Event: Jennifer Westacott interview with Martin Soong and Sri Jegarajah, Squawk Box Asia, CNBC
Speakers: Martin Soong host, Squawk Box Asia, CNBC; Sri Jegarajah host, Squawk Box Asia, CNBC; Jennifer Westacott chief executive, Business Council of Australia
Topics: Federal budget; productivity; GDP growth; labour shortages, cost of living; tax reform; housing
Sri Jegarajah host, Squawk Box Asia, CNBC: Jennifer Westacott, chief executive at the Business Council of Australia joins us from Canberra. Jennifer, good morning thanks for your time.
Jennifer Westacott chief executive, Business Council of Australia: Good morning.
Sri: So, we look at the global context. Of course, the UK mini budget was a very sobering reminder of the perils of unfunded tax cuts. So how cautious and how responsible therefore do you think this spending plan was regarding it was?
Jennifer: I think it was responsible. I think it is a cautious budget, no one was expecting this to be a big reforming budget. I think there are some very positive things there in terms of growth. A very big skills package, an industry package of $15 billion to start diversifying our economy. A lot of action to get women participating, which will have a big economic uplift and record infrastructure spending. What we are concerned about in the context of that global environment is the deteriorating position which the budget lays bare, a feeble 1.5 per cent GDP growth next year, only going up to 2.5 per cent in the outer years. You've got unemployment set to rise, you've got productivity at a 60-year low. It is productivity, as we all know, that is the principal handbrake on wages. If we could get productivity right, we get our wages growing, we've got wages still growing very slowly. So, our message is it’s a ‘steady as you go’ budget. It hasn't made the mistakes that we've seen in the UK. But the work of reform has to be done, and we have to be willing to look at our tax system, our skill system, our workplace relations system, our regulatory system to put ourselves in the box seat for the next 20 years.
Sri: So here in lies the challenge, Jennifer, to support these multiple constituencies, softening the cost-of-living crisis for Australians and supporting your members - supporting business, productivity, efficiency, alleviating labour shortages as well. Can this budget, walk and chew gum at the same time? Can they do both?
Jennifer: I don't think this budget has done that. I don't think it ever sought to do that. I don't think we can wait for a budget in May to sort some of these things out. We've got a labour shortage crisis. We've got to keep the foot on the pedal in terms of fast-tracking visa applications, making it attractive for people to come to Australia, filling those skill gaps. We've got to put our foot on the pedal on starting to look at our tax system, which is not going to raise enough revenue. At the same time it’s done inefficiently, which deters investment. We've got to look at business investment, it's as low as it was in the 1990’s, the last time we had a sustained recession in Australia.
Sri: Can I just clarify one thing? Does this imply then that Australia needs to move towards more relaxed immigration policy? If labour shortages are a key issue?
Jennifer: The government has done that. I mean, it's not more relaxed. It's a larger number, which we've been advocating for: 195,000. That's a good thing. It's also put some money on the table to fast-track visa applications. So, it's not about relaxation, it's about actually targeting properly. We've said very much, you've got to target skilled migration, you got to fill the skill gaps that are there. We can't wait for a budget to do that. But the government has made some good announcements last night. We just need to get on with that. So, there's stuff that's got to be done in the budget. There's some preparatory work that's got to be done. But where there are some reforms that I think they should just get on with, I mean, there's just a plethora of red tape. That creates a lot of friction in our economy, that would be pretty simple to get rid of, let's get rid of it. So, I think it’s that task of, okay we've had a bit of a reset with this budget, which is good. There are some important things in it. Now we need to take stock. We need to start doing the reform. But at the same time, not wait and kick stuff down the road. There's some simple stuff you could get on with that I think would actually have some quite big impacts in terms of shoring up business confidence and growing the economy.
Martin Soong host, Squawk Box Asia, CNBC: For Jim Chalmers, Jennifer, one of the things he wants to really get on with, although I think it was a little bit obscured in the language, is tax reform. This is I know, something that you're a little bit concerned about, because you think that multinational tax compliance, we're talking about a global minimum corporate tax here, could deter foreign investment in Australia? But you know, what other way out is there? When you've got a situation where debt and deficits are still an issue in Oz. And spending, you need to do it, but you need to be sort of restrained, as well? The taxes at some stage will have to go up. I think this is the first budget from a Labor government in about a decade and at least theoretically, Labor’s interests politically and corporate Australia's interests politically are not always aligned?
Jennifer: That's exactly right. Look, let's, there are two things to solve. We do have to solve for spending. So that's about better design of services, it’s not about cost cutting in health and aged care. It's about investing in technology, investing in workforce, getting better outcomes for people so that we can control the rate of growth in those expenditure lines. The second is tax reform. We do need more revenue. But as you would know, it's what you collect, and how you collect it, that that really makes the difference. So, if we kind of see a string of ad hoc taxes, super profits taxes, things that aren't properly conceived, they just own goal the economy, or they have that kind of effect of deteriorating investment. The crucial thing is that we redesign the tax system. So, it drives investment, it drives incentive, it makes sure that the issues of a federation, you know, the so called vertical fiscal imbalance between the Commonwealth and the states gets resolved. That we look at these really terrible taxes that killed the dynamism in the economy, a thing called stamp duty here, where you pay a tax when you buy and sell properties. There's a lot of taxes that kill the dynamism in the economy, which drives the productivity, which drives the growth. So, we've got to have our eye on the big prize, which is the growth agenda, and making sure that we design the tax system in a way that increases revenue, but in a way that is efficient and that drives higher economic growth. The temptation is always ‘let's just add some more taxes.’ That is not going to last for the long term.
Sri: Jennifer, childcare and housing, those components of the budget, are they moving in the right direction?
Jennifer: Absolutely, huge task on housing. This has been a neglected area of public policy for a long time, particularly on affordable housing, and it goes to two issues. The stock of affordable housing, but most importantly, the continuous supply of housing. We always try and do things on the demand side, give people home loan subsidies, we never really tackle the supply side about land release, about planning approvals. So, the announcements of a housing accord in the budget are really well received. Very welcome. Childcare, look, it's a big issue. It's a huge factor in women's participation, a huge factor in economic uplift. The government, I think wisely, has set out a timeframe for that. That allows it to do the work on workforce, on designing the subsidy properly. That's excellent. So, there's some very important measures in the budget, but housing is a good one. But it's a big task, the housing task and in Australia, particularly, as we increase migration, we're going to have to think through that housing supply task.
Martin: Jennifer, pleasure talking to you appreciate the time. Thank you.
Jennifer: Thank you very much.