Event: Jennifer Westacott interview with Sarah Ferguson, 7.30, ABC
Speakers: Sarah Ferguson host, 7.30, ABC; Jennifer Westacott chief executive. Business Council of Australia
Topics: Seize the moment report; skills; tax reform; productivity; economic growth; business investment
Sarah Ferguson host, 7.30, ABC: Jennifer Westacott is the BCA chief executive. She joins me now. Jennifer, welcome to the program.
Jennifer Westacott chief executive, Business Council of Australia: Thanks very much.
Sarah: Now this report, called 'Seizing the Moment' so full of life and drama. I'm just going to quote from it, ‘If we continue along the low road, Australians are sitting on a wages and unemployment timebomb.’ Now what will happen to Australians' living standards if we don't adopt a more ambitious reform?
Jennifer: Well, there is two things, Sarah. One is what could have happened if we’d seized the moment, to use the expression from the report. We say if we can take a series of actions to get our economy growing faster at around just over 3 per cent which was longer than average, then by the end of the decade, Australians are going to have $7,000 every year extra in their pay packet. The economy would be $200 billion bigger, and governments will have $50 billion of extra revenue. So that is what could happen. What will happen if we keep drifting, people will just take longer to get their wage increases and at this particular time when people are dealing with cost-of-living, that really hurts. People will find it harder and harder to get into the housing market. That intergenerational problem we've got of younger people not being able to get the things that we've all enjoyed, that will get worse because we haven't done the reforms to the housing system. If we keep drifting on our skills system, our people will not be able to compete. They will not be able to compete for those jobs. They won't have those high-tech skills or some will and some won't and we want that across the system. If we keep drifting and not broadening the base of our economy, we will have a very narrow-based economy and that means we are a sitting duck.
Sarah: So sitting duck, we will come in a moment to some of the pressures that we face but as you describe it, the stakes couldn't be higher for all Australians. One of the things that you want to change and you've argued for this in the past is a change to the GST. Now I just want to ask you, is that a serious proposal or a form of performance theatre if you like from the Business Council because you knew that the Treasurer was not going to agree to a change to the GST. Why bring it up again?
Jennifer: We didn't call in the report for an increase to the GST. We said we want comprehensive tax reform, and the GST is the third biggest tax in the country. So if you're not going to look at it as part of tax reform, it seems to me narrowing your options by not at least talking about the GST. Look, we're not naive. The GST is a very difficult topic. It gets quickly politicised and it tends to be the focus when you talk about tax reform and the first thing people talk about is the GST and everyone says "we're not going to talk about the GST" and of course, then we don't make progress.
Sarah: Have you gone to the Coalition and asked if they would consider taking it to the next election, to get a commitment from them?
Jennifer: Not specifically but we've certainly talked to them about tax reform and the need for retax reform. I mean, the simple reality is this, the tax system is not going to do the job that the intergenerational report will show later this week that needs to be done. It will not raise enough revenue to pay for the services people need and it will not raise it in a way that is efficient. It will not incentivise investment, it will not help grow the economy and it is growing the economy frankly, that is the best insurance against the sort of spending pressures that we're going to see later this week.
Sarah: You want to see the corporate tax rate lowered as a form of incentive. It is a very hard sell during a cost-of-living crisis especially when people see corporate profits as being part of or one of the drivers of inflation?
Jennifer: Yes, of course, I think most serious economists have projected that had proposition.
Sarah: The IMF said it was part of the growth in inflation in Europe, above and beyond the impact of energy prices in Europe.
Jennifer: It is not the big contributor to inflation. Inflation is being driven by these big global forces.
Sarah: A contributor.
Jennifer: But what really matters, Sarah, is that we get a competitive company tax rate and we have said over time, we have said progressively reduce the company tax rate. We haven't said do it tomorrow. We've just said progressively reduce it because I've just been to the United States. I have looked at this Inflation Reduction Act that they're introducing over there. This will just suck out so much investment from Australia and around the world and we have not been able to compete. We have got the lowest level of business investment for the last 30 years. It is business investment that drives productivity. It is productivity that drives higher wages, and we are going nowhere on this.
Sarah: Let me just ask you this, I want to come back to that situation in America because it is very significant obviously for Australia but just briefly, does the business sector also carry some responsibility for the sluggish nature of productivity or how much responsibility do they carry?
Jennifer: Everyone is responsible for it. I think that the question is this - business wants to do more, but you have got to have the right environment to do more. One of the big themes in our report released today is to let business do more of the heavy lifting.
Sarah: What does that mean? What does heavy lifting mean?
Jennifer: It does mean taking those investments, taking those risks, expanding, training your people, going into new markets, taking risks in markets where you previously haven't been. Really capitalising on this incredible opportunity in South-East Asia, but if your system is full of friction, full of regulation, full of difficulty, it is so hard to do business. It is so hard to take risk. If you've got tremendous policy uncertainty like we've had for a decade over energy policy, it is really hard to get those companies, whether they're small or large companies to take risk, to do that innovation, to make those investments because it is very difficult to convince your shareholders you're going to make a return. It is very difficult if you are a small business, to take the risk.
Sarah: So in that sense, both sides of politics are part of contributing to the environment where we're in, where all of that friction exists?
Jennifer: Absolutely. I mean for years, we've been putting off, really doing that microeconomic reform. Things like planning. The time it takes to get a major project approved in this country, how are we going to do the clean energy stuff, how are we going to do the big renewables projects, how are we going to do critical minerals if we are taking three, four years to get a planning approval.
Sarah: Let me just ask you this just before, I want to find out what answer to that question is. I am not expecting you to deliver it in a few seconds, but people do like to know that there is hope because we are talking about some serious challenges but just to understand the environment that we are working in, you said you've just come back from the US. That amount of money that the US is putting into their green energy transition as well as chips. It is nearly up to $1 billion, sorry $100 billion...
Jennifer: A trillion.
Sarah: A trillion dollars sorry, a billion here, a billion there, sorry. A trillion dollars, $370 billion for the green transition. Australia investment, we are already seeing investment going to the US. Australia can't compete in that environment so what does it do?
Jennifer: It can't compete on measures like that, I mean it just can't but what we can do is make our whole economy perform better. It is interesting, Mike Henry, the head of the BHP, he said when making investment decisions, he'll take getting the fundamentals right any day over a short-term particular policy initiative. And I think that's the opportunity we've got to make ourselves this super attractive place for investment by getting our skills right. A lot of companies say to me it is the skills that we're looking for. Getting our industry policy right, getting it balanced, picking the things that we can scale up where we've got comparative advantage. Making it easier to do business, getting our tax system working. If we can be that economy that people say, "Australia is a fantastic place to invest, take risk," that is the best hope we've got of competing with that. These are massive changes in the United States. I've just been there looking at it and I liken it to the clean energy equivalent of Roosevelt's new deal. It will touch every aspect of their economy, it will transform it and in doing so, transform the world economy, but it is really now very urgent for us to say, "Let's look at our investment environment. What action can we take to get investment going again?"
Sarah: You're coming towards the end of your term at the BCA. Just briefly, is it more difficult now to create the conditions for reform?
Jennifer: No, I don't think it is because I think the cost-of-living crisis, I think the fact that we've talked to thousands of people, I think Australians are up for it.
I think they can see what is happening in the rest of the world. I think they want direction, and they want a plan. They want action to be taken. They want their lives to be improved and I think now is the time to get these things done.
Sarah: And just coming back, it is a trillion dollars in the US. The first day back from a holiday, I get my billions and trillions mixed up.
Jennifer: In dog years, in Australian dollars, that's double-and-a-half the size of our economy on one initiative. That shows you how big it is.
Sarah: Thank you very much indeed for coming in, Jennifer Westacott.
Jennifer: You're very welcome, thank you.