Event Jennifer Westacott interview with Ticky Fullerton and Adam Creighton, Business Weekend, Sky News
Speaker Jennifer Westacott, Ticky Fullerton, Adam Creighton
Date 29 September 2019
Topics Retirement incomes, red tape and regulation, energy, economic growth
Adam Creighton, co-host: Well certainly Jennifer Westacott has been in the boiler room of big business lobbying for 8 years as the boss of the BCA.
Ticky Fullerton, co-host: Yeah, she's also been on the board, is on the board, of Wesfarmers and chairs the authority looking after the delivery of the Western Sydney aerotropolis, which is huge. She joins us now at the desk. Jennifer, great to have you at the at the desk. Now look, I've got to talk to you about, I was down there, at the game, at the AFL. You're a great Giant's supporter. What does this mean for you and what does it mean for Western Sydney?
Jennifer Westacott, Business Council chief executive: Oh look, it didn't go according to plan but I think people should be still really proud. To get in the grand final, to be a new team, to get so much community support. That's a really big achievement. I'm really proud of them that they got into the grand final. I'm really proud of my friend Tony Shepherd, what he's done with the club, getting sponsorship but also getting that community excitement which is really important for young people, for their sense of community. It's interesting, there was something in the paper the other day about a guy who said that he just didn't know what it meant to live in Australia until he got involved with the GWS Giants and then he got this real sense of community. So I think we shouldn't forget that.
Ticky: And you've of course worked so closely with Tony Shepherd over the years. He's taken this on as a mission. I spoke with him briefly at half time and he was very stiff upper lip about it. But I mean, goodness, this is AFL, isn't it? It's got to hurt.
Jennifer: It's got to hurt. If you don't care about your team winning or losing, you're not really a fan. So I think anyone who was watching yesterday who didn't sort of feel a bit of pain, isn't really a, isn't really committed as a fan. But look, you know, we'll be back next year. To get in the grand final, you know, it's nothing to sneeze at.
Adam: I actually put my first bet down.
Ticky: And lost?
Adam: And lost! Anyway, let's move on to superannuation, which I think is one of the big issues of the week. So of course, the government has announced a full review into the retirement system. Now some people hope, and some people are concerned, that it's a stalking horse to stop the increase from nine and a half to twelve per cent. Is that what you actually hope it is?
Jennifer: No. Look, we've been calling for this for years, this review. So, first of all, it's great the government's doing it, because we've been concerned for a long time that you had to look at more than just incremental changes to super, you have to look at the whole retirement income system because you've got to kind of get this to work for a modern economy. We have to imagine a world where someone's going to work part time, they going to get some super, they're going to get a part pension. I'm not sure the system as built is going to do that. So, we've got to get it designed properly. In terms of the increase to the super guarantee, the 3 per cent, I hope the inquiry looks at this because I think the question is, if we're going to make this decision, it's got to actually achieve the outcome intended, which is to actually make more sustainable people's retirement income. So, I think it's perfectly legitimate for them to look at it.
Adam: Should it be saving the government money in the long run? Is that the purpose of compulsory super?
Jennifer: Well its certainly to save government in terms of big pension requirements. I mean, it's principle purpose is that people have got an adequate retirement income. And we've looked at super as an isolated issue, we haven't looked at how it works with the kind of broader retirement income system.
Adam: Is there too much confusion out there about who actually pays the superannuation guarantee? I always notice on The Australian website, so many people say, "oh look, you know, the boss pays it," whereas others say workers pay it? What's the correct answer?
Jennifer: Oh, well whose pay does it come out off? I mean it comes out of your pay. I think Australians are entitled to say, if I'm compelled to do this, then it's got to work for me. It's got to achieve an adequate retirement income for me. And I think that it's great and they put some very, very skilled people on that inquiry. I think it's a really important step. And we welcome it and we want to see it to be a very comprehensive review.
Ticky: Alright, watching brief. Jennifer, you have been championing business at the BCA for eight long years now. In recent years, post Hayne Royal Commission and suddenly all this confusion of messaging coming at big business as to what they should and shouldn't do from government, from regulators, from stakeholders. Have we gone too far and is the pendulum possibly swinging back?
Jennifer: I think you saw on this week some really serious warnings from people in the property industry that if you get a credit squeeze, you're going to have a lot of unintended impacts. So look, we've got to make sure that we respond appropriately to the Royal Commission. It made some very serious findings. We've got to respect those but at the same time if we overreach on regulation and create a credit squeeze, we've got to remember who pays the price of that.
Ticky: But do you see the comments from Josh Frydenberg as quite significant?
Jennifer: Absolutely. Because I think he's sort of trying to get that steering down the centre, get the right balance because everyone forgets, a credit squeeze impacts the small business starting a business.
Ticky: So is this changing the relationship between the government and business now for the better? Because it's been pretty ropey hasn't it?
Jennifer: Yeah, it's been tricky. It's been a very difficult time. Look, I think our meeting in Canberra week before last was really important for three reasons. The first is that you've got a government calm and in control and that always makes people feel a little bit more certain about the future. The second is you had an opposition leader turn up in Anthony Albanese and say, "I understand the role of business" and that's a view he's had for a long time, that the people he cares about, the workers of Australia, can't succeed if business doesn't succeed and he reinforced that message. And the third thing was a recognition by both sides of politics that the economy is not where it needs to be and that business is vital to that. It was a very important game changer we had a couple of weeks ago. And I think the 80 or so CEOs and chairman who turned up there felt pretty good about the discussions they'd had, not just with the politicians but with the departmental secretaries. And I think they felt a bit more of a sense of confidence and optimism.
Adam: Certainly, just on the question of the economy, of course, we all know the growth rate has slowed to 1.4 per cent, the lowest in a decade. Now the government has been very confident that its $8 billion of tax cuts his quarter will make some difference, but increasingly we're seeing retail sales go backwards. We're seeing CEOs come and say, look, we aren't actually feeling much of a difference. Is that also your sense?
Jennifer: Look, I think that's certainly what you hear and look, it'll take a while for those tax cuts to to go through. That's not to underestimate the importance of doing it. I mean to take out a whole tax bracket, that is serious reform.
Adam: In five years away, we should be getting it sooner shouldn’t we?
Jennifer: Yeah, look, I mean that's a question the government will have to examine. I think the big issue Adam, and I think you've written on this and we've certainly talked about it for a long time, it's the private economy that's not doing well. It's business investment that's as low as it was as a share of GDP since 1994. It's business investment that drives productivity. It drives wages growth. That's not happening and so we have to look at what is the recipe of policies that we can apply to getting business investment happening.
Adam: Well seemingly low interest rates aren't, they aren't having much of an effect?
Jennifer: But think about if your company, you think about that. You know that at some point that has got to change, that interest rate. Whereas obviously a tax reduction, which we argued very passionately for, or some sort of depreciation or investment allowance might be a more certain way of encouraging investment. The company tax cut has been taken off the table for this term of government, we accept the politics of that.
Ticky: So when Peter Costello came out the other day and he said that any stimulus actually that the RBA could deliver is just not appropriate. But what he wants is to see is "hard reforms". What do you think he meant by that?
Jennifer: I'm not sure what is in his recipe of hard reform but his principal is right. We are not in a 2008/2009 situation where you've got to stimulate the economy. We're in a situation where we are staring down a long period of low growth and that long period of low growth means lower wages and that's very, very difficult for Australian households. So we've got to stand back and say what do we need to do to get the economy to accelerate its rate of growth? And if you talk to many of the many leading economists, and you've made this point yourself Adam, it is the private sector economy that's got to work harder. People used to talk about capital deepening, now they talk about capital shallowing. We've got to find a way of getting businesses to invest.
Adam: Is there any sense in which businesses are losing confidence in the reserve bank's monetary policy. I think these latest rounds of cuts of have certainly been of great concern, not only to Peter Costello but to other business leaders.
Jennifer: I think it was Warwick McKibben last week who said that they're actually now at the law of diminishing returns and possibly going to impact on confidence. I'll leave that to the economists. I think the issue is they're not going to change the trajectory of business investment and its business investment that we need to actually fire up. And we've got to look at the kind of range of policy measures, be it regulation, be it tax, that is going to accelerate that rate of private sector investment.
Ticky: So you've talked about deregulation, red tape and the government is focusing in some areas which you've given them a tick for. But they're also re-regulating. I mean, look at this “Big Stick” which obviously is of a great concern to your members.
Jennifer: Absolutely. We do not agree with this and what we've said is, look, the government took this to an election. Now let's try and work with them to get an amended in a way that sort of deals with the two big issues we've got, which is the ministers power to issue contracts and this potential that it's going to start to apply to other sectors. So, we want to see some serious attention paid to those concerns. But it's not going to, it's the classic example of regulation, of a solution looking for a problem. You know, it's not going to get prices down. The ACCC gave the government a menu of things that would get prices down. Some of them they're doing, some of them they're not. The biggest issue I've got Ticky, with this is that what is going to drive affordability in the long run is investment in existing dispatchable power or base load power and investment in new sources of energy. Now, if you're a company, particularly if you're a global company, and you've got the prospect that a government can come in and split up your assets are you seriously going make a 30 or 40 year investment?
Adam: Just on the competition issue though, in the case of energy, I think there are three large players, three or four large players. And that is the case in many sectors in Australia. Do you think it is unrealistic to assume that it's highly competitive when there are only three or four large players? Whether it's banking or whether its energy?
Jennifer: Yeah, but that's why we've got a set of pretty robust competition laws and I think many of the things that the "big stick" legislation is trying to do is already done through the competition laws as they stand. So I think it's one of these cases of, what is the problem we're trying to solve? We're trying to solve that we get power prices down, which we should, we're trying to solve that we get reliability, we're trying to solve that we reduce our emissions. All of those things require long lived investments. And if you start making that more and more uncertain, we're worried about the sort of unintended consequences of this. But you know our job is to work constructively with the government to say, let's try and get this the best it can be
Ticky: What did you make of the IOOF court case?
Jennifer: I think it's a classic example of let's be cautious about litigating first, let's be cautious about knee jerk reactions. I'm not going to comment too much on the case, but I think the one thing particularly that really struck me in the judges findings was the finding that directors of companies have an oversight role. They do not have a management role. And you know, it's very important we respond to the Hayne Royal Commission, but at the same time...
Ticky: Well this flies in the face of what a lot of the Hayne Royal Commission was he's driving at doesn’t it?
Jennifer: You know, if we've got to be super careful that we don't just jump to regulation, jump to litigation, because what I want companies doing is making sure they're growing. Growing for their shareholders, growing for their employees, growing for their customers. And what we don't want to see is that we've got 10 years of legal battles and that we're spending all of our time in the courts. Of course we should have responsible corporate governance. Of course we should react properly to the Hayne Royal Commission. But I think we just got to be very careful that we don't overreact.
Adam: Just one last question, on the jobs market, if I may. We often hear from big businesses that there are skills shortages, that you can't find the right people but wage growth is still stagnant and the jobless rate is going up. So surely those two things?
Jennifer: Yeah, it's a strange conundrum now isn't it? That we, we've got the skills shortage, but it's not putting upward pressure on prices and we're doing quite a lot of analysis to sort of see what that relationship is. But there's no doubt that we've got to drive that productivity, of getting people to work smarter to use that jargon, of restoring the enterprise bargaining system so that companies and their employees can sit down and say how can we be more productive? And we've got to act on our skill shortages. We've got to act on our skills system. I mean, I'll tell you one sector that companies tell me about all the time, is cyber. They cannot get the enough cyber skills.
Ticky: Alright, Jennifer Westacott, we've covered a lot. It's terrific to have you in here. Thank you so much for joining us.