Things are getting bad for the Business Council of Australia. But not as bad as its own timing.

The BCA has been hammered in the tax debate. The major reform it wants — to slash company taxes and shift more of the tax burden onto the rest of us, and particularly low-income earners, by an increase in the GST — won’t happen. And not merely won’t it happen, but the Prime Minister has described it as politically suicidal. Voters believe the major reform that’s needed is for big companies to pay their fair share of tax. Worse, their own allies have turned on them. Liberal powerbroker Michael Kroger savaged the BCA’s contribution to the tax debate and called for council head Jennifer Westacott to be dumped.

Discredited even in the eyes of their own allies, the council has launched an offensive to regain traction in the debate, with favoured outlet The Australian Financial Review and its favourite editor, Michael Stutchbury, devoting considerable space to a BCA “roundtable” yesterday, featuring the Commonwealth Bank’s Ian Narev, Qantas union-buster Alan Joyce, the ASX’s Elmer Funke Kupper and Coca-Cola Amatil MD Alison Watkins, along with Westacott and Council president Catherine Livingstone.

The BCA used it to reveal it would be unveiling a 10-year tax reform plan next week, despite only releasing a major report on tax 18 months ago and making several submission to various inquiries along the way. We’ll take a wild stab in the dark and predict that the BCA’s long-term tax reform will include the radical suggestion that the BCA’s members pay less tax and everyone else pay more.

The fact that many of the BCA’s big business members (many of whom are foreign-owned) pay little tax already — or, in some cases, no tax at all — is clearly a presentational problem for the council. “People don’t believe businesses are paying tax,” whined Narev to the AFR, possibly because of all those businesses that don’t pay tax. “People don’t believe when the facts are that they are.” But Narev had to acknowledge that, well, yes, some don’t pay tax. “To the extent there are corporates who are not doing it, which is true, but to a low extent … our job as the BCA is to make sure we’re very clear that that’s also not right.” Presumably by incessantly calling for company tax cuts.

But worse was Funke Kupper, who is reported as saying it is “almost a shame … if you ask me personally, [that] we didn’t have a deeper downturn to wake us up [to] the heavy lifting that we’re going to have to do, which countries like New Zealand have had to do”.

Think about that for a moment: this is one of Australia’s most senior business figures (who runs the ASX, the company with the fattest profit margins in Australia) openly saying we should have had a worse economic downturn — which would have shuttered more businesses and brought with it misery for Australians — so that it would be easier to impose the BCA’s agenda of tax cuts for companies and cuts to wages and conditions.

While Funke Kupper dissociated himself from the BCA in expressing that view, it is an eloquent reflection of the mindset of much of the Australian business community: the rest of us should be made to suffer for the benefit of their bottom lines.

But with an immaculately disastrous sense of timing, the whole affair was carried the morning of yesterday’s national accounts figures, which showed the economy turning in a stronger-than-expected performance and returning to trend growth, with a 2015 growth figure of 3%. That result follows an extended period of better-than-expected jobs figures, and despite global headwinds and a collapse in commodity prices (which now looks to be finishing). The accounts also showed another increase in labour productivity (via trend market sector gross value added per hour worked) and a slight fall in trend unit labour costs.

The GDP result was not only driven by the housing and real estate buying boom alone, but by services — 0.4% of the 0.6% GDP growth in the December quarter came from final household consumption, and that was driven by growth in the service industries of information, media and telecommunications, retail trade, and even arts and recreation services. Perhaps the many foreign-owned members of the Business Council don’t have a strong grasp of what the local economy is doing at the moment. It’s very telling that many of the BCA’s members are not investing at the moment. Instead, many that are listed on the ASX are paying out bigger dividends or doing buybacks and rewarding shareholders. And yet with real wage growth at a record low and growth in average weekly earnings even weaker, real unit labour costs steady now for four years, productivity still solid and record low interest rates, now is the time to invest — and there is not much of that happening in big business, many of whom are oligopolists, content to rake in the easy profits.

Narev insisted “the number one question we’ve got to step back and ask is; what’s the overall package that’s going to grow the economy, create jobs?” It’s certainly true that the government doesn’t have any economic package. It doesn’t even have the wrapping paper and string for a package. But despite the disaster of the Abbott government, the Australian economy grew at trend levels and created jobs in 2015. Households got on with spending, business got on with hiring (taking advantage of the flexibilities of the Fair Work Act) and the services sector, which employs far more Australians than mining or finance ever will, continued to grow. And it managed to do so without the Business Council’s “reforms” involving big business paying even less tax and workers losing pay and conditions.

Funke Kupper must have been devastated about the good news.

Peter Fray

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