Event: Jennifer Westacott interview with David Speers, Sky News
Speaker: Jennifer Westacott
Date: 16 October 2017
Topics: Energy and company tax
David Speers, Sky News host: On this energy policy, it will go to cabinet tonight. Firstly, are you aware of what the policy is? Are you satisfied with the level of consultation about it?
Jennifer Westacott, Business Council CEO: First of all what’s really good is the government sort of saying what we’ve been saying for a while now which is that we’ve got to talk about affordability, reliability and meeting our emissions reduction target. And far too much of this debate has been about an EIS, an ETS or a CET – I think that has bewildered the community.
But no one scheme is going to solve every single problem, so what I am really comforted by is that they’ve been listening on the fact that you’ve got to have a comprehensive package – it’s got to address reliability and affordability as a top priority, and of course we’ve got to meet our Paris targets – and these things have got to be brought together in a comprehensive plan.
I think what really matters to make this kind of work is the opposition spokesman Mark Butler saying we’re not going to rule things out. The opposition, other political parties, business itself all need to stop, pause, look at the detail, work out whatever the government’s proposing, how it can be made to work; the worst thing that could happen now is that we go into another round of ‘never ever’, pure politics or ‘this won’t work’ or ‘it’s not our scheme, so it’s not a good scheme’.
We have to remember at the end of this is someone’s who’s just got their winter bill, who’s working out what they’re not going to do now to pay for it, and a small business or even a large business who says ‘wow, you know, these bills are starting to really hurt our competitiveness’ – that’s what really matters here, and I’m calling on everybody to sort of stop, pause, take a breath, let’s get on top of the detail, let’s work out how it can work.
And what we want to see of course is that government sits down with industry across all of the industry sectors and says how are we going to make this work? We just cannot afford more stop-starts on this. I mean that in itself is having this terrible effect on investment.
David Speers: That’s an interesting point, so you’re saying to all sides of politics when this announcement comes down tomorrow, give it a go?
Jennifer Westacott: Absolutely because we have this tendency of just saying ‘we don’t like that’ and ‘we don’t have an alternative, but we don’t like that’. Well, I think my call on people tomorrow that if you don’t like this, put up the alternative – but not an alternative that’s just another acronym. Put up the alternative that solves those three problems which is what I’ve been saying for ages: affordability, reliability and meeting the reduction target.
David Speers: The Clean Energy Target which you’ve certainly supported, but does it do much on reliability?
Jennifer Westacott: No, it’s not designed to do that. It’s designed to send a signal for investment which in, you know, in due course obviously impacts reliability -
David Speers: New generation -
Jennifer Westacott: Yeah.
David Speers: - that’ll help
Jennifer Westacott: The thing – you and I have talked about this before – the thing about the Clean Energy Target, all of these schemes, you’ve got to kind of boil it down and say what is it you’re trying to fix for? You’re trying to send a signal about how emissions will be treated in the economy so that you then give companies that corridor of certainty about how they invest. Because if I said to you now ‘what’s going to be the way that carbon pricing is dealt with in 2036?’ you won’t know the answer to that and nor will anyone else. That’s the purpose of these schemes, and I think we’ve got lost that first of all we’ve got to deal with emissions reduction across the whole of the economy, and secondly we’ve got to remember the point of these sorts of schemes was to send that signal. But importantly it’s got to come with a package of things about affordability and reliability as well.
David Speers: Alan Finkel the Chief Scientist keeps saying whatever you do here – it doesn’t have to be the Clean Energy Target, you’ve got to have some trajectory -
Jennifer Westacott: Yeah, that’s right. Correct.
David Speers: About how you meet that emissions target, 26 to 28 per cent –
Jennifer Westacott: Correct.
David Speers: How important is that for you to see tomorrow?
Jennifer Westacott: Well it’s hugely important that we see not just the trajectory, but what’s the trigger? How will emissions be treated? Because if you’re trying to do a major project you want to price risk – you want to price price. Now of course companies do that all the time - they price currency, they hedge for fluctuations - but we don’t even know what this looks like, so it’s very difficult for companies with long-run investments to make even that first decision. So we want to see a trajectory, we want to see how emissions will be treated. But we have a trajectory, we have a carbon reduction target set by the government, 26 to 28 per cent; we need to work within that target and avoid having other targets on top of that like the Renewable Energy Target.
David Speers: So you don’t want to see any additional subsidies for renewables beyond -
Jennifer Westacott: Beyond what’s there now.
David Speers: Then keep the RET as it is.
Jennifer Westacott: Yeah. Look, the problem now is unfortunately, ironically, the scheme that’s caused so many of the problems we’ve now inherited, it’s bringing on the investment we need. That’s potentially got that impact, certainly on all the evidence I’ve seen, to put some downward pressure on prices, and certainly a lot of evidence suggesting if you removed it now that downward pressure won’t come. So ironically the scheme that’s caused so many of the problems, it’s important to let it run its course but not beyond that. I mean, you’ve got to remember what was being done here, we were giving people subsidies for being renewable – now, you know, that has distorted the market –
David Speers: And it’s concentrated in one state –
Jennifer Westacott: It’s true and of course we’ve never managed baseload on top of that and all the stuff that people know.
David Speers: To simplify all this, the wish-list from business essentially, it’s saying let the RET as it is run and nothing beyond that, but have something in place that is going to show how we get our emissions down and boost reliability?
Jennifer Westacott: Correct, well boost investment which is then boosts reliability and affordability. All of this is about keeping capacity in the system, getting new capacity to come into the system. And it’s not just all of this; other things that are in Finkel’s report are important like getting the states to remove these moratoriums on gas. This is about a multifaceted approach absolutely.
David Speers: You’ve watched this debate for years and years and years. How confident are you that the policy we’re going to see tomorrow is going to end the climate and energy wars?
Jennifer Westacott: Look, you know, I’m optimistic that there’s been a lot of listening and we are really at a point now where I think government realises this and it’s great to hear Mark Butler kind of taking the sensible approach here. Let’s just all tomorrow just put it to one side for a minute, let’s look at the detail. And I make this point to business as well because there are always trade-offs in these things and we’ve got to get on top of that and keep coming back to those three things: does it improve reliability, does it put downward pressure on prices and improve affordability, and does it help us meet our emissions reduction target? We’ve got to balance those three things.
David Speers: Alright, let’s move to company taxes, because I'm sure we will get back to energy at some point once we do have this policy announced.
Jennifer Westacott: Yep.
David Speers: Now, parliament has of course passed company tax cuts for businesses with a turnover up to $50 million. The government's policy is to go beyond that over a number of years but it can’t get it through parliament. You've today have produced this brochure and you are focusing on what the rest of the world is doing and in particular, I suppose, Trump's plan to bring down the corporate tax plan in the United States. Is there a real danger we are going to lose investment in Australia?
Jennifer Westacott: It's not just me saying this, the International Monetary Fund a couple of weeks ago put out a report saying if the Americans go to 20% you'll see a lot of investment move to the US and they mention from Australia and other countries.
David Speers: Is there any difference though that the US has state income taxes on top of that?
Jennifer Westacott: Yeah, but they do have a headline company rate of 35%. I mean all these systems are complex but they do send a signal about the competitiveness of investments. And I was there a few weeks ago meeting with very senior people in the administration and there was a lot of momentum behind this - a real sense that they had to get something done on this. And interestingly -
David Speers: Is it unfair to compare the 30% rate here to a 20% rate in the US because of the state income taxes?
Jennifer Westacott: Well, it’s more kind of the real points of comparison are the state company taxes. Look, I think it's the overall tax burden and the headline rate. I mean we have many kind of state taxes, if you take payroll tax and you take stamp duty. I mean, all these things kind of are kind of amounting to the same thing. They are all a tax on investment, they are all a tax on competitiveness.
I mean, it is pretty clear that global companies will move their funds to where they get the best return and you know the US signal that is going to go from 35 to 20, for in a world where big investments in agriculture, mining, manufacturing are all competing for that same pool of funding – that money going back to the United States or that money not coming to Australia – that is putting our capacity to create new jobs, new businesses, pay people more which is the real bugbear for most Australians. It's putting that at risk.
I mean, we have to now get into, as I talked about in my Press Club speech the other day, a kind of sense of the proper protectionism: how do we protect Australian jobs, Australian workers, Australian wages, not through industry subsidies, not from turning our back on the world, but from being able to compete globally? And tax is a huge part of that.
David Speers: As you know critics of company tax cuts say there's no evidence that it trickles down into wage rises for ordinary workers. I mean where is the evidence of that?
Jennifer Westacott: Well the evidence is in their own work. I mean, Ken Henry when he did his report, a report commissioned by the Labor Party when they were in government, made it very clear that the beneficiaries of a company tax decrease were wages and workers.
Take us back to economic reality. There are only two ways to increase wages: you get the terms of trade first or you increase productivity. And just look at the data going back many, many years. The link between productivity – and by that I mean, more efficient, smarter, working, creating more value – investment and wage growth are absolutely inextricably linked.
David Speers: The small and medium sized businesses have received, albeit, a small company tax cut already. Have they passed it on?
Jennifer Westacott: Well let’s see. I mean these things all take time to play out but my question always is this. In a world where people are competing for global capital, in a world where we know that productivity drives wage growth and it’s wages that the community is very concerned about, what is the alternative to driving business investment - the lowest it’s been as a share of the economy since 1994 - if we do not do this? Are we seriously going to just watch country after country around the world lower their rates, not over 10 years, but immediately. I mean, why are we at 30%? That was the rate that was set so we were below the OECD average. Even if we do this plan, we are still going to be above the OECD average and that's over a decade.
We are just falling so far behind on so many fronts. Tax is something we can control and we should. I'm pleading with people in the Senate to understand – people I know care about the country; Senator Hanson rightly cares about mining, about manufacturing, about regional Australia; Nick Xenophon rightly cares about manufacturing and jobs in South Australia – we have got to pull lever that we can pull to make ourselves more competitive.
David Speers: Jennifer Westacott, the chief executive of the Business Council of Australia, thanks very much for joining us.
Jennifer Westacott: Thanks very much, David.