Tim Reed interview with Patricia Karvelas, ABC RN Drive

01 April 2020

Event: Business Council President Tim Reed interview with Patricia Karvelas, RN Drive

Speaker: Patricia Karvelas and Tim Reed

Topics: JobKeeper payment, COVID 19 response


Patricia Karvelas, host RN Drive: Business groups, unions and the opposition are all broadly welcoming the federal government's landmark multibillion-dollar wage subsidy scheme and so are businesses themselves. More than 200,000 have registered for the $1,500 a fortnight JobKeeper payment in the last 24 hours. In fact, it's closer to 300,000 now but there are already calls for changes. Critics argue that casuals who've been with their employer for less than 12 months must also be included. Tim Reed is the chairman of the Business Council of Australia and was previously the CEO of MYOB and he joins us on RN Drive. Tim welcome.

Tim Reed, president Business Council of Australia: Patricia, great to be with you. 

Patricia: The aim of this scheme is to allow business to keep workers on their book and to keep them employed, will it do that?

Tim: It will absolutely. In fact, I think the estimates are that about six million employees will be covered by this and businesses will get the subsidy and be able to ensure that there is an ongoing relationship that is maintained between them and their employees. Even if there's no work to be done. And we do have a health crisis and we have to first think of it as a health crisis but the ramifications for some businesses is that there are no customers coming in the door and therefore there's no revenue coming in the door. But we need to be in a position as an economy where we can bounce back strongly once this is over and once the health crisis is dealt with. And what this will enable is for those businesses to maintain that important relationship between the business and their team members so that when things do come back they'll be poised and ready to get back to work as quickly as possible.

Patricia: We know a few hundred thousand businesses have registered to get this payment, what feedback are you getting about the kinds of businesses that are now accessing or trying to access the payment and the ones that have thought, 'hmm I don't think we can do it?’

Tim: I think it's being used by businesses right across the board. I mean, you mentioned in the intro, approaching 300,000 businesses in 24 hours. There’s somewhere just over two million operating businesses in Australia. 50-60 per cent of them are sole employees. So, sort of, owner/contractor type businesses. By the time you get up to businesses with 20 employees I think you're at about the 98th percentile of businesses. So overwhelmingly they're going to be small businesses. They're going to be businesses that are there built to support local communities and businesses that rely on local communities but contribute back to those local communities. But I fully expect also that there will be some big businesses in there but no doubt that hospitality industries, tourism, leisure industries, these industries that we know have had revenue hits of more than 30 per cent. And a business does have to have revenue drop by 30 per cent before they can apply. Then those businesses will be very heavy users of this subsidy.

Patricia: So we know that there has to be a 30 per cent downturn for businesses to be able to apply and of course we will get into the bigger amount for businesses that are over a billion dollars of turnover. 

Tim: Yep.

Patricia: The Australian Industry Group says that 30 per cent figure perhaps should be looked at, what are your views on that?

Tim: Look 30 per cent is a material downturn in the trading of a business. But if you think about the way in which a business operates, it does have some flexibility in expenses and also I think we've got to look at this in the context of the other elements of the package and things that frankly other businesses are doing. So, utilities that are offering relief on bill payments, banks which are offering six months holidays on loan repayments and on mortgages frankly, not just on business loans. So there are other things that are happening out there which will also be going to support these businesses that have had this downturn in trading. But you know I don't think you would want to see a government subsidy go to businesses that are actually growing, and there are some sectors that are growing because of this. So I think you need to draw a line somewhere. I think when you do draw a line it is very difficult to say precisely that 30 per cent is the right number. But when I saw that my initial take was somewhere in that 20 to 30 per cent range is probably the right range. 

Patricia: And businesses with a turnover of more than a billion dollars a year will have to see a 50 per cent drop, is that reasonable?

Tim: Yeah look that's I think getting harder. That's a massive downturn in revenue by the time you're looking at 50 per cent. And one of the things that I really liked about this package is other than that one element that you just asked me about, it applies to all businesses whatever industry they're in, however big or small they are. And I think what the package is trying to do is to support jobs. It's trying to keep Australians working. It's trying to keep Australians in that relationship between the employee and the employer, which is the relationship that is more than just a salary. You know, it's a relationship where people gain stability, they gain confidence, it provides an underpinning for people to be able to go about positive, constructive lives. The government has rightly talked about the mental health concerns that are coming from this health crisis following into an economic crisis. And by keeping that employee/employer relationship we are valuing that and trying to lessen the impact on things like mental health challenges that will come from this. So to draw a different line, to me feels a little arbitrary but I think it is about Australian jobs and I would rather see that line be consistent for big and small businesses, but I don't want to say that sounding like I'm taking away from what I think was a fantastic package. I think it was a very bold move by the government. But a very appropriate move, one that really brought hope to many people last night.

Patricia: The CEOs of the major banks say GDP could drop by as much as 10 per cent in the March quarter. We've now seen three major packages. The original one was called a stimulus package but we're really getting into, sort of, survival or getting people through this crisis now. This is just about keeping the economy going, keeping people fed. Do you think we're going to need more to actually keep that GDP from dropping any further?

Tim: One of the things that when I reflect over the last three weeks is just how quickly this has moved and how quickly our response has moved and how quickly the governments have moved. And again, I take my hats off to governments of all colours around the nation as coming together and creating a national government and really in large parts coordinating their efforts and acting swiftly. So I don't think anyone would want to say we draw a line under things at this moment in time and nothing else will be needed and nothing else will be done. But what I will say is this is a very, very significant move. I hope and I believe, I've got every confidence based on the behaviours that I've seen over the past month that the government is very much in tune to what's happening in the community and very much in tune to reviving things if they realise that they have got something slightly out of place with some of the policies that they've put in. And also adding to it where necessary. And so I don't think anyone would want to at this point be ruling a line under things and saying no more.

Patricia: A billionaire, John Van Lieshout, has told many of his commercial tenants they'll have to keep paying rent even though he owns the properties outright, is that lacking in empathy?

Tim: Look I think that every individual circumstance needs to be looked at and that's not one that I have any particular knowledge as to. But what we have seen the government engaging with large landlords, certainly know those that are members of the BCA, proactively and constructively in conversations about what rent relief might look like and how to balance the complexity of the requirements for the retailer but also the requirements for the landlords who may well have a considerable amount of debt on their property. I don't have any knowledge of that specific incident or circumstance that you have referred to though Patricia.

Patricia: Just on another issue before I let you go, Virgin has asked the federal government for a $1.4 billion dollar loan to stay afloat and Qantas say if Virgin gets a bailout they should get one too. Should the government be open to that?

Tim: Look I think it is really important that in making decisions that we think about what happens after this. There is a health crisis flowed into an economic crisis because it changed the way in which we behave. But that health crisis will pass us and there is hope on the other end. We are a strong nation, we went into this in a strong position and we will come out strongly. What we really want to do is make sure that the policies that are put in place set us up to come out as quickly as we possibly can and as strongly as we possibly can. Now different industries have been hit in different ways. Broadly speaking I think programs like the wage subsidy that was announced yesterday is the best thing to do because it applies across all industries and to businesses big and small. But there are some sectors that have been hit particularly hard and certainly, aviation is one of them. So I don't think it's inappropriate for the government to consider an aviation package because at the end of this aviation is a critical part of the infrastructure in our nation. We need it to keep our supply chains open, we need it to make sure that workers get to remote mines, we need it to link our regional communities with our cities, and us with the rest of the world. And so I think there is good reason for the government to consider an aviation package.

Patricia: Tim thanks for your time.

Tim: My pleasure.

Patricia: Tim Reed there, he's the chairman of the Business Council of Australia and this is RN Drive.


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