Event: Jennifer Westacott interview with Peter Stefanovic, First Edition, Sky News.
Speakers: Peter Stefanovic, host, First Edition, Sky News; Jennifer Westacott chief executive, Business Council of Australia
Topics: 2022 federal budget; wage growth; fuel excise; cost-of-living; federal election
Peter Stefanovic, First Edition: Joining me live is the CEO of the Business Council of Australia, Jennifer Westacott to talk about last night's budget. Jennifer, good morning to you. What's your assessment? What's your read of the budget so far?
Jennifer Westacott chief executive, Business Council of Australia: I think the budget is pretty good. I think it shows the economy is roaring back to life. The challenge is maintaining that momentum. I think it struck the right balance between dealing with cost-of-living pressures and then laying the foundations for stronger growth. The cost-of-living pressures responses I think are targeted, I think they're measured, I think they're quite thoughtful. On the laying the foundation, I think there's three or four really crucial things. The first is skills and people that's the biggest issue for business. So, a $7 billion skills package, big incentive for women to participate through changing paid parental leave, and of course, restoring migration and weighting that migration to the skills area. The second big foundation is helping small business move from life support to a growth model by giving them tax deductions for things like digital and training. And the third platform is really all of that work that continues to go on around infrastructure, around regulation, around regional development, all those things lay the foundation for the future. The concern we've got going forward is when you look at the outer years of the budget, you've got growth numbers back down in the two’s and you've got business investment, which has been supported by the expensing provisions which we've been very strongly supportive of, falling away. You've got business investment falling away and you've got growth back to two’s that worries me a little bit, Peter, because that's not the basis on which you can get high wages over time, so that's the work to be done after the election.
Peter: Okay, yes the Treasurer had forecast pretty good or reasonable wage growth over the next decade or so. Are you as optimistic as he is on that point?
Jennifer: Well, I think you've got to do the work that drives wage growth. Wage growth is not the same as wage inflation, which we're seeing now which is basically very patchy across bits of the economy and ultimately causes a whole lot of problems where businesses either don't open up for the amount they want to open, or people are put off projects. So that's not a solution to the problem. I think that if we're going to achieve those numbers, we've actually got to do the work to achieve them, and that's about driving business investment harder, it's about getting the skills of people up, it's about attracting those new industries, it's about, to use the technical stuff, it's about lifting our productivity, the way we produce things. It's about driving those new industries like modern manufacturing, there's lots of stuff in the budget on that, but I don't think the wages equation comes just by the current policy settings, and I think you’ve got to do a bit more.
Peter: Why would a business give an employee a wage rise at the moment when businesses themselves are facing so many inflationary pressures that are only going to worsen?
Jennifer: I think that's spot on. I think that's the sort of, the kind of, myth if you will of wages that somehow because, we've got to remember that business is facing those inflationary pressures. If you look at the data, if you look at the non-mining sector, you’ve got to take mining out because it's very distortionary in terms of the data. Non-mining profits are about 2.7 per cent, non-mining wages 2.3 per cent, so they're both tracking below inflation. So, it's very difficult, particularly for small business just to give people wage increases, and that's not the solution. I want people in Australia to be paid more, I want them to have higher wages, I just want them to have higher wages over the long term, and that's not going to be done just through an inflationary environment. You've got to do the hard work I've just talked about. So I think, a lot of people aren't paying people more because they need labour. People say to me every day Peter, I just cannot get workers, but the trouble is, how long can that go on for before? You know, it sort of falls away and you end up with people having a sharp wage declines, or they just get less hours.
Peter: Are there more storm clouds on the horizon too Jennifer in terms of interest rate rises with economists predicting that there could be as much as seven individual interest rate rises over the course of the next 12 to 18 months. I mean, that's going to put a huge squeeze on business?
Jennifer: Absolutely. We are in a very volatile environment. We're in a volatile global environment with our supply chains, our energy supply chains, really kind of being called into account. We've got a very uncertain economic outlook in terms of inflation, what do you do? Well you do, do some of the things that the budget has done, you do lay the groundwork for a more competitive economy, you do have to deal with those cost of living pressures that households are feeling. You do have to do the work of building the skills base of the Australian people, and you do have to do the work on national security and cyber and cyber resilience that's in the budget. Those are the things that the government can control. I think by and large it’s pulled the levers in the right direction, but you know, for sure we are in a very uncertain future.
Peter: Do you think that the cuts to fuel excise was really needed?
Jennifer: Well, look, there'll be lots of debates about this. I think, , if you kind of think about you know, people who are really struggling to put petrol in their tanks and keep their businesses running or their households running, you can understand government taking that decision. I think the challenge is keeping it temporary, and then making sure it buys us the time to do the work that we should be doing on a national road user charging model, particularly taking into account the fact that we're going to have a lot of electric vehicles. I think it's one of those things that you sort of damned if you do and damned if you don't, I can understand why the governments done it, I can understand the economists saying that that's not something we needed to do. I think the crucial thing though, is to make sure that it's temporary and then as I said it buys us that time to actually do the real work on road user charging and making sure that that is kind of fit for purpose.
Peter: I mean, when we're talking about filling up a 50 lite tank of fuel, it's 10 bucks Jennifer, I mean, a lot of people probably aren't going to even notice?
Jennifer: Yeah but 10 bucks to some people peter is a lot of money. You know, $10 bucks is the difference between whether you buy the kids a couple of extra things or whether you have something extra I mean, $10 bucks for many people on a low income is actually a lot of money.
Peter: Yeah, and for truck drivers, I suppose they do more kilometers, they cover more ground. They have higher expenses when it comes to fuel. So, I suppose it would be a bit more of a saving for them anyway. So just in total, Jennifer in terms of a report card, what grade do you give it?
Jennifer: Look I don't sort of get into this grading thing. I think it's a good budget, I think it's a budget that does that sort of right balancing. You know, I think there'll be a lot more work to do post an election, all that big structural work that we need to do that is going to sustain higher wages, that's going to put more money into people's pockets, that's going to make Australia more competitive, that's going to make us an attractive destination to do business across the world. But in terms of a point in time, I think is pretty good.
Peter: Okay, Jennifer Westacott. As always, thank you for your time. We'll talk to you again soon.