Event: Interview with Peta Credlin, Sky News
Speaker: Jennifer Westacott
Date: 20 May 2018
Topics: Company tax, federalism, workplace relations
E&OE

Peta Credlin, host: Joining me tonight to go through all of this and more, is the chief executive of the Business Council of Australia, Jennifer Westacott. Welcome to the show, Jennifer. It's great to have you on.

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

Peta: You've been the CEO, now, for a long time. Four Prime Ministers, by my reckoning. 2011, I think I go back with you.

Jennifer: Yep, that's right.

Peta: Through all this time, all of those Prime Ministers, all four of them have said they want to deliver serious economic reform in Australia. But virtually none of them have yet to really succeed, to make headway beyond that announcement. Have we forgotten how to do serious economic reform in this country?

Jennifer: I think we've certainly not been able to show that we can do it; really comprehensive reform. There are things that we've done and there are things that are on the table, that are important reforms. But really big things like the federation, like fixing our health system, like big changes to our education system; we seem to have lost the ability to get those done. I think that's a problem for the country. And look, there will be a lot of politics around that, and I won't need to re-enter that. But I do feel that we are not able to stay the course on big political reform. And part of that, I think too, Peta, is you know, one of the things I think we've missed is really constructive oppositions, particularly now, where it's just a kind of “no, no, no”. And scoring political points on everything rather than saying, “you know, really we have to get on with some things”.

Peta: I think one of the important things that the current government didn't keep on the table, and I would be urging the Labor opposition if they were to win, to put it back on the table, was the federation white paper process and the tax white paper process because, this is helpful for viewers, I guess, when you do piecemeal tax reform, to look on then right across the haves and haves not, you then create real errors of data matching.

You have concerns for real individuals who really fall through the cracks. It has to be comprehensive or you really don't do it at all. But if you are going to do tax reform at a national level, you must deal with the federation, which is the payment system between the commonwealth and the states. And I have to say, looking at it in government, this extraordinary level of duplication and waste. I say they are the two most important immediate reforms in Australia, beyond your corporate tax cuts, have I missed anything else?

Jennifer: Look, I think that's it, because they all kind of go to how we actually make the country more prosperous. And you can't fix health and education and get those services working for the community, if you don't fix the roles and responsibilities between the commonwealth and the states. And to your point, there's tremendous duplication, there's tremendous waste. And you know, we've put 40 per cent more money into education and the results in many areas have gone backwards. How did that happen?

I think health; we've got one in ten people still going into hospital and having an adverse event, 10 per cent of money wasted. And then, look, big tax reform, as you know, the Business Council has been banging on about this for years. Because every time you touch something, like imputation credits for retirees, something else moves. And so, obviously, we would like to see big tax reform back on the table. The difficulty is, that it takes a long time and that's why I have been a supporter of the company tax cuts. Because if you can't do the big reform, then pick the tax cut that is the most effective in terms of giving you a better sized economy, giving you bang for your buck, and dealing with the worst of the taxes, which all of the economists would agree is the company tax cut.

But you're absolutely right. If we do not fix our federation, then for years and years and years and years, our budgets will be more expensive, and the bang for the buck, the value for money to the consumer, will just not be there.

Peta: You had good oversight of the Tony Shepherd Commission of Audit Board that at the start of the government, which led in part, was a really comprehensive review of how they spend their money at national level, that led to the 2014 budget measures. Now what was in the budget wasn't Tony's work, that was a political decision of the then government Tony Abbott, Joe Hockey and the cabinet. Will you actually agree with every single measure in the budget, it was a serious attempt to deal with debt and deficit, but blocked, broadly speaking, in the senate. There are some measures that were quite significantly amended that got through.

But, broadly, the senate as it is constructed now, with quite a disparate crossbench. It doesn’t appear to have the stomach to take anything off anyone. Happy to spend money and always to get anything through. You're layering on extra money and extra promises and a little bit of pork-barrelling, but to actually makes fundamental changes in Australia about who is on the public teat and who is not. Have we got ourselves into a situation here with the Australian electorate that we don't have a senate that's got Australia's best long-term interest at heart?

Jennifer: Well, we don't have a parliament. You know, I think a lot of the responsibility here goes to Labor. That they've not been really willing to sit with the government and work with the government about sustainable spending and proper spending and value for money spending. And the problem is, if they form government in the future, they'll still have the same set of problems to deal with, so my frustration is that you can't just keep kicking these things down the road.

I mean, there's a huge problem that I think we just have forgotten about, that we all have an ageing population, we'll have a diminishing tax base, we continue to spend at a rate that is way higher than is sustainable. Our tax system, to your earlier point, is not designed to deal with that expenditure. 

So, we do need to whole parliament together and say, "how do we slow the rate of growth in health? How do we get better outcomes for people? How do we improve services”? This is not about hard cuts to people. It's about repositioning the budget, and a lot the kind of work that was done in the 2014 was trying to reposition ... I think most Australians would be really shocked to know that 52 per cent of Australians do not pay any net tax. Now, you have to ask yourself, "how long can that go on"?

So, you know, we have to do two things; we have to keep budget discipline. We have to reform some of the services that people get better value out of it, better actual service delivery. But have got to increase the rate of economic growth. We constantly talk about 26 years of uninterrupted economic growth. But, our growth number now has a two in front of it, not a three in front of it. And our expectations about wages, about budget positions, about service that people can expect, were built off an economic growth rate of three per cent and plus. And we have got to do those two things of get the budget in order, get the discipline going and get our economy growing faster. 

Peta: I want to get into to the kind of company tax cuts that are before the senate in a moment, Jennifer. You know, I have to turn to the ACTU. They have a new chief, Sally McManus, who is very much on the far left, very committed to making a name for herself and driving a very strong agenda ahead of the next election. There've always been big campaigners, big spending campaigners close to elections, but it's been quite extraordinary the way in which they've stepped right into the ring on these new campaign ads regarding business and complaints about, for instance, bosses’ pay. How is that going to frame this debate as you're getting into the very pointy end, I guess, of whether or not these big corporate tax cuts will pass the parliament? 

Jennifer: Yeah. Look, I think we just have to stop and ask ourselves, you know, what kind of a country do we want to be? I'm a person who wants our country to thrive, to allow people to realise their potential, to have less government rather than more government, to have less regulation rather than more regulation, and I don't start with the premise that business is a force of bad. I start with business is a force for good. Private enterprise is a force for good. Of course, business does things that it should fix and it should address. But this idea, this kind of new, class war. Well, actually no, it's an old fashioned class war. It's an old fashioned, "we hate the bosses. We hate business". You know... and where are the solutions? 

So, do we really want companies to be unprofitable? Really? Go and live in countries where companies are unprofitable and the economy's failing and see how good social safety net is in those countries. You know, this is always what always amazes me about this kind of very simplistic, old class warfare, hatred of villains, them and us. Where are the solutions? Where would we be without business that employs 10 of the 12 million working Australians? That generate over 80 per cent of the economic activity?

Are we seriously suggesting, as a country, that we want to go back to some eastern bloc way of thinking about the world where government runs everything? Because we know how that story turned out. It wasn't very good. And it was very, very bad for poor people. And my interest is that every single person in this country should have the chance to realise their potential. Every single person in this country should have the chance to get a meaningful, well paying, good job. But that is going to be delivered by a strong private sector. It is not going to be delivered by an overblown government sector.

And I think the way the ACTU is framing up this debate is extremely divisive, it's very old fashioned, and I want them to put the counter solution to the table. Well, if you don't believe in economic growth through private enterprise, what is your answer? For paying people more? For dealing with unemployment? What are you going to say to the people in Townsville who are dealing with 9 per cent unemployment, 14 per cent youth unemployment, who've lost so much industry? I tell you what, I was there a few weeks ago. You didn't have much of an argument about the need for a corporate tax rate cut up there because they want business back, they want business to thrive up there. I think this is a very sad development for the country, actually.

Peta: Well, I think also Sally McManus has signalled that they will push very hard for IR reform, further changes to IR. Now going back to your point about the collaborative nature in many of these business relationships people have with their employers. If it wasn't for business stepping in, taking a cut in its profit margins, or making no profit whatsoever, just barely to survive during the GFC and the other downturns, to keep our people employed, you would have had far greater unemployment in Australia on the back of some of that trouble a couple of years ago. But that wasn't recognised by the Sally McManus types.

You've also got the instance where the real wage growth happening in this country is really only coming forward out of the public sector. Public service wages in Victoria around at three per cent. Right around the country it was barely at inflation if you weren't employed on the taxpayer. And, of course, it's not made out of profits, it's not made out of a business doing well. It's just government signing off more of your money to pay those employed as public servants better. So, I think IR is certainly going to be a battleground.

Jennifer: Oh, it is. And when people start to talk about things that we thought were in the 1970s and we know that they weren't successful, and to be fair, Labor governments got rid of them. And we've had a very successful enterprise bargaining process in Australia that companies and unions have agreed to. You know, it's falling apart. Many companies now tell me they're just not willing to use it, because of the way the better off overall test is applied.

You know, we want that system to work. We want people to have better working conditions. We want the conditions for higher incomes. But anyone who thinks that that is going to be delivered by the heavy hand of government, they're just simply not in reality land. That is going to be delivered by thriving private enterprise that has government basically regulating for the protection of people's rights, providing a safety net and allowing companies to be competitive and to thrive. And that's why the tax stuff is so important.

But what we don't need, Peta, is to go back to a militant, strike ridden, conflict driven industrial relations system in this country. You know, most Australians aren't members of trade unions. If you said to the average person, "is that the kind of country you want to live in"? They'd say no. If you said to most Australians, "do you want to live in a country where you're not allowed to have an extra property? You shouldn't have shares in a company or don't want companies to be profitable. We don't want you to have good superannuation". Seriously? You know, I talk to people all the time, and that's not the country they want.

Peta: No, it's not.

Jennifer: They want to be rewarded for effort.

Peta:   It's not. But, I mean, the government was asleep at the wheel. It didn't get its ... public interest test in before the CFMEU and the MUA got approval to merge. I know they're trying to put it through the parliament, but, too late, she cried. The merger will go ahead. The appeal was lost to stay that merger decision.

I just want one more question to get into this issue with the corporate tax cuts. You're obviously in Canberra, getting around, knocking on doors, as you do so well. You seem to have had some movement with both Derryn Hinch, who says he wants sort of some legislation to require companies to employ more people if they get a tax cut. I think that's very hard to do. I think it's micro-managing, obviously for business. And because these tax cuts are over 10 years, Trump's were far more immediate.

It's not apples and apples. Pauline Hanson doesn't require, in comments today, doesn't require anything legislated. She wants to see voluntary commitments from business. I also noted with interest in her interview, Jennifer, that she has got herself out of Canberra, got herself out of her homestead of Queensland, gone over to the Pilbara, spoken to a lot of these really big companies that have got billions on the table, in terms of prospective future investment and said, "how important are these tax cuts to that investment you're getting out of your head office that's not located in Australia"? She was strongly supported once she got it from the horse's mouth, not just from Mathias Cormann or the government about how important this is to the economy. That's a real to the way business has been lobbying, I think. I think it's a good move. Is that what you're doing but a lot more on the crossbench?

Jennifer: Oh, absolutely. Because, it's funny, it’s got to be CEOs who tell the story about what they're going to do. And many of them, many, many of them, Wesfarmers, BHP, Rio, Woolworths, Qantas, all have said, "we are going to invest more in Australia. We are going to employ more people. We're going to pay more people". All of them have said that. These are the big employers, and they've made those commitments. 

They've also said that there are tremendous risks if we don't pass this. That, a company like Rio, that has more shareholders in the US than it does in Australia, you know, has to. It has a job.  It's got a duty of care to return the highest returns to its shareholders. And, it's got to make decisions now into the future.

We also know from history that when we've had higher productivity we've had higher wages. And we also know that if the economy was the size it was for the last 20 years, with a three in front of it, instead of what it's been for the last five, the economy would be $150 billion bigger and $85 billion of that would have gone into wages. So, it will flow through to wages.

What I think companies cannot do, to your point, is just say that immediately we're going to give a wage rise and that should be legislated. And now I respect Senator Hanson for the way that she's conducted herself. And she's gone out, as you say. And she's gone on the ground, and I really admire her for that. But I don't think companies can be asked, to your point, to say, "look, we're going to sign up to something now". Look, this is a ten year cut. The big companies don't get anything until 2022. Trump's cut was immediate. It was huge. And I was over there a few weeks ago; huge changes, not all of them in wage relief. Exxon putting $35 billion straight back into the economy. Walmart, well off bonuses. You know, the big employers, the big companies, have all said they'll invest more. They'll invest more in Australia. And some companies have said, "we’ll bring things back from overseas".

Peta: I know we can't get the Trump cuts here, sadly, they're not on the table. But it's invigorating, because what washes out of the US often washes here. Jennifer Westacott, thanks so much for your time.

Jennifer: Thanks very much.