Chalmers vision: corporates wake in fright

Business leaders say Jim Chalmers should not be looking to rewrite Australia’s successful market-based system in pursuit of a new economic era and the country’s top job.

Treasurer Jim Chalmers outlined his plans to overhaul Australia’s system through redesigning outdated energy, finance, labour and social services markets.

Business leaders have warned Jim Chalmers not to “sleepwalk into being a quasi-command economy” nor rewrite Australia’s ­successful ­market-based system in the Treasurer’s quest to usher in a new era of values-based ­capitalism.

Business Council of Australia chief executive Jennifer Westacott and Australian Industry Group chief executive Innes ­Willox said the private sector would work with the government in good faith but advised against undermining the market-based system.

Other industry bosses and chief executives of major health, superannuation, insurance, mining and finance companies welcomed Dr Chalmers’ vision to ­“rethink capitalism” but cautioned against overreach, which could leave energy markets ­exposed and shrink profits needed to fund aged and health care.

Former federal Labor leaders Paul Keating, Simon Crean and Mark Latham were also split in their responses to Dr Chalmers’ essay, published by The Monthly on Monday. Mr Keating – who alongside Bob Hawke oversaw the nation’s boldest economic reforms and set up the modern market-based system – told The Australian the Treasurer was “entitled to make his own way in the face of contemporary changes in Australia and the international system”.

The debate over Dr Chalmers’ vision for the economy came as credit rating agency S&P declared the nation would likely avoid recession due to strong institutional settings and “wealthy economy”.

“Australia’s economy will likely avoid recession and expand over the next three years,” S&P said on Monday. “This reflects low unemployment and high commodity prices. Australia benefits from being a net energy exporter. Our ratings on Australia benefit from its strong institutional settings, wealthy economy, and monetary policy flexibility. Although external indebtedness is high, external risks are balanced by a current account surplus.”

Former prime minister Paul Keating says Dr Chalmers is ‘entitled to make his own way’ following criticism of the essay.

Dr Chalmers on Monday hit back at critics of his 6000-word essay, which pledged greater government intervention to radically remake post-pandemic capitalism by redesigning outdated energy, finance, labour and social services markets.

Dr Chalmers, who opposition Treasury spokesman Angus ­Taylor accused of abandoning Hawke-Keating economic reforms in favour of “Whitlam-like” objectives, said the main conclusions of the essay had been “either wrongly caricatured, deliberately ignored, or completely missed”.

“It’s pretty strange that some people are arguing against better designed and informed markets, capital flowing to its most productive purposes, governments and businesses working together to create prosperity and opportunity, and modernising our economy to lift living standards,” the Treasurer said.

He said his ideas were borne out of “necessity not ideology” and rejected suggestions the government would “pick winners”.

“As the essay makes clear, I see well-designed and well-informed markets as a powerful and positive tool, capable of efficiently and effectively allocating resources to deliver private and public value,” he said. “It’s about finding the priorities

“As the essay makes clear, I see well-designed and well-informed markets as a powerful and positive tool, capable of efficiently and effectively allocating resources to deliver private and public value,” he said. “It’s about finding the priorities and opportunities that capital can respond to, in ways that align our economic and national objectives.

“I believe business has an indispensable role to play not just in strengthening our economy but strengthening our society­. ­Envisaging a powerful and legitimate role for business puts my thinking in concert, not conflict, with the spirit of the Hawke and Keating period.”

The relationship between the private sector and the Albanese government soured after last year’s jobs and skills summit, with company chiefs expressing concerns about lack of consultation over price caps imposed under the energy market intervention, new industrial relations laws and tougher climate change rules. Ahead of the election, Anthony Albanese and Dr Chalmers had promised to channel the Hawke-Keating era and work to bring “business and unions together to pursue their common interests and grow national income”.

Ms Westacott, who represents major employers including the big four banks, telcos, Wesfarmers, BHP and Qantas, said the market-based system had led to household wealth growing more than nine-fold from $1.5 trillion in 1992 to more than $14 trillion.

“We know it works,” Ms Westacott said. “Everyone agrees that Australians should have access to good jobs, higher wages, better living standards and the best opportunities in the world, but that isn’t about rewriting the system. What the system does need is constant attention to keep pace with rapid change and we’ve dropped the ball on that kind of economic reform. That’s why many Australians feel like they can’t get ahead.”

Mr Willox said it was positive the Treasurer had “laid out his long term philosophy, ideas and objectives” but warned against “sleepwalking into being a quasi-command economy”, which he said would be disastrous for the country. “There is always an important need for government and the private sector to work together in the national interest or where there are clear common goals or needs,” he said. “There needs to be clear understandings on how that would work, including a clear understanding that the private sector is not simply an arm of government.”

He said the market-based economy had served Australia well over four decades and urged against “vague and populist disparaging of neo-liberalism”.

Business Council chief executive Jennifer Westacott says the system needs ‘constant attention’ but doesn’t believe rapid reform would improve the country.

Mr Crean, who chairs the ­European-Australian Business Council and Australia-Korea Business Council, said Dr Chalmers wasn’t saying that he wanted to “prop up failing markets”. “He’s recognising that there are market failures and clearly energy has been one of those,” Mr Crean said. “I think it’s a refreshing piece. It hasn’t got a lot of details. The track record to date shows that they’re more inclined to embrace the policies that recognise the strength of the market but recognise that the game’s changed and it has.”

Mr Latham, who quit the ALP and is now a One Nation NSW MP, said Dr Chalmers should have told voters about his plans before last year’s election. “Where does this take the Labor Party? These things were all ­settled by Hawke and Keating, who said we’re no longer going to wrestle and struggle against the market economy,” he said.

AustralianSuper chief executive Paul Schroder said Dr Chalmers was right to “challenge us to think deeply about the longer-term issues facing the country”. “The most important thing is that the numbers always need to stack up,” he said. “We are in the business of making the most money risk-adjusted for members over the long-term and that is best achieved through a well-diversified portfolio. Nobody should ever forget, it’s not our money or anyone else’s – it is members’ money.”

 

NIB managing director Mark Fitzgibbon said, although it made sense to collaborate with and ­encourage the private sector to deliver a “positive social impact”, governments had limited resources. “The way the economy works, unless you’re getting a reasonable return, you aren’t going to get the capital flows necessary to achieve these social goals,” he said.

In the essay, titled “Capitalism after the crises”, Dr Chalmers said the government would this year create a “new sustainable finance architecture, including a new taxonomy to label the climate impact of different investments”.

Robert Millner, chairman of coal producer New Hope said he was wary of any attempts to fast-track a move to renewables given the need to balance the power grid around the clock.