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Sharing Prosperity: A Conversation on The National Interest
On 23 November 2011 Business Council of Australia Chief Executive Jennifer Westacott delivered the 2011 Brotherhood of St Laurence Sambell Oration, under the title ‘Sharing Prosperity’.
Jennifer Westacott was subsequently interviewed on The National Interest program on ABC Radio National, where she discussed her Brotherhood of St Laurence speech and her belief in the value and positive influence the Business Council of Australia can have on Australia’s future prosperity.
This is a transcript of Jennifer Westacott’s comments on The National Interest program on 25 November 2011. ‘Business Thinks Laterally on Social Welfare’ is reproduced by permission of the Australian Broadcasting Corporation and ABC Online. (c) 2011 ABC. All rights reserved.
[Program host] Peter Mares: ‘People cannot live on $35 a day. Entrenching them into poverty is not a pathway back to employment.’ This is the kind of critique of our social security payments that you expect to hear from welfare groups, but in this case the comments come from the Business Council of Australia, the top end of town.
The Business Council of Australia brings together CEOs from 100 of Australia’s top companies, amplifying their input into public policy debates. And they’re calling for a national inquiry into entrenched disadvantage. It’s one of the proposals put forward on Wednesday in a remarkable speech to the Brotherhood of St Laurence, delivered by the Business Council’s chief executive, Jennifer Westacott.
Jennifer Westacott, welcome to The National Interest.
Jennifer Westacott: Thank you very much.
Peter Mares: Why do we need a public inquiry into entrenched disadvantage?
Jennifer Westacott: Well, I think the point I make in the speech is that notwithstanding our economic statistics – 20 years of continuous growth, rising GDP, rising wages – we’re not doing well for some people and, as I say, I think it’s the same people over and over again. And one of the critical things for us is that we believe fundamentally in shared prosperity and we think if the community doesn’t feel that they’re getting that share, they’ll reject the very policies we need to grow the economy and increase participation.
So we feel that there’s this group of Australians who are being left behind and we need the Productivity Commission to have a look and say what’s causing that and what’s the best way of dealing with it.
Peter Mares: So the Productivity Commission, you think, are the right ones to do this inquiry?
Jennifer Westacott: I think they’ve got a really good history of tackling difficult reform, of being independent, of looking at it from an economic point of view, which is how we want to look at it. Because this is fundamentally, for us, obviously an issue about people’s quality of life, you know – and that’s obviously at the forefront – but if you come at this from people in Australia deserve the right for economic participation, they deserve a better standard of living, they should not be left behind in a country as wealthy as ours, we think the Productivity Commission is the right body to really look at the causes, the economics, the effect, and look across the world and say where are there some examples of what works?
Peter Mares: In a capitalist system it’s a dog-eat-dog world, isn’t it, law of the jungle? I mean, why does business care about people who fall behind?
Jennifer Westacott: Well, because we believe that in creating wealth, the fundamental challenge and the task, in our view, is to create wealth that’s shared to the community as a whole. And as I say in my speech, making just a few people wealthy is not a pathway to true wealth, which we believe are the things like a good health system, a good education system, decent infrastructure, proper opportunities for people. So we think that the point of growing the economy is to make sure that all Australians have a better quality of life and a lifting standard of life, and that that’s fundamental to our social cohesion, to our sense of wellbeing, to our confidence as a nation.
Peter Mares: On the same day you gave your speech, on Wednesday, the Financial Review put out its annual survey of executive salaries – they do this every year. Sixteen million dollars a year for Frank Lowy at Westfield, $11 million for Marius Kloppers at BHP Billiton, the CEOs of the big four banks are all getting upwards of $8 million a year. Now, when ordinary wage earners see those sorts of figures, they might find it bit rich to talk about prosperity being shared and the business community wanting everyone to have a go at this wealth.
Jennifer Westacott: Look, I understand the community’s concern about this and I talk about, in my speech, tough conversations and I talk about the profit–pay conversation as one of them. There’s a couple of points, I think, to make about executive salaries. The first is you need the economy to be strong so that everyone can benefit from it, and our major corporations are really the firepower behind that economic growth. We need to attract the best talent in the world and we need to pay people in a way that is going to attract the best talent in the world. The next point to make is that a lot of confusion exists out there about how these salaries are structured. Many of them are structured as share arrangements and also on a performance basis. And the final point is that this is a matter for shareholders and for boards of directors to make decisions about what’s an appropriate level of remuneration for those executives running very, very, very large corporations. I always say to people, you know, people talk about mega-profits of companies – what if we were talking about mega-losses? Because we’d actually be talking about very, very big job losses and very, very poor circumstances for many people in the community.
Peter Mares: Sure. And no one wants to see businesses fail and people lose their jobs, but at the same time, I mean, you say in your speech that since you’ve been at the Business Council – a job you took up in April – you’ve not met one business leader who isn’t focused on a broad concept of community enrichment as opposed to just getting rich. And I accept that – I mean, I speak to quite a lot of business leaders as well – but I wonder then why the extra six million? I mean, isn’t $2 million enough, rather than eight? I mean, why not set an example and show a bit of moderation? If what they’re really interested in is the business of building a business, of employing people, why the excessive salaries?
Jennifer Westacott: Well, I think you have to look across the world and say are they excessive and are they excessive for the ...
Peter Mares: Well, they’re excessive in an Australian context, aren’t they? If you look at them as a multiple of average annual earnings of workers, the multiples keep going up year by year.
Jennifer Westacott: Yeah, but look at the contribution some of these companies make to the economy, the number of people they employ, and the role they play in building what we call national wealth. And it’s true that this is a debate and I say that this is a tough conversation and it’s a conversation we should have as a nation, but we need to remember, it’s our view that to really create shared wealth, mass prosperity, you have to have the major businesses of Australia working well, being profitable, and in order to do that you need to attract the right people with the right talent to run them, and those are decisions that shareholders and directors need to make.
Peter Mares: Let’s move away from the individualisation of it, then, in the pay packets for CEOs, and look at on a broader societal level. As you said, we’ve had 20 years or more of unprecedented growth in Australia, households have all become richer, but at the same time we’ve also seen greater inequality. Is that part of the problem that you see?
Jennifer Westacott: I think that’s right and that’s why we’re calling for this inquiry, because what you don’t want to see is a polarisation of wealth and you don’t want to see entrenched disadvantage just getting worse. I actually think, and there are some other commentators who agree on this, that if you look at some of the difficulties in the US, it’s the lack of wealth being shared across the economy that can’t, if you will, pump prime the economy. It’s the polarisation of the wealth in many respects is a handbrake to getting growth going again.
Peter Mares: You sound like you could be part of the Occupy movement.
Jennifer Westacott: Well, look, I think that, you know, I’d hardly be probably in the same league as those people, but I understand their concerns, and that’s the point of the speech; that many people in Australia don’t feel that they’re getting a share of that wealth. And it’s important for our policy settings to do two things: to make sure that we grow the economy – stifling the economy is not a solution to this problem, growing the economy is – but we need the right settings, the right policy arrangements to make sure that all Australians benefit from it. And in particular, we need to make sure we stop leaving the same people behind year after year. And people talk about this transition in the economy; we need to make sure we don’t leave other new people behind. And that’s really, I think, the challenge that we’re putting to government and to ourselves and to the non-government sector; we all need to work better together to make sure that the wealth that we’re creating is shared across the community.
Peter Mares: This is The National Interest on ABC Radio National. I’m talking to Jennifer Westacott. She’s the chief executive of the Business Council of Australia and we’re discussing a very interesting speech she gave a few days ago to the Brotherhood of St Laurence. And, Jennifer Westacott, you canvass a whole lot of policy areas in your speech. It’s very interesting. We can’t go through them all, but I want to focus on one in particular and that’s housing, public housing, which is a matter close to your own heart, I think?
Jennifer Westacott: I grew up in public housing and as I say in my speech, when I grew up in public housing, pretty much everyone worked; they didn’t earn lots of money, but they all had jobs.
Peter Mares: So they were working poor, as it were, as we call it today.
Jennifer Westacott: Working low-income people. When I ran the Department of Housing – so I guess I’ve seen the housing system from two lenses; as someone who grew up in it and then ultimately the person who was running it in Victoria ...
Peter Mares: Because you were a senior public servant in Victoria and New South Wales before joining the Business Council.
Jennifer Westacott: Exactly, and I was the head of the Department of Housing in Victoria. When I ran the Department of Housing in Victoria, nobody worked, or almost nobody worked. It was unusual to go to those big housing estates in Fitzroy and Collingwood and the Latrobe Valley and find many people who had jobs. And for me that created a whole lot of problems – very rundown estates, places that people were embarrassed about their postcode, a lot of poverty, a lot of crime, a lot of social problems. To me, we just need to rethink the model of social housing, as it’s now called, but housing for low-income people. We also need to rethink the whole issue of housing affordability, which I feel passionately about; that the average Australian family will not be able to buy the average Australian home in most of our capital cities. I mean, that’s unacceptable and ...
Peter Mares: If we come back, though, for a moment, to the social housing or public housing, what kind of changes do you recommend in that particular sector?
Jennifer Westacott: I’ve looked at this across the world and to me the best model is to get community-based, commercially focused organisations to run the social housing system, to have more flexible allocation policies so you get a mix of people living in some of these large estates ...
Peter Mares: So community-based means kind of social entrepreneurship, so not profit driven ...
Jennifer Westacott: Not for profit, yeah.
Peter Mares: But certainly not running at a loss either, so ...
Jennifer Westacott: Of course.
Peter Mares: And using that income to then invest further in more housing, that sort of thing.
Jennifer Westacott: Correct. And giving those people flexibility in who they provide housing to, rather than this giant waiting list and people kind of queuing on that system; promoting different models of home ownership, like shared equity, which is very popular in places like the United Kingdom; getting tenants and residents more involved in the way their houses are run, their communities are run – to me, that’s hugely important, so that people don’t feel like they’re sort of just part of some amorphous system that is completely insensitive to them. And using the kind of big assets of the public housing system to drive private investment to perhaps renew and redevelop those estates.
And getting rent models that don’t trip people into poverty. I mean, at the moment, if you’re on unemployment benefits and you get a job, the first thing that happens is your rent goes up. Well, that’s very, very demoralising for people. What we need is a system that recovers the right amount of money, puts the right incentives in for people to go to work if that’s what they choose to do and they’re able to do it.
Peter Mares: The Business Council of Australia, if I read your speech correctly, wants better infrastructure, better education, universal healthcare, support for the arts, and a decent social safety net; in fact, from the opening quote that I used in my introduction, you’d like to see payments increased for people who are unemployed. But you also want lower corporate and personal tax rates. Now, how do these two things fit together – better services, lower taxes?
Jennifer Westacott: Sure, well, let’s pull that apart a bit. So what I say in the speech is what do we mean by a wealthy society? Do you measure that in GDP or GDP per capita? And I say in my speech, I don’t think so. I think when people talk about a wealthy society they’re talking about those things like our capacity to afford decent infrastructure, our capacity to afford a good health system and education system and so on. My thesis in the speech is that to do that you’ve got to grow the economy. And to grow the economy you’ve got to make it more competitive to invest, and to make it more competitive to invest, you’ve got to get company tax rates to be more competitive across the region and amongst our trading partners. So our fundamental thesis is that if you want those things that are what I call in the speech the signs of a truly wealthy society, the best way of achieving that is to grow the economic pie. And the best way to grow the economic pie is to improve the competitiveness of our tax system and the policy settings that will unleash investment rather than constrain it.
Peter Mares: You give the example of Europe as a kind of warning for Australia of we don’t obviously want to go down the road of Greece and Italy where things have fallen apart to such an extent that you now have unelected bureaucrats in the role of prime minister. But if we took a broader view of Europe you could say actually the countries that are doing better in the crisis are the Scandinavian countries that are high- taxing, high-spending countries.
Jennifer Westacott: I mean I think the Scandinavian countries are often pulled out as examples and there’s huge differences in the way they’re structured. You know, I think the point I make about Europe is that I think we get into a lot of complacency about our way of life in Australia, about what I call the social contract, the fundamentals of the way our society is run. And what we’ve seen in Europe is the inability of politicians to have tough conversations about the retirement age, or the cost of the social security system, or how we actually make our services more efficient. It means that not only, what are we seeing now, austerity measures, we’re actually seeing the fundamental democratic arrangements being renegotiated, because the political class is not capable of having the kind of conversations that it needs to have to preserve the economy. So I think it’s a very important warning sign that there’s more at stake here of not making sure that we renew and refresh that social contract, the fundamentals of our society; that you potentially paper over weaknesses and ultimately you put the most disadvantaged people at risk.
Peter Mares: So we have to have tougher conversations. But, you know, there are some real tensions in your argument. I mean, on the one hand, for example, you argue that we need to tackle chronic health problems, like obesity, so that we don’t overwhelm the health system in the future. I think we can all agree on that; that needs to be done. But one way to do that is to get manufacturers to reduce the levels of fats and salts and sugars in all their processed foods, to have labelling in the supermarket that you can read without having to take a magnifying glass with you. But in the Business Council’s view that would be more kind of nanny state and unnecessary red tape and regulation that stifles the economy.
Jennifer Westacott: Well, I think that the regulation issues ... you know, what we want to see with government is some evidence that these are the things that actually make a difference. I mean, I could run a different argument about the way Medicare payments are structured to manage people’s health versus deal with their sickness. I think there’s a lot of things that need to be put on the table about how you tackle obesity, how you tackle chronic disease. What we want to see with these sorts of regulations is the evidence that it’s actually this that will change people’s behaviour, it’s actually this that will improve health. And what we often see is kneejerk reactions to things, you know, regulation that sounds good, but of course when you look at the evidence, it has a pretty marginal impact.
Peter Mares: Well, Jennifer Westacott, thank you very much for joining us in The National Interest.
Jennifer Westacott: You’ve very welcome, thank you.