Event: Jennifer Westacott interview with Matthew Pantelis, FIVEaa
Speakers: Matthew Pantelis host, FIVEaa; Jennifer Westacott chief executive, Business Council of Australia
Topics: Interest rates; renewable energy; decarbonised economy; Same Job, Same Pay; Industrial Relations; unemployment rate; tax; South Australian budget

E&OE

Matthew Pantelis host, FIVEaa: Jennifer Westacott, the CEO of the Business Council of Australia. Jennifer, good morning, welcome. What brings you to Adelaide?

Jennifer Westacott chief executive, Business Council of Australia: Well, we are here as part of our Strong Australia program. So, we've been doing this for about five years getting the big CEOs, like Mike Henry from BHP, together with the local business chambers talking about what will get places going. We think Adelaide, South Australia is a place of huge potential, particularly off the back of all the defence spending. And we'll be sitting down with the Premier, Sam Dighton, from the Committee of Adelaide, Mike Henry from BHP with about 250 people from business and the community. Talking about what's really going to get Adelaide and South Australia going, what do we need to push it along? What do we need to drive living standards and productivity? What can business do? What are the practical things that can be done? And what are the policies that we need to pursue to really get the thing happening?

Matthew: You would have seen last week the state budget handed down here I'm sure you're across some of the detail or at least the overview of that. But a strong business-type budget in terms of trying to get businesses perhaps out of Victoria more so than anywhere else into SA?

Jennifer: I think it's a really, really good budget, it's got the right balance of investing in the things that governments have to invest in. But avoiding things like payroll tax levies on business. Because I can tell you that for the large companies, this is not a couple of million dollars, this is tens of millions of dollars. And they will be thinking, well, for the things that we don't need to have in situ, in an actual physical place, why wouldn't we look at places like Adelaide in South Australia, to look at our data processing centres, to look at some of our big distribution centres, some of our logistics stuff? Why wouldn't we? Because we're going to be saving, in some cases, 20 and 30 million dollars. So, I think it was a really, really strong budget, a strong message to business and I'm sure the Premier today will strengthen that even further. And then some really good co investment, some really great initiatives in the budget, some great stuff around TAFE and skills. All the things that are going to drive the economy even harder.

Matthew: Is it enough on payroll tax for the government here to say well, we don't need to cut it any further Victoria is putting theirs up will rely on them doing the work for us to attract business here. Should they be moving more on payroll tax and business taxes like that?

Jennifer: I think there's an opportunity for states to look at the taxes they control. It's not just payroll tax, I mean, payroll tax is a tax on a job. But stamp duty, stamp duty is one of the worst taxes in Australia, all the economists when they're doing modeling, they all say stamp duty gets right up the top, company tax the second, because it really stops mobility. So, it stops mobility in lots of ways. Say I want to move to South Australia for my job, great opportunities come up, I look at the stamp duty and I think, okay, that doesn't make my equation stack up. Or say I'm living in Sydney in a three-bedroom house, I'm a single person, I'm thinking of downsizing, going into an apartment. I look at the stamp duty bill and I think, oh no, I'm going to stay in that, well, that house could be occupied by a family. I'm a small business and I want to buy a new. Like this all stops movement, which stops productivity. Then you've got these insurance levies and so I think you've got to do state tax reform as a comprehensive kind of reform. And payroll tax is, I think, quite a destructive tax because it is taxing, I mean, you think about the absurdity of it, you're taxing for every person you employ. You kind of think about that, and you say, hang on why are we doing that.

Matthew: Exactly. But it is a revenue raising measure for governments isn’t it?

Jennifer: There’s revenue raising and then there's doing it efficiently, and every tax you put on people changes their behaviour and this is a tax on employing people. You’ve just got to do the thinking about that.

Matthew: You mentioned defence, one of the reasons you're here today talk about obviously AUKUS as part of that as well. So where do you see that going in the future? I mean AUKUS seems such a long way away, we're talking about setting it up at the moment. But you know, the first sub likely be what 15 or so maybe even more years from now? It's a long way off.

Jennifer: It is a long way off, before we see them completed and in the water. But a couple of things the government's done here which is really good is setting up an AUKUS authority. Which I think is really sensible. But you think about the lead time for all these industries that have got to get going, you think about all of the kinds of bits that are going to be built in South Australia. The bits that are going to be built around the world supply chain, you think about the industries that you've got to get going. The guidance systems, the electronic systems, the fabrication systems, think about all the training that has to go into that. So, we actually are lucky that we've got the time to kind of set in place those industries, that supply chain to make these things happen. And then starting to think about well, how do we build out from that? So, if we do advanced missile guidance, advanced electronic guidance system, what are the other areas of application? So, there's a big space push here at Lot Fourteen how can we add those capabilities together to really get Australia position in that satellite and space economy ich is going to be the future of so much communications around the globe. And that takes us into those big supply chains, that are worth trillions of dollars, that give us a place as a country in those big global manufacturing supply chains. Gives us expertise. So, I think it's, I'm not worried about the timeframe, I'm worried if we don't get started and I'm worried if we don't get momentum.

Matthew: There's so much going on in here. Just to talk to a business leader such as yourself, we are talking AUKUS, we can talk space, we can talk hydrogen in terms of clean energy, that is another thing on your agenda. So, South Australia seems to be setting the pace in all this?

Jennifer: Absolutely, you've now got 75 per cent renewable energy. So, you've kind of got that clean economy and I think people forget what a clean economy really is all about. It's not just about exporting clean energy, that would be great. But the first thing is to take the carbon out of your existing industries and out of your existing domestic consumption. So, if you think about steel, or aluminum, or things that have been on the cusp of people worrying about whether they could survive in Australia. Once you start, first of all, going up the technology chain in how you produce those things. It's the skills of people that make the difference. The second thing is once global purchasers of these things start to add carbon, or add to the embedded carbon, and they say, well, actually, we've got to reduce our emissions. So, they start thinking about Australia’s steel, or Australia's aluminum and they say, actually, that is produced in a really carbon efficient way, suddenly, you're super competitive in industries that 10 years ago we were thinking whether or not they could survive. So, it's not just about exporting hydrogen, which is a very complex thing to do. It's about making our existing energy consumption and production much more energy efficient. But the opportunities are huge. The opportunities for renewable power in South Australia are amazing. There's obviously this new Hydrogen Act, the first place in the world that's got a specific Hydrogen Act. Here's our big problem. We are not competitive as a country, we have very high taxes, we have very high regulation, we have a very high cost of doing business. The Americans have introduced this thing called the Inflation Reduction Act. It's making things like hydrogen 40 per cent more competitive than in Australia. So, if you're a big global company and you are thinking about where do I do my hydrogen? Or where do I do my big gas project? Or other clean energy projects, like lithium production and things like that. That starts look pretty attractive those tax incentives the Americans have given.

Matthew: On that then let's move to the government’s IR package at the moment. We hear the campaign, it is running on FIVEaa right now, the Same Job, Same Pay but that business is not happy with, just explained that?

Jennifer: Yeah, look, it sounds right in a sense, the kind of slogan sounds, where people go yeah, yeah. But what's wrong with this is that what the government is trying to do is stop people using labour hire. Now, labour hire is a very legitimate form of workforce, very important for these big projects that we've just been talking about, as they flex up as people have to bring in extra workers. Effectively what they're saying is that for each and every employer - whether you are two weeks, two days, two months, two years -you are going to be paid the same in terms of all of the conditions and pay, this is what we understand. And I'll come back to the process in a minute. As people who are in that host employer. So how fair is it going to be if I'm an engineer, and I've been working for 10 years, I'm working on this highly specialised thing, someone comes in as a contract engineer, they're working for two months, maybe on a different thing, they're going to get paid the same conditions. That's including bonuses, things that people negotiate in their EBAs such as childcare, training, extra leave days, incentives. They're going to get those things that I've negotiated and worked hard for, how fair is that? How fair is that for small business to go through this incredible red tape working out is this person doing exactly the same job? Should they get exactly the same conditions? Now a big question to the government is this, what is the problem we are trying to solve? What's the loophole that you think people are doing? Because let's solve that instead of making the economy much more rigid, stopping the flexibility of being able to hire people. The absurdity is government is one of the biggest hirers of contractors in the economy. So, this is because people need people for a certain period of time. And many labour hire firms have already got an EBA, they've negotiated really good conditions. And many of those labour hire firms, highly respectable, highly reputable companies who do great deals with their workers. Are we saying that their deal doesn't matter when someone goes onto a host site? No, you're going to be paid the same as them, I mean, the whole thing just doesn't make sense.

Matthew: Where has it originated? Is it a union ideal of fairness? Is that where it's come from?

Jennifer: I think it's been around for a long time and look I think people are trying to avoid sham contracting. Well let's solve that problem.

Matthew: That is fair enough.

Jennifer: Let's not restrict the entire economy by making it impossible to hire extra workers when you need them. Because is we want to do this clean energy stuff that we've just been talking about. If you want to build a wind farm. If you want to do a hydrogen plant. If you want to build a big critical minerals project. There are going to be times when you have to hire extra workers for a short period of time. If you've got to go through this maze of complexity about working out are you doing exactly the same job as me? Should I get all of the bonuses and conditions that you get? And you're going to be sitting there saying, hang on, I’ve been doing this for 10 years? It's not very fair.

Matthew: All right. So, a couple of other issues, we've got to wind up soon. But the Treasurer, the Federal Treasurer today warning of the risk of recession. And I suppose all the interest rate rises you wonder the Reserve Bank not pulling out the history book from 1991, to see the effect that the interest rate increases back then had on the economy. It seems we seem to be heading down that same path willy nilly?

Jennifer: Well, we can control a lot of things though. My big call to the government is this, that what will avoid recession or certainly if we go into recession, make it shorter is getting investment going. Is getting the economy moving. I mean, the big number that was in the budget, which was actually an extremely small number, is the economic growth forecasts with a 1 in front of it. And we've had over the long run average, an economy growing in around 3.5 cent. Now it's growing in 1.5 per cent. That's the first thing to fix right, get the economy moving, we have got an investment drought in Australia. We've got more money leaving the country than coming into the country, made even worse by this thing I talked about in the United States. So, let's make it easier for companies to invest, let's get rid of the red tape. Let's make it easier to get your planning approval, get something done, don't make the industrial relations system a nightmare, because that will just avoid people hiring workers and doing more. We have got to come to terms with the fact that this country is super expensive and when big global companies are sitting around working out where they put capital, they look at Australia, they say one of the highest company tax rates in the world. An inflexible labour market. Lots of red tape. Well, we're going to go somewhere else, that's the thing to fix. We've got things we could control; this will be a creature of our own destiny. And we should start pulling the levers now that avoid either going into recession, or certainly having a long one, and making sure that we keep people working. We keep them working in good jobs.

Matthew: Have interest rates gone up enough.?

Jennifer: Look, I think they're just going to be 40 different economist views on that. I mean, they are where they are. The question is what you do about it now. The question is controlling the things that don't drive inflation, making sure we don't put unnecessary pressure on inflation. Making sure that we take control of the levers that we've got to make our economy more competitive. To make it easy to employ people. Don't put friction in the way of doing stuff for small or big businesses, because they are going to have to do all the heavy lifting here.

Matthew: All right, and finally, unemployment. There’s a suggestion unemployment is currently too low to rein in inflation moving forward. 140,000 job losses is what the economy needs now. That is terrible.

Jennifer: Yeah, look, if you think about that, that's 140,000 people. We should be doing everything we can to keep unemployment extremely low. But it goes to all the things I've just talked about. Ted Evans, the former Head of the Treasury years ago said, a country chooses its level of unemployment. We can make choices to avoid that. We can make choices about getting new industries, like we've been talking about with defence. Government can co-invest carefully in things and scale them up, we can make it easier to do business we should not be making it harder to do business. That is our best weapon against increasing unemployment. But if we make it hard, if we add to the cost of things, if we make it impossible, particularly for small business to do stuff and expand and grow, and they say, well, I've only got two levers to pull. I can either put up my prices to consumers, or I can look at how many people I've got working. Let's avoid them having to make either of those decisions.

Matthew: Exactly. Things are expensive enough as they are. Jennifer appreciate your time today. Thank you for coming in.