Event: Tim Reed interview with Peter Ryan, ABC RN, AM
Speaker: Tim Reed, Peter Ryan
Date: 18 October 2019
Topics: New BCA president, the economy, surplus, infrastructure, skills
Peter Ryan, host: Tim Reed, congratulations on the role. What do you hope to bring to the Business Council?
Tim Reed, incoming Business Council President: Thanks Peter, and it's great to be here with you today. The Business Council since its foundation has been about ensuring prosperity for all Australians. We think the best way to do that is to make sure that Australia is a competitive place to do business. So the businesses invest, they create jobs, those jobs are high paying jobs. And so, at the Business Council, what I intend to do is to continue to advocate and communicate for policy that enables that to happen. Policy that means that Australia is an attractive place to invest, that our businesses are competitive and that they're thriving on a global scale. I think that starts with the skills within Australians, making sure that we do have the skills that are needed for our economy to continue to thrive into the future.
Peter: There's a bit of an anti-business sentiment in Australia at the moment. How do you plan to confront that?
Tim: I don't believe that Australians are anti-business. I think that most Australians understand that business is what creates jobs and creates opportunity. Now 11 million of the 13 million Australians who are engaged in the workforce are employed by businesses. And it's those businesses that invest in those people's skills, it's those businesses that enable a future for them and for their children. And so, I don't think that when you get out to the community, and it's the BCA we've been doing this through, our Strong Australia program, where we get out to the regions and we talk to people about business and about the role of business, that Australians per se are anti-business. It can sometimes come through in the commentary, and I intend to be a part of that communication on behalf of the business community, making sure that Australians do understand the importance of business. Because this would be a much poorer, much worse place if we didn't have strong businesses that were creating jobs.
Peter: But when you see a free market government intervening in the energy market, for example. Also, they've commissioned the ACCC to undertake another banks inquiry. Do you see an anti-business sentiment there?
Tim: I don't think that we have an anti-business government and I think that successful governments in Australia have worked with business rather than against business. I actually think one of the things that has led to us being a wealthy, prosperous nation, where we have a large middle class and where Australians overall continue to advance and prosper, has been that the government, trade unions and business have been able to work together to come to agreement on things and agreements that have moved our community forward. There are moments in time where government feel it's necessary to take a perspective on what the market is doing. And at the BCA, we will continue to be true to who we are, making sure that we believe that the environment is right for businesses to invest and create prosperity to all Australians. So there will be times, for example, the divestment legislation that's in front of the government, where we disagree with the government and we think that that creates sovereign risk, and that that is likely to lead to less investment, not more. And when that occurs, we will absolutely stand up and make sure that we take our perspective forward so that the community is aware of that.
Peter: But when you see that big stick intervention that we are seeing with energy companies, will you be communicating these concerns to the Prime Minister and Treasurer who've been advocating this type of intervention?
Tim: The Prime Minister and the Treasurer are very well aware of our perspective on this. We've done that to them in person and we've also taken that perspective and shared it broadly. So absolutely, we will be doing that. I think the Prime Minister has been very clear. He believes that it's up to business to prosecute the case of the business, and that is one of the things that I think the BCA is able to do, has been able to do and is going to continue to do going forward. Ee will have those moments where we disagree with the government. I don't think that that means it's an anti-business government though.
Peter: But what about the ACCC's inquiry into banks? Is that another type of intervention, given the political push and the pressure on the government to have interest rates passed on in full to all borrowers?
Tim: Look, I thought that was a very interesting conversation that took place in the public domain between the treasurer and the leaders of some of those big banks earlier on this week. And they effectively came out and said, we welcome this because what we believe is when the community has a better understanding of the way a bank works, they will understand the decisions that we're making. And let's be clear, there are three clear stakeholders within a bank. There are the depositors, there are the borrowers and there are the superannuation funds and those that rely on those funds, where any decision that is made affects all three. And it's naive and just unrealistic to believe that when the CEOs of those banks make a decision, they can only take into account one of those stake holders. They have to take into account all three. And I think that's why they welcomed the opportunity to have a conversation, such that Australians can understand the decisions and the challenges that they face in making those decisions.
Peter: Last year’s banking Royal Commission revealed some criminal cases, potentially, of misconduct, but do you see an element of bank bashing at the moment?
Tim: Yeah, look, let me firstly deal with that point up front. At the BCA, we do believe that businesses need to conduct business in the right way. We believed that businesses should be transparent with their customers. We believe that businesses should operate within the confines of the law. And we don't make any excuses for behaviour that falls outside of that. I do think that there has been a lot of focus coming from that onto the banks and as one specific industry, they've probably had an undue amount of focus relative to other industries out there. But there will always be times when there are commentators who make statements that someone might interpret as bashing. Someone else might say, "That was just a fair statement of the facts." I think that's up to the eye of the beholder and up to their interpretation. I think what is important is that we continue to make sure that Australians understand the overwhelming amount of good the business does, the investment the business is making, the ability for business to continue to ensure that Australians have a prosperous future.
Peter: The International Monetary Fund has significantly downgraded Australia's economic growth outlook. So, is it still practical and feasible for the government to pursue the budget surplus?
Tim: Look, that was disappointing and I think we do need to put those forecasts in the context of a global economy. I think Australia is still forecast to grow faster than all but one of the G7 nations, and we are still a nation that is growing. But we are growing in a global environment that is slowing down and our growth is slowing down with it. What we believe that means is the government should really be pursuing the sorts of policies that will lead to long term growth in the Australian economy. And that does get to the regulatory environment that we work in. And it does get to the competitiveness of the local environment. There's monetary policy, there's fiscal policy, and then there's what the former treasurer described as the heavy lifting of reform. And we think the government should focus on the third of those, rather than focusing on the second and taking the hard-fought surplus back into deficit.
Peter: So should that surplus be freed up or abandoned to stimulate the economy?
Tim: No, I don't think so. I don't think we're in a GFC moment. We've had 28 years of uninterrupted economic growth. The global economy is still growing. There were emergency measures that were put in place in 2008, which I think were right for the time because of the global economy at that point in time was contracting. But that's not the case here. So we think that the government went to the electorate, they said they were going to have a surplus. We think that it's important that the government is able to pay for their bills because any deficit is simply putting off those payments to future generations. And we don't think the current environment calls for that.
Peter: The debate over company tax cuts was damaging, particularly for the Turnbull government, but do you still foster hope that a company tax cut could be back on the agenda? Or should be back on the agenda?
Tim: I think that the debate about company tax cuts was a very interesting one. Through that period of time, community sentiment towards company tax cuts moved increasingly in favour of that legislation, to the end point where 60% of Australians believed that it was the right thing to do to ensure that those tax cuts were passed for all businesses because they understood that it was necessary for Australia to really remain competitive. And I will note, if you look at 28 years of uninterrupted economic growth, for the majority of that time Australian company tax rates were just below the average of the OECD. We've now moved from below the average to above the average, from the third quartile up into the top quartile in terms of company tax rates relative to the OECD. I think in the long-term, that is a question that needs to be addressed. In fact, it's more than a question, it's an issue that needs to be addressed.
Peter: So should the government be pursuing a company tax cut again, even though it's politically toxic?
Tim: Well, I don't think it's politically toxic. That's my first point. I think once we got out there and actually talked to the community, the majority of the community were in support of those tax cuts because they understood the importance to them. This government has gone to the nation and was elected on the basis that in this term of government, they were not going to lower company tax cuts. And I also think it's important that when governments make commitments, that they stand by those. What we have seen is conversation around an investment allowance, some sort of targeted form of measure in the budget that really promotes investment by businesses. And that is something that I would strongly encourage the government to think about going into the next budget.
Peter: Now you come from a different part of business, having been the long term chief executive of MYOB. So are you a new generation president of the Business Council?
Tim: Look, that's probably a difficult question because all I know is the opportunity that I have here going forward. But certainly, my background is all in technology. I have been a passionate advocate for small business and for business overall. As a part of that, I've seen the transformative capability that technology can bring to businesses, I've seen the new jobs it can create, and I've seen the skills that people are able to build and the productivity impact that that has. And so, I'm very passionate about that. And that's something that I will bring to the role. It's probably up to you and to your peers and colleagues to comment on how that perhaps differs from others in the role. But I do think that, if I think of the last four presidents of the BCA, who I've really actively watched and had an enormous amount of respect for, each in their own way have continued to be true to the core purpose of the BCA, which is really that we're here to advance the prosperity of our nation and the prosperity of all people within our nation.
Peter: So should business buy into social issues? We've seen the same-sex marriage debate, but also the Israel Folau free speech debate.
Tim: I think that businesses are an important part of the community. And what they need to do, each CEO in each business needs to think about what it is that they have license to discuss and to talk about. And I think if there's an issue that they feel is what might be considered a social issue, but it's an issue that is important to their business, then absolutely they should have the right to talk about that. And in fact, I would encourage them to talk about it. I was very active in talking about the same-sex marriage debate at that point in time because it was important to our business. I knew it was important to our team members and I wanted people to turn up and know that they were accepted for who they are. And I think it's difficult to do that in a place where the laws treat people differently. And so, to me that was a very important business issue in the context of MYOB's business. And I would encourage all CEOs to think about social issues in that way. If this is an issue that they can see a direct line of sight from the issue to their business, the performance of their business to their supply chain, to their customers, then absolutely. They have the right to be active in that conversation.
Peter: So they can live side by side, especially given that companies have corporate social responsibility policies?
Tim: I think I would say that they do live side by side, and that it's impossible for them not to live side by side.
Peter: Okay, and this is my last question. The Reserve Bank governor, Phillip Lowe, has been asking the federal government to step in with fiscal stimulus, such as infrastructure spending in addition to monetary policy. So what sort of encouragement is needed to get more infrastructure projects underway?
Tim: Yeah. Look, we're very supportive at the BCA of investment in infrastructure. Infrastructure drives productivity, getting people to and from work faster than they have been able to do that currently, ensuring that they have the skills that they need. That is the infrastructure that we need going forward and we're very supportive of that investment. I don't think that that means however, that governments need to take on more debt necessarily. What we've seen is asset recycling be very effective in enabling governments to be able to build infrastructure, to then involve the private sector in owning and running that infrastructure such that they have the funds to be able to continue to build new and more infrastructure. And we're very, very supportive of governments continuing to look at ways like that, that mean that they can meet their current fiscal responsibilities and invest in infrastructure.
Peter: Okay. You've been generous with your time