Event: Jennifer Westacott interview with Ticky Fullerton and Adam Creighton, Sky News Business Weekend

Speaker: Jennifer Westacott, Business Council chief executive; Adam Creighton, host; Ticky Fullerton, host

Date: 26 July 2020

Topics: Economic outlook, workplace relations, company tax, skills, post-COVID-19 reform

E&OE

Ticky Fullerton, host Sky News Business Weekend: After all the economic news in the last few days, Jennifer Westacott chief executive of the Business Council of Australia joins us live from Canberra:

Jennifer Westacott, chief executive Business Council of Australia: Thanks very much.

Ticky: Can I ask you about this growth questions. The government is saying that we're going to grow to get our way out of here. We don't have immigration, we don't have a lot of fuel from the RBA. Can we do this supply side of reform of Reagan, Thatcher, Hawke and Keating? Where's it going to come from?

Jennifer: Well I think the question Ticky is also what's the alternative but to grow out of this? I mean you can't tax and spend your way out of this. I mean governments are going to have to do some strategic spending. But I think we've got to play a long game here and there's a couple of things that are pretty obvious. First of all, we have to open up activity in the economy which means we have to get the health management right and that's about the protocols, that's about not extending this to state-wide lockdowns. It's also about starting to build the growth agenda. That's by encouraging business investment which of course has collapsed in the figures that we saw this week. That is about tax, it's also about deregulating the economy, cutting the red tape. It is about a flexible industrial relations system. We've just got to take a three to five year perspective on this. I mean clearly migration isn't going to come back for quite some time. So what do we do in the interim? We've got to pull those levers that we can control in the domestic economy. I can't emphasise enough how much we have to stay the course on opening activity up in the economy. Because the alternative will be very severe unemployment going forward. 

Adam Creighton, host Sky News Business Weekend: Just on that, at the tax front there Jennifer. Of course, in recent weeks the government has been talking about bringing forward either stage two to stage three of the personal income tax cuts. I was a little surprised this week that the Treasurer didn't actually talk that much about it when delivered the statement. Are you concerned at all that maybe they're having second thoughts about bringing forward the third phase to next year?

Jennifer: Yeah I simply don't know. I hope they're not because if you look at the budget, to your point, what should the budget do? It has to be a reforming budget. Then you want to see those permanent structural changes to the economy that are going to position us for the next wave of growth. And one of those, of course, is to get that 90 per cent of people paying no more than 30 per cent of tax. I mean that was a big reform. The second thing we all want to see is obviously some kind of investment allowance to avoid companies, if you will, sitting on cash and give them that incentive to invest whether they're the biggest companies or the smallest companies in Australia. That crucial investment around equipment, around staff skilling, around expansion, around getting ready to access those big markets in Asia which will open up. China as you've already said continuing to be strong. So you do want to see a reforming budget and we would want to see those tax cuts in the budget. And of course, if you take the other side of this, the welfare side of it, we continue to argue that at some point we have to come to terms with an adequate rate for JobSeeker that needs to be higher than the old Newstart allowance. And so you'd want to see those reforms as well as a big push onto skills. We've got to get our IR system working more flexibly. So that's the sort of suite of things that have to be done. Budget will pick up some of those. There is still a big place for government unleashing it's balance sheet on public infrastructure. But it's got to be the infrastructure that obviously has a job creation effect but has that effect of positioning us for growth. And Ticky, you and I have been around the country in these big regional centres which are really ripe for growth. It's got to be that kind of infrastructure that's going to have that kind of effect of unleashing growth.

Adam: Just on the company tax front. Is it fair to say that the government has basically given up on the across the board company tax cut? Is that how you see it?

Jennifer: I hope they haven't. I mean at some point someone has to come to terms with this. I mean we don't want a low tax rate, we want a competitive one. Why? Because it changes the equation of the value of an investment. So many companies Adam say to me 'look when we turn up to our global headquarters and we ask for capital, we're competing against countries with a 16 per cent corporate tax rate and we've now got a bizarre two-tiered tax rate with one of the highest headline rates in the world.' At some point, someone has to confront this system. Because the idea that people aren't sitting around the world, like we are today, thinking how do we grow our way out of this? How do we access these Asian markets? How do we invest? How do we incentivise investment? I mean we're not the only people having those conversations in this country but we've got a real drag on that by this big headline rate. Look I hope they haven't given up. I hope eventually we can get some bipartisanship on this. But in the meantime lets at least do some kind of investment allowance. 

Ticky: Right so the other area where perhaps we do lag is on industrial relations. Now the government has said that it's going to move on this. We've had the Treasurer this morning that the government would be talking to the unions to extend the workplace changes agreed to during the crisis. Now, do you think the unions are going to be open to this idea and what in particular does business need in terms of flexibility? 

Jennifer: Well I hope they're open to this idea because I think the cooperation that's happened between the ACTU particularly and employer groups has saved tens of thousands of jobs. And we have to continue to focus on creating new jobs and saving those jobs that might be at risk. And the flexibility that we're looking for is that capacity to ramp up hours of work, ramp down hours of work, change hours of work, remove some of these very long lead times in rostering, in some cases eight weeks to change a roster. It's that kind of flexibility that companies are looking for Ticky. And over time, and when I say over time in the short-term, we have to do things like fix that better off overall test which has I think stopped people doing enterprise bargaining properly. And it's really enterprise bargaining in the way that Bob Hawke and Paul Keating conceived for it that allows companies to sit down at the enterprise level with their teams and say 'what does our competitive circumstance look like? What do we need to do? How do we make ourselves more productive? And how do we share that through higher wages and better conditions?' We've got to get back to the system and the BOOT test is killing that system.

Ticky: Right. The other area I know we've talked about before but it's right on the brink now is skills right? And this announcement the government about apprentices. Now, what is going to make sure that we've got the right skills programs? The right apprenticeships. So that we don't end up with this being just an extension of young people to keep them off the dole queue. And then there's no connect with the businesses that need the skills of the future.

Jennifer: It's a really good question this. So there's a couple of things that I think we should do in the short-term. The first is I would get the JobActive network, the people who manage people on JobSeeker, on unemployment, to do an audit of where the skills capabilities are of people who've gone onto JobSeeker. And in many cases we need to do that analysis of people who are on JobKeeper who've been stood down and start to identify the sorts of things that employers are going to need. Now the second part of that, to your question, is how do we start identifying the skills that employers are going to need? So a great example is digital skills. If you're a person over 55 and you've lost your job, chances are your digital skills are not as good as they could be. So how do we get people into those short courses so that they can actually quickly skill up? And then over time we've got to start getting a better way for employers and large companies, in particular, to start talking about what's going to happen with occupations, the sorts of skills people are going to need. We've got to make the system much more agile. So get away from this very rigid approach where people have to do one occupation, one course versus being able to pick and choose a series of micro-credentials that give you, I guess, a skills set that allows you to work in a particular industry. We've just got to get the whole dynamic nature of the system working better. From employers being clear about what they need. A system that allows employers to feed in. And a system that breaks down the traditional way that people get skills. It's just not without complexity. I think what the government announced last week on apprenticeships was really good because what you don't want is a whole lot of kids leaving school this year languishing on those unemployment queues. Having a humiliating ritual of applying for jobs that simply aren't there. We've got to get them onto a training pathway or an apprenticeship pathway, And that's about getting the employment incentives right. But this is a very complex area. But this is one of those areas where we have to tackle it. We just can't keep kicking this can down the road much longer. 

Adam: Just finally there Jennifer. We know this week that the Treasury gave the government the review into the retirement income system. So presumably they are going to release that in coming weeks. Is it your hope that they will use this review to stop the increase in a superannuation guarantee to 12 per cent?

Jennifer: I certainly think they have to evaluate whether or not that's the right policy for today. I mean the government has said it's going to continue with that legislation, continue with that change. But I do think everything Adam needs to be on the table because our fundamental objective in reform has got to be to create jobs and stop jobs being lost. And of course the more money that employers have to pay outside of employing people is someone they're not going to employ or extra hours they're not going to give to someone. So look I think it's a very sensitive question, it's obviously a very sensitive question with the unions. But I do think we have to hope that the retirement income review comes to terms with it. And does take that position of what is right for the country right now? And what is the best was that we can have the collective action of policymakers focussed on that job creation exercise. Because I agree with you, I think the unemployment numbers could be much higher. We will see some companies not be able to continue to operate. That will create additional unemployment. We just can't take the lens off that job creation exercise. 

Ticky: Right, Jennifer Westacott, really important as you say all through regional Australia as well. Thanks so much for joining us.

Jennifer: You're welcome thanks very much.