This opinion article by Business Council chief executive Jennifer Westacott was first published in the Australian Financial Review on Friday 18 February 2022.
Australia has moved beyond waiting for a COVID end date.
Omicron has changed the game, and we need to get on with reopening and recovery while the virus morphs from pandemic to endemic. In other words, living alongside it while we prepare for new waves and potentially different strains.
If too much friction remains with too many mixed messages across state borders, Australia will send the wrong signal to the rest of the world at the very time we need to attract people and investment.
The message ahead of next month’s federal budget is simple – Australia risks stalling momentum in the recovery unless we urgently fix the immediate short-term supply and structural barriers that threaten to hold the economy back.
For this reason, the budget needs to address the problems of acute worker shortages and record low business investment while also laying the foundations to secure Australia’s economic future through a diverse, strong and innovative industry structure with better jobs and higher wages.
The Business Council’s budget submission puts forward a combination of short-term practical measures and long-term initiatives to keep the recovery on track and shore up the future.
Our focus is on rebuilding the labour force, making the tax and regulatory environment more competitive for business, building future capability, and putting government finances on a more sustainable footing.
Accelerating the pace of recovery is not about either further big spends from government or austerity. The answer is ensuring the private sector can take the baton and drive growth by removing the constraints on the economy. Let business get on with its job.
COVID has left us with around 300,000 fewer workers employed in Australia than were expected before the pandemic. This dire shortage is creating havoc for large and small businesses across the nation’s critical supply chains; contributing to inflationary pressures and our ability to attract investment.
This will not lead to sustained wage increases; it will lead to an inability to get important things started and the crucial skills needed to drive the economy.
It’s why we recommend making the most of the migrant workforce in Australia and attracting global talent back by returning to four-year visas for all skilled temporary migrants and improving pathways to permanent residency.
Our budget strategy and women’s budget statement are also aimed at empowering women to return to work, take on more hours and advance, and we suggest extending paid parental leave to encourage more flexibility and greater sharing of caring responsibilities.
OECD data shows Australia ranks 28th out of 42 countries for maternal workforce participation.
While good decisions have been made, more work is needed to improve women’s workforce participation and avenues to advance.
KPMG modelling in 2018 demonstrated that if the labour force participation gap was halved between men and women, Australia’s GDP would increase $60 billion by 2038. This would leave the average Australian over $2,000 better off, not to mention the work and career benefits for women.
To give families more choices and opportunities, we are calling for the Productivity Commission to comprehensively review the childcare and early childhood systems examining everything from the complexity of current taper rates, the subsidy and affordability of the childcare system to the productivity gains of co-locating childcare, preschool and primary school.
Critical to this budget is creating the conditions to attract greater levels of investment and for Australian companies to have the confidence to invest in major projects.
As a share of GDP, new business investment is at its lowest level since the early 1990s recession.
Increasing business investment is needed to drive higher productivity and higher real wages.
A point lost in RBA Governor Philip Lowe’s recent speech is that wage rises will only be sustainable if backed by productivity increases. That needs investment.
Higher wages that simply reflect supply pressures will be inflationary and ultimately not sustainable, and that’s why it’s critical we reinvigorate the nation’s investment and productivity agenda.
We argue common-sense steps that make permanent the easing of regulations during COVID, streamlined foreign investment screening and action to make the company tax system permanently more competitive are still needed.
This starts with mid-size companies that have been rocked by lockdowns and restrictions and face global pressures.
When fiscal conditions permit, a sustained increase in investment in the medium term can be driven by either applying the lower company tax rate of 25 per cent to all companies, phased through increases to the turnover threshold, or by introducing a broad-based investment allowance of 20 per cent for all companies.
This budget is also a significant opportunity to build our national capability.
We recommend setting up world-class nationally significant industry precincts by establishing a central future industries fund to support local industries to develop capabilities, scale up and compete globally. This would build on the government’s recent research commercialisation announcement.
And accelerating funding to the Clean Energy Finance Corporation and the Australian Renewable Energy Agency to encourage private sector co-investment in untested and emerging clean energy technologies that may not otherwise reach commercial scale.
Critical to the recovery and our future is skilling up Australians. Here we propose increasing VET investment through a new more ambitious National Skills Agreement and extending the Boosting Apprentice Commencements wage subsidy for a further 12 months at a stepped down rate.
Finally, to get our house in order, the government should support states that want to progress tax reform such as phasing out stamp duty by providing them with a clear guarantee of no disadvantage in the allocation of GST revenues.
And it could go further by providing productivity payments to states that implement beneficial reforms, including tax and regulatory changes.
We don’t have a moment to waste. This budget is the time to remove the roadblocks to recovery and begin laying the foundations for a more secure economic future.
Jennifer Westacott AO is the chief executive of the Business Council of Australia