Event: Jennifer Westacott interview with Justine Parker, ABC RN Breakfast
Speaker: Jennifer Westacott, Business Council chief executive; Justine Parker, reporter; Cathy Van Extel, host
Date: 20 December 2019
Topics: The economy, surplus, business investment, climate and energy policy, newstart
Cathy Van Extel, host: Australia's biggest businesses are calling for new incentives to encourage investment and an overhaul of skills and industry policy amid a decline in forecast business investment in this week's budget update. In its budget submission out today, the Business Council is also renewing its push to slash red tape and is reviving its campaign for tax cuts. It's strongly backing the Morrison government's surplus plans. Jennifer Westacott is the Business Council's chief executive, she's speaking here with our business reporter Justin Parker.
Justine Parker, reporter: The Business Council says Australia can't afford to casually slide into another decade of deficits, but given annual growth is at just 1.7 per cent wouldn't it be sensible to abandon the surplus, not casually, but carefully, strategically and in a targeted way, and that could actually help prevent bigger deficits down the track?
Jennifer Westacott, Business Council chief executive: We don't believe that you should just give up on the surplus because it's been very hard fought. It's taken 10 years to get here. I think people forget that, if we just say, ‘look, let's put this off for another year’, what we're putting off is starting to pay down that debt and we've got now a $19 billion annual interest bill, which is not going to services. It's not going to the things that people want and need. It's not going to hospitals, to schools, to firefighters. So, we've got to remember that it's very important that we keep the discipline going.
Justine: Some economists say that now is exactly the right time for the government to borrow, here's HSBC's Paul Bloxham speaking on the program yesterday. Let's take a listen:
Paul Bloxham: Governments are empowered. They are empowered by the fact that they can now borrow at the lowest levels ever, and so this real focus that we've got here in Australia about delivering a surplus or not delivering a surplus just doesn't frame the fiscal debate appropriately. The way to think about this is actually the state and federal governments in Australia can all borrow for under 2 per cent for 10 years. At the moment we should be considering that actually. When you can borrow at such low interest rates for such a long period, what are they useful things that you can use those borrowed funds to build infrastructure, do tax reform, reforming other areas of policy as well. That has all become a whole lot cheaper than it used to be.
Justine: Paul Bloxham there. Does he have a point?
Jennifer: Well, he does, but I think that you've got to be careful here. You know, borrowing money has to be paid back. We're already paying $19 billion a year in the interest bill on the debt that we already have. We have to be able to do that work around infrastructure that he's talking about and that might be around things like off balance sheet borrowing, and that’s what happened with things like the NBN and the airport but we cannot take our eye off spending restraint.
Justine: One thing you have long called for is an increase to Newstart. Is that the kind of stimulus spending that you would support?
Jennifer: Well, I don't think Newstart should ever be seen as stimulus spending. Newstart is a moral imperative to make sure that people are not living in abject poverty and that's why we have always supported an increase in the allowance. This is about the fact that people are living on extremely low incomes and we have always said that allowance should go up and it should go up as part of a reform of the way we deal with unemployment, how we get people into training and how we particularly, Justine, deal with the fact that there were 30,000 people on Newstart that have been on it for 10 years. Now those people have been living in very difficult circumstances for a long period of time. We should fix that because it's a moral thing to do.
Justine: Now, business investment has been weak for a long time. You're saying the conditions for investment must improve and the first thing you want is a broad-based investment allowance. Now that's actually a policy Labor took to the election. What are you seeking here and how would it work?
Jennifer: Well, we supported it when Labor took it to the election. Look, it's basically about giving a tax deduction on investment on certain classes of assets. And we're asking for it to be broad. What it would do in practice is basically bring forward investment in capital, investment in new machinery. And we've seen company after company, when you go into a small or medium size factory and you could see this company could just upgrade their equipment, expand their equipment, they could export more, they could employ more people. So, this is what we're calling for, something that makes it more attractive to invest, gives people that tax deduction to increase the attractiveness of investment so that we can drive productivity harder, drive expansion harder, employ more people. And that is the way that we start getting wages up.
Justine: You're also calling for a reduction in what you describe as unnecessary regulation. What regulation do you want cut?
Jennifer: The first thing we're asking for is that the Council of Australian Governments, COAG, really sit down together and work through some of these issues and we've categorised them as things like the cost of employing people, the differences in payroll tax all over the country, the cost of getting a big project done, our major project approvals, where big things take way, way too long and that means that they create an element of risk and extra costs. Things like getting exports out of the country, things like our shipping costs, you know, it costs more to ship something to Tasmania than it does to Hong Kong.
Justine: You talk about project approvals there. Does that include environmental approvals?
Jennifer: It does and it's really about making sure that we have the best environmental protection system in the world, but that we do that in the most efficient way and there are many levels of government, multiple agencies and sometimes I think actually that is not good for getting the best environmental outcomes.
Justine: Now you're also reviving calls for a cut to the company tax rate for big businesses. That's among a broader suite of tax changes. Do you see much prospect for a cut to company taxes given they failed to get through last time?
Jennifer: We've said this is just something we've got to resolve as a country over the medium term. Now the government's made it very clear that it doesn't support that in this term of government but as a country, if we're serious about getting investment over the long term, the idea that we've got that second highest tax rate, in an effective sense, in the OECD and a two-tiered tax system for companies, that is not sustainable over the long term.
Justine: Now there were concerns in the community that the Morrison government is failing to show leadership on the economy, the bushfires raging around the country, climate change and energy policy. You've even called for a long term credible energy policy in this submission even though it's outside the scope of the document. Do you share those concerns about leadership?
Jennifer: We have always said as the Business Council that we want a comprehensive energy and climate policy. And what do I mean by that? I mean that we bring together how we meet our emissions reduction with how we preserve affordability and how we maintain reliability. And that is a comprehensive response. And we need a durable response. Something where we can make real progress and something, frankly that should be bipartisan because we cannot afford to continue to stop-start on this. And I understand that many people today are very frightened in Australia and we need to show them that we have a credible plan to get our emissions down, to put prices down and to get reliability up.
Justine: But in terms of that plan, Australia came under fire at the UN climate conference in Madrid last week over its plan to use so-called carry-over credits from the Kyoto protocol to meet its Paris climate goals, the BCA supports the use of carry over credits. Doesn't that actually undermine the entire point of the Paris deal though, which is to reduce emissions and not just hit our targets using tricky accounting?
Jennifer: Well, the Kyoto carry-over is obviously a permissible thing under the Paris agreement but the most important thing in the government's review of climate and energy policy next year is to ask this question: can we meet our emissions reduction targets, our Paris agreement targets, across the whole economy, without the Kyoto carryover? And if we can, we should.
Cathy: That's the chief executive of the Business Council of Australia, Jennifer Westacott, speaking there with our business reporter, Justine Parker.