The Distillery: BCA's big vision

Anyone who reads the Business Council of Australia’s plan to reinvigorate the national economy simply has to conclude that it’s an impressive, measured document. That’s the takeaway from Australia’s business journalists, though they’re all concerned that the report will do little to improve the discussion in Canberra.

Fairfax’s Malcolm Maiden urges everyone not to dismiss the plan as a wish list for big business simply because there’s a 16.7 per cent company tax cut. The report is much, much better than that.

“It’s no blueprint. The impact of proposals such as the cut in company tax from 30 per cent to 25 per cent are not modelled, for example. It does, however, present a coherent plan for change, and offer an implementation timeline. There are 93 actions proposed over 10 years in policy areas including fiscal policy, population growth, infrastructure, education and the labour force, trade, energy, and the environment. The BCA wants stronger fiscal discipline and a more flexible industrial relations environment, of course. But it argues for many other things, including population growth and high immigration intakes, a tax system cleanout, a merger of energy and environmental policy, and an intensification of infrastructure investment including investment funded by government borrowing to lock in a doubling of infrastructure investment to 4 per cent of gross domestic product during the resources boom.”

The Australian’s John Durie is similarly impressed by the proposal, not just because of its depth but by the fact that it is actually more than business saying ‘We want this and that’.

“The report is impressively comprehensive, ranging from the usual laundry list of tax changes to the need to broaden Australia’s capital markets. Industrial relations is notable in impressively being treated as just one area of reform, rather than the central element, as one might expect from the usual BCA diatribe. Competition policy and other specifics are also touched on, but as expected rather superficially. These issues will be covered in coming months if there is a change of government. But the truism, like competition laws, should protect the competitive process rather than particular competitors, is well stated. Australia has well over half a million pages of regulation and more than 24,000 licences, which needs management.”

The Australian Financial Review’s Matthew Stevens recommends reading the report’s “thoughtful introduction” that illustrates the link between investment and general prosperity.

“What we have is an articulation of the gulf between where we are and where we ought to be. And right across the business church there is a belief that the chasm between our reality and the optimal is a direct result of a government focused on redistribution rather than growth. There has been all too little reform that has directly confronted, improved and pursued productivity, capital formation and economic growth. What little has happened has been an afterthought to the main game, which has been re-cutting a cake of prosperity now past. The BCA action plan is a delicately pitched wake-up call to Canberra. The BCA has, with clear-sighted subtlety, told the government that, at a certain point, its addiction to spending other people’s money and its inability to focus beyond the electoral cycle will combine to erode the sustainability of the broader economy. The BCA is saying we have reached that tipping point.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd says the vision’s central theme is the enterprise of individuals and business – with an emphasis on small business – as the defining characteristic of any successful market economy.

“It says that there are more than 800,000 small and medium employing enterprises in Australia and about 6000 large ones, and that in 2010-11, private sector enterprises created more than $920 billion in wealth. These businesses employ more than 10.5 million Australians who were paid, collectively, about $440 billion in wages and salaries. The operating profits of all companies was $340 billion generated from sales of $2.8 trillion. Small businesses contributed about a third to overall sales and profits; medium businesses a quarter; and large businesses just over 40 per cent.”

The Australian Financial Review’s economics editor Alan Mitchell concedes that there are certainly some ‘wish-list’ style suggestions in the report, like an expansion of the GST and a cut in company taxes.

“But, as the Grattan Institute pointed out last year, rebalancing the roles of the GST and company and personal income tax is one of the few reforms capable of making a significant difference to per capita incomes within the 10-year life expectancy of an Australian government. Company and personal income taxes distort investment decisions at the top of the income scale, and workforce participation decisions at the bottom. The Organisation for Economic Cooperation Development estimates that shifting 1 per cent of tax revenue from income and corporate taxes to consumption taxes could increase GDP in the long run by 0.74 per cent.”

Like pretty much every commentator writing on the report this morning, The Herald Sun’s Terry McCrann is depressed about the prospects of the report hitting a nerve in the community.

“Bluntly, but realistically, the BCA’s plan is not going to be embraced. Certainly not in its entirety or even in its sentiment. It’s too easy to dismiss it as being too business-centric or too ambitious. It doesn’t help that it has surfaced in the white heat of the election campaign. So its greatest and hopefully continuing value will be as a benchmark – both in overall terms and in specifics – to judge policies and processes against, and, more brutally, to turn to when the country gets into serious trouble.”

Meanwhile, in corporate news Business Spectator’s Stephen Bartholomeusz writes that Woolworths boss Grant O’Brien would have been “quietly satisfied” with the retailer’s fourth quarter sales numbers, had it not been for the rollout screw-ups now evident in the Masters hardware chain.

Fairfax’s Adele Ferguson is slightly darker in tone, noting that the numbers “failed to inspire investors” and suggests a challenging 12 months is ahead for the company and its suppliers.

The Australian’s Richard Gluyas wonders whether Westpac Bank has stretched itself a little too far by giving the title ‘annuity deposit’ to its latest product that isn’t a genuine annuity.

And finally, Fairfax’s Ross Gittins picks up on the Grattan Institute report from Monday showing how the benefits of the mining boom mightn’t be directly evident to those living in the non-mining states, but they are there. Everyone benefits, but not everyone knows it.