CEOs want urgent action to boost economic growth

It is time for Ben Morton, who is allegedly the most powerful man in politics outside of the Prime Minister Scott Morrison and Treasurer Josh Frydenberg, to undertake a listening tour of business leaders judging from the latest Chanticleer CEO survey.

Morton, a former Liberal Party state director and the Assistant Minister to the Prime Minister and Cabinet, will find plenty of rich material for input into the government's policy framework for kick-starting an economy that most CEOs agree is in need of urgent attention.

As the conduit for business, Morton probably knows the economy is stuttering badly. Household consumption is less than half the trend growth rate, housing construction went backwards by about 10 per cent in the year to September and business investment is down 1.7 per cent over the past year.

The 40 leading CEOs who participated in this year's Chanticleer survey say they are ready and willing to help the government boost economic growth and lift productivity. They have sensible suggestions for managing the transition to renewables and fresh ideas for supporting innovation and uplifting workforce skills.

Matt Comyn, chief executive of the country's biggest bank, Commonwealth Bank of Australia, sums up the task facing Australia when he says: "Australia needs income growth to stimulate the economy."

Comyn sees an opportunity for the government to attempt to implement the sort of visionary micro-economic reform of the 1980s and 1990s.

"I think we have missed an opportunity to drive some of the big, difficult structural reforms that will really set the country up well for the decades ahead," he says in response to a question about what opportunities Australia failed to seize over the past decade.

"When I compare the reform agenda of the past decade to the '80s, '90s or early 2000s, structural reform feels like it has been harder for a range of reasons.

"Given the pace of change, a broader reform agenda will be required again in the future. This will require business and community to engage and work through the issues, and it will at times require trade-offs and choices to be made."

Comyn has, in effect, described a collaborative approach to policy development. This goes beyond the creation of super ministries focused on delivery of government services. It is a theme that runs through the answers from the 40 CEOs in the survey.

Hampered by 'vague legislation'

Chanticleer recommends Morton starts his listening tour in Melbourne by having a coffee with Reserve Bank of Australia board member and chief executive of EnergyAustralia, Catherine Tanna.

Tanna is well known for her straight-talking approach. She cut to the chase when asked what policies or reforms the federal government should prioritise to stimulate growth.

"There’s a strong argument that the experience of the past few years in energy shows that stable policy matters more than reforming policy," she says.

"In Australia, and internationally, we’re seeing more subjective decision-making and more power concentrated in the hands of politicians, and a few politicians at that.

"Commercial risk used to hinge on understanding the rules and playing within them. Disputes or breaches were addressed by an independent arbiter in the judicial system.

Governments need our help, otherwise they will retreat, centralise decisions and grasp for solutions.
— Catherine Tanna, Energy Australia

"Business invests and takes on the risk, so the taxpayers don’t have to. Now, the risk lies in legislation which is vague and is passed quickly, with less review and consultation, and produces unintended consequences.

"Markets can deliver, but not when governments cannot collectively say what they want.

Ultimately, the best investment we might make is finding ways for business and government to once again work together. Business and government are partners. Or, put another way, if Australia were a new-build house, governments are the architects, and business is the building contractor.

"Governments need our help, otherwise they will retreat, centralise decisions and grasp for solutions. Investing in that relationship might make all the other investments possible."

Tanna's response to the question about missed opportunities included some helpful advice about the future.

She says we failed to plan the retirements of big coal-fired power plants.

"Hazelwood showed why that’s important and we have to get better at it," she says. "That means agreeing the basic sequence for the change that is coming – Liddell, Yallourn, Callide and Bayswater/Eraring will shut in the next 15 years.

"The exact timing may shift a year or two. We have to find a way to say what we want – no price increases, a smooth transition and reduced carbon emissions – and plan for that."

'Energy policy needs to be resolved'

Energy was one of several big picture policy themes on the minds of other CEOs.

Jeanne Johns, CEO of industrial chemicals company Incitec Pivot, says one of Australia’s key strengths for investment was its affordable energy costs but this is no longer the case.

"The government should focus on restoring this strength which will simultaneously encourage investment and provide stimulus for the economy by increasing the spending power of each and every household in Australia," she says.

"With investment in ‘value adding’ to our natural resources will come opportunities for innovation and building new skills and jobs in regional and urban Australia."

Rio Tinto CEO Jean Sebastien-Jacques echoes her comments when he says "energy policy needs to be resolved so that Australia, as an energy-rich country, has the affordable, secure and flexible supply it needs".

Dominic Stevens, CEO of the ASX, said the country needs to settle "on a clear and sustainable energy policy, which addresses climate change and includes a significant role for renewables".

Corporate tax rate too high

LendLease CEO Steve McCann highlights the bottlenecks in Australian construction when he says it took three years between Lendlease winning a $3.8 billion mixed-use development in Singapore and residents moving into the finished project.

Coca-Cola Amatil CEO Alison Watkins and Qantas CEO Alan Joyce both say Australian corporate competitiveness is badly affected by the high corporate tax rate.

"We do need to face the reality Australia’s business tax rates are high compared to the OECD average and most trading partners," Watkins says.

"Our 30 per cent rate was set in 2006 and is out of step with an Asia-Pacific average of 21 per cent. It’s made worse by the current two-tier system which creates a tax cliff between small and large businesses.

"We need to lower the rate progressively to 25 per cent for all companies. In the meantime, Australia should introduce a broad-based investment allowance which remains in place until we fix our uncompetitive rate for large companies."

Joyce says: "Company tax reform is an area that would make a big difference. Ireland’s a good example where they have set a competitive tax rate to help boost the economy. They have a 12.5 per cent company tax rate."

"Their economy is the fastest-growing in Europe, with GDP growth of 8 per cent last year. Australia’s corporate tax rate is 30 per cent and GDP growth is around 2 per cent."

Retaining entrepreneurs

The other big picture theme on the minds of CEOs is innovation. Darren Steinberg, CEO of Dexus, visited Israel this year and came back with some sound advice.

"I believe it is essential that we continue to prioritise incentives for technology entrepreneurs to remain and grow their businesses in Australia," Steinberg says.

"This is imperative because every major country I’ve travelled to this year is supporting and looking to grow their technology sectors. Singapore, England, the US, Israel and Hong Kong are all focused on this, and if we can’t compete through either tax or business incentives, then we won’t be able to maintain the talent, and that growth will go to other countries."

Let's hope Morton has time for a CEO corporate listening tour that could be labelled "Bending Ben's Ear". If Morton, who is assistant minister to the PM, is too busy to hear the feedback from business, Morrison might need to find someone to do a post-Morton analysis.

Either way, the opportunity should not be missed.