Event: Panel interview with David Speers, Sky News
Speaker: Jennifer Westacott, Business Council Chief executive; Sam Maresh, GE country leader; Dave Johnson, AGL general manager development and contruction
Date: 23 October 2019
Topics: drought, Strong Australia, the economy, energy
David Speers, host: Jennifer Westacott, Dave Johnson, Sam Maresh, thank you very much for joining us here in Toowoomba. Look, you know, we hear a lot of talk, certainly in Canberra, about drought right now. It's every day dominating the debate. When you're her though, Jennifer, you really see it and when you talk to folks here you really feel it. What's your takeaway here in Toowoomba about the impact the drought is having?
Jennifer Westacott, Business Council chief executive: Oh look, this is a really serious issue. We drove out to Coopers Gap yesterday to look at the wind farm, but you know property after property after property, just looking desolate, the animals looking pretty lean and unwell. You know we’ve just got to, as a nation, come together around people affected by this and find the short to medium term solutions but as a country we've just got to I think come to terms with the fact that we are going to have these periods of drought. What do we do to actually make our farms more resilient? Do we diversify more? Do we look at things like carbon farming? Do we look at giving people breaks to sort of change to something else?
David: Well this gets to what industry can do, not just government. On what the government can do, a lot of debate about this. What do you think of the idea of exit packages? Paying farmers to help them if they are making a tough decision on whether to leave?
Jennifer: I think it's a thing to do, I don't think we should discount it. I think the challenge for me is, well, what's next? People leave, there's whole lot of stranded...
David: Do you lose that productive land?
Jennifer: That's the challenge. So, I think it's got to be part of the mix. I think it's got to be a case by case basis. I mean some people, we just heard from Lifeline are really doing it so tough, maybe that's the best option for them. But I think part of it should also be, can we look at those packages and say how do we help that farmer move to something else? How do we give people financial assistance to tide them over? Because for some people, as the guy from Lifeline was just saying, it won't be a permanent thing. They just need some tiding over money. I think it's got to be a really intensive case management of each farm, each family. How do we help you? And then as a nation we have got to come to terms with the fact that we are a drought impacted country. The climate scientists tell us that it's going to get worse. So, what is the bipartisan national plan to make our country more resilient from drought?
David: One of the things you talk about there is diversification. Now, Dave, I'm guessing farmers right now, when a wind farm comes along are pretty happy to see the income that that can bring.
Dave Johnson, AGL : Yeah, absolutely. The diversification is evident once the wind farm is constructed and land owners are getting those annual rent payments, which are not correlated to any weather patterns.
David: And without getting into the specifics, is it a significant earner for the farmers?
Dave: Absolutely. I mean, it is of course dependent on the number of turbines on the property but it is actually a very significant income.
David: Do they have to de-stock or change much in terms of their farming?
Dave: It has no impact. If anything it has a positive impact, the fact that in the course of maintaining the wind farm, you have to maintain roads and fences and other infrastructure that's been installed. So it certainly has no negative impact on the operation of the farm.
David: And here, well just down the road from here, this Coopers Gap project where AGL and GE have partnered the construction of this. Sam, it's about halfway through, this is wind farm?
Sam Maresh, GE: That's right. That's right. We're a little over halfway through, 123 massive turbines, 453 megawatts of energy, enough to power a quarter of a million homes. So, it's a very significant project for this part of the world. Particularly at a time when that people are doing it tough.
David: About 200 workers involved in the construction there, there'll be some who stay in the operations.
Sam: That's right, GE will be providing a 25 year service and maintenance agreement with AGL, so we'll have people on the ground here for many years to come.
David: And this is very welcome in a region like this, no doubt about it particularly for those farmers directly, is that the end of it or aren't we going to see more and more wind farms built like this?
Sam: From my perspective, I think this part of the world and rural Australia more generally has enormous opportunities. They've got great renewable resources, great wind resources, they've got skills available albeit I think your going to need a pipeline of more people. So long as we've got the right infrastructure and grid infrastructure in particular, I think we can, we can see this this industry growing.
David: There's been a lot of investment in renewables. Today in Canberra, the House of Reps, the "big stick" legislation has passed and we know your industry hates this idea. Is it going to deter investment?
Sam: Well, can I just say this, you know GE is a company that supports markets because markets support competition and they support technology and innovation. So ultimately we want and support markets. We think there are better ways to go about doing that and getting that outcome. But ultimately I think it's now at a point where everyone’s got to work with government and we've got to move through this.
David: So you don't think it'll necessarily stop investments?
Sam: Well, as I said, I think markets are the best way of delivering innovation and technology. What we've got here is government that's put forward a different proposal, different proposition.
David: Not exactly market based is it?
Sam: It came a bit of a surprise for a conservative government but that said it is what it is. And I think we now need to work with everyone.
David: What do you think of it?
Dave: We're working through it with various levels of government. We're hoping we can get through to the other side and have certainty on what it is or what isn't.
David: That's still not clear?
Dave: Well, its becoming clearer but it's still not legislated. Once we've moved through and get to the other side we'll see what certainly it provides and what certainty it doesn't. Because really that's that's the challenge, how do you provide an environment where people can invest and they need to have a longer term view.
David: Well Jennifer, you've not been a fan of this idea either, it is going to happen though, Labor is now supporting it.
Jennifer: I think it's the form in which it happens that really matters and then if it passes, as you're suggesting it has today through the house but not through the Senate, I think people have got to be very careful about the form this takes. So look, we respect the fact that the government took it to an election. We would like to see some amendments, particularly to the powers of the treasurer. But you know with these things comes enormous responsibility to make sure that we're sending the right message to industry about this.
David: Everywhere we've been in regional Australia it's about trying to attract some investment.
Jennifer: Exactly and if you've got the spectre of this quite complex piece of legislation and a government deciding that their view on prices is different to your view prices and the minister being able to issue a contract, a court being able to decide to divest you of your assets…
David: The government is saying its only doing this in the event that market power is abused.
Jennifer: It won't change the price problem and that's the problem. I think this will not put downward pressure on prices and if we want to get downward pressure on prices over the medium to long term, you've got to get investment.
David: Is that right Dave?
Dave: Yeah that’s right. If you want to put downward pressure on prices, you need to build new assets that are more reliable and more efficient rather than keeping old assets, which should be closed down, keeping them running, and in order to build new assets you need to attract investment because you can't do it without the investment.
David: Tax, let me just get some thoughts on this one because you know the seeds of a new debate on the GST coming out of New South Wales right now, Jennifer. But is that the priority we should be focused on?
Jennifer: I think that that the last thing we need at the moment is blow the whole tax thing up again. We need some very focused discussions. We need some very tight discussions on solving the principle problem in the economy, which is low business investment. And we've got personal tax stuff, which is terrific. That's, you know, a big reform and no one should underestimate how big that reform is. But now we need to do the heavy lifting on why businesses aren't investing. And so if we're not going to do the company tax stuff, then lets do an investment allowance because these projects that power up places like Toowoomba really depend on some of those things like tax settings. We've got to remove these obstacles to investment be it the skill shortages that we see around the country, be it the lack of infrastructure, that's the job that needs to be done to drive the economy.
David: So this is the sort of idea of some sort of business investment allowance to incentivise big investments, like we talked about, a similar thing before the election. The government says it might have something along these lines in next year's budget. Can we afford to wait that long?
Jennifer: Yeah, I think we can. I think that we need to very carefully calibrate that as part of the budget. I mean, you know, we're not in a circumstance where we need knee jerk reactions to things. We need to sort of start to do the heavy lifting on getting the economy to grow faster. This would be one of those things, not just for big investments either. You know, we were down in Geelong a few weeks ago and there was a small food producer. They would really benefit from being able to really upgrade their equipment, increase the span of their operations. They had the demand, they didn't have the capital. It would help a lot of midsize businesses as well.
David: What about for your firms, will make a difference and we don't know any details about this, but if there was some sort of allowance, depreciation incentive to invest, is it going to make a difference?
Dave: We’ll wait and see what it looks like.
Sam: I think there are two, two elements. Sure, you need to see what the detail is but I think generally Australia has still got an issue around competitiveness. I mean we're a high cost economy really, we've got to be more productive. But, you know, from an international perspective, from a company that operates in 175 countries, I can tell you, we need to be more competitive.
David: Why aren't we, what are the main?
Sam: Well, I think there are a whole lot of regulation concerns, there are obviously the tax competitiveness concerns, all of those matters. So I think there are things governments can do to make the situation a lot better and spur on the industry to do what it does best which is invest.
David: And generally stimulus Jennifer, just to finish on this. A lot of debate about whether the government does need to put some stimulus in right now or hold off and wait and see how things go. What do you reckon?
Jennifer: I don't think that's the solution to the problem. I think what we need to do is that structural work, to use that jargon, to get the economy to grow faster and to make sure that that growth is sustained. So that's the skills agenda, the government is doing some good stuff on that. That's the tax agenda we've just talked about.
David: So you're not urging Josh Frydenberg now to start spending?
Jennifer: No. Because I think if you just pour money into things and we still haven't fixed these structural problems, to Sam's point that make us uncompetitive, that make us more of an attractive destination, you've just really spent money for the sake of it and you won't get the outcome. We've done that too many times in Australia. We're not in a 2008 situation, we're in a situation where our economy needs to grow faster, we need to lock that in. And that's about infrastructure. That's about skills, that's about tax, that's about cutting red tape. Those are going to be the better things to do. The surplus has been hard fought and we should not just walk away from it because people say so.
David: Let me ask you this just finally if they were going to spend a bit of that surplus on a company tax cut, I don't think I will because we had all this debate, would that would that be a good idea?
Jennifer: Well, many things I may be, completely naive isn't one of them. I don't think that's going to happen David. But I do think it's a priority because, you know, how can we continue to compete in a world where capital will go to the place where its most welcome?
David: Is this view of business as well, that the government needs to get back to that company tax issue?
Sam: I think the government has to do a whole range of reforms, you know, that's one amongst them.
David: Yeah. Dave?
Dave: I agree. You just creating that environment to attract the capital and attract investment is what’s needed.
David: All right.
Jennifer: Before we leave, can I thank you, David for your last Strong Australia. You've been fantastic and you've really got out here and told the story of regional Australia and we'll be really sorry to see you go. The ABC has really, I think got, Australia's, most impressive political commentator but the way you've come to these communities tapped into what's happening has been fantastic.
David: That's very kind. Jennifer Westacott, thank you and Dave, Sam thank you