Jennifer Westacott interview with Hamish Macdonald, ABC RN Breakfast

Event Interview with Hamish Macdonald, ABC RN Breakfast

Speaker Jennifer Westacott

Topics energy, business investment

Date 17 September 2019

E&OE

Hamish Macdonald, host, ABC RN Breakfast: Jennifer Westacott is the chief executive of the Business Council of Australia and I spoke to her earlier. 

Jennifer Westacott, chief executive, Business Council of Australia: Thanks very much.

Hamish: The Business Council of Australia along with major energy users, did oppose these 'big stick' laws when the bills were originally introduced in parliament last year. What's your position now?

Jennifer: We still oppose them. We still believe all the risks exist in terms of deterring investment and that's what we really need in this country. We need investment in our existing system. We need investment in new parts of the energy market. We think it will deter it. We think it is a highly risky piece of legislation and we think it's unnecessary. You've got the competition regulator yesterday announcing that for 800,000 small businesses and households prices have gone down. And this legislation will not put downward pressure on prices. So, look you know, the government took it to an election. They've got a mandate to do it. What we're trying to do is to work constructively with them to get the legislation in better shape, to make sure it doesn't have these unintended consequences. And we've worked very hard on that and so we are hoping the government takes our suggested amendments very seriously.

Hamish: What's the evidence that it will affect investment?

Jennifer: Well I think you've got to look at it from an investor's point of view. If a government starts actually negotiating contracts on your behalf, if government is interfering in pricing, if there is capacity for a government to actually divest your assets. You know if you're a company you have to ask yourself are you seriously going to put a lot of your shareholder's money at risk. That's the fundamental problem we've got. And I think the problem we've got with this legislation and always have had is that it will not actually achieve reduction in prices. There are many other things that the competition regulator said could be done. And then the competition regulator has said that this is an extreme measure, this proposed legislation. 

Hamish: Aren't there other places though where this sort of thing has been done? It actually hasn't resulted, for example in the UK, in a loss in investment.

Jennifer: Well let's have a look after the long term because, you know, the UK has a very different energy market to the Australian energy market. And we really need investment. We need investment in existing dispatchable or baseload system. We need investment in new types of energy. It's a very different energy market, the Australian energy market to the UK market. But all these experiences Hamish play out over a period of time. We just don't believe this is the right way of approach to getting prices down. And the ACCC gave a pretty long menu of things to do and said this would be an extreme measure. And it is an extreme measure but we have to respect the fact that the government has got a mandate on this and we want to work constructively with them.

Hamish: On the ACCC report that came out and said that actually some of the new rules forcing electricity retailers to offer customers a default market offer has already resulted in pretty significant savings.

Jennifer: That's the point I'm making. 

Hamish: But I suppose the question is for the many customers they'll look at that and say 'look government taking a really strong approach with these providers has resulted in lower prices for us.' Now you can argue the reason why those prices have come down but you can see how that might look to a customer. 

Jennifer: I can understand how that does look but I think for the medium to long term what really matters in this country is to get investment going. And the ACCC itself, you've got to kind of make sure we remember what they said. This would be an extreme measure. And they offered a range of things but one of them that, kind of, where they thought the biggest increase was in terms of people's power bills was wholesale markets. And that's driven by supply which is driven by investment. 

Hamish: And do you have examples of the, kind of, investment that you think won't happen because of this?

Jennifer: Well I think you've got to look across the range of the energy market. You know, we've got to get exploration in gas happening. Because gas is a very, very good transition fuel. It's very emissions efficient. We've got to make sure we keep the stock of our baseload system going. And these are the decisions Hamish that people are going to make for 20, 30, 40 years and they want to understand the risk around of what they're doing.

Hamish: How do you view, I suppose, the implications of this in the context that we have a government, we have a Treasurer, saying actually we want the private sector to do a lot more investment.

Jennifer: Well you've got to make sure all the settings are right to do investment and one of the things we'll be talking to the government about this week is the possibility of an investment allowance. The other thing we will be talking to government about this week is we are bringing 80 of our members to Canberra to meet with the government and meet with the opposition is the burden of red tape and regulation. And we are keen to work with the government on that. Minister Ben Morton gave a speech last week signalling that they want to get regulation under control. We've been arguing that for a long time. So there are many things that get investment going but at the same time don't do things that deter it. But, you know, we want a really constructive partnership with the government that we want to really accelerate this week to make sure that we create the conditions for companies to invest. Not just in energy but across the whole economy because we've got to remember that investment as a share of GDP is as low as it was since 1994. Now we should be doing a lot better than that. Interest rates have not had the effect that people thought they would have. Companies are still not investing and we need to make sure that we pull out all stops. Particularly, given the volatile global environment we are operating in, to invest in this country.

Hamish: Is it a bit hypocritical though for the government to do that? To on the one hand say the private sector has got to invest, we need that for growth, and then on the other hand potentially introduce some legislation that might deter investment.

Jennifer: As I said we don't agree with this legislation. We don't think it's the right way to encourage investment, we think it's full of risk. But at the same time we welcome their comments on regulation and we want to work with them constructively both the so called 'big stick' legislation and on how we create a better environment for investment more generally. Look I understand the government wanting to get prices down. I really do. We do too. You know, today it's pretty cold down here in Canberra, for a lot of people power bills are pretty difficult and challenging to pay. But we've got to make sure that we work together on these to get the right solutions at the right time. To get people's bills down, to keep them down, to keep supply going and to keep investment going.

Hamish: You mentioned that speech by the Minister Ben Morton, he's effectively warned business off activism. How do you respond to that? Should businesses be able to speak out on economic issues as well as social issues?

Jennifer: Well I think they should. I think it's about getting the balance right and I've been making these comments for the last couple of days. You know, we've got to remember who business is. It's people. You know, it's 11 million people who work for a business. It's their shareholders, their mums and dads investors, it's their customers, it's their communities they operate in, it's their employees of course. And, you know, we've got to make sure that we respect the fact that companies feel very strongly on some issues, that their employees expect them to. But at the same time we do want companies speaking out on economic issues. And we do want companies taking a stronger stand about the virtue of making ethical profits. The virtue of being successful. The virtue of employing people. The virtue of increasing people's wages. It's about getting that balance right. I don't think they are mutually inconsistent. I think you can have a strong view on some social issues and at the same time have a strong view on economic issues. And I think we have an obligation on those economic issues to speak up.

Hamish: Jennifer Westacott there, the chief executive of the Business Council of Australia.