Business Weekend | 10 August

This is Business Weekend with Ross Greenwood.

Hi there and welcome to a special edition of Business Weekend. I'm Ross Greenwood. It's great to have your company. Well, today we get in ahead of the government's economic and productivity roundt to create a roundt of our own with some of Australia's strongest voices about what's needed to get our nation moving again. Today we bring you our shadow economic roundt. the one the government I think should really listen to.

So much of the democratic world is vulnerable because governments are not always meeting the aspirations of working people. And we have a responsibility here. And we have an obligation, a responsibility to rebuild confidence in liberal democratic politics and economic institutions by lifting living standards for working people in particular, but also an obligation to future generations to deliver a better standard of living than we enjoy today. You never promised this before the election. Did you intend before the election to call this or is this because you've got this huge number of seats now? So, so you say well now I can actually do reform.

The agenda going forward on productivity, there's an opportunity early in a term to bring people together from business, civil society. We've invited the opposition to participate as well and have a discussion about things that aren't immediate, aren't about the 24-hour media cycle. They're not about the next week or even the next year. It's how does Australia position ourselves for future growth? And part of that has to be productivity.

Productivity has been slowing and it was slowing even before the co pandemic and basically productivity's gone nowhere apart from it's been all over the place during the pandemic for various reasons, but basically it hasn't gone anywhere in years. But I think it's really good that the government and the treasurer have latched on to productivity as being a really important thing that we've got to get on top of. Now the treasurer is moving forward with more announcements and more plans with respect to his productivity roundt in just a couple of weeks. But it's very clear to me this is not about productivity. This is all about raising taxes. Every message you hear is about raising taxes. And the Australian economy doesn't need more taxes. Hardworking businesses don't need more taxes. Productivity is not about raising taxes, treasurer. The beginning of the last parliament, we had a jobs and skills summit which seems to be being repeated in this parliament with a productivity summit. It's the same group of people getting together again.

Well, today we're going to divide our discussion into three broad areas. Productivity, taxation, and competitiveness. But like unlike other roundts, nothing is off the agenda here. We can talk about anything we like. So, let's introduce our panelists today, shall I? And some might argue that each of these should have been at the government's own round table. First of them, Jeff Wilson, founder and chairman of Wham Capital and a fierce advocate against changes to dividend imputation and the government's plan to tax unrealized capital gains in superannuation funds. Then Romley Madu, chief executive of the Engineers Association and the former chief executive of the government's infrastructure advisor, Infrastructure Australia. Then Tony Shepard, the former president of the Business Council of Australia and the chairman of the construction giant Transfield in the past. Then Tanya Constable, chief executive of the Minerals Council of Australia, formerly who worked in Treasury. And to Paul Cooper, chairman of the Advanced Manufacturing Growth Center and executive chair of industrial electronics company Rinstöm. Welcome to you all. Thanks so much for being here today. Really appreciate it. Um so can I just start with you Romley and I want to start with you because really this is about Australia's productivity. You know, we know that that is the amount of, you know, sort of economic benefit we get for the unit of labor worked. The question is, why has Australia's productivity gone so far backwards?

Uh, great question and a huge challenge, but we do have the answers and we, industry and government have worked together for many years to understand what the productivity challenges uh, and in Australia it is, is we're inefficient. So when you look at engineering, for instance, uh, we've plateaued the number of students studying engineering and 62% of our uh, engineers are now born overseas. So, and if you look at the whole economic performance and infrastructure pipeline, what do you need? You need engineers. So the first thing is skills and capability. Uh, the second one is red tape, and that has been caught out by the productivity commission. Uh, when you just look at engineering alone, uh, every single state and territory does a different registration. So it's not like a driver's license where you can drive anywhere in Australia. If you're an engineer, you have to be registered in every state, uh, single state and territory. I mean, that's just an easy, very quick and easy fix. And then the next one really is technology and the use of AI. Uh, if we think about, uh, applications, uh, for housing, for instance, and we look at Singapore and even California after the fires, just the use of AI have taken it from weeks to days, and that's an easy productivity gain. So we have the will, we just need to get on and do it.

Okay, so Tony, you've been involved in roundts such as this in the past. You know, a lot of people saying this is just all going to be hot air when it comes to productivity. That is a lack of productivity. So what does the government actually need to do? Where's the low-hanging fruit to improve Australia's productivity to make it easier even for the Reserve Bank to cut interest rates?

Well, you could start with, um, and I think my colleague here is right. We really do need to lift the game in terms of our engineering and science and what have you. And if you look at the results in mathematics in all of our school plans, disaster. So Australia has not kept pace with the rest of the world.

So you're saying this starts at our education system?

It starts with their education system that goes right through to training. I was in a factory in in Adelaide yesterday. They they build rolling stock and what have you. They're struggling to get apprentices, struggling to get printers, and one of the few railway companies left in the country that's operating. Can't get them. Can't get them. But then we have a look at these changes to industrial laws which makes it harder and harder to to for business to be competitive. And we have to be competitive in Australia, and we've got a very, very high cost base here. Cost of energy's gone through the roof too. That that that has a huge impact on your business. Cost of labor has gone up. The productivity from that labor has gone down. Have a look in construction now. We're paying them more for less time, and that means less work, less productivity.

Okay. Okay. So, Tony, Constable, can I take it to you because the mining industry is clearly one of those areas where there has been enormous strides forward in productivity in the past decades, but now that has slowed. There's no doubt about that. Just explain why it's slowed in the mining industry and what you need to try and raise productivity, really to try and have fewer people producing more of the minerals.

Well, Tony just talked about costs going up, and that's the big challenge that we have because we're not the only producing nation in the world. We've got competitors all around the world, and our miners, they have choice on where they go. So they want to make sure that there's great ore bodies in Australia and the costs are lower. So when you've got high energy costs and you've got rising wages, you've got to find productivity elsewhere. So we've been really very good at it. Uh, the mining industry is three and a half times more productive than the next closest industry in Australia. So that means if you, for every hour that a miner works in the Pilbara, there's $700 flowing into the economy. And that means households are about $19,000 better off for the work that's done. So we need to do more. We know what needs to be done. We have to spend more time on technology, and the mining industry are leaders, as you know, in AI and the use of technology. We're bringing through automation. We're bringing through AI in the work that we do. Uh, that doesn't mean loss of jobs. That means jobs in other areas. We've actually got more people in the industry now, double what we had 10 years ago. So they're the sorts of things we need to focus on. Skills, uh, Romley talked about skills, uh, AI technology, and making sure that we get more efficiency in what we do. But let's not lose sight of the big issues around bringing down energy costs and making sure that our industrial relations activity and taxation match that. It's all of those policy instruments together that will raise productivity.

Okay. So Paul Cooper, just talk about advanced manufacturing right in Australia. Everybody would say this is the the the sweet spot. If you can suddenly in a new world where the world is connected through AI and and other means, that it should be easier to create manufacturers here in Australia, high-tech manufacturers. The reality is though, it's even tough for those businesses that I speak with on a regular basis. Why is it so tough and why is the productivity in those areas still really lagging what it is around the rest of the world?

So the the manufacturing industry is is the solution to productivity because we need to get more efficient at what we do. We need to make more and we need to export more high, more highly complex products. So we we've spoken to, we were reaching to about 8,000 manufacturers in Australia. We've gone to them and said, well, what are the challenges of making more complex goods and growing your business? And they point to three things. The first one is the cost of energy. It's already been spoken about. That was it. It comes up all the time. Cost of energy. It used to be the cost of labor. That's gone away. What they're saying is we just want labor. So the lack of skills in Australia has been a problem. Uh, the third thing is we need access to capital and capital that we can reach, capital that allows us to grow. So the government has stepped in with some solutions. NRF is one. But the NRF does not address and align with the manufacturers in Australia. The NRF has minimum check size of $10 million, and they can't be the lead investor, and they don't want to be front ending on on it. So they're looking for $40 million investments, $100 million investments. That rules out 97% of Australian manufacturers. Cannot reach to a level to be able to use the NRF.

But is part of the problem even that the government is actually offering that money? That really, if there were right incentives in place, maybe those businesses could find the capital elsewhere themselves?

Well, the NRF say they say we crowd in capital. If we go in as a lead investor, we'll crowd in other capital. That is true. But those 97% of manufacturers can't get up to reach that $10 million minimum check size. We need scale. We need to work out how we get, uh, more with less. We've got to bring those manufacturers together to work cooperatively to to form clusters. 62% of our population live in five capital, five five cities. So we need to spread that love, but we need to also get those those manufacturers to consolidate to get scale to then get complexity greater to sell overseas.

Yeah, it's interesting. So Jeff Wilson, you're an investor, so you look for businesses that are highly productive.

Is government here the solution or is it the problem?

Well, unfortunately, you know, we're starting off, um, well, whether it's at the round table or or not that, um, Albanese charmers are saying that we're going to have to pay a tax on unrealized gains.

So, in superannuation above, you know, $3 million. So, pretty much you've got $4.2 trillion of long-term patient capital which you need for productivity, at least the $1.1 trillion that's in self-managed super funds. Why will they take risk going forward if you say they invest in something, it goes up, you know, the valuation might go up and they have to pay the profit, pay a tax on it, and then it actually doesn't, you know, the the valuation falls and you know, that's just bad luck, unfortunately. You've paid the tax. You so to me, taxing unrealized gains is insanity. We, um, we've we've already done a paper on it, and we've estimated the negative impact to the Australian economy, this before we start, is minus $94.5 billion. So, yeah, you're talking about now, Paul was saying what we need is we need that patient long-term capital. Uh, and by taxing unrealized gains, you're effectively just removing, you know, that patient, at least a trillion dollars of that patient long-term capital.

Yeah. So, so in terms of trying to allow industries to make the right decisions and and those, you know, all those small companies, they're going to get negatively impacted. I think we've estimated over 600,000 small Australian companies will be negatively impacted by, you know, taxing unrealized gains.

Including farmers.

Yeah.

Including farmers.

So, Romley, can I just ask you one aspect of this, and that is the government itself, right? We understand that productivity, poor productivity is linked to lower living standards and broadly you can see it because there's been a per capita recession in Australia.

So the same question I asked Jeff: is government the answer here or is it actually the problem, given the fact that so many people now rely on their incomes on government-related programs or indeed direct employment by the government itself?

I think, uh, the government's both. Uh, so when you think about red tape and education, when we look at the importance of, um, maths and science in schools, there's an opportunity there. Uh, and we've been, you know, we're not the only ones who've been saying this is what we need to put our focus in. So that's where the government should be leaning in, uh, to support a lift in productivity in engineering and STEM. We're going to have an increase of 12% uh, requirement of STEM in the coming years, but where's the pipeline coming from? So that's where we do need the government. We need them to intervene in that. Don't we just bring those people in from overseas? Don't we just migrate those people in? Although the government's saying it's going to cut migration rates, which is...

Yes, we used to, but now we're in a very competitive world where those uh engineers and anyone in STEM, we're competing with all the other countries that have, uh, maybe an easier way of getting in and working than they do in Australia. And when it comes back to cost of living, which you've raised, if you're looking at buying a house in Sydney or buying a house overseas, you may choose to take a job somewhere else because of cost of living. So we need the government to work closely with industry because industry know what the answers are. We've been working and living in in, you know, in in this environment for some time and can see where the challenges are. So that's where it should use its power to be bold and ambitious and to go, what are we going to do for reform? Let's see change, let's put a target and let's have reform. And I'll give you a statistic which is slightly scary. 45% of all engineering work in in Australia is for the government. So if we don't make it productive, uh, the taxpayer is the one paying for this. So when we have poor regulation, we can't get access to good skills, uh, we have the issue with, um, licensing of occupations around Australia, who's the one who's paying for that? The taxpayer.

All right. So see the other problem, Ross, is that, you know, the the government is actually crowding out the private sector now. The the government has grown in in in terms of employment far more than the private sector over the last 3 years, and we're now we are in that lovely state where it, on a world scale of, you know, reasonably established companies, countries, we have the highest proportion of public servants to workers in the world.

Okay, well, I'll come to that because that's one issue that I've raised with a lot of economists, and that is if you work in childcare, if you work in aged care, if you work in the NDIS, it's not as though the work you do is not important. It's vitally important, but the reality is there's almost no productivity in those particular jobs. It's not the way it's measured. And so the issue is here as to where productivity comes from. It comes from the private sector investing and creating jobs because it creates and generates the wealth. The rest of those occupations are services helping the people in the private sector to remain employed and remaining productive. We don't, we seem to have almost lost sight of that, I sense, don't you think?

Yes. Well, yes, and look, the bottom line is basic economics 101. The private sector is what brings us prosperity and growth, and the public sector's job is to distribute it equitably and fairly, which Australia's got a very good record on. But so what we're doing now is we're we're pushing down the private sector, which is the generator of wealth, not the government, and we're growing the government side. So that's heading towards socialism, which has had been shown economically throughout the world to be a disaster.

So you seriously are saying that you think Australia right now is going down a more socialist front?

Is that...

Absolutely, no doubt at all.

Tanya Constable, can I ask you the question because in regards to your industry, it is highly likely the government's going to turn to your industry because it not only needs critical minerals which it feels as though is the future and also for say the energy transformation which is going undergoing, but then on top of that, it'll sit there and say, "Well, we think your your mob are making too much money. We basically need extra money to fund all of our programs." Maybe, who knows, a mining resource rent tax comes back into play or some other such thing that you've successfully fought against before. You must be highly conscious of that.

Oh, we're very conscious of that. But and this is an industry that relies on foreign investment coming in. It's it's that capital that's required because the pool is too shallow in Australia. So we rely on that, uh, you know, as in, in order to operate. Um, I, there is an opportunity to work with government. I, I think that right now, it's very clear that our environmental approvals process is very difficult for the mining industry. It's 1371 days for a mining approval, which is absolutely ridiculous.

Indeed. Tanya Constable, many thanks. So that is our first salvo when what's needed to get our country going again. After the break, we go to the place that Prime Minister Anthony Albanese doesn't dare to go, and that is tax reform. What's needed to make the system fair but encouraging for companies to invest more? Thanks for being with us here on this special edition of Business Weekend. Our shadow productivity and economic roundt ahead of the government's own roundt that starts in 10 days time. So let's reintroduce our panel. The chairman of the advanced manufacturing growth center, Paul Cooper, is there. The chief executive of the minerals council, Tanya Constable. The former president of the business council, Tony Shepard. The chief executive of the engineers association, Romley Madu. And the chairman of Wham Capital, Jeff Wilson. Thanks for being with us today. I want to now turn to taxation, which is often seen as a way to push forward Australia's competitiveness. But look, I'm always reminded of Winston Churchill's great quote. For a nation to try to tax itself to prosperity is like a man standing in a bucket trying to lift himself up. Well, let's go to that issue, shall we? Paul Cooper, I want to start with you. Taxation is the key here. It drives away. Australia is a high tax country already, and this nation wants to tax more. Is this making any sense to your members? Does it drive businesses away from this nation?

It's the three-year election cycle does that as well. But taxation, I spent 25 years in tax, so it's bread and butter for me, and it's the thing that Australia can die on if they don't get it right. So overt taxing small business, medium business, large business is counterproductive. Like the, uh, Winston Churchill quote, we need to get the right balance of tax and not keep changing it because of political cycles. We're talking about having a tax rate and then we're talking about, uh, having franking maybe not, you know...

But you can see it here. Look at this. This is the headline rates of taxation. We bring them back up again and just show everybody. And that is Australia at 30%. And you can see where we are. But if you go into our near neighbors in Southeast Asia, they're 17 and 15% in Singapore, um, and also in Hong Kong. So, you know, it raises questions. Now, there are suggestions. Tony, I'll go to you on this one. And that is put in this this taxation on revenue. 5% of every revenue of every company, basically, should be taxed as distinct from taxing profits, which we've already done.

It is the thin edge of the wedge. Uh, the CRA, parts of CRA have been pushing for this for years, and this is a thin edge of the wedge. It started five or 10, and it'll go up and up and up, and it will kill business in Australia.

Why will it kill business? Because isn't this just another, because there's a lot, there's a lot of companies that haven't got huge margins, and if they don't, and you're paying tax on turnover, you'll go out of business very quickly, or you'll move offshore.

So it's a nightmare. It's a nightmare that the, the no other, not very few other countries in the world, I haven't found one yet, taxes on turnover. Very few countries in the world, and there's many successful economic countries in the world other than Australia who've done it without it, and taking it takes away the incentive. And have a look at that 30% company tax rate. Even Sweden is 20%. Hey, the the the the favorite country of of the WS is at 20%, and we're at 30%. We are way below.

I mean, but I, I know, like like from a business perspective, you know, putting the other, um, you know, pair of glasses on.

Yes.

The, if I could get something as a percentage of turnover, um, then then I'd always do it because, um, I knew that I'm always going to get the money, uh, and at at the the advantage or the disadvantage of unfortunately the person running the business. To it's a smart idea, no-brainer for the government, but not very good for the government. A disaster for the, yeah, a disaster for companies. I mean, it's insanity for the companies.

What does it do to share market valuations of companies like retailers, for example? Low margin, low margin businesses. I mean, that's right, it'll it'll kill them.

And capital intensive businesses, they'll just go to that. How does, how does that change there?

So capital intensive businesses, they can work out where they're going to operate in the world. Can they operate in Asia? Can they operate in Thailand? Can they operate in in the US? US is 21% as you just showed. They're talking about bringing it to 15%. You know, that was well breaking when they changed it to 21%. Businesses looked at moving. Only a couple of hours ago, I stood up in front of a room. 35 engineers and data scientists were being put off, being laid off from an international company here in Sydney. The whole thing is shutting down, and they're moving to Malaysia and Philadelphia, uh, Pennsylvania.

There you go.

It's shutting down.

Well, but why is that? Because of tax? Is it because of competitiveness? What it's about?

It was because of the the entire ecosystem that's in Australia where it's where low volume. So if you're operating in Australia, you need to be thinking about export. Why operate with 2% of the world's economy? You need, if you're going to do something in Australia, you have to be internationally competitive. Think of the car industry. Would you set up a car industry again in Australia? Well, yes, but if it was if you were going to sell cars to India. So if you can't be that efficient, people are saying, well, why set up in Australia? It's very hard. If you bring in a turnover tax, that would completely dry up.

Constable, can I bring you in on this? Because again, there's a couple of things. If taxes are too high in this country, then there are key developments. Doesn't matter how good the minerals are, how good the deposits are. If you can't make money from it, and the government's taking too much away from you, there are other deposits in other parts of the world. And your members are some of the biggest companies in the world. Their capital is mobile. Their capital can lift itself up and go somewhere else. And I think government misses this the whole time.

Well, that that's right. We're we're very capital intensive. Uh, we are able to make choices all over the world. And that's the message that the companies are giving to government about, you know, making sure that we've got stable, predictable tax settings as well as other policy settings. Bring down energy is another one I want to make sure that that is addressed. But you know, our industry over the last 10 years paid $400 billion in taxes, and in 2022-23, it was 39% of all taxes. So to bring through a cash flow tax, another 5% there, a, a pressure being put on by some commentators out there that want to see fuel tax credits removed. That's just a tax grab on our industry, and we can't sustain anymore. When you've got high wages, you've got high, uh, energy costs, you must have, uh, stable tax, competitive settings, and that's slipping away. Look at Queensland. A 40% royalty on coal just takes all of the profits away from the coal industry. So all of the small players drop out, and you only have the big players left. And I know that one of your members, BHP, when that happened and came in, it basically said it would not invest in Queensland. Now, I know the government there has changed since then, but broadly, when you got big companies saying, "We will not invest there because of a tax policy," then something has got to at least be woken up in people's minds.

It was good to see it was good to see the Prime Minister say yesterday, "No new tax." Now, I think we need to hold him to that, that no new taxes on industry. I think that's a great thing. At least it will, it's the stability, predictability, and it will calm down investors. It will calm down companies about what might actually come out of this productivity round table.

Okay, Jeff, and potentially fix up some of the mistakes they've already made because I'm not sure if everyone's aware, but, you know, the government a couple of years ago bought in a tax where it actually disadvantages companies that are listed on the stock market.

Yes, absolutely. Um, it it was to do with, um, the loss of franking credits for buybacks. So if you're an unlisted company...

It, and you do a buyback, it doesn't impact you at all. If you're listed, it impacts you. So why would you, if you're, you know, if you want access to Australian capital and want to be listed on the ASX, you wouldn't do it.

So that's why, you know, the number of ASX listings have continued to decline. I know, um, you know, Jim Chalmers, you know, they're saying yesterday, "Oh, look, there's another competitor coming in to the ASX," but if companies don't want to list there because...

Doesn't matter who's it, it doesn't matter how many competitors you have.

So in other words, it means the capital is also more difficult to obtain unless you have a thriving and active stock market as well. Romley, tell me, to take me to tax when it comes to the big projects we've been built. You ran Infrastructure Australia. You gave the list of priorities to government to go out and build things. When it comes to that, quite clearly construction companies, building companies, all of these, they have to make a decision before they build that they can make a profit out of that project, and that includes their taxes and the incentive to go and undertake that project in the first place. Have we got the priorities, the settings for tax right in Australia?

So there's a couple of challenges, uh, happening in Australia at the moment. Is one is the cost of doing business, especially in construction, continues to rise. So Tony's involved in infrastructure as well. And what we've seen is you can't do fixed price contracts anymore because the cost of skills, the cost of materials, supply chain challenges means that all the costs are going up in all our major infrastructure, energy, and other projects. And so that, as I said before, a lot of that is being paid for by government. Who's behind most of these major projects are actually small to medium businesses. So while we have the large businesses that may be overseeing the project or designing the project, what you have on site are hundreds of small businesses, and that has an immediate impact on the cost effectiveness of that business. We have seen in the last couple of years a number of construction companies go bust, especially when we have a housing supply problem. That's not what we need to be seeing. We need to be seeing an incentivized, uh, environment for the small to medium businesses and the larger businesses to be making sure they're competitive, and that we're getting the best, um, out of our projects so that they're on time, um, on budget, uh, and that we're meeting the needs of the businesses. And we have great examples in Australia where that has happened. But it's always the one-off, and we need more one-offs. It needs to be business as usual to make sure we've got a great environment for not only the larger businesses but the smaller ones in our construction.

So a big one in the government's round table is the 1.2 million homes, the target they've got between now and the end of the decade. Are there any hope of building those 1.2 million homes?

Uh, there needs to be a lot of, uh, uh, interventions to make sure that they happen to reach that target.

I'll take that as a no, shall I?

I won't comment.

Well, the the cost, cost of a new house in Sydney, if you do yourselves right, 50% of the cost is government charges.

50%.

Yeah.

I like the 3D printing houses. Yeah. You can print a house in, yeah, in what, six weeks, a three better.

Well, the, yeah, I think you're right. I think we're heading down that modular homes is a very cheap, much cheaper and a cost-effective way of doing it. I have a vested interest in saying that, by the way. But anyway, but because building in a factory is far cheaper than building on site.

And so sustainable and so, you know, your productivity is dramatic.

So, so we go, we go to that. Okay. Sick back to tax. One thing I want to ask you about is really right now is Australia really taxing its way out of its competitive situation?

Absolutely. We had, but we've got to hear from these experts and just talking about the resources sector. If you just do a quick sum about what our economy would look like without the resources sector, which is gets vilified by some people every day. Yeah. This country would be bankrupt without it. And and and and you're right, they can't afford to take any more taxes. If you look at the money they pay in taxes, in royalties, in infrastructure, in or in everything they do, I mean, they already make a massive contribution to the to the...

Okay, Paul, I want to bring you in here as well, because this is a big issue because one of the things that a lot of people are talking about is having the relief on capital gains tax. In other words, rather than the 50% discount, bring it back to a 25% discount. So, when you actually sell something for a profit, you're actually eventually going to pay more net tax. Your business owners, if they are successful. Problem is, if they come to sell a business, it means they're ultimately going to be out of pocket more money. Is that an incentive to set up a business? Because I don't think there's terribly many incentives to set a business up in Australia.

Well, some of those people that I stood in front of a couple of hours ago, they said to us, well, we may not go and get another job. We may start our own business. So, can you imagine if you then start your own business, and unfortunately, many small businesses are a salary sacrifice scheme into capital gains tax. Unfortunately, that they don't make enough money, and then eventually they try and sell off to the next Ponzi buyer, and they they make a capital gain. If they're going to have full tax on that all in a lump sum, all in one year, with our progressive tax scales, that they lose half of it in tax. So no, it is a massive disincentive. There needs to be consistency that matches the life cycle of investments changing. You know, we need capital to grow businesses. Part of that capital is debt, equity. So debt rather than pure equity. You go to a bank and you say, "Well, I don't know what the next five years are going to be because we're heavily reliant on current tax systems. If it changes, my business model fails." Banks aren't going to lend if we can't get certainty along the same investment cycle as running a business.

Yes.

And a mine, and and any infrastructure, you have to have the same amount of lineup between the investment time frail and also the taxation.

Paul Cooper, many thanks for your time there. Well, coming up after the break, we'll turn our panel's attention to the biggest issue of all if we want the nation's economy to grow faster, and that is our competitiveness. Thanks for being with us here on Business Weekend, special economic and productivity roundt. In this segment, I want to address the most crucial economic measure, and that is competitiveness. And perhaps this is what the government's own roundt, I think, should have been called. I think it's fair to say that if Australia's Olympic team at the Brisbane 2032 Olympics is as uncompetitive as Australia's economy is right now, there will be a royal commission into its performance. For the economy, there's no royal commission, just a three-day gap fest that the Prime Minister is also already rather seriously watered down. But successive governments have clearly left Australia in many areas uncompetitive in what is a fast-changing world. From this year's IMD World Competitiveness Survey, Australia ranks 16th for economic performance, 22nd for infrastructure, and we've slumped from 21st for business efficiency in 2020 to 37th this year. Overall, we now rank 18th. That's compared with our top 10 rankings from 2008 to 2010. Our top place was fifth. So something clearly in Australia is not working right now. Jeff, I want to start with you on this one. Competitiveness. You invest in companies. You try and find competitive companies. Is it harder to find companies that are truly globally competitive here in Australia right now?

It is a, and unfortunately due to the another I think mistake by the current government, which is, you know, um, you know, your future, your super, which has really pushed all the investment, you know, the four plus trillion dollars in in superannuation into the larger companies, which four years ago made up, I think, 37% of the market by, uh, capitalization, now make up close to 47%. So all all that money isn't going into the small companies, and all the small companies are being taken over by overseas, uh, companies in terms of uncompetitive. Um, you know, one of the sad, you know, really sad things is you you look at Brickworks. It's cheaper for Brickworks to, uh, produce bricks in New York and to, uh, send them over to Sydney than to produce bricks in, you know, Western, um, now Sydney.

Which is ridiculous, right? So that says everything. Crazy.

So, okay, so, so Paul, I'll come back to you on this one as well. Australia's competitiveness. We've seen here in the stats, has gone way downhill. Now, unless we are competitive, this goes to a whole range of things. It goes to tax, it goes to industrial relations, it goes to the cost of energy, it goes to the ease of having a a project approved. It goes to so many different areas, and every one of them ultimately points back at government. And it doesn't matter which flavor of government, whether it's state or federal, but this is where government should act, not necessarily propping up businesses that seem likely to go out of business for whatever reason it might be.

Bear with me a minute on this because one of the statistics that wasn't shown up there is Australia's economic competitiveness index, the complexity of what we sell overseas. We've fallen from 95 in the 1990s to 105 in the developed world. We are the bottom of the developed world. We are between Botswana and Cavoire in terms of the complexity of what we export. Now, part of that is we are gazumped by the amount of iron ore and and minerals we export, but the complexity of what we export has actually gone backwards. You used the Olympics example earlier on in Montreal in 1976. Australia walked away with five medals, no gold. We were humiliated because New Zealand got a gold, one gold and four medals. We said, "We've got to do something. We need to set up institutes of sport around Australia. What do we do best? We'll set up an institute of sport in swimming, in diving, in in water polo, in these types of things." We said, what we we looked at what we want to do. We said it matters to us to to be better in the world. You imagine if we came away from the Olympics at 105, what would we do? We would say, "Well, now we need to set up specialist areas, focus on what we do best." It might be conversion of critical minerals. It might be advanced manufacturing. We set up things like the Fraunhofer Institute in Germany or Catapult in in the UK, where we bring in industry-led research, not university-led research. Industry-led, government one-third, and Fraunhofer Institute, 13. It's been going 78 years. 75 Fraunhofer institutes. It works. Don't touch it. Let it go beyond the election cycle. Get it right. Get the settings right, and we will build up that complexity. Yes. And and that will make us more competitive globally and locally.

Okay. So Tanya, yours is one where, and again, we talked about capital walking out of Australia, businesses prioritizing other places because it all ends up with money. The return on equity is the key here. If you can make more money in America than you can in Australia, you go and invest in America. And one thing I think government misses is that that capital is fluid and can leave this country at a moment's notice.

Absolutely. I, I think that that message is starting to get through because we're seeing that leakage occur. We we're seeing our companies, our tier one companies going elsewhere. They're going to Africa, that is not as politically stable as Australia. We're seeing them going into the United States, into South America, into Asian countries, Indonesia. So we want them back in Australia. We are all about competitiveness because we we're an export-facing country, um, uh, set of companies in our industry. So we want to see those, uh, stable, predictable settings that I talked about before, and environmental approvals are at the the top of that. We want good taxation settings. We want low energy prices. We want to make sure that our industrial relations, uh, settings are good for employers and good for employees. And we think that we had that right in the mining industry, and government intervention there is not required where...

I ask you about that because the government clearly has favored some industries. You know, we've talked about the metals industry, the steel works, as one, all of these foundries that it's going to try and back. Rex Airlines, didn't let that go broke. So what I'm wondering is, is it smart for them to say critical minerals, we're going to pour it in. We're going to be a superpower in critical minerals. Does that actually work when a government says that?

Well, critical minerals are really important because you need it in modern-day life. You need it for everything we use, phones, uh, in terms of any equipment, electric vehicles, everything that we, uh, that we have now that is electronic, you need those critical minerals, not least of all for defense purposes. So, Australia has most of the critical minerals that we require in modern-day life. But China, as an example, those critical minerals are highly concentrated in terms of processing. So there is an opportunity for Australia working with some of our strategic partners because we can't do it all of our ourselves in Australia. There is a supply chain where different countries have different competitive strengths. We need to make sure that we are supporting actively some things like lithium, on our rare earths. We need to make sure that we're getting the settings right in Australia. Those sorts of industries should be supported here, and then we work with our partners to make sure that our critical minerals are what you see in manufacturing around the world.

Okay. So Tony, you were there when the Sydney Harbour Tunnel was first built. You were there when they built frigates. Transfield was there. You were helping run that at the time. Is Australia competitive now or not?

No, it's not. It's lost it. We had the will post-war, and we brought in a lot of immigrants from overseas and and a lot of scientists, engineers, and and whatever, tradespeople, and that's what got the country going, and we had the foot on the accelerator, and we've taken it off now, and we've put the brakes on. And I see, I think the first thing the government's got to do, and I'm talking state and federal here, is facilitation. Get out of the road, make it easier, be, you know, cooperate, uh, if you're there providing the transport, make sure it's available, and all that sort of thing. Facilitation. The the last thing they can do, I suppose, is is in terms of subsidies or something like that, or free kicks in tax to encourage you to invest. Sure. But I would, the easiest thing for them to do is to get stuck into facilitation and make and get get out of the way and let people get going. And and then in the meantime, invest significantly in our education system. So we're turning out the people. All the engineers I've worked with over many years in huge projects, went to public schools in Sydney or Melbourne or or or Brisbane, or every single one of them. They had a fabulous education, mathematics and science. Yeah. Absolutely. Then they rolled on in university and got their degrees, and then they became the the masters of, you know, of our destiny in many respects in terms of building and and developing things. Who was the third country in the world to successfully launch its own satellite?

Who was that?

Australia.

Who who invented the over-the-horizon radar?

Australia.

Exactly.

So the challenge of that is 70,000 engineers will be retiring in the next 15 years.

And we don't have the maths and science teaching level. OECD has said that it's falling in Australia. We don't have our kids, um, doing maths and science. So is that taking Australia as a nation?

That is reducing our competitiveness. When you look at us compared to Asia, uh, Europe, and other countries, even Iran, who have 50% women in engineering, we have 16%. Um, you can see that we're losing. Just a simple thing as let our kids all do maths and science at high school. It should just be mandatory. Uh, and then making sure that we have our own Australian pipeline of kids coming in. We still need our overseas qualified engineers. But when it comes to competitiveness, we need skills, and we've got, we're challenged with that when it look, when we think about STEM. We need deregulation. We've got too many. We need a cut in red tape. Uh, and we need to increase the use of AI and digital tools, and it should be digital by default. We should no longer be using Excel on a major infrastructure project.

No, it's so true. Paul, can I ask you one thing? If you were sitting up and had a great idea today, here and now, as a young person, university graduate, coming out of TA, whatever it might be, would it be better for you to set that business up here in Australia, or would it be best to go to America straight away?

I've got kids graduating now. So, and they're looking globally. I've got I've got American grandchildren. I've got Canadian grandchildren. I've got Australian grandchildren. They go to where the market is, where it's easier to operate. One of the things that the government needs to do though is get out of the way. Tony mentioned it. It's get out of the way. Don't sprinkle quantum fairy dust here and critical minerals here and say, "We are going to be the best of the world." Now, I had a business in in Michigan. I've moved it out into Illinois. But I saw Detroit say, when the car industry was collapsing and everything was going bad, "We want to be the medical tech capital of of America." And they poured money into it, they're bankrupt. They didn't get anywhere because they just said, "Oh, we want to be and this." And it doesn't happen like that because Boston already does that. So, you, it's a looking at Australia, looking at the clusters of where we do have, um, you know, real ingenuity and allowing that to foster, to get the short jumps between one one industry and another, build an infrastructure, build momentum, and then say, "Let's go overseas."

Okay. So Jeff, I'll come to you and basically this is the whole question about Australia's competitiveness, the return on invested capital. That's what you study, and the fact of the matter is if you can get a better return somewhere else, you would expect as an investor in that company for that company to put it there, wouldn't you?

100%.

Yeah. And unfortunately, that's what we're seeing. I mentioned Brickworks, but but you look at CSL, you look at, um, a number of Australian companies. Um, uh, you look at Vizy with what, um, you know, Pratt's done with the with the paper business, you know, they've they've moved it elsewhere.

And the reason for that is because of Australia's competitiveness. I think that's one of the keys that we come out with today. So can I just say to all of you, this has been just a really fascinating chat. We've gone to tax, we've gone to productivity, and we've also gone to our competitiveness, which I think is the absolute key. So it will be fascinating just to see what comes out of the Prime Minister and the Treasurer's own round table. But the one message also that I hear is tax policy. You reckon that Albanese might be on to something in basically saying, "Keep the taxes steady until at least you go to the next election."

So...

And get rid of the tax, you know, the proposed tax on unrealized gains.

There you go, Jeff. Always the final word. Thank you so much for that. Anyway, that is it for this special edition of Business Weekend this Sunday. I want to thank my guest, Wayne Capital's Jeff Wilson, the Engineer Association's Romly Madu, the former president of the Business Council, Tony Shepard, the Minerals Council's Tanya Constable, and to the Advanced Manufacturing Growth Centre's Paul Cooper. Thanks so much to all of you for lending us your brains and your insights today. Up next is all the latest news right here on Sky News. Business Weekend returns next Sunday, but of course, you can keep up to date with all the latest business news with our daily program, Business Now, 4:30 p.m. Eastern time, and via our website, skynews.com.au. Thanks for your company today. I'm Ross Greenwood. We'll see you next week.