ADDRESS TO THE UBS AUSTRALASIAN CONFERENCE

I acknowledge the traditional owners of the land on which we meet, the Gadigal people of the Eora nation, and acknowledge elders past, present and emerging.
We thank them for the stewardship of our land over 40,000 years.
Well thanks for inviting me to be here today.
As investors in Australia, I am sure you have plenty of questions about Australia, our political system and our economy.
Like “Why does Australia, with twenty-seven years of uninterrupted economic growth also have a revolving door of prime ministers”?

Or “How will Australia be affected by global trade uncertainty?”

Well, we can talk about those things and other questions on your mind in the Q and A session if you would like.

In my opening remarks, I am going to give you my answer to a different question: “What would the election of a Shorten Labor Government mean for business?” 

In fact, I’ll go a step further and give you five reasons why the election of a Shorten Labor Government would be a good thing for business in Australia.

Those five reasons are:

Let me deal with each issue in turn.
 

Bill Shorten has now been leader of the Party for five years.   He is facing his third prime minister.

I have been Shadow Treasurer for five years.  I am facing my third treasurer.

I am the second longest serving shadow treasurer in Australian history.

We’ve learnt the lessons of instability and have run a disciplined ship, focussed on the long term. 

With us, you know what you get, and who you get.

But we’ve also used this long period of stability to develop a comprehensive policy program for government.

No Opposition party has had a more detailed policy agenda released ahead of an election in a generation.

Making the tough calls in opposition means we are more capable of delivering stable policy settings in government.

We believe that the days of parties concealing their plans until after the election are over.

People may not agree with all the policies we’ve announced, but they can see our policies announced well before the election, time for them to be digested and ventilated in public.

We announced negative gearing and capital gains changes over 2½ years ago.

We announced our plans to reform family trusts over a year ago.

And more than 6 months ago we announced our plans to take the dividend imputation system back to its original form.

We haven’t done this for fun.

These achieve a few things.  They help broaden the tax base and make the tax system fairer. They will help put the budget back on a sounder structural footing and allow Labor to deliver bigger surpluses than the government in uncertain times.

And they reign in some of the unsustainable policies put in place in different economic times. 

But they do more than that.

Announcing these reforms well before an election means we will not need to engage in the deception tactics we saw from the Liberal Government in 2013.

Promises of no cuts to health or education, and promising to fix the budget without having to make difficult decisions. What followed was the exact opposite.

It was a fantasy.

And set in motion the destruction of the Government’s political capital which left them unable to prosecute the case for much needed economic reform.

And it also means we will not need to engage in knee-jerk policy on the run to fund our commitments or make the budget add up.  This is what the current government did with the bank  tax.

A tax that was not ventilated publicly until it was leaked on budget day. An appalling display of stakeholder management and secrecy.

The take away is that the Government has been forced into making these decisions in government, because it didn’t do the hard work in opposition.

If I become Treasurer I want to stand at the dispatch box and bring down a budget that delivers what we said we would.

On the back of a mandate received from the Australian people.

An approach that will allow us to govern with more moral authority.

An approach that will allow us to govern on a no surprises basis which is good for businesses looking to invest and grow.

I am not suggesting that everybody loves all our policies. 

But I am suggesting that a business environment that craves certainty can take comfort from the fact that we have used our stability in personnel and leadership to construct a clear and comprehensive plan for government which business can factor in to its plans.
 

Now I’ll turn to energy policy. 

I raise this point second, because in all my discussions with business big and small, Australian and multinational there is one theme to my discussions: the biggest challenge facing business is energy prices and the lack of a national energy policy to engender the investment in generation necessary to put downward pressure on prices.

Of all the negative consequences of the revolving door in personnel of the current government and the policy dysfunction we have seen, the lack of a national energy policy is probably the most significant.

It is now possible for me to say, reluctantly, that is clear that the Liberal Government is pathologically incapable of delivering an energy policy for Australia.

They’ve had several attempts: the now aborted National Energy Guarantee was just the latest.

The fact is that the Liberal and National parties are too ideologically divided about the basics like whether climate change is real to be able to unite around any specific energy policy.

But in the modern day Liberal party, ideology has trumped evidence based policy.

There has been no greater failure of the Liberal Party than failing to listen to business which has consistently argued for sensible, moderate and bipartisan energy policy that aligns with Australia’s international emissions target obligations.

Electricity prices used to be a competitive advantage for Australian businesses.

It’s now a competitive weakness.

Both parties have signed up to the Paris agreement, an agreement which seeks to keep a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels.

But there is only one party that has the ability to put a policy on the table without confronting party members riven with ideology.

This is not about ideology for us.

We believe in stable policy settings to get more investment in our energy system, but we also know that our international
climate change obligations will not be achieved “in a canter” without the right policy settings.

It will be left to the Labor party to infuse some policy predictability back into this area.

We’ve already announced our objectives for emissions reductions and that we will prioritise support for renewable energy and we’ll be having much more to say about the policy framework underpinning those plans in coming weeks. 

But the fact is that a Labor Government will have unity around energy policy and a commitment to give the nation the investment certainty necessary.
 

Turning now to corporate tax, an area which has been the subject of intense political debate in Australia.

And you might be surprised to learn that in fact, Labor has a superior offering on corporate tax than the incumbent government.

The Government recently scrapping its plans to reduce the tax rate for companies with a turnover of more than $50 million, and their bring forward of tax cuts with a turnover of less than $50 million: a policy we support.  

This means that for businesses big and small, in fact the headline corporate tax rate will be the same, regardless of who wins the election.

The government also allows small businesses to instantly write off small investments that cost less than $20,000, a policy that we also support.

But a Labor Government will also have the Australian Investment Guarantee, an offering the Liberals have not matched.

Our Investment Guarantee will allow small, medium and large businesses to immediately deduct 20% of all new investments upfront, with the remaining depreciated in line with normal depreciation schedules.

It will be a permanent feature our tax system, taking it out of the yearly budget cycle, giving businesses the certainty in policy settings they need to plan and invest.

It will improve the economic return on investments for both domestic and foreign investors.

Importantly the allowance will apply to all tangible and increasingly important intangible investments.

If Australia is to remain at the technological frontier, businesses need to be investing in the most cutting edge technology.

As the Business Council of Australia said in recent weeks “The link between productivity and investment is inextricable.

Investment is low and that should be the focus of public policy”.

We agree.

We need to put in place settings that help businesses get to the technology frontier. And we aren’t there at the moment.

For example, Alpha Beta economics estimate that just 9 per cent of Australia’s listed companies are making sustained investments in automation, compared with more than 20 per cent in the United States and nearly 14 per cent in leading automation nations globally.

And McKinsey point out that investments in digitally enabling innovations “can represent the next frontier of productivity and economic uplift for Australia, with the potential to contribute between $140 billion and $250 billion to Australia’s GDP by 2025, based on currently-available technology alone”.

Our investment guarantee will help the business case for all these new investments and will help improve business productivity and boost living standards.

It’s not just me saying it.

The Australian Industry Group has said:

“The Investment Guarantee would provide a significant boost for businesses to invest particularly for longer-lived investments….. the Investment Guarantee would increase the stock of invested capital, boost the quantity of capital per worker, raise productivity and underwrite an acceleration of real wage growth”

And Morgan Stanley has said the Australian Investment Guarantee “would be a positive for listed Australian corporate cash flows”.

We understand the need to put in place policies which drive new investment, and it’s exactly what we’ll do.

We’ll have a superior tax offering for foreign and domestic businesses wanting to invest at the next election.
 

Now I’ll turn to a policy topic which is not often on the front pages, but which is of significant importance to the economy: competition policy.

Frankly, what we’ve seen in recent weeks is more attune with what we see in Venezuela, not Australia.

I don’t think it’s possible to have a policy more anti-investment than the divestment powers put forward by Scott Morrison and Josh Frydenberg.

In some countries, a divestment power is held in reserve by the courts as the most serious penalty for substantial breaches of competition law.

Divestment powers haven’t been part of the Australian competition landscape.

But what is being proposed is not a consideration of giving the courts a divestment power to be held as last resort in the most serious breaches of the law.

Rather, it is proposed that the Treasurer: not the courts, but a politician, have the power to force the divestment of an asset by an energy company if the Treasurer takes a dislike to that energy company’s approach.

At the moment, the proposal is only for energy companies, but Government MPs have already called for the policy to be extended to supermarkets and banks.

This is extraordinarily poor public policy and Labor will have no part of it.

Nothing screams ‘sovereign risk’ more than new powers for a minister to break up businesses, but that is exactly what the Liberal Party is running with.

The competition regulator chair, Rod Sims, did look at this issue in the energy sector in his report on the electricity retail sector.

Mr Sims concluded that such radical powers were an “extreme measure” and not something the ACCC would be recommending.

It actually gets worse though, because we only recently found out during Senate Estimates when we asked Rod Sims how he found out about these divestment powers he hadn’t even called for.

“I think I can confidently say Senator I found out about it when everybody else did, when I read about it in the newspaper.”

The head of the nation’s competition watchdog was not consulted ahead of the announcement of the most extreme and heavy handed set of competition powers there is.

Mr Sims went on:

“I guess divestiture is such an extreme step that we felt that judgement would be very hard to reach….but that was the judgement we reached Senator and our view hasn’t changed.”

Labor has a track record of initiating and support robust competition.  But we have resisted populist urges like the Government’s innovation chilling effects test.  The Government has sacrificed good competition policy on the altar of populism and there is every sign they will continue to do so.
 

And finally let me turn to economic growth.

Our twenty seven years of uninterrupted economic growth is a very substantial achievement for our country. 

And it is due in no small part because of reforms put in place and the economic management of previous Labor Governments, from Hawke and Keating to Rudd and Swan.

Labor is the party of economic growth: we know it lifts people out of poverty and turns aspiration into reality. It is the most effective poverty alleviation program ever invented.

But we also need a holistic plan to keep it going.  Cutting corporate tax and hoping that investment follows is not plan. 

Our plan for growth encapsulates many areas: infrastructure, connectivity and entrepreneurialism for example.

Time doesn’t allow me to touch on all these initiatives today, so I want to concentrate on two: our approach to deeper economic engagement in Asia and our investment in human capital.

A little over a year ago, I gave a speech outlining the importance of promoting deeper economic engagement with Asia to a Shorten Labor Government.

I argued that Australia needs a step change in our economic relationship with Asia.

Not tinkering, not gradualism, but a fundamental whole of government, indeed whole of nation, effort to deepen and broaden our engagement with Asia.

We need a whole of nation effort in government, in universities and across business.

We are simply not doing well enough to grab the economic opportunities in our region.

And our lack of Asia relevant capabilities is inhibiting Australia’s economic opportunities.

The recent 2018 ANZ Opportunity Asia Report highlighted for businesses potentially looking to enter Asian markets, “the biggest barriers indicated are lack of knowledge and limited language capabilities for developing business relationships”

Or AsiaLink has shown that:

In some respects, signing Free Trade Agreements is in the easy part.

But they are not sufficient to growing our export markets in Asia.

The latest Australian International Business Survey shows only seven per cent of businesses surveyed identified FTAs as a key reason for choosing their first overseas market.

This is exactly why Labor has been outlining its whole of government approach to lifting engagement in our region.

These are the foundations for enduring economic growth in these decades to come when the middle classes in our region are set to hit a 3 billion.

And just as investment in Asian literacy and engagement is ultimately an investment in human capital, our investment in education more broadly is a vital piece of economic policy.

When I meet with CEOs around the country, skills is the one issue that pops up regularly, which is why we’ve put such an emphasis on human capital.

With our commitments to:

 
The differences in our offering, our investment in human capital and skills formation and our suite of FutureAsia policies will be the key points of differentiation between the two sides of politics at the election.
 
Conclusion

So, to conclude.

When it comes to economic growth and investment, predictability and stability of policy settings are important.

What we’ve seen in recent years is a government adrift because they haven’t done the hard work.

A Government bereft of values and purpose, with increasingly damaging populist approaches as its last vestige. 

If we are fortunate enough to win the election, because of the hard work we have done in opposition we will be well placed to provide predictable and stable policy settings.

Businesses have enough to worry about and certainly don’t need a government that is jumping from issue to issue depending on which way the wind blows.

People may not agree with everything we’re doing.

We accept that.

But they know where we stand.

Which gives us an opportunity to deliver stable government.

Which is exactly what a Shorten led Labor Government will do. 
 
ENDS