Event: Interview with Ticky Fullerton, Ticky, Sky News
Speaker: Jennifer Westacott
Date: 24 May 2018
Topics: CFO forum, business reputation, budget 2018
Ticky: Ploughing on through all of this though is the chief executive of the big business lobby group, the BCA, Jennifer Westacott. Jennifer joins me now.
Jennifer: Thanks very much.
Ticky: Great to have you at the show again, haven't talked for a while actually, Jennifer. You've got quite an important speech coming up this week, deliberately talking to CFOs, financial officers.
Jennifer: So I've got three messages in this speech, the first is to reaffirm our vital role in Australia's future. That business has to reclaim its legitimacy, it has to reinforce its legitimacy because without us we are a very un-prosperous, very difficult country. We'll come back to the budget in a minute, but without a very strong business community, the budget would look very, very different. So I want to reaffirm that. The second thing I want to do is to say that we can't continue to have these problems, we have to fix the things that are not working. If things are not working we need to admit mistakes, fix them, make sure we repair that to the people who have been affected by it. But continue to pursue the need for legitimate profitable companies. But we have to fix the problems. Then finally we have to do better at advocacy, within companies, across the business community.
Ticky: Because if you remember back to when the BCA was created, it was the government that brought together the unions.
Jennifer: That's right.
Ticky: We needed business.
Jennifer: That's exactly right, and we can't have a kind of wildly un-unified business community. But also we can't be timid in our advocacy, we have to play on the same field as organisations like GetUp! We don't have to use the same tactics, but we have to be on the same field. Companies have to mobilise their shareholders, their suppliers, their staff, their contractors.
Ticky: You're talking to CFOs as I was saying, how important is a CFO in terms of setting the financial culture of an organisation?
Jennifer: They are hugely important. I mean a lot of the things I think we see in companies are the result of poor incentive structures and I think a bit of sense of not having a clearer sense of purpose other than just the financials. Return on equity is not a purpose for a company, it's a target. But I want to say to the CFOs, you have to be part of that broader conversation about what our real purpose is. How do we set the incentives? How do we drive better cultures? Because cultures are creatures of processes, of systems, of incentives, of rewards, of sanctions.
Ticky: We don't see a lot of CFOs here in the media, it's normally the CEO who's out in front of the house. But they really are, in fact many of them become CEOs.
Jennifer: I was going to say, the other really crucial thing about CFOs is that they often become the CEO. So I think they're a very important group of people who'll become the kind of custodians of the next kind of generation of business leaders. They are already in the know of themselves in their own right serious business leaders. But I think those messages of, we are an important force for good in society. We have to fix the problems that we've got, but we've got to be stronger advocates and better coordinated ones.
Ticky: To what extent do you have to take, I mean the damage that has been done, reputation wise to business is quite clear. How much more do you think of a whipping do you think business has got to take before we come back with a more constructive message?
Jennifer: Look I think it's inevitably going to take a bigger whipping, the anti-business forces will certainly see to that. But I think to wait and hope it'll just go away, it's not going to. We've got to get a stronger voice of reminding people of the criticality we play in a better society.
Ticky: So you've got your Strong Australia campaign going, that's very much a regional thing. It's out there in the regions.
Jennifer: That's right, so this week we're going to Penrith, we'll be talking about infrastructure. We'll be talking about the role of big government spending, big private sector spending. What it does to transform.
Ticky: That comes presuming just ahead of the big Aerotropolis?
Jennifer: Correct, exactly.
Ticky: The Prime Minister will be doing a bit on that.
Jennifer: Exactly, the role of the airport huge job creator, but constantly reminding people that it's companies who are creating that prosperity. It's big and small companies working together to create that prosperity. But you know we can't, I think Ticky allow an anti-business agenda, off the back of some very poor conduct. But an anti-business agenda that has always been there, to take a strangle hold and produce a series of self defeating policies that will actually hurt the country and frankly hurt the poorest people in the community, not the richest.
Ticky: What about remuneration, it does seem to be a touchy point.
Jennifer: It is a touch point, and I think it's that kind of sense of the relativity between the top and the lowest income earners. Look I'm not sure how we fix this problem, but to say it's not a problem would be equally as problematic.
Ticky: But again it's lower level, this is very important.
Jennifer: I mean we do have good mechanisms now in terms of the two strikes capability, and we are seeing shareholders being more active there. But I do think it's important that there is accountability for success, and there's accountability for failure, and that, that's seen quite clearly to hit the bottom line of pay packets. I think the CFOs have got a huge responsibility there.
Ticky: The budget, there are a couple of things that I think really mattered. I think R&D was a big concern?
Jennifer: Yeah, we're sort of looking at that now, I mean you can understand what the governments trying to do. They're trying to make sure that the intensity of the R&D is what's rewarded. The difficulty is what gets caught up in that. So we're going to get our members in to sort of talk about how this will work in practise. Whether there are some unintended consequences-
Ticky: That's on the big business side.
Jennifer: Yeah, what we don't want to see... I mean, the cap has been increased from 100 to 150,000 so that's good. But we want to see how this is going to work in practise to make sure there are no unintended consequences. Because this has been a huge driver of innovation and of allowing companies to compete, and we don't want to obviously kind of, in trying to get good reform, end up with some things that don't work.
Ticky: So, Jennifer obviously the big thing is the company tax cut, they are still in the budget. But where do we go from here? Because clearly business itself seems to have a mixed message. I mean the AICD and some companies are standing over on one side saying, no, no, company tax is not the priority.
Jennifer: Well, let’s go to the budget first, I mean what the budget showed to me absolutely in a compelling way, was that when business is successful the country is successful. When business is thriving we can put back, and we do things like income tax relief. We can do things -
Ticky: But because of jobs creation-
Jennifer: Because job creation-
Ticky: Wasn't necessarily the company tax that contributed the lions share-
Jennifer: It contributed a lot though.
Ticky: It contributed a lot but actually the lion’s share, or half of it was job creation, wasn't it?
Jennifer: Correct, and so when the private sector is working creating jobs, paying more tax then the economy gets better, and then we are able to put more back. Now people say well you don't need a company tax cut in that case. Well, you do because we're still terribly reliant on terms of trade and the tax cut goes to the essence of productivity, which requires investment. It's the productivity number that's going to control our own destiny, rather than being the will of China.
Ticky: Timing wise, until about now or this year or so, a lot of companies were recovering from the GFC, weren't actually at full rate. So I'm wondering whether this comparison with investment positions on a global basis is actually the rubber is going to hit the road over this next-
Jennifer: Absolutely, because in the meantime the Americans have lowered their tax rate dramatically. The French are talking about lowering theirs. I think the crucial thing is in the forward estimates there is 100 billion dollars of expected tax revenues from companies. That includes the tax cuts.
Ticky: I come back to the mixed message-
Jennifer: Well, I’ll come back to that. In a decade that's a trillion dollars, with the full tax plan implemented. Now if that goes to 80 billion, we're going to be having a very, very different discussion about the budget. So either we get sorted on our productivity and our competitiveness, because meanwhile other countries are moving. Or we put that incredible prosperity that the budget clearly shows if the country’s thriving, it's business is thriving, you can give the stuff back. That's the ultimate social compact, which is the message in my speech tomorrow.
On the mixed messages, look you know it's funny because I think we're at the same place at the AICD. I mean here's their document here, they lament the fact that the tax cuts are not going to roll out for larger companies for a decade. They talk about how the corporate tax rates stands out as one of the highest in the world. What they want to see is a package of bigger tax reform. Now, as you know better than anyone, the Business Council's been on about big tax reform for years. The simple reality is this though, we don't have it. We're not going to have it. So if people are talking about starting a process of tax reform, why wouldn't you start with the tax that the economists all agree is the most harmful tax to the economy? Why wouldn't you start with wiping out a whole tax bracket in personal income taxes.
Ticky: So the challenge is even though it may make sense economically, it's the one lot that have not been behaving themselves. So to sell it is quite difficult.
Jennifer: It's very difficult, but to not... I think anyone who thinks tomorrow, if the company tax stuff doesn't get up that we'll wake up and there'll be this bipartisan conversation about tax reform and there'll be a new white paper. That is just fantasy land, I mean the ALP has very clearly ruled out any discussion about the GST. So when people talk about comprehensive tax reform-
Ticky: It's got a bit more broad.
Jennifer: It's got a little bit, but you know in terms of what people are very often not clear about what they mean by comprehensive tax reform. We're talking about-
Ticky: The suggestions with Labor, that they're actually going to pull back on the company tax, even take-
Jennifer: Which is a tax increase for companies. So I get quite concerned when people say, we can't do anything until we do comprehensive tax reform. When we're not clear what comprehensive tax reform is. Is it a big hike in the GST? Well, that won't be popular. Is it a land tax, stamp duty swap? Well, that won't be popular. We've got a plan on the table now for a staged 10-year reduction in our corporate way, to keep us competitive. Just keep-
Ticky: So how are those cross ventures going?
Jennifer: Well, we're working pretty hard, I mean I can congratulate Pauline Hanson because she went out, she talked to companies, she did her due diligence and came to a very considered view. But I think this idea that you can't do this until you do the lot, it's just not going to happen. We've got a plan, it allows us to stay competitive, we need to get on with it.
Ticky: Alright, just we've got the big APPEA conference down in Adelaide tomorrow. I see Wood Mackenzie coming out saying, really these gas prices that are going up now. They're actually going to impact, well Saul Kavonic has been saying seven large gas suppliers in industries like ethylene, ammonia fertiliser. We've got Incitec Pivot Chief Jean Johns talking about it. That all means jobs, how we're going to sort this?
Jennifer: Absolutely. Well I think you've got to get that energy sorted, the initial energy guarantee sorted by COAG, we can't really have any more delay there. Because what has been holding back investment-
Ticky: Will that bring the gas prices down?
Jennifer: Well, then of course we've got to deal with supply. I mean we've still got two states with moratorium on gas supply. I think the problem is people want to fix this by retrospectively adjusting the market, and that's just going to deter more investment and create a whole other set of problems. We still need those really basic things that we've been arguing for a long time. Investment signal around how we're going to deal with reliability and emissions, some very clear and decisive action by states to release the strangle-hold they've got on supply. Then obviously some of the things the government has done around contracting arrangements. But there isn't going to be a silver bullet to this. As I've said to you before, this is probably the most mangled area of public policy, the energy and climate change. But we've got to un-mangle it and a start to that will be seeing real progress on the National Energy Guarantee. Real progress on lifting those moratoriums, and real progress on fast tracking these planning approvals that go on for nearly a decade, to get a big project done.
Ticky: Jennifer Westacott, it's always great to talk to you.
Jennifer: Thanks very much.
Ticky: Thanks for coming in.