David: Jennifer Westacott, good to talk to you. Thanks for joining us. Bill Shorten has dismissed the argument he says the fat cats, the top end of town are putting, that if you lift the minimum wage that there'll be job losses. What do you say to that?
Jennifer: Well, it's always disappointing when people try and create this divide between Australians, I mean here we are in Penrith and I was at a local chamber function last night with a lot of small businesses people and there aren't a lot of fat-cats there, there aren't any fat cats there. It's a way of dismissing legitimate concerns about how do we do this. So let's just get to the bottom of this, we want Australians to have better wages. I've been saying for years that we need to do something about the wages issue, but we need to make sure that we can get wage rises across the economy for low and moderate income earners.
David: But are we getting that?
Jennifer: No we're not but saying things and doing things are very different things. So let's take the minimum wage. Now, the Productivity Commission, I looked this up this morning so forgive me for reading this, because I remember they looked at it quite extensively. So we've had this process as you know, of the Fair Work Commission setting the minimum wage, now when the Productivity Commission looked at this they said maybe, in one of the recommendations, "the wage regulator, should broaden it's analytical framework to consider systematically the risks of variations in economic circumstances on employment and the living standards of low paid employees.” Then they went on to say "however, significant minimum wage increases pose a risk for employment, especially for disadvantaged job seekers in weakening labour markets". So, this is a balancing act.
David: So essentially the productivity commission is saying if you lift it too much it will cost jobs?
Jennifer: Correct. Now this is about a balancing act. So, on the living wage, on the minimum of wage, perhaps there is something in being more precise with the Fair Work Commission about the factors that it is meant to consider. I went and looked at them this morning and they are pretty broad. So maybe that's worth considering, but they've got to balance the economy's capacity to pay for it and obviously the circumstances of low income people. But you know, let's just take this on a kind of systematic level, to get wages up you have to grow the economy. You cannot get wages to rise in a weak economy. You've got to make sure the EBA process, the system where employers and employees sit down together at an enterprise level, work out how they can be more successful and then how those wages and benefits follow. You've got to make sure you skill people up, you've got to make sure that you increase productivity across the economy. And the data is unequivocal on this, when productivity increases, wages go up and that's about driving investment. You've got to do something about people's cost of living, so look at their taxes. The whole issue around energy. The other conversation we never seem to want to have is the conversation about really disadvantaged people. I've been calling for years about raising the Newstart level for single people. Let's do an inquiry into entrenched disadvantage, no one ever wants to do that.
David: If Bill Shorten's really compassionate that's where he should be focusing, Newstart?
Jennifer: Let's do those things. I want people to have higher wages but I don't want them to have higher wages that are then seen in lost jobs. Because let's take the people out here in Penrith, working hard driving up this huge investment that's going on here. If their businesses aren't successful or they can't increase their success and they're paying higher wages to people then they've got three choices, they sack people, they put their prices up for consumers or they pay themselves less. Now these aren't fat cats. You know people in small business where the minimum wage really bites, often their profits are their wages.
David: A lot of small business here in Penrith may not be sitting on fat profits but clearly a lot of bigger corporations are doing well. Bill Shorten keeps pointing out that corporate profits nationally have gone up over the last three years, 43% but wages have only gone up 8%. Why the disparity?
Jennifer: Well, I think there's a lot of complex things to kind breakdown there. First of all, those companies that use the enterprise agreement process, which is overwhelmingly large corporations, do pay on average higher wages. So the wage price index, the wage increase is about 2.3%, people on EBAs about 3.2%. We just heard from Andrew Mackenzie who talked about how BHP pays quite considerably higher wages to its employees. So you know, when you look at the kind of real economic data the kind of share of profits and wages hasn't changed very much at all. You've got to be very careful.
David: Over the last three years though, there seems to be a disparity?
Jennifer: The employment figures that came out in December, show that in the non-mining sector wages had gone up at about 4% and profits have gone up at about 2.3%. People got to be very careful here because you want to start tying profits and wages together, profits are very cyclical, very volatile. In the global financial crisis, profits went down by 8% and wages went up by 3%.
David: So that 3 year window is not, we should look over a longer period?
Jennifer: We've got to be very careful. And this is not a debate that we should be trying to divide Australians with, I want people's wages to go up, but I want people's wages to go up in a way that lasts and I want people to have jobs. We want to make sure that we get the best of both worlds here, that we get sustained rising wages and that we get full employment.
David: So is it your view though, if we do lift the minimum wage too much, it will cost jobs?
Jennifer: Well let's do the work. I mean nothing has been put on the table here. No number.
David: Would you like to see that from Bill Shorten before the election?
Jennifer: Well I'd like to see the mechanism. That's why I went to look at the Productivity Commission's report this morning because I remembered 'I actually did quite a lot of work on this'. Perhaps the best way is to stay with the Fair Work Commission.
David: Which he says he will.
Jennifer: Which is very important but give them more precise terms of reference but they have to be balanced. They have to be about the circumstances of low paid workers and they have to be about the economy's capacity to maintain that. However, we've got to make sure we lift wages for the whole economy for low and middle income earners; and that's not just about the minimum wage.
David: No, the minimum wage applies to, I think, 2.3 million?
Jennifer: Well, let's be clear about that. The people who live on the minimum wage is 200,000 people. The impact on the minimum wage which then influences awards flows to about 2.3 million.
David: Right, okay. Look the ACTU reckons it should be pegged at 60 per cent of median wages. What would that mean?
Jennifer: Well let's see. They've got to put a submission in to the current inquiry, what’s the economic analysis?
David: They have. Their submission is for six per cent rise this year and then an 11.5 per cent rise over two years.
Jennifer: And it's perfectly legitimate for the Commission to now balance that against the submissions of employers about what the economy and, in particular, this is a small business issue much more than it is a big business issue.
David: I mean you haven't put a submission in as the Business Council?
Jennifer: Well we've never put a submission in.
David: But is your view that the ACTU submission is too high?
Jennifer: I simply don't know. Because it's not my job to do the economic modelling on it. But it is the job of the commission to assess that submission against the submission of employers to say what can the economy absorb and what would be the impact on small and medium businesses in particular? Because we've got to be super careful that we don't get a year or so of higher wages at the minimum wage end only to see job losses in two or three years time because the economy is not performing properly. Where's the plan for growth, where's the plan for investment and where's the plan for skills? We haven't got one.
David: Okay but before we leave this wages issue it does sound like you agree there may be a case for changing the guidelines the Fair Work Commission uses?
Jennifer: I think we supported that when the PC went back to our own, kind of, work on that and I think we said that's a good idea but again be very careful about it.
David: We need to see the detail?
Jennifer: You need to see the detail but also the commission was very careful about the balancing bit.
David: Energy. Now Jennifer Westacott as you know there's a raging debate over coal fired power right now within the Coalition. What do you think? Should governments be involved in supporting, financing, even underwriting coal fired power?
Jennifer: You've got to always ask a question about why governments underwrite things. Because it's not governments underwriting, it's taxpayers underwriting. It's taxpayers when things go wrong who foot the bill for these things. In some cases, like here we are in western Sydney, in Penrith, the federal government has quite rightly decided to put the $5.3 billion in to get that thing going.
David: The Western Sydney Airport?
Jennifer: I was out on the site this morning and that will be an unbelievable catalyst for change and job creation here in Western Sydney but let's go to coal and this whole, kind of, let's build another coal fired power station. What is the problem we are trying to solve? Do we want people's power bills to go down? Or do we want to build a coal fired power station? If we want people's power bills to go down we'll do a couple of things. We'll implement the vast array of recommendations that the government has before it on how to get people's bills down. We will make sure that the existing power stations which represent 60 per cent of all energy use stay open and that there are incentives for people to invest in those. And that we have got supply of coal coming into those power stations. Surely that is the practical, sensible thing to do rather than this debate about a new coal fired power station which will take a long time to build which will be the subject of endless planning appeals versus a practical, sensible discussion. Let's get the reference bill, the kind of technical word around the ACCC recommendation about how the power companies set the bills. Let's get supply moving. We've still got coal seame gas blocked up.
David: This was an ACCC recommendation to underwrite new generation?
Jennifer: No, he was very careful in qualifying that he did not mean coal. He did not mean picking winners and this is the problem with this whole energy debate. When governments start picking winners whether it's coal, whether it's renewables, they are not good at picking winners.
David: What about Snowy Hydro 2.0?
Jennifer: Well Snowy Hydro look, the economics on that I think is probably better and clearly the issue to solve was storage. And so it fulfills that.
David: But the market can't do that?
Jennifer: Well I think the evidence is that the market hasn't done that. So, you know, I haven't seen all the detail and economic modelling that underpins that but the issue of storage at Snowy Hydro 2.0 is about fixing that storage. But I think on coal, I would like us to be talking more about how do we keep the existing coal fired power stations running because if we start seeing base load stripped out of our system.
David: There's an interesting point from the Business Council president Grant King here today. If you build a new coal fired power station t would put an existing one out of business.
Jennifer: Exactly. This is the kind of problem about what is the problem we're trying to solve? Are we trying to get people reliable, secure and affordable power or are we trying to build a coal fired power station?
David: Let me ask you about Labor's plans though for a more ambitious emissions reduction target, 45 per cent. We heard here today from the BHP boss, chief executive Andrew Mackenzie that Australia shouldn't be trying to be a European country when it comes to emission reduction, we are not. We can't simply import energy in the way that many of them do. You've been critical of the 45 per cent emissions target. Is it still your view that is too much for Australia?
Jennifer: I've been critical of the absence of a plan to do it. So, I've been critical of the absence of economic modelling from the Labor Party that shows what the implications will be. We don't have a plan to do this. So how are we going to do this? Is it economy wide? Or is it just for the electricity sector? If it's economy wide, what's the mechanism by which we are going to do it? Is it a cap and trade system? Is it the National Energy Guarantee? Is it a base loading credit system?
David: They say National energy guarantee, as long as there's bipartisan support.
Jennifer: People have to be clear about what is the way we are going to do this. Are we going to accept the trade exposed sector? If we are, how is that going to be absorbed in the rest of the economy? Are we going to allow the carry over for Kyoto? Big implications if you don't. These questions are hugely important because the implications of it is that you start to see sectors of the economy under tremendous pressure. I think the Australian people are entitled to understand how these things will be achieved. So never mind debating the percentage. Debate how you get there and the implications of doing it.
David: So, while the government hasn't had huge success on energy policy, Labor still need a lot more detail. Is that what you're saying?
Jennifer: And I think the community is entitled to ask for this. This is the history of this problem that people say stuff and then they try and implement it and everyone goes 'oh hang on, we didn't actually mean for those jobs to be gone in that sector. We didn't mean for this entire sector of the economy to be wiped out - now we'll have to have a compensation scheme.' Then the whole thing gets, kind of, caught and then we stop and then we go backwards and then we make no progress. That is the history of this stuff and it's super critical to sit down with business and say how do we do it? What is the plan to do it? What is the mechanism to do it? And the modelling that I saw on the 45 per cent a few weeks ago by BAEconomics there are some very big implications, particularly if you don't allow for the Kyoto carry forward. Huge implications.
David: Are you getting that dialogue with Labor?
Jennifer: Well we've had constructive dialogue with them on energy policy. We've said to them we support the National Energy Guarantee if they continue to argue for that. We would support that. But the National Energy Guarantee isn't in and of itself an energy policy. You have to have how are you actually going to do it, what's the target and all these other issues we've talked about. How are you going to deal with the ACCC's recommendations? How are you going to deal with supply issues? You know, you can't just have an acronym and say that's our energy policy. You've got to actually explain to people how it's going to work, who's it going to impact and that's what I'm calling on them to do.
David: Jennifer Westacott, thank you.