Government and industry must get on the same page

After years of being distracted by progressive indulgences under the banner of environmental, social and corporate governance principles, big business finally is focused on the challenges that must be faced. Like a giant that has woken from a self-imposed torpor, there is recognition of the destructive forces that lie on the horizon.

The message delivered by the Business Council of Australia in its Seize the Moment report is that the status quo leads to reduced living standards and a diminished nation. The message is backed up in the federal government’s intergenerational report, but the spirit needed to address the challenge is missing. Without intervention we are on track for economic growth to slow a full percentage point to 2.3 per cent across the decade. We have the lowest productivity in 60 years and a three-decade low in business investment as a proportion of gross domestic product. On current trends, by 2050 the size of Australia’s economy will fall from 13th to 21st – behind Mexico, Egypt, Saudi Arabia, Pakistan, Turkey and Bangladesh.

Rising uncertainty surrounding our biggest trading partner, China, both in terms of regional security and economic durability, is a dilemma that can make things only worse. The International Monetary Fund puts China’s GDP growth at below 4 per cent in the coming years, less than half the rate for most of the past four decades. At those rates, China will miss President Xi Jinping’s target set in 2020 to double the economy’s size by 2035, leaving its economic destiny unfulfilled.

Australia’s fortunes inexorably are tied to the bigger global picture. Government and industry have a shared responsibility to maximise the national potential. Unfortunately, the areas of current greatest agreement are not necessarily the areas most relevant to building an enduring prosperity. The government is preoccupied with social programs that it has misinterpreted as productivity-enhancing measures. These include the National Disability Insurance Scheme, increased childcare and aged care. Meanwhile, the BCA rightly is focused on the need for fundamental changes to a tax system that imposes too great a burden on personal income tax and has company tax rates that make it “one of the most uncompetitive in the developed world”. The merits of replacing these taxes with a higher rate of GST is a discussion that must be had.

In his address to the BCA dinner on Wednesday, Anthony Albanese told business leaders: “I can assure you, my colleagues and I don’t seek your input for the sake of appearances. We do it because we want you involved in the design and detail.” Burnt by the outcome of the Jobs and Skills Summit, where it was ambushed on union-friendly industrial relations changes, business is interested in deeds, not words. The tougher IR environment, with more to come, no doubt is at least partly responsible for the new-found vigour with which the BCA now is prepared to push its case for reform in the public square. Business knows that Employment and Workplace Relations Minister Tony Burke’s stage two IR reforms are the opposite of what is needed to build the workplace productivity and flexibility necessary to compete. Government and business say they are in agreement on the need for a lower emissions energy transition, but delivery is more difficult. Our biggest companies are scaling back timelines for net zero. Vital trade-exposed industries are looking to government for assurances of protection. Meanwhile, government actions at federal and state levels have been guided more towards destroying our traditional advantages of low-cost and secure domestic energy supplies and putting more financial imposts on the export commodities most responsible for our national riches.

The Prime Minister used his BCA address to talk up the prospect of renewable energy as a way to reduce input costs for manufacturing and of using clean energy to sustain and grow large-scale energy-intensive industry and transport to export green steel, green aluminium and green ammonia. The reality is that concerns are growing about the pace of the renewable energy transition being sufficient to keep the lights on and existing industry in business. The Clean Energy Council warned on Tuesday that just four renewable energy generation projects secured financial commitments during the first six months of the year – the lowest level since the green group began collecting data in 2017. In short, the Albanese government has turbocharged ambition but seen delivery fall to a lower rate than when the Coalition was in power.

The BCA’s warning to avoid the trap of rising trade protectionism will challenge a government that may have misread US President Joe Biden’s Inflation Reduction Act as an invitation to increase domestic subsidies and erect carbon-based trade barriers. If there is any cause for cheer it is that business finally has rediscovered its voice.