Business Bashers Must Explain The Consequences
This opinion article by Chief Executive Jennifer Westacott was published in The Australian Financial Review on Monday 21 November, 2016.
Populist politicians who target business should tell their voters to expect years of low growth - and tell them why.
To say we are now living in volatile times would be an understatement.
Donald Trump's election - the latest in a series of surprising decisions around the world and at home - is a seismic shift in global politics, exposing uncertainty and unease that must be met with empathy and understanding, not blame and degeneration.
Lower growth and greater inequality have caused many people in Western democracies to feel that, despite working hard, things are not getting easier for them.
While the technical measures of inequality haven't moved much in Australia, wage growth is below average and the great Australian dream of home ownership feels unattainable for many.
There is distrust of the very institutions that facilitated our present prosperity and cohesion. Globalisation, technological advances and mass migration are challenging their sense of control over their lives.
Politicians will be tempted to pursue protectionist, isolationist and populist policy directions. However prosperity cannot be achieved through an agenda that is anti-innovation, anti-technology or anti-business. These policies will only condemn our society to decades of lower living standards.
Our leaders must instead pursue a vision for long-term prosperity with good jobs, decent wages and opportunities for people to get ahead. A strong business community is essential to achieving that vision.
As companies scramble to respond in real time to the collapse of old business models, any regulatory or cost obstacle that undermines their ability to adapt will further erode our competitiveness.
We know that growing economies, cohesive societies and stable democracies remain the best foundation for a prosperous society. The fundamental drivers of economic activity are still private enterprise, free trade and liberated markets.
Imagine the alternative, as it is espoused by some who clearly see populist value in attacking business (despite the fact that private enterprise generates 80 per cent of economic activity in Australia and employs 10 million Australians).
What if we took their anti-business, anti-growth proposals to their logical conclusion, actively shackling business with high taxes and uncompetitive costs rather than liberating them?
Even assuming companies wouldn't leave, the consequence would be very low growth. More people would need income support just when government revenues were falling, potentially leaving a legacy of debt and crippling taxation for future generations.
If anti-business sentiment is allowed to fester and exert greater political influence, there will be serious consequences for our living standards. Make no mistake: it is the poorest citizens, not the richest, who would suffer most. Proponents of anti-business agendas are therefore duty bound to explain the consequences of their positions. They must say how we would pay for essential public services without the tax revenue generated by businesses and the people who work in them.
If they can't put forward their alternative plan for wealth and prosperity, they must explain to every Australian the consequences of decades of low growth.
We simply cannot let the anti-business sentiment take hold or else we will be a moribund and bereft society.
In a global race for investment, company tax is a powerful lever to attract investment and unlock job creation. Uncompetitive company tax rates deprive the community of more tax revenue, higher wages and new jobs. If Donald Trump delivers on his plan to lower the US company rate from 35 per cent to 15 per cent, we will be floundering in terms of our competitiveness.
We have to get real about this issue. Remember, the UK's tax rate is 20 per cent, the average across Asia is 22 per cent, and the OECD average is 25 per cent. Australia is at 30 per cent.
Some economists say reducing company taxes is a leap of faith. The real leap of faith is blithely assuming people will continue doing business here, no matter the cost or difficulty. Our trading partners can buy products from other countries, and they will.
To other policy areas: a world-class education system, built around the learner, can protect people when their jobs are displaced by the forces of change.
But a clunky enterprise bargaining process undercuts efforts to creatively boost productivity at the workplace level.
People also cannot thrive in an unacceptably toxic culture, which is why our senators must reinstate the Australian Building and Construction Commission.
Stronger government budgets are needed, not as a mere bookkeeping exercise but to reinvest in people, provide better services, withstand economic shocks and save future generations from debt and higher taxes.
But budget repair should not be achieved through mindless cost-cutting. Spending programs must be carefully redesigned so as to secure better outcomes at lower cost.
Business also needs a stronger sense of purpose. If our actions are not contributing to a better society, our social licences to operate will be threatened.
The global forces of change present monumental opportunities to lift our living standards and protect those of our descendants. We should accept nothing less.