. Who ends up paying more? Working people for our schools and our hospitals.

Jennifer: I accept that principle. Let's crack down on tax avoidance but let us have the debate properly. The ATO just put outs some information. Private individuals, they think the level of the gap, as they are calling it, is $8 billion. For small business it’s 10 for large companies it’s 2.  The government has introduced initiative after initiative after initiative to deal with so-called multinational tax loopholes and we’ve supported all of those. So I'm totally in agreement with Sally, let’s deal with the loopholes, let’s make the system full of integrity, but let's get the debate right on where actually the big gains are.

Barrie: We are out of time, thank you both.

Jennifer: Thank you.

Sally: Thank you.