Event: Jennifer Westacott National Press Club Q & A
Speaker: Jennifer Westacott
Date: 11 October 2017
Topics: Energy, tax and education
Chris Uhlmann: And thank you very much, and we'll go now to our questions from journalists, and we'll begin with The Guardian Australia.
Catherine Murphy, journalist: Hello there. Catherine Murphy from Guardian Australia. If I can take you to the flipside of the lifelong learning imperative that you've outlined very interestingly in your speech, and that is the economy that workers are actually going into. We all know wages growth is flat. We know that the rise of the gig economy is transforming people's expectations about secure lifelong employment. As well as talking about how we make workers more resilient, more skilled, more adaptable, don't we also need to talk about wages growth, income security, whether or not New Start payments are actually fit for purpose in the way that the economy is transforming? So what, if any, thoughts do you have on that front?
Also, if I can just pick up- in your speech there was a reference, you made a reference, obviously, to rogue providers and everybody in this room will be aware, obviously, of the scandals that have erupted in recent times around private training colleges. Can you explain to me how, if you shift the structural kind of power away from institutions and to students, how that doesn't increase the risk of more dodgy private providers proliferating?
Jennifer Westacott: Perhaps if I take that last one first. So we are proposing that the regulators stay in place, and we are proposing the new authority would have powers to deal with rogue providers. We are also proposing in our market information that we would actually have information about the quality providers, but when you read the paper you can see we have made it really clear – these things should be shut down. There is no place for them. I know the great private providers, some of whom who are here today, their great frustration is these rogue providers that have trashed the reputation of the system, ripped off vulnerable people. We in the paper outline a number of steps to deal with that, but we are certainly not proposing any diminution of the regulator's role, but we hope this new body would have a strong role in dealing with some of these rogue providers.
On wages, it was the Business Council who raised this whole issue a few years ago. It was us who said: hang on, 26 years of uninterrupted economic growth; that is great, now look at wages. Wages are not growing at the rate they should be growing, and we need to fix this, but we need to fix this through productivity, and that is why we continue to call for the tax cut. Because productivity – and I am talking here about people being able to get new opportunities, creating new value, more creative workplaces by having investment, more efficient workplaces – that relies on business investment. You just look at the data over many years and you can see the link between productivity, wages growth and business investment. That is why we continue to call for the company tax cut to be reduced.
But you are absolutely right that we do need to start thinking about how the transfer system and the employment system and, I think, the superannuation system are going to work together. Because you can imagine a world where someone has got a bit of super, they've got some part-time work and they're getting some kind of government payment. Now, our system is not designed for that, and the cliff edges for people, where their effective marginal tax rates are very high when they enter the work place, is a real deterrent to work.
On New Start, it was the Business Council who said that the New Start allowance for single people was not good enough and that it was a deterrent for people to get back to work, and it was the Business Council who opposed the six months- not allowing people to have New Start allowance for six months. So we do have to fix these things. It would be good to fix them in the context, though, of an overall improved tax and transfer system.
Chris Uhlmann: The Australian Financial Review.
Phil Coorey, journalist: Hi, Miss Westacott. Phil Coorey from the AFR. Thanks for your speech. Just at the start of your speech, if I could ask you about energy, you lamented the stop-start nature of policymaking, and it's just a general frustration, I think, that's felt out there. On Monday, South Australian Premier Jay Weatherill suggested that- well, he said the Commonwealth is incapable of fixing this problem and he suggested the states go it alone. He said he'd had preliminary discussions with his counterparts that the states take control of the National Electricity Market and their own carbon price. I wonder whether you would be interested in, from the business perspective, pursuing that course of action?
Jennifer Westacott: Well, it is an interesting idea. But let's remember where some of these problems begin. The states have put moratoriums on gas exploration, the states have imposed additional renewable energy targets on top of the Commonwealth's target, the states who have introduced a mishmash of Greens schemes that have put up prices. We would have to see a lot of change in those things to actually believe that that was possible. I would be curious to see what the process was for them to agree one scheme and what the capacity is.
I think we have to continue to ask our national government to sort this out. As people would have heard me say many times, we have got to de-clutter this agenda. We have got ourselves very confused here. We have got to get back to a simple conversation about security, reliability, affordability and meeting the carbon target that the Government has set. That is going to require a multi-facetted approach, but we have become very focused on one aspect of that and that is the clean energy target. We need to broaden that discussion, and we need to be very clear in each of those steps what is it that we are trying to achieve and how do these things work together, because as you know as, if you change one thing, and you suddenly end up with less affordable energy and that is the problem we have got now. We want a comprehensive approach and mostly we want the Government to work constructively with business. If the Government is not going to pursue Alan Finkel's clean energy target, then they need to put something on the table and work with business about how that would work.
Chris Uhlmann: I'd just add on a line in your speech. You said: we have done tough things before. And I was just thinking back and thinking, okay, apart from the GST in 2000, when was the last time Australia actually managed to achieve- to do a tough thing, when we've managed to get people on board in the states and in the Commonwealth working in the same direction to do something tough? Can you think of one in the last 17 years beyond that?
Jennifer Westacott: I think the NDIS was tough. I am critical of aspects of the NDIS, but I think the NDIS was tough. I think the states and the Commonwealth came together pretty effectively on that. You know, if you look at the Hawke-Keating-Howard reforms, these were big. The Hilmer competition reforms; these were huge transitions in our economy, and we are still getting the payback for that.
So I think we can do big reform. But, of course, we have got to get the political will to do it. What we are trying to do with our paper today is set a direction for what that reform might look like. But I think we are increasingly seeing, through the kind of political culture we have got, that we have to get reform into bite-size chunks. And one of the things we have tried to do in our paper is to break it down into you'd start here, and you'd start here and you'd start there. But I don't believe we are incapable as a country of doing big reforms. We wouldn't be putting this paper out if we felt that. We have put it out in hope, not in despair.
Chris Uhlmann: Alright, The Australian.
David Crowe, journalist: Thanks, Chris. Thanks, Miss Westacott, for your speech. Lots of big ideas there, but I want to ask a question about energy, given that's also in the news. You talked about changing decisions by the Federal Government. We are seeing debate now about one of those, which is that, of course, Tony Abbott, when he was Prime Minister, oversaw a 26 to 28 per cent commitment to cut Australian emissions by 2030. He has clearly got second or third thoughts about that. But we are also seeing other people with other opinions on that. Fred Hilmer and today, Gary Banks, former head of the Productivity Commission, suggesting that we could step back from that Paris commitment. Do you think that it is time to have a debate about stepping back from the Paris commitment? Do you think that, in setting a new energy policy in Canberra, that that is one way of assuring Australians they can get lower costs for their energy?
Jennifer Westacott: Well, I think the starting point, David, has to be to have a comprehensive plan and see how that impacts on the target. I mean, the Business Council supported the target, but we did always support it with a very clear message that it was a hard target. It was a challenging target. It was not a soft target. I think there is a question about the trajectory and the timeframe, but let's do the work on the plan before we jump to that. Let's do the work on making sure that we can get security, reliability and affordability, and how do we go about reducing our carbon emissions in line with that target, and what are the most flexible, sensible options.
The other point I would make, which I think the current debate has completely lost sight of, is that meeting the target is an economy-wide endeavour, and we have got focused on electricity and energy as the only way that we can meet the target. We have forgotten vehicle standards, building standards; many things that can be done across the economy to meet that carbon target. I want to see the plan. I want to see a comprehensive plan. Then, I think, and only then, can you start saying can we meet that target.
Chris Uhlmann: The West Australian.
Shane Wright, journalist: Miss Westacott, thanks for your speech. Shane Wright from The West Australian. The Parliamentary Budget Office a couple of hours ago released a report on the direction of tax rates for individuals, and the hardest hit over the next four years are going to be about 900,000 people who have got an average income of $46,000 who are going to see the biggest increase in their tax. If you were a member of the Senate and you had a choice between giving tax relief to 900,000 people on $46,000 or some of the biggest companies who are some of the most profitable right at the moment, which way would you jump?
Unidentified Speaker: [Indistinct] [Laughter]
Chris Uhlmann: Thank you, [indistinct].
Jennifer Westacott: Well, when we put out our original tax plan, we actually did have tax cuts for that group of people, because they go into bracket creep very quickly. We did call for comprehensive tax reform, but that has not been the proposition put by governments nor is it in the appetite for governments to do big tax reform on either side of politics. The difficulty in making that an either or is this: If you seriously want to get wages to go up – and let's be clear, that is a huge issue in the Australian community – you cannot do that unless you raise productivity, unless you've got a terms of trade head.
The evidence is overwhelming that that is driven by business investment and that tax matters to investment. We have got our investment at the lowest level as a share of GDP since 1994, on the wake of a recession, as I said. We will see money flow to the United States if they move their tax rates. We were there a few weeks ago and there is a lot of appetite for tax reform in the United States. It is not just us saying that, it is the International Monetary Fund.
We have to have a bigger picture than this. We have to not have an either or. We have to get back to big tax reform, but my urging to the Senate is this: we are talking about a very, very glacial pace – let's be frank – to get our company tax rate down to 25 per cent. The Americans will do it – if they get it passed through Congress and the Senate – very quickly. We are falling behind, and falling behind isn't about companies and boards of directors, it is about workers and their wages, and we have got to keep that firmly in mind.
Chris Uhlmann: When you're talking about workers, though, can you make the argument to that person on $46,000 a year, how a business tax cut benefits them and their families in the long run? What is it for them? What's in it for them?
Jennifer Westacott: It is not just my argument. Ken Henry, when he did his review, said that two-thirds of the benefit of a corporate tax rate will fall to workers and their wages. Chris Bowen has made that comment himself, that the big beneficiaries of a corporate tax cut are workers.
Chris Uhlmann: He is not making it any more.
Jennifer Westacott: Well- but he is not making it for political reasons. My question to people is this: what is your plan to raise productivity? What is your plan to raise investment? What is your plan to get wages across the economy going? What is your plan to keep Australian business competitive? What is your plan to get the investment going so that we can create the jobs of the future? Because I can tell you that is what people are very worried about out there. They are worried about their wages and they're worried that they won't have a job, and we have to both get our education and training system right, but we have to get our tax setting right. If this is such a terrible idea, why are even the French doing it now? You know, they are going to lower their rate.
Unidentified Speaker: The French are not [indistinct].
Jennifer Westacott: The English have done it. The Americans are going to do it. The IMF says this is an important reform. The Treasury says a big change to the value of the economy. If people have got a better plan to raise productivity, to raise incomes, to raise business investment, I want to hear it and I want to see it modelled.
Unidentified Speaker: [Indistinct] targeting.
Chris Uhlmann: Should just let people know that we have a focus group of one from the Senate over here at the moment.
It is not entirely a complete picture of what is going on but I think we're getting the view from the Labor Party. We'll go now to Sky News.
David Speers, journalist: David Speers from Sky News. Thank you for your speech, Jennifer. I want to go to one of the ideas you have raised here, one of the central ideas; this lifelong skills account. I am a little confused as to how this would work. You've said that every Australian would get one. So I'd get one, you'd get one, kids leaving school would all get one, and then you say, working out how much you get in that account, there will be independent analysis of the overall cost of living, the course – fair enough – the private benefit to the individual who acquires the qualification, and the public benefit to society. How do you know what the public benefit to society is of me doing a plumbing course or an IT course or a law degree or a Masters? Are we getting into social engineering? How do you work out the public benefit, notwithstanding the private benefit to me of choosing one of these training courses I might want to do? Who decides that and how?
Jennifer Westacott: Well that's what we're charging this authority with. But let me ask you a different question: I mean this is the taxpayers' money and we believe that a starting point is that this body has to kind of get its head around public and private benefit. So this is really about the level of subsidy. So you'll still be able to get a loan but the extent to which you're subsidised by the government effectively is based on an analysis- a rigorous analysis which is kept up to date of the public and private benefit of that course. Otherwise how do you actually control that the taxpayer is getting value? This is the taxpayers' money here and we need to know that the taxpayer subsidy are going to those courses that have the highest public benefit. That's not to stop people from selecting other courses and having a greater share in an income-contingent loan but it is to try and say that given we've now got a million people in Australia going to universities, we have to try and assess some balance between what an individual gets and the public benefit. And sometimes they will be the same thing.
Chris Uhlmann: Keating Media.
Michael Keating, journalist: Michael Keating from Keating Media, Ms Westacott. Should we revive the Howard Government-era idea of technical colleges to let skills-orientated students develop those skills earlier and then apply these reforms to them?
Jennifer Westacott: Well, I mean, a lot of people have suggested this in the past. But what are our- we've got great TAFE colleges. We should be making those TAFEs work. We should be creating new vocational providers in the system. I am not sure that will actually help us get on top fast of the sort of challenges I have outlined today. We need to do this quickly. We need to work with the existing infrastructure that we've got and make it fit for purpose. IBM in the United States has these magnificent P-TECH colleges, the sort of thing that you're talking about and we've encouraged that they be amongst the models that be encouraged to grow.
But I think it's not just about institutions; it's how we organise funding, how we organise modules, how we organise training packages, how we organise the incentives and most importantly, how we give existing workers a fast track back into getting education. If you're 50 and you're doing- you're working in a- one of these sectors that's going to be severely disrupted, you want to be able to go back and acquire a- quite a specialised qualification. You need to be able to do that really fast and at the moment, you can't. And we have to create a system that allows people to stay in work but upskill so they can stay in work.
Chris Uhlmann: ABC AM.
Sabra Lane, journalist: Ms Westacott, thank you very much for your speech. Sabra Lane from ABC's AM. Two questions for you: one on energy and one on education.
This education policy, it sounds fantastic. It looks great on paper but in this hyper-partisan environment where the major parties can't agree even on what adequate funding for Gonski should be, how can you see the major parties actually sitting down and working together on something like this?
And secondly on energy; there's been a lot of discussion, especially on the conservative side of politics about getting a so-called Healy coal plant up and running in Queensland. In your view, how could that work? Would it work?
Jennifer Westacott: Well let me take the last bit first. I think the question on this issue of should we have another coal-fired power station, is to ask ourselves how do we get a framework that allows any technology to compete and thrive and- as long as it is meeting those four objectives I have outlined: security, reliability, affordability and meeting our carbon target. That is the question. And I think we've got to say when people propose a new coal-fired power station in Queensland, what would that actually do in the medium term to solve any of those problems? That is the question. Because it will take eight years to build; let's just, you know, given our planning laws, that might be optimistic. It will be appealed multiple times in the courts.
That is not going to help one of Peter's small businesses who are struggling with their bills today. It is not going to help one of the households who have got their winter bill and have gone: oh my God. It's not going to solve that problem. Now should coal be part of our energy mix? Absolutely it should. But we need to stop picking winners. That is the problem with the renewable energy target. That we subsidise things just for being renewable energy and look at the mess we have got ourselves into. So we need to have a framework that supports all technologies; that allows us to achieve those objectives and stop picking winners. On your – what was your first question again?
Chris Uhlmann: Partisanship.
Jennifer Westacott: Well, I am not suggesting that reform is not difficult in the current environment, but you know, our job, our responsibility given that we employ 10 of the 12 million Australians in the business community, I believe we have got a responsibility, given that we know that work is going to change, we know that jobs are going to change, we know that this really bothers Australians. That we have got a responsibility to say: what is the kind of system that we need to make sure that people can stay in work, earn better wages and get better jobs? I don't think, Sabra, we can shirk that responsibility and say well the political culture is all very difficult so we are not going to do anything about that; in 10 years' time you have got people really dislocated. I think we've got a responsibility to say irrespective of our difficult political culture, we have to get out in front of this. We have to get out in front of this poor performing system and face into the consequences of not doing something because I think they'll be a lot worse, and the consequences for people, particularly for disadvantaged people will be extremely high. So I think we have got a responsibility to lay something out. And when I was in the US recently, very senior business people, extremely senior people said it is the vocational system that's going to matter the most. And ours is in a state of decline and we need to arrest that decline.
Chris Uhlmann: Another one of our NPC board members.
Peter Phillips, National Press Club director: Ms Westacott, Peter Phillips, one of the directors of the National Press Club, great to welcome you back here. My question follows on directly from the preceding question: to what extent, if any, have you thus far flagged or workshopped the life-long skills account concept with the Opposition or very particularly in the- with the crossbench in the Senate and I ask that question against the background of 21 Newspolls averaging 47-53, and counting; mightn't it be a good idea for this to be very, very clearly engaged with the Opposition?
Jennifer Westacott: Absolutely. Absolutely. And that's why we've said we are releasing a discussion paper for consultation. We have had initial discussions with both the shadow Education Minister and with the Education Minister and people have known for a long time that the Business Council has been extremely anxious about the decline of the VET system and decline of the apprenticeship system. So it won't come as a surprise to people that we've released this paper today and we've certainly socialised it.
But we want to do a proper consultation on this and we've commissioned the Nous Group to do that consultation. Because we've lost- seem to have lost that in public policy of getting out and saying here's an idea, here's a problem, here's how we think it could be fixed and get the right stakeholders around the table to say well what would be the problems with that, how would this work on the ground, what might be some of the safe guards that need to be put in place, what are some of the things we would need to think about going forward. What are the transition steps? That's what we want to do with a proper and effective consultation process, something that I think is a bit of a lost art in public policy and as part of this exercise we want to reinvigorate the role of good consultation, with a good discussion paper with a good idea to try and solve a big problem in our country.
Chris Uhlmann: Another question from the board?
Steve Lewis, National Press Club: Thank you Chris. Steve Lewis from the National Press Club board. Ms Westacott, you talk about the Commonwealth and the states working with business and unions to build a reinvigorated apprenticeship system. Wouldn't the most obvious way to do that would be to pay apprentices a decent wage? Isn't one of the big problems with the fact – and I think it's 50 per cent dropout rate for apprentices – is the fact that they are paid what many would call- my good friend Doug Cameron would – basically slave labour wages? Why doesn't the Business Council support a significant increase in apprentices?
Jennifer Westacott: Well we have, in the paper we releases earlier in the year we said wages were something that people needed to look at, particularly first year wages. We've always said you need to look at employer incentives and the actual wage structure for apprentices. But we don't have a plan. We don't have a plan for our apprenticeship system. It is falling away and we don't have a plan to fix it. So we need that. And as part of that we should look at wage structures and the extent to which they are a deterrent from a young person doing an apprenticeship.
But there are- in our work, there are many deterrents. One of which is this cultural bias that says to a young person you have got to go to university; that somehow an apprenticeship is a second-rate qualification. Well, it's not. And one of the first things we need to do is to say that should have equal status to a university qualification. It should be a viable pathway for a young person. That's got to be a really important starting point. But clearly we should look at wage structures. Clearly we should look at employer incentives but at the moment we do not have a plan to actually address the failing of this system.
Chris Uhlmann: The Australian.
David Crowe: Thanks. Ms Westacott, just a follow-up question to Steve there: as you were speaking I googled, as you can do these days, to Google while people speak, and the data on apprenticeships really is staggeringly bad in terms of there being 291,000 apprentices in 2015 down from 490,000 in June 2012. Now as you point out, we do work in the hyper-partisan world now where reform is more difficult but does business take some of the responsibility for the fall in apprenticeships over that time? After all, businesses are the employers of those apprentices. If reform is difficult in Canberra – as we all know it is – is there something that business can do without requiring the states, without requiring Canberra to come to the party, where it can do something on that apprenticeship problem?
Jennifer Westacott: It is a very good question and is something that we are certainly looking at. IBM and Microsoft and Siemens are doing things on digital apprentices. They're just getting on and doing pilots and getting on and doing that, which is just highlighting how you actually get people a digital apprenticeship. So we need to just sort of step up on that. I think you will find though that really the failings here come from the incentives, this cultural bias. I think the wages issue is an important one. We have got to get the whole system working properly David, not just one or two bits of it.
But employers do have to step up and make sure that we are offering that as a pathway as well as opening up other pathways for other young people. The Business Council has recently done a major program with the Smith Family to offer young disadvantaged people cadetships in our major companies so that they can work and learn at the same time. We need to try all of these models but what we want to see and the Australian Chamber of Commerce and Industry, James sitting behind you there, we have all joined up to say let's get a national plan to fix our failing apprenticeship system because we need those skills, we're going to need them in the future and this is a very important opportunity for many young people in the country.
Chris Uhlmann: Can I just get a bit of clarification on the detail of the life-long skills account too. Are you asking for the Commonwealth or the states to put in any more money or are you looking at a reallocation of the funding as it exists now?
Jennifer Westacott: Our starting point is there's an envelope of $20 billion that goes into both these systems. We need to stop this kind of practice of saying let's have more money before we do a reform. That's why we are saying let's do the costing exercise. Let's see what the real cost of courses are. Let's kind of determine these subsidy levels. And our starting position should not be that we need more money. Our starting position is for $20 billion, surely we can get better value; surely we can direct money better to students; surely we can improve the information to people; surely we can get people into the right path.
Chris Uhlmann: Please thank Jennifer Westacott.
Thank you so much for coming along today. It's a great debate to have. Let's hope that our federal and state politicians actually have it and we can see whether or not they are capable of doing hard things in 2017, 2018, and 2019.
As ever, when people come along, we like to leave you not going empty handed. Here is a book on the great speeches given in the National Press Club. It was penned by one of our directors Steve Lewis, Stand and Deliver. And here also is a membership to the Press Club and hopefully you'll join us again soon.
Jennifer Westacott: Thank you.