Event: Jennifer Westacott interview with Geraldine Doogue, RN Breakfast
Speakers: Geraldine Doogue, host RN Breakfast; Jennifer Westacott, chief executive Business Council of Australia
Topics: Workplace relations, wages growth, JobKeeper, JobSeeker
Geraldine Doogue, host RN Breakfast: Australia is entering 2021 in better economic shape than anyone could have predicted six months ago. And with the vaccine roll out just weeks away, there is the promise of a strong recovery, maybe a bull run. But it is not a smooth road. The potential of more COVID outbreaks remains a very real threat and on the economic front low wages and the looming end of JobKeeper remain a concern for business and employees alike. For more, I am joined by Jennifer Westacott from the Business Council of Australia, the BCA. Welcome back to RN Breakfast.
Jennifer Westacott, chief executive Business Council of Australia: Thanks very much Geraldine.
Geraldine: The Reserve Bank Governor Philip Lowe gave a reasonably confident assessment, I think you'd agree, of the economy earlier this week.
Jennifer: Yes absolutely.
Geraldine: It was a very interesting address. And we spoke with independent economist, Nikki Hutley earlier in the week, who said we are experiencing that sort of great desire, allegedly a V-shaped recovery. How confident are you and your members about the stability, the sustainability of this?
Jennifer: I think people are very confident. We started in a better shape than many other countries. We have managed the pandemic much better than many other countries. We have continued to see that bounce back in the economy, jobs returning as activity is released. I think where business is concerned is over the medium term that we make sure that we put the settings in place so that we can compete internationally. But overall, Geraldine, I think people are feeling very optimistic. You just have to look at the stock markets, to sort of see how confident people are. But you know, that is not through luck, that's through the good management of businesses who have made very careful decisions. And of course, it's been through the effective management of the pandemic by governments.
Geraldine: Yes and as you know, this whole question of the sort of almost two sensibilities at stake. One, worrying that the amount of money being pumped into the system really, with the Reserve Bank Governor saying sort of, 'I promise you, hold me to it, there'll be low interest rates for three years in order to get things moving.' That could provoke an asset bubble and encourage poor businesses to survive when they shouldn’t, versus those saying, 'look, you just get animal spirits going in Australia and all sorts of other things flow.' And they're quite different sensibilities. Where do you tend to sit?
Jennifer: I tend to sit sort of where the Reserve Bank Governor is. I think that, clearly a sustained period of low interest rates is good for households, good for businesses but you have got to do other things to make sure you take advantage of that. That is not the only reason people making investment decisions. It is things like rate of return, which goes to tax. It is things like red tape. And of course, it is very much about confidence. So, things like overnight border closures are not going to help companies and small businesses make decisions with confidence. I think that it is absolutely important to remember that they're going to keep a very close eye on the risk of asset bubbles. Certainly, for the very large corporations, people have very strict financial parameters to make investment decisions and those companies are not going to depart from those. And so, I'm pretty confident that people are not going to make crazy wild decisions because of low interest rates. I think companies are very well run in this country. And I think the Reserve Bank is saying, it's not worried about it, but it's going to keep a watch on it.
Geraldine: That's what we thought. So, it's really the real estate bubble that worries... Well, does it worry you? Because that is what people are saying. We've said that a few years back, if you recall, and it just moves so fast...
Jennifer: It always moves pretty fast. I think one of the things is to make sure that we're keeping an eye on those long-term settings. Land supply, continuing to make sure that we have got the housing market operating efficiently so that we are not, in two years’ time, dealing with another housing price spike.
Geraldine: Many argue, and the governor was very strong on this, that it's low wages growth. It's one of the biggest handbrakes on the economy. And people like Alan Kohler, the business commentator, is saying that businesses have sort of almost swallowed an addiction and he actually puts the government into this category too, I think. That a good business means low wages and that the governor is saying precisely the reverse. Now this must be a bit challenging for your members?
Jennifer: Not at all. The BCA has had a standing position, we want to see higher wages. We want to see higher wages.
Geraldine: So why isn't it happening?
Jennifer: Well, there's a lot of a lot of factors here. But let's just be super clear. Higher wages are good providing you've got a productive and efficient economy. By that I mean an economy where people are making good investment decisions where you're embracing new technology, you're re-training people, you're skilling up people. That's a productive economy that drives higher wages, not an economy that sees people working harder for less money. So, I just want to be super clear about that. That means we have got to keep in place the settings that are going to give us long-term and sustained wages growth. And that is what we want to see. I would put the skills agenda right up the top of that. We have got to make sure that people have got the right skills and that they have got the right skills for new technologies. We have got to encourage businesses to invest in new plant and machinery. We have got to encourage businesses to expand. And we've got to make sure that our industrial relations system goes back to a system where people are encouraged to sit down as employers and employees and work together to make sure that an enterprise is successful, and that people share the benefit of that in better conditions and higher wages.
Geraldine: And is that on offer with the sorts of industrial relations changes planned at the moment by the government?
Jennifer: Well, I think the package overall is a very good one. The crucial thing for us Geraldine is the changes to the enterprise agreement system. And by that, I mean the structural changes that will encourage parties to sit down together. So, things like saying on the better off overall test that the “overall” is what people should be focused on. That gives weight to parties, particularly trade unions and employees working together. And says, well if the parties have agreed we give that wage. It gets rid of some of the things that have been really distracting the system, things like hypothetical workers, people who aren't even working, having to be considered. Things like long approval times, getting that 21-day approval time. What I want to see is people getting back to the table, using the system that Hawke and Keating put in place, which has driven higher wages because people on EBAs get paid more. That we do not see that system in perpetual decline. Now, if we don't make any changes, I think we are going to end up with a 1980s IR system trying to cope with a 21st century economy. And that is not a recipe for higher wages.
Geraldine: But isn't the logical conclusion of what the governor was saying that actually shareholders, and when you go to your annual general meeting, managers are going to have to be able to explain why they're not distributing as much to shareholders because they're paying people higher wages. I mean, this is a big shift intellectually, isn't it?
Jennifer: I think so, but I think you've got to get the conditions for higher wages. People, shareholders, expect a rate of return. They put their money at risk for an enterprise to be successful. And companies have many stakeholders, their customers, their shareholders, and their teams. But you've got to make sure that you've got the conditions for sustained higher wage growth and that is that stuff around making sure we're a more productive economy. And we are not a productive economy, productivity has been very low for a long time and surprise surprise, so has wages growth.
Geraldine: And unemployment now predicted to peak much lower than originally forecast ending last year at 6.6 per cent. But that is still higher as the governor pointed out than it's been for 20 years.
Jennifer: Well, he said the highest rating two decades. So, we've got to operate on many fronts here. And part of that is that essential first step of managing the pandemic and getting things open again. The second step is getting us to be more competitive Geraldine and getting us to be more creative more innovative. And that's why the Prime Minister's emphasis on Monday was on research and on commercialisation on skills. These things are really important to set us up for the future and making sure that we are re-training people, skilling people, all of these things together, gets you higher wages, get your people back into work and get a much stronger economy.
Geraldine: Just quickly before I move onto some of the others, quite a bit to get through. What about the morality and the, I suppose the conscience around accepting JobSeeker payment and JobKeeper payments when you've made big profits? I see Nick Scali from the furniture producers, really wrestling with this today. What sort of advice are you giving your members?
Jennifer: We're saying you have got to be very careful about this. You have got to make very careful decisions about how you use JobKeeper. Let's be clear, for the very big companies, only a handful of companies got it. And they were smashed. It has had the effect that it was made to have, which is keeping people attached to their employer and making sure that as activity bounced back, people were not made redundant. They could go back to work.
Geraldine: But should they be returning taxpayer money if they really took a big profit?
Jennifer: I think it's going to come down to a business-by-business decision. And it's not as easy as everyone just says off the top of their heads. It's a very complex set of decisions. But my advice to people is to be very careful. This is the taxpayer's money. And it was intended to keep people in their jobs. That is the role that it's achieved. But it is also one of the reasons that we've got to actually move out of JobKeeper, get the economy going again and then obviously find some very targeted assistance to those sectors that can't get up and running again because of restrictions.
Geraldine: Like tourism in North Queensland for instance?
Jennifer: Exactly. And that has really got to be a very carefully designed and targeted package. And to be fair, the government has shown throughout this pandemic that it has been willing to adjust and change as circumstances changed. And the government is very aware that many of those sectors just cannot get going again.
Geraldine: On JobSeeker, you've said for quite a while that there should be a permanent rise in the rate. The government has not made it clear if there'll be any change in the payment. And I see the ACCI, the Australian Chamber of Commerce and Industry wants it to fall back to the base rate of $40 a day. Is there scope for a two-tiered system?
Jennifer: That's something government could contemplate. With all these things, you have got to be careful about complexity, and where do you draw the lines with these things? To me, this is a long-term fairness issue, as the Reserve Bank Governor said this week. We need to say to people who find themselves, often through circumstances way beyond their control, that they need to be able to live a dignified life and they need to be able to live a life that does not put them into abject poverty. Which actually means they find it harder to get back into work. And I think we have to remember that the sort of things we are proposing that you get this closer to the Aged Pension where it used to track pretty consistently, is still 50 per cent of the minimum wage. And on top of that, I think this is the thing no one ever wants to talk about. We've got to get the system working better. The system of matching people to the right jobs, the system of skilling people up so that they are competitive for jobs. All of those things have to be done, but I'm of a longstanding view that returning to that Newstart rate I think is not where we should be as a country.
Geraldine: And look I'd like to finish with President Joe Biden, just having given his first foreign policy statement where he said he will push other developed, bigger emitting countries to up the ante when it comes to climate ambition. Now, we are a bit of an outlier in terms of committing to net zero emissions, you have pushed for them. Do you think we are going to see a change in the debate here?
Jennifer: Well I think we have to get back basics here though Geraldine. It's not the Australians who have to catch up to the United States. I mean, it's the other way around. It's the United States that left the Paris Agreement, Australia didn't. Australia is on track to meet its 2030 target. Australia has met its 2020 target. There are people who want to go further and that is a fair enough debate. But I think we have to be very careful to remember that the Americans have got to catch up with many countries in the world, including Australia. Having said that, we would like to see the government commit to that net zero 2050. And the Prime Minister gave a very constructive speech on Monday. Why? Because it signals to investors, particularly global investors, what our policy direction is going to be and that attracts investment in things like hydrogen. I do absolutely agree with the Prime Minister though, that how you do it really matters and the “how” you do it has got to be in a way that creates jobs and preserve affordability and reliability.
Geraldine: Thank you for joining us.
Jennifer: Thank you very much, good to talk to you.