Here’s a major reform proposal for improving productivity in the Australian economy: Australian business shuts up about economic reform until it’s prepared to talk intelligently about it.
Business last week was out again demanding further tax reform, while representatives of the biggest polluters flagged that they needed even more compensation under a carbon price then they were scheduled to get under the CPRS.
But Australian business has little credibility on economic reform. Its calls for the Henry tax review to be “back on the agenda” are particularly risible after its stone-cold silence while the Rudd government was mugged by the mining industry. The only sector that put its weight behind the RSPT reform package was the superannuation industry. The non-mining business sector, which stood to gain a significant tax cut from the RSPT package, went missing in action. Then they complained when the Prime Minister and the Treasurer cut a dodgy deal with the foreign transnationals that slashed the tax cut.
The Business Council of Australia, in particular, likes to pat itself on the back for its role in economic reform since its inception in 1983. In 2003, John Howard lavished praise on the council at its anniversary dinner for “the very big role in the economic debate over the last 20 years”. But in truth, the council, like other major business organisations, has a very mixed record of backing reform.
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It was, after all, the recently formed Business Council that stopped a broad-based consumption tax in 1985, when Bob White rose at the tax summit and declared that the council didn’t like any of the Hawke government’s three reform options, because it objected to proposals for a Fringe Benefits Tax and Capital Gains Tax. As a result, business got the FBT and CGT, despite an hysterical anti-Hawke campaign that labelled the FBT the “farewell Bob tax”, but Australia didn’t get a consumption tax until 15 years later.
Nor did the council back the Hawke government’s remarkable decision to wind back protectionism. The council was so internally conflicted among its membership that it couldn’t take a position on the first round of tariff cuts in 1988.
Peak business groups also tried to block the extension of superannuation beyond high income earners. In response to Accord Mark II, which featured for the first time an award-based 3% superannuation contribution, the Confederation of Australian Industry and other employer groups went to the High Court in 1986 to argue it was unconstitutional, and lost. Employer groups have consistently and bitterly opposed compulsory superannuation.
And while Paul Keating’s National Competition Policy received the support of some sectors of business, big infrastructure owners have always bitterly resented its provisions for access to monopoly infrastructure. The Minerals Council of Australia, a tool of transnational mining companies, has been arguing for years for an end to the provisions of Part IIIA of the TPA, sufficient that Andrew Forrest squared off with the MCA over its reflexive support for BHP and Rio Tinto’s efforts to prevent Fortescue from accessing their Pilbara railways.
The only significant reforms that received consistent support from the business community were lower corporate taxes and the shift to enterprise bargaining in industrial relations. But even then there were exceptions. The Metal Trades Industry Association opposed IR reform in the early 1990s because it believed that enterprise would generate a wage breakout. And now there’s a stand-off between business and the Coalition, with each side demanding that the other lead the way in a new campaign for post-WorkChoices IR reform.
And while peak business groups supported the Howard government’s introduction of a GST, individual sectors lobbied hard to be exempted, zero-rated or receive “transitional assistance”.
Indeed that’s the consistent pattern of Australian business when it comes to economic reform. The allegedly strong commitment to reform of Australian business hides an unwillingness to accept any negative consequences.
The Business Council of Australia has consistently pushed in its annual budget submissions for restraint of what it has taken to euphemistically terming the “top 10 government programs”, which apart from payments to states, are all welfare, education or health programs. However, only once in all of its budget submissions has it ever mentioned business welfare — in 2008-09, it bravely called for a “review” of “programs aimed at providing assistance to business … to ensure that they contribute to economic growth rather than distorting the allocation of scarce resources”. Apart from business assistance programs worth about $6 billion a year, there’s billions more in pro-fossil fuel tax concessions and rebates embedded in our tax system — ripe, surely, for the sort of “fiscal rigour” the BCA demands of health and welfare spending.
The same inconsistency is now rife among business “leaders” over a carbon price, which most insist is necessary to address climate change, but which most also insist should be applied to every other industry but their own, because their particular industry faces special challenges. The LNG sector is only the latest to dip into the bag of excuses, claiming “the world has changed since 2009” and it should be exempt from a carbon price.
The other consistent theme is that whenever peak business bodies talk about tax reform, they only really mean cuts in the corporate tax rate — the same sort of coded communication that means “workplace reform” only ever means making it easier to undercut employees’ wages and conditions. Heather Ridout was at that game again today in the Fin Review — in fact, a week doesn’t go by without a front page headline in the Fin along the lines of “Business demands tax reform”. In a piece ostensibly exploring the unfinished work of the Henry review, what was Ridout’s “highest priority”? Why, cutting the corporate tax rate to 25%.
This isn’t merely vested interests pleading their case. The same pattern of behaviour emerges, whether it’s Bob White in 1985 or Heather Ridout 26 years later — the pretence of commitment to the national interest and the ostensible rigour of detailed analysis, coupled with a strange inconsistency that only accepts the benefits, and never the costs, of reforms. The latter are wished away, or to be borne by taxpayers, or low-income earners or, in the case of climate change, our descendants.