Event: Jennifer Westacott interview with Laura Jayes, AM Agenda, Sky News
Speakers: Laura Jayes host, AM Agenda; Jennifer Westacott chief executive, Business Council of Australia
Topics: Federal budget; energy policy; industrial relations

E&OE

Laura Jayes host, AM Agenda: So, the first Albanese government federal budget was pretty careful and cautious. It does lay out a blueprint for necessary first steps to steady the economy, but there is an acknowledgment that there are considerable longer-term challenges which do need addressing and warn that the hard work lies ahead to shore up the economy. Joining me live now as Business Council of Australia CEO, Jennifer Westacott. What do you make of this?

Jennifer Westacott, Business Council chief executive: Look I think it’s a careful budget, I think it's cautious, I think it's responsible. I think there are some very good things in it that are going to drive productivity and economic growth and the skills package was very strong. The childcare, paid parental leave, getting women to participate, that’s going to be the economic effect. Obviously continued a record infrastructure spend, the reconstruction fund, obviously, that's got to be targeted properly to diversify the economy, there’s some careful reining in of spending. But look, the concern I've got is, is the outer years, and we've got a colossal task ahead of us. Productivity is 60-year low; it's productivity that's the big handbrake on wages. Debt at a trillion dollars, the interest bill is the fastest growing payment in the budget above the NDIS, aged care and health. You've got unemployment ticking up again, you've got wages not growing as fast. All of those things are not conditions for wages growth. An economy that's got a feeble 1.5 per cent next year, and then only going up to 2.5 per cent. Those are not the conditions for higher wages. So we've got to get real about reform in this country, we've got to get real about encouraging investment, which is still as low as it was in the 1990s. We've got to get real about being competitive. We've got to get real about getting rid of all the shackles on the economy that kill the dynamism of the economy. We've got to get real about going further with the skills task to make sure Australians have got access to new jobs. We’ve got to get real about attracting new industries and diversifying the economy. We’ve got to get real about the tax system, it's not going to do the work that people need it to do. We've got to get real about the reality of the energy transition. Unless we're willing to do that, you know, we keep kicking the can down the road, the big reform task. The decisions people are going to have to make in five- or six-years’ time, because we've sort of slipped, you know, like, we keep slipping, we're spending, 27 per cent of GDP, we're growing at a really feeble rate. Now, the government's inherited a whole lot of things; it’s inherited a very difficult external environment, but we've got to get on top of this, otherwise, we're going to find a deficit we can never wind back.

Laura: Speaking of kicking things down the road, this mini budget, I would argue, does exactly that. When it comes to energy, we've seen Jim Chalmers and the Prime Minister signal that, you know, perhaps extraordinary regulatory intervention here. I note that the Prime Minister is invoking you again this morning, the Business Council, your endorsement of their energy strategy. Can I just get you to clarify what exactly do you endorse?

Jennifer: Yep, so we endorse the net zero. We endorse the 43 per cent. We endorse the government's architecture, the safeguard mechanism, the offsetting arrangements. We've been very strong about that. I mean, that was what we put forward and the government has adopted that. But what do we need to do? Well, we need to stay the course with that policy architecture, because what we don't need now is more uncertainty.

Laura: Have they diverted off that path?

Jennifer: No, no, I don't think so. I think they’ve put out the safeguard mechanism, and these things are hard, the devils in the detail, but they’re consulting widely on that. So that's not the issue. The issue is now doing unprecedented market intervention. So, let's just go through what needs to be done. So, we need to stay the course on the climate transition. But part of that was always an expectation that there'd be some mechanism, a capacity mechanism, that dealt with reliability and affordability. Now, the states have rejected that on the basis that they want no fossil fuels. Now, our modelling and the government's modelling has always had gas in it. Gas is the medium-term kind of issue that we've got to get under control, and you've made this point this morning. That's not about heavy-handed regulation. That's about encouraging investment. That's about making sure that we've got that capacity mechanism…

Laura: What does that mean? So, you’re not exactly on a unity ticket with the AWU here. But you agree that gas is the shorter-term solution?

Jennifer: Yeah, well, first of all, we can't have states saying well, ‘we won't agree to a capacity mechanism,’ which is about how you make sure the system stays reliable and affordable, because we don't want any fossil fuels in it. Well, sorry, you have to have gas in this system. It's there for the medium term. If you want manufacturing to work in this country, there is no feedstock substitute than gas for manufacturing. We have to have gas in the system. So, we've got to get ideology out of this debate, get pragmatism back in. So, we need that capacity mechanism. We need to do that really quickly. That needs to be consulted heavily. I don't think that big interventions in the market are the answer because they just shock the market. I mean, AEMO is able, as it did earlier, to intervene on prices. But we can't have this kind of shock to the system. This discussion about super profits taxes, be careful what people wish for here, because these are the same companies who are going to have to do all the heavy lifting to move us to that renewables future. Again, we send that signal about ‘don't invest in Australia because policy is uncertain.’ That's what’s got us into this position as well as some external things.

Laura: So, what is the government doing here? Because they're threatening extraordinary intervention, their words, not mine. So, do you think that's a signal to the gas companies? To Kevin Gallagher, to Santos, to whoever is out there, saying, ‘you’ve got to do something about this, otherwise, we're going to intervene?’

Jennifer: Well, I think the better thing would be to sit down and say what can be done? You know, what can be done?

Laura: The AWU argue it's a done deal?

Jennifer: Well, let’s see what that deal is. I think you’ve got to bring in the unions, I agree with the unions on this. You’ve got to have everyone at the table again to work out what do you do. But you know, some of the things that people have been fighting around the last 24 hours, ‘let’s have a super profits tax, let's have a retrospective reservation policy.’ People have been through these arguments before, they're not going to work.

Laura: The previous labor government.

Jennifer: Exactly, they're not going to work. They're not going to solve the problem. It's about careful calibration of the market, in consultation with industry. It's about not doing kind of backflips on things. It's about making sure we stay the course. But to your point, it's about making sure that we don't get rid of systems until we've replaced them. This is what's happened in Europe. People got rid of things before replacements were in place. That's why gas is important. But whilst ever this debate continues to be an ideological battle about types of fuel sources we don't like, as opposed to what's the task? Reduce emissions, maintain affordability and reliability, we're not going to kind of make progress here.

Laura: Okay, that is a longer conversation, we'll be speaking to the AWU’s Dan Walton later in the program as well. Jennifer, before I let you go and we'll have a longer conversation about this when we finally do see the legislation, and that is IR changes. You haven't seen the legislation and it's going to be introduced today?

Jennifer: No.

Laura: Why not?

Jennifer: Well, people have been people have seen it under a nondisclosure agreement. Look clearly, we've had discussions with the government, we've been involved in discussions with the department. What we haven't seen is the whole package, and we'll see that tomorrow when it's introduced into the parliament. We want wages to go up, we want people to have higher wages, but we want those wages to last. We don't want them to be at the expense of unemployment, we want full employment, we want wages to go up. That's about an industrial relations system that drives bargaining, which is the ticket to higher wages. That drives productivity, that is the ticket to higher wages. And that doesn't produce more complexity, that doesn't produce more conflict and that doesn't produce widespread industrial action. So, when I hear union leaders saying what we want is widespread industrial action, I don't think the community wants widespread industrial action. I think an economy that's in a really fragile position, which ours is, in a very, very difficult world. Which you've just had on your news there, the UK in a political and economic crisis. We can't afford to overreach here. We can't afford to make missteps. We can't afford to have the economy know, freeze drying, with industrial action. That's the stuff we'll be really looking at tomorrow, seeing how it all fits together, and seeing whether or not it is going to encourage bargaining, it is going to increase people's wages and it's not going to lead to a whole lot of unintended consequences.

Laura: Yeah, we’ll be poring through that detail when we finally do see it on Thursday. Jennifer, thanks so much for your time.

Jennifer: You're very welcome.