Budget has restored ‘sense of confidence’: Wesfarmers

Wesfarmers CEO Rob Scott: ‘Childcare is an area where I would love to see a bit more reform.’ Picture: Colin Murty

Rob Scott employs over 100,000 Australians in businesses across the country and it is no secret that he is a business leader Treasurer Josh Frydenberg has frequently turned to this year.

But asked what advice he gave the Treasurer ahead of the budget as the economy wrestles with the loss of around a million jobs, Scott’s answer veered to the unfinished business of structural reform. It is clear that he sees the next May budget as time for a productivity gamechanger.

It is also clear that he is deeply troubled by the impact of the hard line Andrews government policies on the wellbeing of Victorians.

“The advice that we have been trying to communicate with all key political leaders has been the things we can do to create jobs,” begins the quietly spoken former Olympic oarsman. “We have talked about things that can happen to the tax system, some initiatives that are really important around industrial relations.”

Yet this budget had precious little big reform to boast about. Scott agrees. This budget is about stimulus.

“We should acknowledge that the budget has been very effective in creating a sense of confidence that will get people back in work. But there are still many issues that need to be addressed in terms of broader tax reform, broader reform to set our economy up for long-term success.”

That sense of confidence will be central to non-mining business investment which the budget expects to bounce back from -14.5 per cent to a staggering 7.5 per cent in just a year.

The future is uncertain. Over the past year, Wesfarmers has been cashing up. “What you see us doing at Wesfarmers, you are seeing a lot of households doing,” explains Scott. “You’ve seen savings levels increase through COVID, in many cases because people are nervous about the future. We really don’t know what’s going to happen. At Wesfarmers, we manage our businesses for the long term and we want to have a conservative balance sheet.”

Scott insists Wesfarmers is also not afraid to invest, having put $1.5bn in capex and investments this year.

But the budget’s accelerated investment write-off for business will move the dial on business bringing forward investment.

“That is what we need at the moment because one of the key problems we have is a lack of confidence of businesses to invest, confidence to hire another person and indeed confidence at a household level to invest in the future. What matters for Wesfarmers is, the more people that are in jobs, the more income in households, the more that small businesses are investing, that directly benefits many of our businesses.”

In good shape

Of the lessons so far from the handling of the crisis, Rob Scott says that on the plus side, having a strong balance sheet as a country has left Australia in relatively good shape and that we should take pride in the co-ordinated response of government, business and community which led to lower rates of infection, fewer deaths and less of an economic toll than many other countries.

Victoria is a lesson all of its own however.

“The situation in Victoria has been very tough, very tough in particular for those people in Victoria. We have 25,000 team members in the metropolitan areas so I see first-hand, day in day out, the toll that these shutdowns are having.

“From a financial point of view at Wesfarmers, we will get through the challenges in Victoria. It represents about 20 per cent of our overall business.

“What worries me most is the mental health and wellbeing challenges. There’s a lot of fatigue setting in the community. We see some of the challenges at a personal health level and we’re trying to do what we can to support our team through that.”

With less than 11 weeks to Christmas, Bunnings and Officeworks around the country are humming with home office demand. Not in Melbourne. In September Scott offered to co-design COVID-19 protocols with the Victorian government to enable shops to start opening from October 26. He says despite the low levels of transmission in Victoria, he doesn’t know if Bunnings will be open for business by then. “There is every reason as to why we should be able to expect that, from a medical health wellbeing reason why we should expect that, but I guess time will tell.”

Like many businessmen, Scott sees recalcitrance in states which continue to close borders, a move that made sense in the early stages of the pandemic but now threatens to blunt the stimulus.

“The longer the borders stay shut the more harm that will be done economically and the more harm that will be done at a personal and family level. These arbitrary lines that we draw across the continent representing state borders, they don’t represent the way that businesses operate, they don’t represent the way that many families live their lives.”

Scott has high hopes for the government’s JobMaker wage subsidy to address the very real problem of youth unemployment from COVID, and believes the risk of employers rorting by replacing one job with two lower paid subsidised jobs is low.

“I heard the Treasurer speak to this the other day,” he says. “Any employer that does try and game the system, well they’ve got rocks in their head. Certainly at Wesfarmers we will continue to employ on merit. We are hopeful that we can employ more young people in this program and none of our existing team members are going to be disadvantaged.”

The Wesfarmers chief does not see women losing out in the budget, with the stimulus putting more women back in the workforce. He does however, see childcare, targeted by Labor this week, as ripe for reform, supporting more tax incentives.

“Childcare is an area that a lot of our team talk to me about. I want to remove the barriers to have the best people, men or women, working and being productive in our business, so childcare is an area where I would love to see a bit more reform. I’m hopeful that in the next budget we might see some of these longer term productivity-driving reforms that are going to be needed for the future.”

As to the fate of industrial relations reform, mired in tricky negotiations between business and unions, Scott says he is an optimist. “The fact that the Attorney-General and indeed Sally McManus show a real desire to find a way through is a positive. Ultimately what it takes to get reform in industrial relations is some type of external catalyst and we have one right now: we have technology and disruption is fundamentally changing industries.

“We need to make sure that we have the flexibility in our agreements, issues such as the ‘Better off overall’ test, the time that it takes to ratify EBAs, some of the complexity in the process.

“If you are designing a structure to work against companies that employ people, then this would be it. And then when you overlay additional challenges such as payroll tax, these are quite archaic arrangements that aren’t really suited to the modern economy and environment that we are in. There is a path forward. It is going to take a bit more time, but I’d like to think over the next year, there are some opportunities ahead to create a win win.”