Address to the National Press Club of Australia

‘A Competition for Our Future – Revitalising economic reform: an agenda for the Jobs and Skills Summit and beyond’

ACCI chief executive Andrew McKellar’s remarks at the National Press Club of Australia as prepared for delivery on August 17, 2022.

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Introduction

Ladies and gentlemen, we are in a competition for our future.

Just as the 2.4 million Australian businesses compete every single day, the realignment of the global economy requires that we too must compete.

Over the coming decades there will be significant challenges to simply maintain, let alone improve on, economic growth and the broader wellbeing needed to secure national prosperity and the way of life we all aspire to.

A sustained and comprehensive commitment is required so that the economy has the dynamism to deliver the sustainable economic growth we need.

Only with competition can we lay the foundations for a prosperous Australian future.

Competition is what built Australia and must be what powers it forward.

Competition is what enabled businesses to be innovative, agile, and resilient through a once-in-a century pandemic.

And competition is what will enable us to overcome the challenges and realise the opportunities to revitalise economic reform.

ACCI: A voice for business

It’s the nature of this competition that makes voices like ACCI so important.

It’s important because many of the big challenges, begging meaningful action, require state, territory, and federal governments to work together. Through our federation of state, territory, and local chambers of commerce, we will work with policymakers at every level to ensure job creators have a seat at the table.

It’s important because the decisions that will determine our economic future won’t just be made in the board rooms of our biggest employers. They will also be made across the countertops of millions of small businesses and the kitchen tables of hardworking families. Our network of leading industry associations and major companies means we can leverage our economy-wide influence for business, big and small.

And it’s important because, as the pandemic has proven, Australia’s economy is undoubtedly a global one. As members of the International Chamber of Commerce, Business at the OECD, and the International Organisation of Employers our global ties make ACCI a strong advocate for greater international economic engagement.

Revitalising the Agenda for Economic Reform

For Australia to remain internationally competitive, a renewed and ambitious reform agenda is required to support our economic prospects.

Yet many have lamented the inability of our political leaders to elaborate a convincing narrative for farreaching economic reform.

The Hawke government began with the 1983 Economic Summit and that sets a high bar for the consensus that the Albanese government possibly hopes to now emulate.

Against the backdrop of the Prices and Incomes Accord, the 1983 Summit set in motion a comprehensive economic agenda, led by then Treasurer Paul Keating, that systematically reduced tariffs, floated the dollar, privatised government assets, instituted broad deregulation and reformed competition policy.

The Howard government continued a program of winding back regulation, boosting competitiveness and reformed the tax system, with the introduction of the GST.

However, the Howard government’s early success in workplace reform was followed by changes under Work Choices that many would say pushed the boundaries too far, contributing to the government’s ultimate defeat, and ultimately a reversal of its reforms.

The Rudd government began with lofty ambitions, but its attempts to implement reforms such as the Carbon Pollution Reduction Scheme failed, giving rise to the decade-long climate wars.

The far-reaching Henry Review of the tax system was doomed as a result of the mining super profits tax; and nothing like it has been attempted since.

Yet, it’s not as if we are incapable of achieving major economic change – history tells us we can.

The realisation of earlier reforms required bold and innovative leadership. And in many cases, it was difficult to build consensus behind these ambitions. Courage was needed to press on with the changes that enhanced our place in the world.

Facing the Challenges

As we move towards the Jobs and Skills Summit, the challenges we face are clear:

First, supply side constraints are holding back Australia’s economy.

These include an historic worker shortage, the most acute supply chain disruptions in half a century and an unprecedented stimulus overhang, all contributing to a 21-year inflation high and an end to cheap money as the Reserve Bank tightens its belt.

Second, a gridlocked industrial relations system, stopping efficiency gains and forcing down international competitiveness of Australian businesses.

Bargaining at the enterprise level is withering on the vine, and so called ‘modern awards’ are little more than an echo from the days of centralised wage setting.

And third, languishing productivity, with growth in the last decade slumping to its slowest level in 60 years.

The most recent downgrade in productivity projections is expected to result a loss of $120 billion in tax revenues over the next decade.

Are We Ready to Compete?

Faced with such challenges, we must ask ourselves: are we ready to compete? Is there a renewed ambition to make the hard decisions and to convince the community of the benefits?

So far, the government’s Climate Change Bill and broader plan to decarbonise the Australian economy is a positive first step.

Combined with a more comprehensive energy policy, this will help secure the planning, investment and innovation necessary to underpin an efficient transition to a net-zero future.

And as the Productivity Commission has recognised, addressing climate change is an important economic reform. It means harnessing our enormous competitive advantage, supporting job creation, driving down costs, and growing businesses.

But what about broader challenges to revive stalled productivity and foster economic growth?

How do we stack up against our competitors?

Here, meaningful action necessitates that we engage thoughtfully and thoroughly in debates of our economic future and recognise the role that free enterprise must play.

Business, must not, and will not, stand on the sidelines in these debates.

Now, I understand many will be sceptical about what can actually be achieved at the Jobs and Skills Summit this September.

But I think we need to be optimistic, and business must play its part.

Indeed, this is the best opportunity we have had to restart substantive economic reform in more than a decade, perhaps in a generation.

With international borders flung open, our competitors are racing to access the best talent, the best markets, and the best ideas, and Australia is at risk of falling behind.

Competition for Skills

Indeed, ACCI’s objectives for the Jobs and Skills Summit reflect this challenge to play catchup.

First, we are in a global competition for talent.

Every week I talk to CEOs and business leaders across multiple industries, in each state, and from businesses of every size—and they all tell me this: Australia’s workforce shortage is a crisis. It’s causing supply chain bottlenecks and driving up inflation. It is undermining the growth of every business.

Employers are furiously competing to attract and retain the talent they need in the tightest domestic and global labour market in decades.

In response, the Chamber has outlined a three-pronged approach to address the dual dilemma of jobs without people, and people without jobs.

A plan that will build our workforce and enable Australia to stay competitive.

First, we need bold skills and training reform. Indeed, the best way to increase skilled talent is by training our own.

The finalisation of the new National Skills Agreement by state, territory, and federal government is a top priority. This needs to deliver a real funding increase to our Vocational Education and Training system and grow the number of funded students.

Establishing a new independent body, Jobs and Skills Australia, will be instrumental in tackling the burgeoning skills deficit, and future-proof us against recurring worker shortages.

Past experience tells us that Australia’s vocational education and training system works best when it is in lockstep with industry needs. We’re working closely with government, and the ACTU to ensure industry is represented at all levels of workforce planning and the skills system.

The surge in apprenticeship numbers in recent years under the Boosting Apprenticeship Commencements scheme has proved to be outstandingly successful at rebuilding our skills base.

But new apprenticeship incentives put in place by the previous government are simply not enough. We cannot afford to see apprenticeship numbers nosedive again.

At a minimum there should be a 30 per cent wage subsidy in the first 12 months of apprenticeships, and first six months of one-year traineeships. This will help ease some of the financial pressure businesses face when taking on an apprentice or trainee.

Second, there is still much more work to do to get people off the sidelines of the labour market, and back into the game.

With unemployment at 3.5 per cent, we must maximise workforce participation and recognise that there has never been a better time to get those that face significant barriers back into the workforce.

Promisingly, participation levels are at record highs, particularly for women. But the gap is closing too slowly. Investment in childcare will minimise cost and enhance women’s labour force participation, as will other options such as more effective in-home support.

For people with a disability, we must reintegrate disability employment services back into mainstream employment services. Improved direct support to job seekers and streamlined points of contact for employers seeking to find staff must also be implemented.

Introducing a Training to Work program will help disadvantaged job seekers and long term unemployed undertake work experience concurrently to vocational training and should provide a pathway to permanent employment.

And while we’re talking about expanding our local workforce, we should not overlook the vast the pool of talent that is heading for the exits in droves. More than 400 Baby Boomers are retiring every single day.

The experience and expertise of older Australians should not be ignored, and changes to aged pension settings to incentivise greater workforce participation must also be on the Summit’s agenda.

And finally, third, we must reinvigorate our migration program to meet the needs of a 21st century economy.

While we must build our own skilled, educated, and diverse workforce, Australia must also remain an attractive destination for the world’s best and brightest.

We welcome the government’s recognition of the significant economic value derived from an ambitious and sustainable immigration plan.

A great place to start is raising the target for the permanent skilled migration intake up to 200,000, at least for the next two years, to address the staffing crisis we’re seeing across the economy.

While a recent ramp up in resourcing to unblock the visa processing pipeline is also welcome, more can be done. Business simply cannot afford for backlogs of up to nine months when countries like Canada and the UK are racing ahead.

This isn’t just about adding more staff to process visas, but rather removing the overlapping priorities that slow down processing times.

Our skilled migration program could once have been described as world leading – but over the last few years we have burdened it with restrictions, red tape, and rising cost, removing its ability to respond to genuine skill needs.

It’s time we got back into the race.

Competition for the Future of Work

If we want to unlock productivity gains and drive genuine economic reform, we must participate in the competition for the future of work and return to a simpler enterprise bargaining system.

Only this will reverse the significant decline in agreement-making we have seen since 2010.

Government, employers, and unions all agree that a decline in the number of enterprise agreements has fuelled low wages growth, poor productivity, and rigidity in workplaces.

The Summit provides an important opportunity for these groups to come together in a collaborative manner to agree on some practical solutions.

Government must be an active participant in these discussions alongside business and unions. I have been encouraged by the level of engagement by the Government to date but urge it to lean in further so that it can carry a fully formed tripartite deal through Parliament.

Any deal must also be endorsed by a truly representative cohort of business and union representatives.

With its diversity of size and industry, business is represented by more than one voice.

It is medium-sized businesses that have seen the greatest decline in agreement making and it is through them that the greatest gains can be achieved.

It is for this reason that ACCI is working with the BCA and AiGroup – the three peak employer groups – in an effort to put forward a joint proposal ahead of the Summit.

ACCI is approaching this process with three priorities in mind.

Firstly, we want to achieve sensible and modest reform at the Summit. We will be putting forward specific proposals where we believe consensus can be achieved, not a wish list of every employer demand.

If a deal is to be won, other parties should approach this process in the same spirit.

We remain open to all changes put forward by others in good faith and that will make the system better for all.

Secondly, a priority must be fixing the Fair Work Commission’s unnecessarily technical and complex agreement making process. Multiple independent reviews have found this to be the primary contributing factor in the decline in bargaining.

Thirdly, all aspects of agreement making, including bargaining, the approval process, and the application of the “better off overall test”, must be considered.

The “better off overall test” has become a point of contention between business and unions in recent times. This shouldn’t be the case.

Recent Fair Work Commission decisions have distorted the intended application of the “BOOT” as set out in the Fair Work Act making it too inflexible and turning businesses and unions away from agreement making altogether.

There are certainly mutual gains to be had by considering modest changes to how the test is applied that would not leave employees worse off.

We do not propose to put forward any changes that would see employees worse off.

We must focus on reforms that shift the needle. That make a real difference.

That’s why we are puzzled when we see claims that the trade union movement is prioritising the abolition of the right for parties to apply to terminate expired agreements.

The reality is, this can only be done by the Fair Work Commission if it is satisfied that it is in the public interest and if it has taken into account the views and interests of all parties to the agreement.

For us, reform has got to be about much more fundamental issues that go to the heart of ensuring that our industrial relations system is responding to the future of work.

Competition for Capital

Winning the future also means acknowledging that we are in a competition for capital.

The federal government must pull all its available fiscal levers to ensure Australia is a competitive destination for a new wave of business investment.

One of the greatest impediments to growing our economy is the shockingly low flows of private capital.

Investment brings new innovations, skills development, and enhanced efficiencies needed to boost productivity, and grow our economy.

Total private business investment has been in steady decline over the past decade, falling from 17 per cent of GDP a decade ago, to just 10 per cent today.

A level not seen since the 1991 recession.

While there are no quick fixes, the ability to immediately write-off investment through the Temporary Full Expensing measure is a good start. Extending this scheme beyond 2023 will be instrumental in encouraging businesses to make investments.

Large-scale investments are also needed to achieve the greatest productivity gain. An investment allowance, with a further 20 per cent tax deduction on major investments above $500,000 in plant, equipment and machinery will further stimulate this.

As surging inflation and rising interest rates continue to chip away at economic conditions and drive-up costs, business investment risks being further derailed.

With the right policy settings, we can turn the tide and enable our small and medium enterprises to level up against their international counterparts, inspiring innovation, growing pay checks, and creating jobs across the country.

Competition for Markets

Our globalised economy also necessitates a competition for markets.

Seaports are critical gateways for goods entering and leaving Australia. Yet Australia’s rank as some of the least productive in the world, snarling supply chains and slugging business, workers, and consumers with increased costs.

The World Bank recently ranked the top ports in the world and Australia failed to put a single port in the top 250.

Meanwhile the MUA maintains its chokehold on Australia’s ports, trashing any measures that would encourage a more flexible and responsive workforce.

Indeed, in a report released late last year, the ACCC found that rolling industrial action has destabilised the operation of Australian stevedores for more than a decade.

Today, the stakes are especially high.

Australian businesses are still grappling with the supply chain challenges associated with the war in Ukraine and disruption from the COVID-19 pandemic.

Cutting the performance gap of our ports is critical to address Australia’s languishing productivity growth and will provide improved access to global markets.

Because uncompetitive ports mean uncompetitive businesses.

Achieving a high level of productivity requires containers to move as quickly as possible through our ports and keeping transportation costs at a minimum.

‘Family and Friends’ style clauses, such as that agreed between Hutchison Ports and the MUA, mean that 70 per cent of new hires must be sourced from employees’ “families and friends” or a union list of names. These must be barred in any future agreements approved under the Fair Work Act.

The same holds for clauses that prevent job losses from automation. We are shooting ourselves in the foot if we stifle access to efficient and innovative port operations that our competitors already have in place. We must use the bargaining system to provide for workforce upskilling rather than simply delaying the inevitable.

Furthermore, complex regulation, overlapping agency administration and undue red tape governing our ports has similarly curbed their productivity.

With over 30 agencies and 200 legislative mechanisms governing the operation of international trade, it is vital that federal and state governments reform Australia’s international trade regime to streamline their operation.

In some cases, poorly conducted port privatisations have also produced near-monopoly conditions. The freight and logistics systems that move goods to and from the ports are similarly constrained. Governments must encourage new players to increase competition in our ports.

If the government is serious about pursuing economic reform and productivity gains, it must address our grossly inefficient stevedore operations which will put Australia on a stronger, more competitive path for years to come.

Competition for Ideas

And finally, to succeed at the Jobs and Skills Summit and beyond we must have a competition for ideas.

We want the Summit to be a success.

Business will come to the table with a clear agenda and realistic proposals that offer a pathway forward.

Do we want to see reinvigorated productivity growth leading to higher real wages and better living standards for all Australians?

Absolutely!

ACCI seeks a positive and constructive relationship with the ACTU. We want to be partners in a process of national renewal.

We do not need to make trade-offs in proposals for reform in enterprise bargaining, stronger investment in skills, or an ambitious skilled migration program. These things are unambiguously in the national interest.

Accordingly, there is a responsibility on all stakeholders to be fair. This is not an opportunity to settle old scores, or to push an outdated agenda.

Last week the ACTU published an issues paper, ahead of the Summit. The paper presented some increasingly familiar analysis relating to recent trends in real wages and the so called ‘wage share’ of GDP.

It contained some valid warnings about the risks of accelerating global inflation and the dangers of excessive reliance on higher interest rates as a blunt instrument to respond to challenges of an economy facing the most severe supply constraints in nearly 50 years.

Worryingly, however, many of its policy prescriptions were throwbacks to a forgotten and bygone era: direct regulation of key prices, rent controls, labour market re-regulation, an ‘excess profits tax’ on energy companies, and higher taxes on distribution of dividends!

A closer look at what’s actually happening shows that profits and productivity are highly variable. It’s definitely not a case of one size fits all – we must avoid excessively simplistic analysis.

Recent ABS figures show mining profits are up 25 per cent, but accommodation and food services are down almost 50 per cent. Many businesses are facing soaring labour, energy and material costs, squeezing profit margins.

And while we are currently experiencing falling real wages, this is temporary.

Indeed, recent evidence from the Productivity Commission shows that real wages have consistently outperformed labour productivity, even in the past decade.

If we are going to succeed in the global competition for ideas, we will need to pull together and achieve a level of national consensus not attempted in Australia for decades.

Conclusion

Ladies and gentlemen, if you hear nothing else today, hear this—the stakes are high.

The upcoming Jobs and Skills Summit can, and must, act as impetus for significant action.

A chance for a revitalised economic agenda, powered by the potential of free and fair enterprise.

But action must start now; global forces demand that we remain competitive; complacency cannot define Australia’s future.

And try as they might, critics of competition cannot ignore the reality that it is a force for good.

That’s why ACCI will never cease to fight for business, boosting prosperity, creating jobs, and making Australia a better place to live.

Because competition for talent fosters opportunity, driving skills investment and ensuring business is armed with the workforce they need.

Competition for capital drives business to adopt inspiring innovations and create new jobs.

Competition for markets pushes us to engage with the world for our own security and prosperity.

Competition for the future of work enhances productivity and grows wages.

And competition for ideas encourages robust debates, uncovers common ground, and builds constructive solutions to society’s biggest problems.

We must be ready because a failure to compete will only see us left behind.

Thank you very much.

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