Media & Speeches

Jenifer Westacott – Interview with Chris Kenny, Sky News

Event: Interview with Chris Kenny, Kenny on Sunday, Sky News
Speaker: Jennifer Westacott
Date: 13 May 2018
Topics: Business reputation, Budget 2018, company tax
E&OE

Chris Kenny, host: But let’s get on with this taxation and economic debate. Now I’m joined in the studio by Jennifer Westacott from the Business Council of Australia. Thanks for joining us, Jennifer.

Jennifer Westacott, chief executive Business Council of Australia: You’re welcome.

Chris: You know, we’ve been after debate about economic reform in this country for a long while. We’ve had a lot of false starts, but we seem to have pretty clear contest now.

Jennifer: Absolutely, I think the budget was very good that the government handed down this week. It was pro growth, it was pro business. I think the crucial thing about the budget is that, to me, showed absolutely that when business is strong, when it's working well, then you're able to put back into the community.

Tax cuts to low income earners, more money on health and education, big aged care package, spending on infrastructure. I think the figure that people keep missing is the hundred billion dollars of company taxes that will be paid by the end of the forward estimates. It's business that's really doing a lot of the heavy lifting.

Then, in contrast, you've got a budget reply that it's very difficult to say where the growth is going to come from. It's very difficult to see that there's anything in there around incentives for people, any serious reform. The government's plan to take out a whole tax bracket, that is huge reform.

That is a massive incentive for people who really get so frustrated when you talk to them. They get a bit of extra work, they can get in a few extra hours and suddenly, they're paying more taxes because they've gone into the next tax bracket. It was big reform on top of some quite big reform they've done on company taxes.

So, I just think we've now got this, do you grow or do you not grow. I think it's a very old fashion view of the world that you don't have a kind of plan to grow businesses to compete. To kind of allow them to innovate and do the sorts of things that are make a successful economy.

I find that really quite difficult to come to terms because I don't think you can deliver the fairness agenda, the market based economy, if you do not support the private enterprise system.

Chris:  Well, if you look at the areas of government spending. I'm one of the critics who say that government hasn't done enough to reduce spending. We want to keep the incentive along the way. But if you look at the areas where the spending is increasing, it's national disability insurance scheme, it's education, and it's health. It's these areas that people love.

As you say, unless you've got a growing economy, you cannot possibly afford to fund those areas.

Jennifer: Absolutely. You look at that hundred billion dollar figure that companies will be paying at the end of the forward estimates, a trillion dollars over a decade, now that's including the tax cut. That's including the tax cut.

Imagine in four years, if that number goes to 80 because businesses can't compete. Businesses aren't able to be successful. We're not able to drive investment into manufacturing, into sort of innovation, which we're going to have to do to stay competitive in the global economy. We will be having a very different conversation about the budget if those numbers go down.

So people say, well why give them a tax cut when they've got forecast high revenues. Well, we're still not fixing the big productivity problem in this country, which is absolutely linked to investment, which is absolutely linked to after tax returns.

I can't see what the opposition has got to offer for growing the economy, I just can't see it. In which case, we're just going to spend an ever diminishing pie, to use that jargon. Where does that get us?

Chris:  Let's unpack some of that, I'll come back to the opposition in a moment. Let's start off with the government's plan. I agree with you. What stood out with me in the budget is that there is at least some plan for growth here.

But let's be realistic. The plan for growth, the government action for economic growth is really on the tax cuts when it comes to big business. Those tax cuts don't come in for quite a few years. There's already been tax cut, of course, through the smaller businesses.

But the real tax cuts for the bigger businesses where you expect a bigger investment, don't come in for another four or five years. So, there is not going be a tax cut for business in the foreseeable future, even if the coalition is re-elected. Yet, the Labor Party is digging in, it's not going pass these tax cuts for big business.

So, do you see any hope that those tax cuts will get through the Senate? Any sign that the crossbench might actually fold and allow those tax cuts, distant as they are, to be passed by this Parliament?

Jennifer: I think it's very important to sort of unpack that. So the big companies, the big investors Rio or BHP, the signal matters enormously because they have projects going out 10 / 15 years. BHP has got 32 billion dollars of projects, 15 thousand jobs, and they say the tax break is very important.

Chris:  If they know the tax rate is going to be 25 percent in 2025, that will in fact affect investment decisions tomorrow.

Jennifer: Correct, correct. Exactly. They've made that very clear. Worse, if you kind of take the opposite, if we don't do it ... and these companies operate all over the world. They start doing more of their next activity somewhere else, it's very hard to get them to come back because these are projects that are 10 / 20 years out.

So companies, even the big retailers, are looking 10 or 15 years out and saying if that tax rate is lower, it gives us a signal. We start planning for that investment, do more activity. That, of course as we know, leads to higher productivity, which leads to higher wages, and so on.

So the signal is hugely important. I think, to your point, this is what people keep forgetting. They say a tax cut, 80 billion tax cut for big business. Well, the bulk of businesses are actually small and medium. They're not the big businesses. They don't get it until 2023, they don't get the full cut until 2026.

So this idea that we are going pay for this, instead of giving a tax cut to a big business in the forward estimates, big business is getting nothing for a long time. But the signal is hugely important. But the benefit to a small or medium size business is hugely important.

Chris:  Let's have a quick look, though the test case in many ways is what Donald Trump has been able to do in the United States. It's early days, it's only sort of six months into his tax cut plan. But two things stand out for me on that.

One is, we have seen investment flow after those tax cuts. We have seen unemployment rates reduce even lower. The lowest they've been for many decades, so that's the good sign. That shows us that business tax cuts can work. But it also increases the pressure that's now on Australia because those investments are going flow to the US rather than to Australia.

Jennifer: Absolutely. This has been our argument all along. The US is still our biggest investor, it is still one of our biggest trading partners. A company like Rio has more shareholders in the US than it does in Australia, it's got a responsibility to all of its shareholders. If we can't compete with the US, we will have some serious problems.

We'll see capital moving there. We'll see other activities going there. We've gotta remember in the world context, Asia is at 22. The British are going to 17. The French are talking about lowering those. The Canadians are at 25. All across the world, people are lowering their corporate rates.

Ours it at 30 per cent. We have been taking it down for 16 / 17 years. We are falling behind, falling behind. Of course, we know from all the economics that when you do this, you drive productivity, you drive higher wages, you drive better job creation.

So this has been the most, I don't know, mischievously analysed policy. I've never seen a tax cut so contested in Australia. We're not contesting tested tax increase, but-

Chris:   That's the point here. Let's look at Labor's position. Now I cut my teeth on politics during the whole Keating years. Now Hawke and Keating were very pro-business. Sure they have big unions they dealt with, but they had the accords. They had big unions, and big business, small business ... all cooperating on a national project for economic growth.

Jennifer: That's right.

Chris:  They cut personal income taxes, they cut company taxes, they cut investment taxes. We have the Labor Party, now, completely shunning that aspirational ideal. We know that Bill Shorten is opposed to the top end company tax cuts.

We know he's going to increase taxes on higher increase earners. We know he's gonna increase taxes on retirees. We know he's going increase taxes on people investing in real estate. We know he's going increase penalty rates again. We know he's going re-regulate the labour market. We know he's going adopt energy policies that will increase energy prices even further.

Have you ever seen a more anti-business approach in politics.

Jennifer: I haven't. I haven't. I think the problem is, it sounds like the rhetoric is interesting for people. But the problem is that people forget who business is. They try and create this, I don't know, abstract entity, but business is the 10 million people who work for a company. Ten million of the twelve million working Australians, work in a business.

Chris:  But having this happen, what has business done then, to alienate itself so badly from the Labor Party? The Labor Party used to always talk about aspirational Australians and economic growth. Now, you're essentially at war with them.

Jennifer: Well, I don't know if it's at war, but we're certainly in conflict with them because we have a different view. But it's not about our interest, it's about the country's interest. It's about people who want to get ahead. It's about an aspirational Australia. It's about small, medium, large companies being able to hold their own in the rest of the world.

Chris:  You have an argument being dealt a really damaging blow by the behaviour of the banks that has been exposed by the Royal Commission.

Jennifer: Yeah, look I'm not going to make any excuses for those actions. They've been shocking and they've been devastating.

Chris:  We know that, but that must have damaged your argument fairly heavily, because people see that as big business and why should they be cut any slack.

Jennifer: Of course people say that, but the problem we've got is this, if we start carving the banks out from the company tax…

Chris Is that a possibility?

Jennifer: Well, I don't believe that's good public policy because you're just punishing the shareholders of banks. The regional bank manager who's been helping your country town for years. You're just punishing the customers. You're punishing the employers. If cut off at 500 million dollars, you're punishing Rio, and BHP, and the big retailers. You're punishing a lot of companies.

But don't forget, people had this anti-business agenda long before this stuff came out about the banks. So, I'm not making…

Chris:  It's just played into their hands.

Jennifer: It's played into it. The problem is this, if we use that as an excuse to not do these tax cuts, we will fall behind for the decade. In ten years’ time, they will be saying, how come our wages are still flat lining? How come our productivity hasn't moved? How come we're very vulnerable now to a changing China or a changing world of commodity prices.

What happened to those opportunities? Why is our economy only growing at 2.4 per cent when it used to grow at 3.4 per cent, which has given us our fantastic living standards. That's my, I guess, depression. That people want to use this political opportunity to score political points, that don't have the long term interests of the country in mind. The people, Chris, who will be suffering for that, our poor people, not rich people.

Chris:  So you would say that this Bill Shorten agenda, at the moment, would take Australia backwards?

Jennifer: Absolutely.

Chris That poor people would suffer?

Jennifer: Absolutely. Chris, how can you argue a fairness agenda? I mean, what is a fairness agenda? How fair is it to let our people's wages stagnate because we're not driving productivity? How fair is it to put a ball and chain around every Australian company and say, too bad that we've got one of the highest tax rates in the world?

How fair is it to not allow us to invest in innovation? How fair is it to see unemployment grow? How fair is it to stop a young person getting extra hours? That's not a fairness debate. How fair is it to say we are going to deny a stronger economy, a growing economy, more money in the coffers of government? That is not a fairness agenda.

Chris Now, you're running a campaign organisation now for the Common Good.

Jennifer: Yep.

Chris I think we'll put the website up on screen here. You're starting to actively involved in campaign for public support for business, talk about what it does. This is a good initiative, in my view. But is it that you're playing catch up now, aren't you?

Shouldn't business have been doing this for the last two decades to explain how central they are in people's lives? Now, in response to this politics of envy,you're having to try and catch up.

Jennifer: Yeah, there's no doubt we're plying catch up, I'm not gonna deny that. But, we either play catch up and get it done or we see terrible public policy. We see people's living standards in Australia fall behind as a result of it. We've got a few campaigns, one is a campaign called Australia at Work, which is reminding people of the two truths we know they absolutely get.

That business creates most of the jobs and that and business working together really matters. Then, we've got this Common Good, which will be issue by issue in electorates, in marginal seats, as well as across the country, all in issue. We won't be doing candidates.

What's so interesting about this is, suddenly this kind of backlash for that. So, when businesses were, "we're going step up and play on the same field as GetUp and the trade unions". It was just terrible.

Chris:  And all of the other, they're saying this is our right.

Jennifer: We’ll be calling people out, that's for sure. We'll be factual and we'll be judged on that.

Chris: Are you disappointed with the way the Coalition has run these economic arguments over the recent years? The whole debate has been poorly handled. For instance, we constantly see the Labor party talk about tax cuts as handouts, as if it's the government giving you money rather than the coalition making clear over many years, that no, actually tax cuts enable you to keep more of your own money.

Jennifer: That's right. I think we all have to do better with that argument. I think when people's wages are not growing, it's a big opportunity for people to play pure politics. We all now have to step up and argue that a tax cut for business is a tax cut for the 10 million people who work in a business, for the five million shareholders, for your superannuation for my superannuation, for a growing economy that allows us to put back.

Not doing it, is basically putting a ball and chain around the economy and we'll all see a very different Australia in 10 years’ time. We've all got to step up for that argument and make it real for people.

Chris:  We're going to hear a lot more from business between now and our next election?

Jennifer: Absolutely. Absolutely.

Chris:  A lot of money involved?

Jennifer: Well, we're certainly on a fundraising campaign. We're going to try and put as much money as our competitors do. But one thing we won't be doing, Chris, is telling them all those mistruths and misinformation. The ACTU’s campaign loaded up with union members’ money, telling people things that are just simply not true. Like, casualisation is going up. Well, the productivity commission says it hasn't gone up for 20 years.

We won't be doing that, but we do have to step up because it's not for our interests, it's for the interest of Australians. It's for the fact that we've now got a new definition of rich, which is like a family earning $90,000, well tell somebody in Western Sydney who's earning $90,000 and paying their bills that they're rich. I don't think so.

I'm interested in the national interest, in a better Australia, a fairer Australia by a stronger Australia.

Chris Thanks very much for joining us, Jennifer.

Jennifer: You’re welcome.

Chris: Jennifer Westcott, there from the Business Council of Australia.