CEOs call for fiscal stimulus

Australia's top chief executives say the federal government must intervene to stimulate the economy through infrastructure spending and tax cuts, and have lamented the nation's failure to properly tackle climate change and to develop a strong innovation policy.

While the nation's business chiefs have backed the Morrison government's efforts to cut red tape, respondents to The Australian Financial Review's annual Chanticleer CEO survey believe more must be done to lift business confidence, including the introduction of a business investment allowance.

"Australia needs income growth to stimulate the economy," Commonwealth Bank chief executive Matt Comyn said. "We saw some positive impact from the government’s one-off tax refunds earlier this year, and there may be opportunity to bring forward planned future tax cuts to help increase disposable income for households on a persistent basis.

"There are also opportunities to bring forward infrastructure investment and drive structural reform aimed at driving productivity."

Bendigo and Adelaide Bank boss Marnie Baker said the government's focus on returning the budget to surplus was hurting economic growth.

"The government has an economic lever readily available to them – greater public spending and infrastructure development.

"Nonetheless, it appears determined to bring the budget back to surplus for the first time in a decade, which is leading to a slower economic recovery."

The national accounts last week showed the economy remains stuck in low gear. GDP grew at just 0.4 per cent in the September quarter and is running at an annual rate of 1.7 per cent.

The number showed recessionary conditions in the private sector.

Despite falling interest rates and the fact that somewhere around 60 per cent of the $7.2 billion in tax cuts has been paid out, consumer spending rose just 0.1 per cent, the worst result since the GFC. Business investment fell 2.1 per cent, with non-mining capital expenditure stuck near 25-year lows.

Puzzle of growth

While Treasurer Josh Frydenberg declared the economy “back in the black and back on track”, Australian business leaders say more needs to be done.

Macquarie Group chief executive Shemara Wikramanayake said Australian politicians were not alone facing the puzzle of how to boost economic growth.

“Governments face a variety of challenges around the world and stimulating growth is common to most. If the government were minded to use fiscal stimulus, infrastructure investment has historically driven growth and job creation.”

Woolworths chief executive Brad Banducci said a recent tour of the group’s regional stores had underscored the impact that infrastructure spending can have in communities.

“Prioritising investment in core productivity-enhancing infrastructure is critical to our collective national long-term success.”

Rio Tinto's JS Jacques and Coca-Cola Amatil's Alison Watkins were among several chief executives who called for the government to restart its stalled efforts to reduce company tax cuts.

“We need an internationally competitive tax regime to attract foreign investment into capital-intensive resource projects in Australia,” Mr Jacques said.

But Ms Watkins also backed Woodside chief executive Peter Coleman, who said the government should examine an investment allowance to help get business spending again.

"We need to lower the rate progressively to 25 per cent for all companies," she said.

"In the meantime Australia should introduce a broad-based investment allowance which remains in place until we fix our uncompetitive rate for large companies."

Several chief executives lamented the fact that much policy was being developed according to political cycles rather than economic cycles, with a resulting lack of stability undermining business confidence.

EnergyAustralia chief Catherine Tanna said that companies were seeing “more subjective decision-making and more power concentrated in the hands of politicians, and a few politicians at that”, and that there were rising risks in “legislation which is vague and is passed quickly, with less review and consultation, and produces unintended consequences”.

But she said business also needs find ways to work more collaboratively with governments.

“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.”

Recurring themes

Asked to nominate the big opportunity Australia had failed to grasp in the last decade, two clear themes emerged: innovation and climate change.

“Australia’s future has to be built upon innovation,” Telstra chief Andy Penn said. “It is the key to diversifying and strengthening our economy, driving the creation of new globally connected industries, developing a strong services-based export sector, and boosting productivity and driving new employment. But to be frank, we are falling short.”

He gave the example of trying to recruit 1500 new roles in areas such as software engineering, data science and cyber security. Last year Australia’s tertiary system produced just 1200 software engineers, while India produced 44,000.

SEEK chief executive Andrew Bassat said another good measure of our lack of innovation progress is that fact Australia’s 10 biggest businesses are all relatively similar to a decade ago.

“When you look at the China or USA exchanges, they have seen the emergence of really big tech businesses which are huge employers and on the right side of long-term structural trends. Hopefully, it is not too late for Australia to seed the next generation of high-growth global tech businesses.”

On climate change, chief executives were equally blunt. Woodside’s Peter Coleman said that in hindsight, the nation should have put a market price on carbon a decade ago.

“We all hold some responsibility for this failure – and that includes industry, as well as political parties from right across the Parliament.”