Event: Jennifer Westacott interview with Tom Connell, First Edition, Sky News
Speakers: Tom Connell host, First Edition; Jennifer Westacott chief executive, Business Council of Australia
Topics: 2023-2024 budget; skills; business investment; inflation; growth; cost of living
Tom Connell host, First Edition: For more budget wash up, Jennifer Westacott from the Business Council of Australia. You've seen a few of these come and go before, what's your take, first of all, on what we saw yesterday?
Jennifer Westacott chief executive, Business Council of Australia: I think it's pretty solid for the circumstances we find ourselves in. I think the missed opportunity though, is to do something about our productivity and our investment. Which would lead to higher growth, more sustainable budgets, better wages, and so on. On the plus side obviously, getting back into surplus is good and it gives markets confidence. But it's driven by those higher company taxes, those higher personal taxes driven off a strong labour market and commodity prices. You've got some good stuff on growth, energy, skills, migration. You've got some important cost of living relief, JobSeeker, rent assistance. Very good stuff on Medicare, reinvigorating the Medicare system. The risk for us though Tom, is that when you put big structural spends in, off the back of temporary and often volatile revenue increases, and against the backdrop of a feeble, dismal, 1.5 per cent economic growth rate. That's where we've got to put all the effort now. Drive productivity, drive investment, get growth up. Because that's the way to sustainable surpluses, and that's the way to higher wages and better living standards.
Tom: 1.5 per cent next year, could be 1 per cent with financial stress around the world. It will be a real per capita recession, if you look at population growth. So, on the productivity side, I guess the government would argue there's plenty in the energy sector. They looked at supply chains a lot and made investments there. There's a lot around investment in TAFE and university places as well. What is missing specifically, that you wanted to see?
Jennifer: All of those things are good. We've been complimentary about that and big supporters of, particularly the skills stuff, which is excellent. You've got to, of course, target those free places to where the skill gaps are. What I think is missing is the investment stuff. I mean business investment is still as low as it was in the 1990s. We've got more money leaving the country than coming in. You've got the Inflation Reduction Act in the United States sucking investment out, making those hydrogen projects, those critical minerals projects more effective to do in the United States than here. You've got complex FIRB restrictions, you've got a regulatory environment that still…
Tom: There’s a lot of areas that might not have needed big spends as necessarily?
Jennifer: You don’t need to spend a lot, you need to do the work.
Tom: Hold that thought - there’s also a lot of pictures around budget times as well, so we’re going to take our viewers to Jim Chalmers and Anthony Albanese.
Tom: So investment that was the missing element that you'll continue to sort of push for, I suppose? What about the inflation test? Because the government says, well 0.75 per cent is the reduction in terms of the energy policies, but there's a big increase in overall spending not matched by the overall increasing tax take. So, there's more money in the economy. Do you think this puts more pressure on the Reserve Bank?
Jennifer: I certainly think there is a risk here. Because if in the short term, clearly there's downward pressure on inflation. But over the long term, if you put $40 billion of extra spending into the economy, logic tells you that that's got to put some greater risk for inflation, and then the Reserve Bank has to respond to that. So, potentially, you run the risk of hurting the people you're trying to actually provide relief for. So, what do you do about that? I'm not sure that the government had any choice, though, but to do some of these cost of living stuff. I mean, people are doing it tough. People on JobSeeker have been doing it tough for a long time. People are paying a lot in their energy and their housing costs, you have to help people with rent assistance because of the rental market. So, I'm not sure what the alternative is. What you have got to do now, though, is remove the reasons that inflation could get even worse, particularly for businesses. Don't make things harder, do that supply chain work. Don't have the cost of business being so high, make it easier to employ people. Those things all put pressure on businesses, which puts pressure on costs, which leads to higher inflation. So what can you control for, try and control for it.
Tom: So, you actually think it could have an inflationary aspect, particularly when you're giving more money to welfare? Because you know, power takes the price of power down. Childcare takes the price of childcare down, and then they’ll re-spend some of the money. But the other money is given to people to spend, but you're saying you get why that happens. It is more about how can we alleviate it in other areas?
Jennifer: Absolutely, and then how can we do that heavy lifting on the productivity and investment side so that you're growing the economy in a stronger way. I mean, to have a two and a one in front of your economic growth when this country has enjoyed a 3.5 per cent GDP growth. To your point when you add population, you go into a kind of per capita recession. That's straight into…
Tom: Tough year ahead.
Jennifer: It is a tough year ahead. That is straight into people’s wages, that’s straight into obviously that forecast unemployment figure going up. That's 150,000 plus people who aren’t going to have a job. We’ve got to try and make sure that doesn't happen.
Tom: Wages are supposed to be above inflation, I’ll believe that when I see it, given those forecasts. Jennifer, thank you.
Jennifer: You’re welcome.