Event: Jennifer Westacott, Michele O’Neil and Danielle Wood interview with Patricia Karvelas, RN Breakfast, ABC Radio
Speakers: Patricia Karvelas host, RN Breakfast; Jennifer Westacott chief executive, Business Council of Australia; Michele O’Neil president, ACTU; Danielle Wood chief executive officer, Grattan Institute
Topics: Federal budget; cost of living; energy; tax reform; industrial relations; women’s participation

E&OE

Patricia Karvelas host, RN Breakfast: Danielle Wood the chief executive of the Grattan Institute Jennifer Westacott, the chief executive of the Business Council of Australia, Michele O'Neil, the national president of the Australian Council of Trade Unions, welcome to all of you. Danielle just beginning with you, the budget forecasts look bleak. But there are some big variables here in terms of how downturns in Europe and the US and China affect us. Is this austere budget what we need right now? And do you consider it to be austere?

Danielle Wood chief executive officer, Grattan Institute: I don't consider it to be austere, but I do consider it to be relatively careful. So, the Treasurer has made a lot of the fact that there is actually some good news here in terms of the fiscal situation, at least in the short term, a lot of revenue coming through the door, particularly from higher tax receipts. And most of that, not all of it, but most of it is being banked to the budget bottom line rather than spent. So ,one rationale for that is obviously to keep a lid on inflation. We've got sizeable demand pressures in the economy. The other rationale is that we have this sort of longer term economic and fiscal challenge that the Treasurer is trying to prepare for. So overall, I think it's pretty well-calibrated to the broader economic environment.

Patricia: Michele, how difficult is the decision not to offer cost of living support for Australians, both economically and politically for people?

Michele O’Neil president, ACTU: Well, I think there are some measures that are starting the really important work of cost of living relief there, PK. I think the childcare, making it more affordable and accessible, the paid parental leave, the housing, starting to deal with the housing crisis, and things like the medicines are important as well - reducing the cost of medicine, that investment in TAFE, and in vocational education and training, and free TAFE places, is also a relief in terms of people who haven't been able to afford to get skills and training. So that's important. But what it shows for us, of course, is the absolute urgent need to get moving on getting wages to increase, because this is a critical missing piece that is not part of what's delivered in the budget. But we see the need for those changes in workplace laws so that we can really fix the bargaining system and see wages starting to lift, without wages lifting, it's going to be really tough.

Patricia: Jennifer, for businesses like retail and hospitality, which suffered through the pandemic immensely will suffer again, as people tighten their belts. But this time, there's no help for them either. What is your assessment? How will they be impacted?

Jennifer Westacott chief executive, Business Council of Australia: I think the one thing that the government's been really careful, obviously, is to not add inflationary pressure. And I think that's wise and I agree with Michele, I think there's a lot of things there in the budget that will go to cost of living. But more importantly, those things like childcare, paid parental leave, TAFE, university places, they're not just going to cost of living, they drive productivity, and they drive a stronger economy. And its productivity, you know, we talked about this at the Jobs and Skills Summit, that really is the ticket to higher wages. If we could go back to the days when we were at our best in the 90’s, where we had productivity 2.2 per cent and the economy growing at 3.5 per cent. If we did that over a decade, Australians would be $9,000 better off on average over that decade. So, it's 1000 bucks a year. And the government has factored in the IR stuff into its wages stuff, they're only modest increases in wages. So, we've got to not take our foot off the pedal on productivity, because my nervousness about the budget is what's in the outer years? A feeble 1.5 per cent growth next year and then only 2.5 per cent, debt at a trillion dollars. The interest bill is the fastest growing payment, faster than the NDIS. You've got unemployment rising. That's not the recipe for higher wages. I agree with Michele, we've always been on a unity ticket. We want to see higher wages, we want to see them sustained. So, there's a lot to be done, I think in the next budget, and we just can't keep as a country talking about reform and then as soon as people start to do reform, everyone just shuts it down.

Patricia: Danielle energy prices are going to rise 20 per cent this year, then 36 per cent next year. Are there ways the government could help households that wouldn't add to inflation? For instance, Matt Kean the New South Wales Treasurer came on the program earlier, he suggested an energy rebate for customers. He said that the Federal Government, the Albanese Government had vacated the field here and it shouldn't have, what's your take?

Danielle: Look, I think those numbers were pretty sobering. And it's difficult to see that the government won't have to take some more meaningful action given the sort of scale of those price rises that you just pointed to. But any decision they make is going to be challenging. They could move to tighter regulation of prices, that would be a big move. At the moment, they’ve sort of focussed on trying to secure supply, but obviously price is the challenge here. The other thing they could do is follow the lead of some other countries in the world, which is to try and work on the taxation, particularly of super profits, that have been in while prices are very high around the world, And then return some of that to consumers by way of rebates. That would certainly take the pressure off households, and it can be done in a way that won't add big inflationary pressures.

Patricia: What do you think, Michele, is that the sort of approach they should be embarking on?

Michele: I think there's absolutely serious…

Patricia: Siri is talking to us. Keep going...

Michele: It's really important to see those super profits tax considered and think of how that can be used to provide some relief. We also know that the government has some more work to do here. And starting by getting into the room, the gas producers, the manufacturers and the unions in the energy area and talking about this. But there's got to be some pretty urgent action to give some relief about those prices going up in energy. It's tough. Of course, the other element, I'm going to say Patricia is doing something to get wages moving is going to make a difference in terms of people's capacity to meet rising costs as well. And, and I agree with Jennifer's point, productivity is critical to this. But we've seen productivity going up and workers not getting their share of that. We've seen profits going up massively, and not being shared with workers. So, it's not just about improving those things. It's making sure we make the structural changes, so workers get their bit.

Patricia: Jennifer do we need to get an intervention into the market?

Jennifer: Be careful what you wish for is my advice on super profit taxes. Because, you know, we've got to remember why we are in this position. We're in this position because of external factors, obviously, the war in Ukraine, etcetera. We're in this position because we've had 15 years of policy chaos in energy. We've had 15 years of lack of coordination. That lack of coordination has led to underinvestment. We've got to stay the course on moving to a low carbon economy, we've got to do that in a planned and predictable way. We've got to do something about the capacity market, which was designed to deal with affordability and reliability, but the states have thrown it out because they don't want to see fossil fuels. Well, I'm sorry, gas is essential as a medium-term fuel. You want manufacturing to get going in this country? There is no substitute feedstock for manufacturing other than gas. So, we can't keep having these ideological debates. And the very companies, the very companies that have to manage that transition, are the companies we want to whack a super profits tax on and see what that does to investment confidence. You know, this should be our kind of very carefully calibrated set of solutions. I agree with Michele, get everyone back in the room. I'd like to see that again on productivity and wages, like we just can't have a Job Summit that goes for two days, and then not kind of see it through because these are negotiations. I mean, productivity is not increasing. It's at a 60 year low. It is the principal handbrake to wages going up. I agree with Michele, we want wages to go up. We want people to bargain, we want people to share in the benefits of productivity. But trust me, we will not get wages going, if the economy just teeters along the bottom at 1.5 per cent and 2.5 per cent.

Patricia: I just want to go to this idea of what's next, because this budget was modest in its spending, and it wasn't bold in you know, changing the settings and reforming the budget. I spoke to the Prime Minister earlier and one of the, I thought, more significant parts of that conversation is when I really tried to push him on will tax reform be on the table in this Parliament, not taking a mandate to the next election. But in this Parliament in this term. He said yes, he's up for that conversation. Danielle, I want to bring you in. I thought it was an important and interesting answer, given the Treasurer wants that. But clearly the Prime Minister is in lockstep on this one. What does that mean, though? As listeners are driving to work or driving their kids, what does that mean for ordinary people? What needs to be on the table?

Danielle: I think what the Treasurer is looking at is those numbers in the budget over the 10 years, which frankly, are pretty sobering. They do show a sizable gap between how much we're spending and how much we're bringing in in terms of tax revenue. So, we've got a sort of structural budget deficit over the long term of about 2 per cent of GDP, which is big. So, I think what the Treasurer is gearing up to, and he's sort of talk of a national conversation, is really that we do need to see movement on both spending and revenue. So, when he talks of tax reform, I think he is talking about ways in which he might be able to increase the tax take, but he's going to want to do that in a way that is the least economically damaging. So, it might be a revisiting of the stage three tax cuts, not a wholesale scrapping, but a better targeting. It could look at things like superannuation tax concessions and other leakages to the income tax base. If we wanted to have a really big conversation, we could talk about the GST and sort of a switch to more reliance on consumption taxes. I'm not sure whether he will go that far. But those are the kinds of conversations that I think he might be alluding to.

Patricia: Michele, are they the conversations we need to be having?

Michele: We absolutely need to have this conversation about tax, we need a fairer and more progressive system. And we would say starting with reviewing those stage three tax cuts is an obvious place to start. We’ve opposed them since they were first introduced. I also think, you know, the point we were talking about, about super profits is something that does need to be seriously addressed in the tax system. Looking at those businesses, and I know there's been some measures on this, but more to do, large businesses that are just not paying their fair share of tax in Australia. All of these things need to be on the table and more action because we do need that revenue coming in. Because the other part, of course, for the next stage of work, Patricia is the workforce parts of what's happening in healthcare, aged care, early childhood education and care. These are all really big changes that we need to see in the care economy, but they won't work, you won't get quality care if you don't have quality jobs, where workers are paid better. And we recognise that women are undervalued, and we put the money in there to make sure that they could both bargain properly, but also get better wages and conditions.

Patricia: Jennifer, what do you think needs to be on the table?

Jennifer: I think first of all, let's get the right kind of proposition. I think we would all agree that we have both a spending and a revenue problem. On the spending side, I'll be quick on this. It's not about cutting spending. It's about controlling spending, by improving outcomes for people in these big areas. That's going to require some investments in workforce and technology in making sure that we're actually delivering better outcomes for people. On the tax side, we do need more revenue, we are not going to have enough. The question is how you design the tax system to do that. To Danielle’s point, you don't get mistakes being made and these ad hoc tax ideas, they will not deliver the long-term benefits. We need to look at the tax mix to make sure it's driving things like investment, the lowest it's been since the 1990’s. It’s investment that drives productivity, it's investment that drives innovation, it’s investment that diversifies the economy. We need to look at the state tax mix. We need to look at the things that to go to Danielle’s speech at the Jobs and Skills Summit, that hold back dynamism. That hold back mobility. Stamp duty, productivity sapping tax, productivity destroying tax, stamp duty. Insurance levies, we need comprehensive reform. With the GST, every time we talk about tax the GST gets raised, someone says, ‘oh my God, we're never going to touch the GST.’ There's the end of tax reform discussion. We've got to be willing to all kind of get on the same page that we've got a revenue and a spending problem and be willing to have the conversation about a proper tax reform process. The longer we kick that can down the road, the longer, the bigger our problems going to be, the harder the decision is going to be, that have to be made.

Patricia: Michele, higher wages was a key promise of Labor in opposition, higher wages was central to the election campaign. This week, they'll introduce a bill aimed at lifting wages, but a real term wage increase isn't expected until 2024. Even then, you know, the Treasurer conceded he's been fairly honest, actually, about the way that forecasting works. And we know forecasting is not always accurate. It's hard to predict the future is the truth, especially in a volatile world. Is the government worried high wages will push up inflation? Do you think they've kind of reneged on their promise of higher wages?

Michele: Well, no, I think the bill that's due to be introduced into the Parliament tomorrow is about delivering on that election commitment to get wages moving. The government's got a mandate on this. It's not going to happen without structural reform. And it also, the budget figures last night show us how urgent this is. We've had a decade of wages being stagnant, and now going backwards in real terms, for more than 12 months. So, workers’ wages are sitting at less than half of what inflation is, even before we see inflation rise to what it's due to get to 7.75 per cent by the end of the year and wages, the most recent figures are 2.6 per cent. We've got a hell of a long way to go even to just break even. So that's why these changes to get bargaining working to make it an urgent change that happens this year. And also those other measures that the government's announced, are going to be in this bill Patricia, around gender equity and pay equity, because it's about bargaining. It's about women in sectors that have been locked out of that. It's about the changes in the law that let us properly value women's work.

Patricia: Yeah, I wanted to ask you about that, Jennifer, because there was the women's economic statement, budget statement in the budget, which I went through in a detailed way. I think it's really interesting that the government wants to put a sort of gender lens on all of its policies to increase women's participation. Is there real inroads in this budget on that issue? Because that's a huge productivity driver.

Jennifer: We've been, big champions for paid parental leave reform that's in the budget, for childcare reform that's in the budget. I mean, these things are not easy to roll out quickly, because you’ve got to do the work on the subsidy model, the workforce, etcetera. But those are big anchors in the budget around women's participation. Then you've got some very big spending on addressing violence. But the women's budget statement is interesting because it's not just about the spending measures. It's about the other things that need to be done to advance women in society. But can I just go to the IR legislation tomorrow? I mean, Michele's obviously had better access to it than I have, I haven't been able to see it. And that's been very frustrating, because we're not going to see it until it's released into the House tomorrow.

Patricia: So they won't brief you before?

Michele: That’s actually not accurate Jennifer, we've all been consulted. I have not seen the bill.

Jennifer: We've been asked a series of questions, anyway. But the point of this is, we all agree we want bargaining to go up. We all agree we want wages to go up. We all agree we want bargaining to be easier. What we're concerned about is that we end up with a system that's more complex, that's more difficult, that delays people's wages and that causes, you know, when I hear unions saying what we want is widespread industrial action. I don't think the community wants widespread industrial action. At a time when our economy is really fragile, that's going to cause a lot of damage to our economy. Back on to women. Look, I think the women's budget statement is really good. I think the measures are excellent, we need to do more. The women's taskforce that Michele and I are both sitting on is really looking at, but I think a lot of the stuff that we need to do around advancing women is not about the budget, it's about changing social norms. It's about how we think about women in society, how we respect women, how we think about them in work, how we think about family structures, and we have got to be willing as a society to get on top of that.

Patricia: We have to bid you all farewell. But clearly, there's going to be a lot to talk about with the industrial relations bill and lucky RN Breakfast is on air every weekday to do that with all of you. Thank you very much.

Business Council media team:

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