- BRW Lists
Published 03 July 2013 22:07, Updated 04 July 2013 09:49
Tony Abbott and Joe Hockey are not assuming they’ll get a honeymoon from business – but they do want business people to know that they have a friend in government. Photo: Andrew Meares
If there’s one idea that the man who may be Australia’s next prime minister wants to get across to the business community, it’s that if there’s a change of government after the federal election, the relationship with business will be different.
For the first time, Opposition Leader Tony Abbott and shadow treasurer Joe Hockey, have sat down together for an interview about how a Coalition government may change the state of play for Australia’s business community.
The interview takes place in Abbott’s parliamentary office. Abbott in shirt sleeves, and Hockey, in his now-customary navy-blue pinstripe suit, form a study in contrast but seem comfortable in one another’s presence.
“We’re not assuming we’re going to win,” Abbott tells BRW. “We’re not assuming that we’re getting a honeymoon [with business]. But what will be crystal clear on day one of a change of government – should there be a change of government – is that Australia is open for business and Australia is under new management.”
It’s the last sitting week of parliament before the federal election, lobbyists are running around the halls of parliament trying to secure last-minute pledges, and it is hours before Kevin Rudd successfully challenges Julia Gillard for the Labor leadership.
Distractions aside, Abbott and Hockey want the business people of Australia to know, if the Coalition wins, they will have a friend in government.
“What business wants is a government that listens to them,” Abbott says. “One that recognises their importance and wants to work pro-actively with them to make it easier to compete and survive and flourish in the marketplace.”
The battle lines have been drawn. It’s a fight for the hearts and minds – and votes – of business. Rudd, who had a hostile relationship with business during his last stint as prime minister, has promised to “work very closely” with it this time.
“I don’t want to see things that drive business and Labor apart,” he told the media after regaining the Labor leadership. “We’ve been natural partners in the past and we can be again in the future.”
Abbott, though, wants to reinforce the view that Labor and business aren’t natural allies. He makes a not-so-subtle reference to former Labor Treasurer Wayne Swan’s attacks last year on mining billionaires including Clive Palmer, Andrew Forrest and Gina Rinehart.
“You’ll never find a Coalition minister standing up in Parliament and demonising Twiggy Forrest and Gina Rinehart,” Abbott says. “We might disagree with them over various things, but we will never demonise them simply because they’ve made money.”
Abbott’s noises about a closer relationship with business are promising, but also exactly what you’d expect a Liberal contender for PM to make.
A large number of business leaders are excited about the prospect of change, but the details are lacking.
To date, none of the Coalition’s policy announcements have indicated an Abbott government will introduce bold economic reforms – at least not in its first term. There’s no clear timelines for planned reviews, terms of reference are unfinished, and most importantly, there are no costings.
The reality for voters is there probably won’t be until a short time before the election, when the Pre-Election Economic & Fiscal Outlook (PEFO) is released.
The Coalition has instead announced a series of shorter-term measures designed to, at least temporarily, appease business. This was necessary after Abbott announced a 1.5 per cent increase to the company tax rate to pay for his paid parental leave scheme.
Most of the Coalition’s measures aimed at business are well known – dumping the carbon and mining tax, delaying the increase in the compulsory employee superannuation guarantee so it reaches 12 per cent in 2021 rather than 2019, and cutting $1 billion worth of red tape.
There are promises of more reviews – an audit of government spending, a tax reform white paper to be published within two years and “a root and branch” review of competition laws.
There’s some general but vague pledges around industrial relations – swinging the workplace relations pendulum back to the “sensible centre, so that wage claims are realistic and fair”.
There are promises to boost productivity, by reducing gridlocks on highways and in cities across Australia.
And, perhaps most crucially, there’s a pitch to small business. The Coalition will extend unfair contract protections to small business. It will also scale back the government pursuit of independent contractors by ensuring the current laws relating to treatment of personal service income are not changed.
For the Council of Small Business Organisations of Australia chief executive, Peter Strong, removing red tape, the review of competition policy and changes to contract law are crucial.
“For small business, the issue is the daily grind on red tape and the problems suppliers are having in dealing with Coles and Woolworths,” he says. “Our other big issue is penalty rates – but that’s one Abbott has said he will wait for the Fair Work Commission to review.”
One area where the Coalition is prepared to make changes is when it comes to start-ups. For all the talk about Australia having its own version of Silicon Valley, dubbed Silicon Beach by some, there have been limited government policies over the past decade directed towards creating a thriving entrepreneurial community.
Labor’s relationship with the start-up world went sour when it announced changes to the taxation of employee share schemes in 2009. Share options are often used instead of higher salaries during the early development phase of a business, with the promise of a greater return when the company lists on the stock market, or sells to another company. Before 2009, employees could defer the tax on shares or rights for up to 10 years, but Labor’s changes mean that tax must be paid immediately.
In May, the then communications minister Stephen Conroy announced a welcome review of the scheme, but the 2009 change has made it harder for start-ups to survive.
Initially, Abbott appears reluctant to commit to a review of employee share schemes: “The problem we’ve got is we’re under enormous revenue constraints, so there are lots of things we would like to do in a perfect world – but we’re unlikely to commit to them pre-election,” Abbott says.
But then, Hockey jumps in, as he does on several occasions, and confirms that a change is on the cards. “Quite clearly, the feedback we’ve been getting is that this is a massive handbrake on start-ups in Australia,” Hockey says. “And in so far as we don’t know, as Tony said, what we will inherit, this is an obvious area for change.”
Asked if it will be in his first term, he confirms it will. “This is an area where there is obviously a gaping hole in the government’s credibility,” Hockey says. “So many start ups have remunerated their senior employees with share options and the Australian Tax Office is now hitting them with a tax liability for what they may receive, rather than actually what they have received.”
He says start-ups need capital for investments. “It’s needed to get the widget to market,” Hockey says. “People want skin in the game. Everyone hopes to be part of the next start-up Apple, start-up Microsoft or the start-up Google.”
It’s a promising start. But reaching Silicon Valley status will involve more than winding back one bad policy decision. As the president of San Francisco-based start-up Kaggle, Jeremy Howard, says, it will “require a total rethink of the way we do things”.
“The appetite for supporting risky but high-potential investments in Australia is just not there yet,” he told BRW. “It would require the [Australian] government to be very proactive about being start-up friendly,”
To this day California pumps “100 times more money” into start-ups than does the entire country of Australia.
Perhaps the biggest change an Abbott-led Coalition could make would be in the area of competition.
It has announced a “once-in-a-generation review” of Australia’s competition laws across a range of areas. It will review the Competition and Consumer Act, with particular focus on access regimes and abuse of market power. It will also look at areas such as enhanced competition in banking. “If you’re going to have a fair dinkum review, you don’t rule things in or out, before you undertake them,” Hockey says. “These are the structural changes necessary, rather than piecemeal approaches.”
He says the Coalition needs to first carry out its own discussions with the wider community before implementing major reforms. Many of Paul Keating’s economic reforms were based on the Campbell report – commissioned and recommended by John Howard as Treasurer. “As [former Liberal prime minister] John Howard and many others have said, the Campbell inquiry was the most important of any review conducted by an Australian government in history,” Hockey says. “That was the one that gave the Reserve Bank its independence. It changed the financial framework. We’ve said we’re having a granddaughter of Campbell and son of Wallis [the last major financial system inquiry led by businessman Stan Wallis in 1996-97].”
Abbott says the dominance of the supermarket retailers, Coles and Woolworths, is part of the terms of reference. How it will be different to three previous parliamentary inquiries into the duopoly’s stranglehold, and whether the Australian Competition and Consumer Commission (ACCC) will get greater power to rein in their dominance, remains unknown.
“You can’t say [ACCC chairman] Rod Sims hasn’t made a difference at the ACCC,” Hockey says. “The decision about a new supermarket in part of western Sydney illustrates that the powers are there. The question is whether the ACCC uses them.”
In June, the competition watchdog finally blocked Woolworths from opening a new supermarket in Sydney’s west, opposing the retailer’s proposed purchase of land at Glenmore Ridge, near Penrith, zoned for a supermarket.
But the ACCC has had greater difficulty in getting small suppliers to come forward with complaints against Coles and Woolworths. Many suppliers are afraid they may lose their contracts with the retailers if they speak out.
Abbott says this issue will be “precisely” covered by a “competition review, which is in a position to listen confidentially to all these things, weigh them and then consider whether the national interest might be advanced by changing the regime.”
Abbott’s big-ticket item to gain the female vote is paid paternal leave.
“There’s also a review of childcare – because that’s incredibly important if women are to have careers and families,” he says.
Women would also like to end up in the C-suite or on boards more often than they do. In March, Hockey told ABC television’s Q&A that if companies failed to elevate women in reasonable numbers, then “more punitive measures” were needed. But he later toned down his comments, saying “quotas must be a last resort”.
Abbott is firmly against quotas: “While we don’t believe in quotas, we certainly want to see women given a fair go,” he says.
The problems Julia Gillard faced during her tenure as prime minister show there’s much room to go before women are truly on an equal playing field to men. Responding to the business situation, Abbott says: “There is no way in 10 years time that women will be under-represented as they currently are. Because, all the time, capable women are moving up the pecking order and there’s no way anyone here wants to hold them back.”
Lobbyists from the Australian Chamber of Commerce and Industry, the Australian Industry Group and Business Council of Australia have all called for major tax reform as recommended in the 2010 Henry Review.
The Coalition, at this stage, is not prepared to adopt the recommendations set out in that review. It wants to conduct its own tax review.
But Abbott will not confirm whether GST will be part of the debate this time, as business is suggesting it should. He also will not say when company tax cuts will kick in, although he has previously ruled out such cuts in the first term.
“Our hope is that the paid parental leave levy will be accompanied by a modest tax cut so there will be no net increase in tax,” he says.
“We will be in a position to be clearer on this closer to the election – when we have better data on the overall fiscal situation.”
He says, for now, a tax review is “the best and most honest way that we can approach this issue . . . You cannot do fundamental tax reform from opposition,” he says.
On the GST he says: “We have no plans to change the GST, but we’re not ruling things in or out prior to the process. It will depend on what people tell us . . . Business isn’t the only lobby out there. There’s also consumers and social activists and think tanks. The fundamental thing we’ve said is our objective is lower, simpler, fairer taxes.”
According to Australian Chamber of Commerce and Industry (ACCI) chief executive Peter Anderson, “many of the Coalition’s general principles sit well with the private sector”.
But Abbott’s proposed increase in company tax to fund his paid parental leave scheme is “a sore point between business and the Coalition. It’s completely at odds with the Coalition’s general principles of reducing the tax burden”.
Anderson says the Coalition government has made encouraging comments on cutting red tape, and, while its workplace relations policies have not gone far enough, Abbott is likely to be “less interventionist” than Labor has been.
Others are less certain the Coalition will be more pro-business than Labor has been in the past three years.
As chief economist at Bank of America Merrill Lynch Australia, Saul Eslake, recently told a business gathering, a government led by Tony Abbott is likely to be the same as the former Fraser government. It may win with an overwhelming majority, and may gain control of the Senate, but internal tensions remain.
Eslake sees the Coalition as split into two groups. On one side is what he calls the true economic liberals – Malcolm Turnbull, Joe Hockey, Andrew Robb, and, if he gets a frontbench seat, Arthur Sinodinos.
On the other side are the more conservative operators: Tony Abbott and the likely industry minister Sophie Mirabella, plus a section of the Nationals. Eslake says as Abbott showed when he said after entering parliament that the floating of the dollar was a mistake, he “doesn’t have any instinctive feel for market forces”.
If the Coalition wins with a landslide, as some polls are suggesting, it could be prepared to make more drastic changes than it’s currently indicating.
The major party’s ability to initiate reform will also depend on the makeup of the Senate. With minority party candidates from the right, including Queensland-based contenders such as Bob Katter’s Australian Party, Clive Palmer’s Palmer United Party and Pauline Hanson’s One Nation, there may be calls for protectionist policies.
“We will act in the spirit of our election commitments,” Abbott says.
During the 2010 election negotiations, the Coalition stuck by its policies, Hockey says. “At the top of Bob Katter’s list was pegging the dollar at 70¢. And we said, ‘no. We’re not going to do that’.
“Then in relation to tariffs, Bob Katter wanted a 10 per cent tax on all imports and we said immediately, ‘no’. That was when we were negotiating for support to form government, and we said no because it was against the grain of our values.”
Abbott leaves business with one final promise: “If we win – we take nothing for granted, and frankly I take the current polls with an enormous grain of salt – we will not do anything that’s inconsistent with our commitments. We will honour all of the commitments we make. We will say what we mean and we will do what we say. That’s our intention isn’t it Joe?”
Hockey responds with: “Amen”.