Event: Jennifer Westacott interview with Ross Greenwood, Business Now, Sky News
Speakers: Ross Greenwood, host, Business Now, Sky News; Innes Willox, Chief Executive, Australian Industry Group; Jennifer Westacott Chief Executive, Business Council of Australia; Alexi Boyd, Chief Executive Officer, Council of Small Business Organisations Australia
Topics: 2022 federal budget; labour shortages; productivity; small business support
Ross Greenwood, host, Business Now: I was joined earlier in the day by the chief executives of Australia's Business groups, Jennifer Westacott from the Business Council of Australia, Innes Willox from the Australian Industry Group and Alexi Boyd from the Council of Small Business to talk about the expected outcomes from the business community from the budget.
Innes Willox, chief executive, Australian Industry Group: Well there’s a whole lot of problems that you’ve just laid out there that the government has to work through as we recover from COVID. The once in a century economic shock. There is obviously been huge ripple effects. The biggest one that businesses facing at the moment, quite frankly, is around labour shortages. That's both getting just getting workers but also skill shortages as well. That's a huge problem for business. When you look at it, there are over 300,000 unfilled jobs within the Australian economy at the moment, we have a 3.5 per cent unemployment rate projected through the rest of this year, 4 per cent now, reduction coming ahead. To us, that's a bit of a false number. We've got participation rates at perhaps the highest levels ever. What we're really seeing as a result of that is a lack of people. We need to, through this budget, that's the number one issue that our members are saying they want addressed, is to get more people into…
Ross: Does immigration fix that?
Innes: It fixes over the shorter term more quickly than skills and training does, but skills and training as the longer term or sustainable need that we need to fill here. You've got the two balances. We want to see through this budget process and in the year ahead, immigration really pick up particularly skilled migration, we're going to have a big effort to make that work because we've had our borders shut for two years. We have to have a significant long term sustainable spend in skills and education, federal and state governments working together. That's what is going to address these labour shortages that that businesses are facing at the moment, which are a bit of a handbrake on our recovery.
Ross: Okay, so there is a handbrake. The second one is productivity, Jennifer. And that is one of the things that Australia's been falling behind for more than a decade now. What is it that could be in this budget tonight that could improve productivity, to allow the economy to grow faster and to allow business to be confident to invest for the future?
Jennifer Westacott, chief executive, Business Council of Australia: There's a few things. The first thing to say about productivity is it's the key to long term wage growth, the sort of stuff that we're talking now is wage inflation, which actually is kind of counterproductive. Because people just say, ‘well, I'm not going to do stuff.’ But if we really want to get long term wage growth, we've got to get our productivity up. That's a few things, it's obviously making Australia an attractive destination to invest. We're not at the moment, we've got business investment at the same numbers we had in the 1990s. We need that investment to go up. We'll be looking for things in the budget that go to that.
Ross: So what sort of things?
Jennifer: We have obviously called for some kind of investment allowance. Something like instant expensing has been good, but it's been very targeted to particular types of machinery. So what's in there for business? In a very difficult world too where the competition for people to invest in Australia versus somewhere else, in a high cost environment, we have to make ourselves more competitive.
Ross: That’s energy prices apart from anything else?
Jennifer: Energy prices, a competitive tax system, low cost of regulation. We've made some progress on that, but businesses tell me over and over again, it's too still too hard to do business.
Ross: The time it takes to get an approval, to set up a new factory to actually create something.
Jennifer: Correct, exactly. Then the final one is the point that Innes is making around skills. If we want to be productive, we've got to have our labour market highly skilled. We've got to encourage women to participate. We've got to fast track the re-skilling of people in areas where some jobs are going to disappear due to technology, but other jobs will be created. We've got to make it easier to attract those skills, migration is a big part of productivity as well. Because a lot of companies said to me, ‘I need to bring people in who've got particular sorts of expertise, because they can then do that transfer of knowledge to other people. Then we've got enough people to actually get a big project going.’ It's a whole raft of things. I hope we're going to see the regulation task force, that the government has rightly set up, become a permanent feature. But we have to be on all fronts if we want to get our productivity going again.
Ross: Okay, so then I come to the small businesses, because they've just been absolutely hammered through the COVID period. Many of them have not survived. Now they’re being told as the engine room of employment in this country, you’ve got to grow faster, we want you to grow faster, so the whole economy grow faster. Do you think there's a mindset of small business and be ready to do that?
Alexi Boyd, chief executive officer, Council of Small Business Organisations Australia: The mindset of small business as you described it, is that they’ve being hammered. It's been issue after issue, largely, a lot of them have been unresolved. So problems around COVID and mitigating risk unresolved, working out how to deal with your customers in your workforce in a very different environment to previously. The mounting debt issues that are around debt levels. And of course, as Innes mentioned, the difficulty in finding staff, those are all unresolved issues right now. So the thought of growing or innovating at the moment, really small businesses are just keeping their head above water, and they're incredibly vulnerable. If we're not cautious and careful, and we don't, in a way consider their vulnerabilities at the moment, we do risk losing them out of community. Now when you lose small businesses out of community, you lose those unique, interesting places that make one suburb different from the next. You lose entrepreneurial spirit because you never learn how to run a business or start your own business when you're working at a larger company, that happens from working in a small business. Not to mention the way that small businesses support community, that could be lost if we're not if we're not careful.
Ross: So what can a government do in a budget that can help address some of those issues?
Alexi: Well the worker shortages, as Innes mentioned, is a big one. There are definitely some hurdles that small businesses are experiencing at the moment. The difficulty in trying to get skilled workers from overseas is very…
Ross: But we've got 3 and 3 ¼ per cent unemployment rates coming. We've got full employment, there are no workers. So where are they going to get the workers from?
Alexi: So let's find out ways that we can get people more engaged with working. There are people out there who do want to do more hours, or they might be restricted around tax. Or perhaps Family Tax Benefit A and B, which is restricting their ability to work more. Pensioners as we've heard recently want to do more hours. It is going to be a little bit of low hanging fruit. There's got to be multiple solutions. We're not just going to have a single silver bullet here. But we need to get more people who want to be engaged in the workforce engaged, particularly at the small business level. Because they are screaming out for people. Small businesses, you spoke about wages, they have other levers that they can pull, they can restrict the hours, they can restrict their offering, their services and products that they produce or offer. They have other ways of contracting. That's the risk, they're going to contract and not grow. It only comes with people and good regulation that makes it easier, as Jennifer said to do business in this country, it is hard.
Ross: I come back to you Innes on that whole subject. We've all agreed on this point about labour shortages, that difficultly of skills. But the point is that the government to make certain that this trillion dollar debt is controlled has got to create faster growth. That's the fundamental underlying issue and proposition that both the government and the opposition give to us right now. It's not about spending cuts. It's not about reducing our spending. It's about growing the economy faster?
Innes: Well absolutely and now is not the time to going from massive spending cuts, as much as we all want to get back to a balanced budget over a longer-term cycle. But now is not the time, our economy is not strong enough to withstand that. The international situation makes that impossible. We're dealing with a whole lot of vulnerabilities here. This is about getting more out of what we have at the moment. That's really what the task for government is to do. That's why the issues we've talked about are so important. That's why trying to get wage growth that is sustainable is important. We're hearing a lot of ambit claims from unions, for instance at the moment. That will do no good to our economy. That will only make businesses like those Alexi represents shut their doors. It will just make it harder for businesses to employ people and to keep people employed. We'll get into a terrible spiral. So that's the challenge for government is to get the economy working more efficiently. We have to do better than going back to 2019, our economy wasn't in fantastic shape then. It was in much better shape than it has been through COVID, obviously, but we have to aspire to be better than that.
Ross: Jennifer, one part of it that we do know is that there's a part of this budget tonight that is about continuing and growing infrastructure. Clearly that’s a part of your passion, in many ways, is to do this. But that infrastructure has got to be well placed, it's got to be targeted. It's got to be about growing the jobs, making that productivity improve, and to allow Australia to grow off the back of that infrastructure spend?.
Jennifer: Yes and I think that's spot on. The dollars are big what we want to see is that the dollars are targeted to those areas where you're going to get the biggest economic uplift. You're going to get the biggest payback. That's why I'm obviously a big supporter of putting quite a lot of extra infrastructure into Western Sydney, because people haven't had their fair share for a long period of time. But we've got to start making sure that the principal thing we are calling for in the infrastructure is coordination, because one of the issues is just capacity constraints. There are labour constraints, there are cost increases. We've got to make sure that we keep the pipeline going, but that we coordinate across the Federation to make sure that that's not a stop-start. Or there aren't big price hikes. The issues with labour shortages, going back to Innes’ point, we've got to make sure that we can deliver on that infrastructure. We've got to make sure that that infrastructure is the infrastructure that changes that productive equation. That makes it easier to export goods. That brings regions alive. That makes it easier to do business and lifts the productivity of people who are currently sitting in tailbacks of 40 - 60 kilometres a day, an hour, wasting two hours traveling back and forth when they could be…
Ross: But that is productivity there is no doubt. Alexi finally I’ll come back to you because tax is one of the key incentives potentially for a person to start a business to know. A: they're going to be covered for losses which they are currently. B: to know that they're going to keep more of that money themselves. C: that if they employ somebody, there is an incentive to do so. Is this a part of what you'd like to see the tax incentives for small business to be to be pointed out tonight?
Alexi: Yes, absolutely. I think it's really important that we continue seeing those instant asset write offs and those sort of incentives continuing because that encourages small, medium, large businesses or to continue to invest, and obviously employing people does the same because it increases productivity.
Ross: Many thanks for your time today.