Event: Tim Reed interview with Ticky Fullerton, Sky News
Speaker: Tim Reed, Business Council President; Ticky Fullerton, host
Date: 20 December 2019
Topics: The economy, surplus, business investment, business reputation
Ticky Fullerton, host: Tim Reed, a lot of work's gone into this submission, obviously. The budget surplus, though, at a time when the economy seems to be screaming for stimulus - why is a surplus still such a high priority?
Tim Reed, Business Council President: Thanks to you and look, it's great to be here to discuss this with you. There were three real priorities we called for. Number one, you're correct, was a budget surplus. Number two is a laser focus from the federal and state governments on actions that are going to drive investment. And number three is to stand back and take a broader perspective on Intergenerational report, which is the main mechanism through which government does long-term planning, to extend that from just the federal to the states as well. On the need for surplus, Australia is not in 2008, it's not back where we were in those days when the GFC was kicking in. We have had 10 years of deficit and the government has fought very hard, we as a nation have fought hard, to get the budget back into surplus. Now, those 10 years of deficits mean that right now $19 billion a year is being spent on interest payments.
Ticky: But those payments are quite low. Interest rates are quite low now and there you have behind you, when business thrives, Australia thrives. Isn't business competing for some budget money?
Tim: Interest rates might be low but $19 billion dollars is not being spent in schools, it's not being spent in health, it's not going to being spent in services to the elderly. It's being spent in interest payments, in an economy where we've got unemployment, we saw the figures out today, where we're continuing to create new jobs, 250,000 jobs created in the last 12 months and underemployment also from falling. We've seen real wages start to pick up in just the last quarter after years of being low, starting to rise. These are not emergency conditions. What we do need to do though is put in the hard work to really drive economic growth over the years ahead.
Ticky: Your big ask of the budget for business is to stimulate business investment. How are you going to do that?
Tim: So there's three things that will really drive investment. Number one is certainty. Businesses invest when they're more certain of an outcome. Now, the good thing is the trends there are in our favour. I think domestically we see politics generally being considered to be more certain than we've probably had for five, maybe even seven years. Internationally, we're starting to see Brexit and some of these long term drags that have created real uncertainty starting to be cleared.
Ticky: But we're looking for specifically a business investment allowance.
Tim: We are. So one of the three things we've said in there is that a business investment allowance is required. That is because we need to have a competitive tax regime. Businesses have the choice where they invest, whether they invest in Australia or whether they invest in other places. In lieu of reduction in the company tax rate, and the government said that won't happen in this parliament, what we've said is we need something that is going to really target and stimulate business investment.
Ticky: Now, you've been very close to small business in particular, at MYOB. You think this will make a real difference?
Tim: I do. I absolutely do. What this will enable businesses to do is to get a larger tax deduction in the year that they make an investment and in total across the life of an asset, a larger investment. What that will mean is more business cases that today look marginal will look positive, and investments that are being compared to Australia versus overseas, it will become more attractive to invest in Australia. And businesses act when that happens.
Ticky: Tim, your not calling, I was quite surprised, for the second phase of personal tax cuts to be brought forward, which could be seen as a stimulus as well.
Tim: It could be. But what we've tried to be is very targeted in the things that we have asked for. So we've said number one, keep the budget in surplus and that means we can't then go and propose spending and revenue reductions all over the place. And what we know is that business investment drives productivity and productivity drives real wages growth, and that's the long term path to success. So we really want to get that engine firing up because if we can lift economic growth by half a percentage point, by a percentage point, and what it means is people earn more and that money gets then recycled as they spend more. And that's where you get that positive virtuous cycle. Business investment is at the lowest it's been in 26 years in our nation right now. That's what we need to address.
Ticky: We have this chronic problem in terms of our wages at the moment, wage rises. Now, there has been said to be tension between the RBA and the government in terms of who should be doing the heavy lifting now. Some people are saying that business should also be a Troika of who's going to do more to help wage rises, because businesses clearly will have another profit season in February when no doubt there will be profits. Why shouldn't business be raising wages, and in that way, stimulating spending.
Tim: So I think we've got to understand the causes of what actually drives wages and why haven't they been rising at the rate that they have in decades gone past.
Tim: Number one, we have a centralised system for setting minimum wages in this country. And minimum wage increases have been going up more than inflation and in fact more than the average salary and wage increase. So that means the people who are the least paid and the most vulnerable in our community have still been continuing to see those increases. When we move beyond there, the main mechanism through which wages have been set in this nation is through the EBA system. And the EBA system does need reform. It led to decades of real wage growth. Unfortunately it's been tinkered with and changed over time and it is no longer working the way that it was, and at the BCA we've called for a number of years for this to be examined. Less and less Australians are being covered by an EBA and therefore less and less of them are getting the benefit.
Ticky: So we'll see the BCA being vocal on this next year?
Tim: Absolutely. And we have been around improving the Greenfields projects, around looking at the better off overall or BOOT tests. And I know that sounds technical, but these things make a real difference to real wage growth.
Ticky: The budget itself, in May, will be upon us before we know, and I'm sure Tim. But in a year, this year, where big business has hardly covered itself in glory, it's not just the banks payments, but businesses like Woollies, would you agree that business is now on notice that bad behaviour may affect what it can get out of the budget?
Tim: Let me start by saying we don't defend anyone who's behaving poorly. You know, businesses need to pay employees what they're owed. Businesses need to follow regulation. That's why it's put in place. And it's very important to us and to our members that we understand the importance the community puts on those expectations and, we need to work hard to win people's trust. That said, we all need to create a system that enables businesses to invest because who benefits when that happens are the employees, the people who get new jobs because of that investment. We need to create an environment where the ecosystem is thriving and businesses are part of that ecosystem. So, what is business? Business is the 11 million Australians who work every day for a private enterprise. Business is the shareholders. And when you look at large institutions like the banks, that is almost every person who has a superannuation account in Australia, which is almost every Australian.
Ticky: But you'd be looking for a better year for big business next year on the optics front at least.
Tim: Look, absolutely. We continue to believe that businesses need to do the work internally to make sure that they are operating in accordance with regulation, to make sure that they are paying the taxes that are due, to make sure they're paying their people well. And we continue to be a voice that says it is important that businesses need to be acting well and properly.
Ticky: Tim Reed, great to talk to you and Happy Christmas.
Tim: Thanks, you too Ticky.