2020 CEO Survey: Rob Scott, Wesfarmers

Employment is picking up and we should see household spending increase as confidence returns, says Wesfarmers chief Rob Scott.

What are the three enduring lessons or changes to flow from COVID-19?

Firstly, the importance of maintaining a strong balance sheet. You never know what risks are around the corner so it’s always important to have the financial flexibility to withstand a range of impacts. Having the ability to invest in your team and businesses when times are tough helps build trust with your team and your customers and delivers value over the long term.

We have learnt how quickly we can adjust and innovate our businesses when we need to and there have been many learnings that we will take on board to ensure we remain agile and responsive going forward.

We don’t need to get on a plane and travel as much as we did before. While there are times when you need to travel to visit operations and meet face-to-face, we have learnt that there are other cost and time effective ways of connecting.

How would you rate the shape of the Australian economy as we head into the new year?

The Australian economy is in reasonable shape leading into New Year, with some cause for optimism as we have learnt how to manage the risks and live with COVID-19, and with a vaccine on the horizon. Employment is picking up and we should see household spending increase as confidence returns, which benefits the domestic economy. However uncertainties exist and we have seen how quickly outbreaks can take hold. Some sectors will continue to do it tough until interstate and international travel reopens and we still have challenges to address long term productivity and wage growth.

What three reforms are needed to sustainably grow the economy?

I am hoping that COVID-19 will be a catalyst for more ambitious tax reform but we have yet to see this, except some valiant attempts at a state level, notably NSW. Payroll tax and other state taxes such as insurance tax and stamp duties are some of the most inefficient taxes that work against job creation and investment. Proper tax reform needs agreement between states and the federal government, having regard to the large number of state and federal taxes that current apply to business and individuals.

The current industrial relations settings are complex and work against companies innovating and creating value and also make it more difficult to share value creation between business and employees. Key areas to fix are to reduce complexity, reduce time required to ratify agreements and bring the focus back on agreements between employees and businesses, rather than let minority interests disrupt processes through technicalities.

Reviewing the workings of federalism to identify roadblocks to investment and value creation. This goes to differences in regulation across jurisdictions, complexities in approval processes and artificial barriers and policy positions built around state lines that don’t represent the realities of how national businesses operate or benefit the nation.

What are the three best growth opportunities for your company in 2021?

We have a great team and strong businesses so the first and best growth opportunity is reinforcing the underlying performance of our portfolio of businesses: Bunnings, Kmart, Officeworks, Target, Catch and our industrial businesses.

Leveraging our digital capabilities to increase sales, expand in new categories and build deeper engagement with customers

Completing the conversion of up to 80 Target and Target Country stores to Kmart and K-hub stores in 2021 and this will support the growth of Kmart, Target and Catch.

What impact will digital transformation have on your company?

Our businesses are already undergoing a digital transformation and there remains plenty of opportunity in this regard. The biggest opportunity is to build a deeper digital engagement with our customers, our suppliers and our team members and to use this as a way of reinforcing what we already do well but to do it even better. In our retail businesses, this means strengthening the connection our customers have with our brands, providing more products, services and information to them in ways they value. There are also many opportunities to leverage the power of data and digital to improve productivity in our industrial businesses and to streamline processes for our team and suppliers.

How would you rate business, state and federal government performance this year?

Given the challenges and the uncertainties, I think business and governments in Australia have generally performed well. We have taken the health risks seriously, we have provided support and stimulus to those individuals and sectors most affected and the public has been largely supportive and compliant. The best outcomes have been delivered when business and governments engage closely and work in a collaborative way. It has also been pleasing to see the way that many big businesses have stepped up to support their teams and the community through the bushfires and COVID-19 and this has enhanced the reputation of business in Australia.