Event: Jennifer Westacott, interview with Thomas Oriti, Breakfast, ABC NewsRadio
Speakers: Thomas Oriti host, ABC NewsRadio; Jennifer Westacott chief executive, Business Council of Australia
Topics: Seize The Moment, tax reform, productivity, intergenerational workforce challenges.
Thomas Oriti host, ABC NewsRadio: Challenges, challenges ahead to I guess, ensure that we still have that quality of life, that so many Australians expect and themes like that. The Business Council of Australia, it's warning this morning that major economic reforms are needed to pay for critical services that Australians expect. And that, of course, comes ahead of this week's release of that Intergenerational Report if you've just joined us, the report expected on Thursday, but information trickling out now. As we've been discussing, it forecasts Australia's future demographics and the state of the economy, that warning that $140 billion will be needed every year for the next four decades to fund things like aged care, Medicare, the NDIS, defence, and those interest payments on government debts as well. The Business Council says those services they can't be maintained without major reform of the tax system, and they've released their own report this morning, it's called Seize The Moment - warning that tough decisions need to be taken on tax, productivity, industry policy, and micro economic reform. We're joined now with the chief executive of the Business Council of Australia, Jennifer Westacott. Jennifer, good morning to you.
Jennifer Westacott chief executive, Business Council of Australia: Good morning, Tom.
Thomas: Can I start with tax; you've warned about some tough decisions that need to be made on tax. So, what exactly is the Business Council calling for?
Jennifer: Well, let's just go back to the basics here. Our plan is the plan to get higher wages, our plan is to lock in full employment, our plan is to lift Australians living standards. On tax, we simply argue that the system is not fit for purpose - it's not driving the right incentives for people, individuals, it's not driving the right incentives for businesses to invest. That investment is crucial, because that's going to drive access to new markets. It's going to drive greater productivity, doing things smarter, it's going to drive being able to invest in our people. This is all a plan about how do we grow our economy faster? How do we become more productive? How do we do the value-added things from the big supply chains? How do we broaden our economy? How do we skill our people? How do we deepen our relationships with emerging countries? And mostly, how do we make sure that our services are fit for purpose for the Australians who want and need them? This comprehensive plan - tax is one aspect of it, but we cover many other areas.
Thomas: Okay, you say this on tax, you do say the tax system is not fit for purpose. So what tough decisions are you calling for? I know that lowering the corporate tax rates is one of them, is that right?
Jennifer: Well, we are saying that we need a competitive corporate tax system, we need to lock in the stage three tax cuts. But what we're calling for Tom is a comprehensive review of the tax system. It just can't be one or two taxes, it's got to be looking at the whole system, the mix of taxes, how do they work? Are they driving the right incentives? Are they going to raise enough money for the services that the intergenerational report says we're going to need? We're calling for a conversation, and we're calling mostly for people to end our decade long attempt to basically rule things out all the time, everyone, sometimes someone says let's look at the tax system, within five minutes, five things are ruled out and we never make any progress.
Thomas: Because that's happened with the corporate tax rate, right? I mean, recent political leaders will tell you that that was on the agenda at one point then it kind of gets put on the backburner. I'm just trying to say is lowering the corporate tax rate one of your proposals, though, just to look at one aspect of this.
Jennifer: Yes, yes, yes, it is. But it's got to be part of a suite of things. That's just one thing. But you know, we've got one of the highest tax rates in the world, we're not asking for one of the lowest, we're just asking for something that's competitive. Because what we're seeing is, you know, we've got a 30-year low in terms of investment as a share of the economy. And we need that investment. We need that investment to drive things like new industries, existing industries to get our emissions down. You know, we need that to kind of skill up our people, we need that to expand into areas like advanced manufacturing, we need that to get into these new big supply chains. If we don't have investment, we can't unlock the potential of the country, and our tax rates holding us back. But many, many other things are holding us back, our regulatory environment, or you know, the fact that we really haven't spent enough time investing in the skills of our people or getting women to participate. There's lots of stuff in here. It's not just about tax.
Thomas: Is that behind because your report speaks about Australia's productivity slump. In your words, just tell us about that. What slump are you seeing and what's behind that?
Jennifer: Well, productivity has flatlined, it's going nowhere. Now productivity, let's remember what we're talking about. We're talking about doing things smarter. We're not talking about people working harder for less, we're talking about people doing things smarter, value adding to the economy, getting access to new markets, using technology differently, so that we can actually grow the size of the pie. And we have been going nowhere, nowhere for a long time - we've had one of the slowest rates in decades. Now, this is really important because it's productivity that drives wages. Eighty per cent of wage increases have been driven by labour productivity, so we need to get our productivity working again so that we can lock in those higher wages, lock in higher living standards.
Thomas: That’s what I'm trying to get my head around, excuse my naivety there, I'm not trying to be a pain, this is a genuine question. The reason why I was focusing the corporate tax issue for example, and the productivity slump is I'm trying to understand the correlation between, for example, lowering the corporate tax rate, for example, and then being able to afford the tens and tens of billions of dollars extra that we're going to need every year for the next four decades to fund things like aged care and Medicare and the NDIS. Seems to be in conflict to me, that’s all.
Jennifer: No, I don't think so at all, quite the opposite. So, if we encourage investment, we do the things that drive productivity, we get the new technology, we get the new machinery that people need, we're able to skill up our workforce, we're able to expand into new markets. That all grows the wages in people's pockets, and that that was absolutely clear in the corporate tax debate. And it’s not just me saying it, it’s people Iike Ken Henry saying it. The benefit of lowering the corporate tax rate goes straight to Australian workers in higher wages. And so, we've got to kind of think about this in terms of, who are you really fighting for here, we're fighting for the current and future generations of Australians and Australian workers. If companies are more productive, if they're investing more, and the incentives are there to invest, they upgrade their equipment, they expand into new markets, they train their people, they put more people on, they pay them more. And if that happens, wages go up, wages can go up over time, and more importantly, the economy grows, and if the economy grows, then we can pay for the services that people need. Now, reports here today, if we were to get our economy back to three and a half, 3.3 per cent, its long run average growth, instead of where it's forecast to be with the one in front of it. Our economy is going to be $200 billion bigger; government is going to have $50 billion of extra revenue. And by the end of the decade, Australians on average will be $7,000 better off. That's the message we're giving. That's the message we're giving.
Thomas: In terms of economic prosperity, sure. And thank you for explaining that for me. But I guess the care economy is also what strikes me as a challenge. It's going to need more investment as the population ages and that big ticket item today for an Intergenerational Report 40 million people in 40 years, they're getting older. Okay, that's economic prosperity, but how do we make sure we have the workforce and the funding to support an aging population as well?
Jennifer: Absolutely, absolutely. Well, of course, if you've got a poor performing economy, you've got, you know, a very, very slim chance of solving these problems. If the economy is growing faster, if people's wages going up, then that's the best way of funding services. As I just said, if we could have that extra $50 billion, that's going to go a long way to meeting these costs. But also in our report Tom, we talked about the importance of starting to invest in these services, really make those investments in digital, in technology, in personalisation of services, so that we're not just sort of funding things, right, we’re making sure that things are working for people. There's a lot of productivity to be gained in the care sector, many people, nurses and so on, still spend a lot of time doing administration. Why aren't we relieving them of that and making sure that they're spending more time with patients, particularly very acutely unwell people. So that's the sort of thing we're calling for this comprehensive look. Of course, workforce is hugely important as well, we're calling for a revamp of the skills system, particularly in that tertiary sector, so that people can upskill more quickly with things like micro credentials, getting recognition for working and learning on the job. That's the comprehensiveness of the report that we’ve put out today. And that's the best way that we're going to respond to these issues that are rightly raised in the intergenerational report.
Thomas: It's a pleasure. Jennifer, thank you for joining us.
Jennifer: You're very welcome, thank you.