Event: Q & A with Jennifer Westacott, National Press Club
Date: 31 October 2018
Topics: Workplace relations, Economy, Tax
E&OE

Sabra Lane: Thank you. We'll take questions from the floor in a moment. What does it say that you've had to remind the business community today that they must pass on the gains of innovation and productivity through higher wages, through better returns, lower prices and better services?

Jennifer Westacott: I think they do. If you take Qantas, for example. It was in a very difficult position for a long time. Now that it's back making profits, it has increased its wages, its EBA is 3 per cent – 3 per cent wage rise which is higher than most EBAs, and it has also given $300 million in discretionary bonus to non-executives in the Qantas outfit, so I think by and large businesses are doing that, but I do want to say that I think it's part of our compact with society, we need to take very seriously that we will be judged on whether or not we pass on those gains.

Sabra: Our first question from the floor, Michael Rodden.

Michael: Thanks for the talk Jennifer. In a recent speech, Reserve Bank Deputy Guy Debelle said business were avoiding pay rises by offering non-monetary rewards such as gym memberships and flexible conditions. The ABS has shown inflation is down again today. What’s it going to take for businesses to actually offer pay rises, particularly when a lot of the pay rises seem to be tied to the corporate tax cuts which have been scuttled? And on that note, if I can, the government seems to be focused on small business at the moment. Is that a misstep when big business is responsible for more jobs growth?

Jennifer: So, let me take the wages point first. Look, the only way wages can go up is through productivity, by companies getting better revenues that they can pass on. This idea that somehow companies can just simplistically give everyone a wage rise. If productivity doesn't improve and revenue doesn't improve, there’s only a few sources you can get that wage rise from: Your customers in higher prices, your people in less workers, or your shareholders in less dividends. And that's the problem. That's my point in my speech. We must work harder on productivity, and then we must, as I think a compact with the Australian people, pass that on to people. But there is a lot of simplicity about this: Why don't business give everyone a wage rise? Well, the problem is that might find its way into less jobs, higher prices and less dividends for shareholders, who put their money at risk for a company to be successful. So on the company tax stuff – look it is bitterly disappointing that that didn't get up and I think it is a terrible mistake, a colossal mistake that the parliament has made and we will see in 10 years' time how well the Australian economy fares as country, after country after, country lowers their rate and draws in more investment. In terms of the big and small business divide, I believe this division is futile, because when you go to a regional community, people don't talk like this. They know that big companies, making big investments is what spurs on small businesses. They talk about the multiplier effect. In places like Busselton. In Townsville, where there is 20 per cent youth unemployment, nobody, when I was up there recently, argued about the need for a company tax rate because they want those big businesses back. So I think it is a mistake to just focus all of our public policy on small business because it is big business and small business working together that generates 86 per cent of Australian jobs, and 80 per cent of economic activity. And it is amazing that one of the biggest supporters of the entire business tax package was Peter Strong from the Council of Small Business, because he said the small business tax cuts would be meaningless if the big business tax cuts don't go through because we need big business investing to make our lives better, to give us the demand to increase our services. So I think it is a mistake.

Sabra: Angus Livingstone.

Angus: Angus Livingstone from AAP. Thank you very much for your speech. You mentioned that you want to see, well, that the Newstart is inadequate. You talked about you don't want to see people working harder for less. You talked about your door being open to the ACTU. It sounded a bit like a pitch to an incoming Labor government, to say “we are ready to work with you should you come in". What do you expect from a potential Labor government coming in, especially given the way the ACTU has really pushed to change IR laws, and deal with wage stagnation and inequality?

Jennifer: We’ve always been willing to work with both sides of politics. Our interest is good policy. We have worked with the Labor Party in the past and we will work with them again in the future. It is up to the Australian people, of course, to decide who forms government. I think that we have to be very careful about walking down the path of some of the ACTU's agenda. Because it will not solve the problems that they say it will solve, it will just create new ones. I'm very keen to sit down with them and say, "if those are the problems that you want to solve, how do we do that together"? But simply turning every single issue into a big business issue, simply by a victims and villains conflict way of managing important public debate, it will not advance the cause. If the ACTU is serious about inequality, if it's serious about the things it says it is serious about, then today they will put out a press release supporting my call for an inquiry into entrenched disadvantage. I look forward to seeing that this afternoon.

Sabra: I know that Sally McManus is a big Twitter user and I can't see she has responded just yet. Phil Coorey.

Phil: Hi Ms Westacott, Phil Coorey from the AFR, thank you for your speech. You singled out the ACTU’s push for pattern bargaining, industry-wide bargaining, as an impediment towards the change, the change in the workplace. Are you happy with the current industrial relations system? Do you think that’s adequately set up to manage the challenge you outlined today in the workforce?

Jennifer: Well, we had a Productivity Commission inquiry into this and it said it did need a lot of reform. Let me go through a few things we suggested and some of them were echoed in the Productivity Commission's report. The whole question of the better-off overall test which has made many enterprise agreements unworkable and has meant companies revert to the awards’ system. The whole issue of rights of access was something that PC talked about, the whole flexible work arrangements for individuals was something the PC talked about. We also talked about the fact that we have 122 awards. Now, the world I'm talking about will not have those rigidities in occupational structure, so we called for a condensing of those awards. And the current system probably still has too many things in the EBA and the more things you've got, the more things you've got to negotiate as part of a complicated process, the more you will slow things down. Of course you should protect people, of course you should protect their rights but we’ve got to do that in a way that does not create an inability for companies to manage, in a way I've talked about today.

Sabra: Peter Jean.

Peter: Hi Ms Westacott, Peter Jean from The Advertiser. I was interested to what you said about population policy and the need to take pressure off Sydney and Melbourne. There is a very active public debate at the moment about whether more skilled migrants should be bound to particular regions for a period of time, such as South Australia, for example. Where do you stand on that issue? Do you see merit in those visa arrangements or do you think it makes life too difficult for business?

Jennifer: I think it's got merit. I think the problem is this one idea of you've got to do more. I mean the first thing is you’ve got to get regions to be attractive for people. Adelaide, a great example – one of the lowest rates of business investment in the country, one of the highest unemployment rates. You have to get economic activity in those regions up. If you’re going to do it, what I would like to see 20 or 30 regional cities around the country which are prioritised as places we’re we are going to invest, encourage businesses to relocate fast track infrastructure, so we actually create meaningful lives for people. Just having that policy without the complementary policy of a serious, serious endeavour into the way we actually plan and manage our regions, of course, making sure that's driven by local people, it will just be another thing that has sort of some effect but not enough effect. It is a good in principle, but you’ve got to do a lot more than simply say to people, “you've got to go to a region".

Sabra: Paul Karp.

Paul: Paul Karp from The Guardian Australia. While I'm tempted again to ask where our pay rise is, I think I would like to focus on what you said about an alternative to private business. It seems to me at this election, with the Greens offering a people's bank and people's everything else to compete with rather than replace private business, and with the major parties not talking about public ownership, but definitely more interventions in the market, I wanted to ask, with all the price gouging involved in market concentration and privatisation, why shouldn't voters prefer a more mixed market approach?

Jennifer: Well, let me tell you, a people's bank will be a taxpayers' bank, it will be funded by the taxpayers. I'm always amazed when the people talk about the public's money. It is the taxpayers' money, and these things have not worked in the past. We've had colossal failures of state-owned banks. We've had colossal failures of nationalisation of industries. We operate in a market economy. We need to make that market economy work better for people, but the idea that these things are going to be solved by government intervention, by government taking over energy markets, by government taking over banks. We’ve done it before, it didn't work, it won't work again.

Sabra: Michael Keating

Michael: Michael Keating from Keating Media. I will ask again what is your view on a potential Labor government's view of bigger government and their tax policy approach? Do you think that will have a contractuary effect on the economy and how will this leave workers in the long run and business confidence?

Jennifer: Let me unpack that a bit. Some parts of Labor's tax policy are quite good. We’ve supported their investment allowance, we thought it should be broader. We thought it should pick up other parts of the economy. Because what I’ve been saying today is the economy will be driven so much by human capital, by innovation. We thought it was perhaps a bit narrow and perhaps that's something they want to think about. Things like negative gearing and capital gains tax, those things are all fine to revisit, but as Ken Henry said, as we have been saying for many years, they should be a part of treatment savings discussion not just ad hoc tax change. There are many things that are external pressures on our country, things we cannot control for. We cannot control for the implications of a trade war between the US and China. We cannot control for big fluctuations in currency markets. What we can control for is to make our budgets more resilient, to make our economy more competitive. And so, I want to see both sides of politics, actually, really develop a serious plan for how we're going to grow the economy, how we are going to work with business to get people's wages up, and how we make sure we protect ourselves in the forces of change, many of which we cannot control. So it is a mixed bag, but we have worked constructively with them in the past and we will do so again.

Sabra: David Speers.

David Speers: David Speers from Sky News. Thanks for your address today. You said in one of the answers to your questions that the scrapping of the big business tax cuts was a terrible mistake, a colossal mistake. So just to your point there, what is going to grow the economy? What do both sides need to do? What is one or two things you would like to see from the government or opposition to drive some growth in the economy, simple as that?

Jennifer: Well, as I said, investment is what is one of the big failings. Non-mining business investment as a share of GDP is about the same rate it was in 1994, and just after the last recession, so if we are going to do something to really drive the economy, to drive the issues or to come to terms with the technological issues that I've talked about today, we have to do something about business investment, not just small business investment, all business investment. So, if we're not going to do tax cuts, then we should do something else. Now Labor is proposing an investment allowance as I said, parts of that are very good. We believe it could be broader to pick up those, I guess, those intangible parts of the economy. We have to do something, David, about red tape. It's interesting, when you and I were in Toowoomba a couple of weeks ago, and we started talking about red tape, people started clapping, because they know it hurts their business, it hurts their business from getting ahead. So if we are not going to do something about what I believed was the most simple, universal thing to allow growth to occur, then we have to find some targeted measures. And finally, we need to do the skills bit because this is a long game. We have to make sure Australian people are equipped for the future and that's really about getting a post-secondary system right. But we also have to make sure we do not put restrictions, unnecessary restrictions, on companies and businesses because they simply won't compete. People will say, well, “so what"? Well, so what, investment will go somewhere else and the jobs attracted with it will go somewhere else too.

Sabra: Just on your idea for a national inquiry into literacy, could you unpack that a little bit more? Are you expecting something from the Productivity Commission? Or would a parliamentary inquiry suffice, or is something else?

Jennifer: I'm not sure, Sabra, who should do that. I mean, the Productivity Commission is obviously the ideal place and they have I think led the way on some of these big social issues like NDIS incredibly well and they have been a very trusted source of advice. But my issue is we seem to spend a lot of money on literacy programs but we're not getting ahead. I think it should probably reach into what we are doing in schools around phonics, around remedial kind of action for kids who are kind of falling behind. So I would like it to be all-encompassing, but I do think when you look at those literacy levels, that we should be, as an Australian population, really quite embarrassed by that and we should do something about it. So it's something we are going to do some more work on. We have got some people working on it in the BCA. What should we do, what programs we should target, but this is one of those things that involves COAG, involves all of the states, but I think this is really urgent. Because we’re serious about this future of work, we're serious about getting people into the workforce, then, my god, at least we should do something about people who have got poor literacy, poor digital capability and make sure they are able to participate in the workforce.

Sabra: Tim Shaw.

Tim: Thanks Sabra, Tim Shaw, radio 2CC in Canberra. Ms Westacott, thank you for your address. Your chief economist wrote an opinion piece in the AFR this month: "Profits are up 8.8 per cent. Wages are up 2.1 per cent." But he noted, too, that profits are more volatile than wages. Bill Shorten’s facing his biggest test at the Labor Conference in Adelaide in six weeks’ time. Sally McManus, Brendan O'Connor are going to be talking about those kind of comments from your organisation. Is it time for a return to the 83 Accord? Who should be at that accord? And what would your message be if the union movement and labour movement are calling for that?

Jennifer: Well, let me just go profits and wages first. I mean people have to be very careful what they wish for because during the GFC, profits fell by 8 per cent and wages rose by 3. So if people want to start tying wages to profits they want to be very careful because profits are volatile, wages tend to be more sticky. To have a compact, to have a heart-to-heart conversation, you've got to have two hearts. To have a compact, you've actually got to have people willing to come to the table and be willing to talk. Now, we haven't seen that. So I say again today, the doors are open, phones are on. There are problems that have to be fix, let's fix them in a cooperative way, but let's not name the wrong problem. This is where I think we make so many mistakes in Australian public policy. We seek to solve the wrong thing and we just create another set of complexities and problems.

Sabra: Tony Melville.

Tony: Tony Melville, Director of the National Press Club, and also Director of the Australian Industry Group, which you mentioned so I should mention as well. You talked about fourth Industrial Revolution and industry 4.0 and the internet of things, and all the various names, we’ll settle on VHS or beta I guess some time soon, but the Governor of Bank of England did a speech on this this subject very recently and he suggested that there needed to be policies to cushion, to quote what he said, was the "likelihood of a period of technological unemployment, dislocation and rising inequality", from the Bank of England. Just focusing on one group in there, often the group that gets hit in these changes, and I appreciate that there is often jobs created and I know a lot of examples of that, that over 50s, 55s, what sort of policy proposals would you say to cushion that and that digital divide that comes with that?

Jennifer: I don't think I mentioned any of those terms that you talked about, because that's my point, those terms are meaningless to people. Industry 4.0 – I know we all use them. If you are a 55-year-old person worried about whether or not you can work for another 10 years, you don't relate to that term. That's the bottom line. I want us to get back to what's really happening. My second point is what is actually happening, what is the data tells us? You can only respond to things that are happening on the ground and I noted in my speech, I nominated that group of people as a group that we ought to be worried about. Two things we can do. The first is I think getting the Job Active Network to move to much more of a brokering system where you've got an exchange if you will, because I know there are lots of people hiring people, they are looking for skilled workers but it's not easy to find them. All of our services are not demand driven, i.e., I’m a business I go to a job active network and I say, "I need these sorts of skills". Here is a company that is changing, transforming, it’s reducing its workforce, being able to match. And the most important thing, Tony, is the skilling agenda that I talked about today. We have to find a way for those people who are 55 to re-train and re-skill without having to go back and do an undergraduate degree. They will not be able to because they will not be able to leave work and if they leave work they will be very vulnerable to long term unemployment. So, let's take this post-secondary system seriously. Let's get the micro-credentialing, the modulling, the life-long skills account that would allow that person to sit down with their employer and say, "I need to retrain. I need to re-skill, be it digital, robotics, artificial intelligence, whatever it is, so I can stay in my job”. And finally, this goes to Sabra’s question, the employer’s responsibility is to identify that their job is at risk and actively work with that people to manage that change.

Sabra: Jade Gailberger.

Jade: Jade Gailberger from The Advertiser newspaper. I'm interested in how you think the jobs of the future will impact on South Australia's brain drain and how local businesses retain workers as the workforce transitions?

Jennifer: Yes, it’s a great question. South Australia is kind of one of the areas we talked about when talked about company tax because to get investment to South Australia, you have to get investment to Australia first and South Australia is really struggling to get that investment. So the first thing, and I think the new premier has got a reasonably good set of plans to do this, is we've got to get investment back in South Australia, and the whole defence industry, not just doing that contract, but it’s about creating the ecosystem, to use the jargon. That supports that huge investment that government has put into defence industries and making sure we get the small and medium enterprises that spin off that, making sure we have got the skilled people there, that we actually harvest those skills in Australia, rather than having to bring them in at the last minute. South Australia is a classic example where lack of competitiveness, poor policies, over-regulation, have really hurt that state, and we need a serious, state-based and national focus on places like South Australia.

Sabra: Thank you very much for that question. I'm putting you a little bit on the spot here, Jennifer, but I was hoping maybe we could entice you back to the club early next year with Sally McManus to debate the future policies for industrial relations, for social inclusion and what needs to happen in the years ahead.

Jennifer: Happy to do it.

Sabra: Fantastic. Everybody, would you please join me in thanking Jennifer Westacott.