Time for a business ideas factory
Business has to build a constituency for change and once that has happened it should come to the government with proof it can work with good polling results from reputable pollsters.
It comes to this task with a distinct advantage. The 100 or so companies that are members of the BCA employ more than 1 million people. Chief executives of these companies have the power to build momentum for nation-building ideas.
Far-sighted companies can pass on to government the lessons learned from the millions of day-to-day interactions they have with the domestic and global economy.
Business is at the forefront of the mega-trends changing society including dealing with the convergence of technology, entertainment, finance and data analytics.
CEOs and boards of directors know we are heading into several decades of disruption that will have winners and losers. Australia can be a winner in a world where success is about intellectual property and not exporting commodities to China.
Big policy ideas
Business can champion the big policy ideas that should flow from dispassionate analysis of the winning strategies, which are capital-light and rely on a highly skilled and flexible workforce. Winning business models churn profits into research and development instead of paying out 70 per cent of earnings as dividends.
CEOs can pass on to politicians the lessons learned from facing up to the challenges posed by the increasing power of hyperscale cloud computing operators such as Amazon, Microsoft and Google.
For example, there are clearly sovereign risks from our big four banks having about 80 per cent of their cloud storage with two companies.
A change in the business lobby’s strategy for engagement with government would be a tacit recognition that the political class no longer has the appetite for the extremely hard work involved in economic reform.
The last truly reform-driven election was John Howard in 1998, which asked for a mandate to introduce the goods and services tax (GST).
Both sides of politics appear to have lost sight of former prime minister Paul Keating’s mantra that a politician’s job is to explain the future to a fearful and sceptical electorate.
Prime Minister Scott Morrison’s key message at the weekend was the opposite of this. He essentially said stick with me for a risk-averse, business-as-usual approach. Opposition Leader Anthony Albanese said much the same.
From advocacy to ideas
The economic reforms needed to put Australia on a better path have been well-rehearsed and, in most cases, have been well articulated in study after study. Tax reform is a case in point.
The Australian Financial Review’s idea that the next government conduct a rapid-fire review of the country’s tax settings is a good one.
It could explore the implications and second-order impacts of a higher GST and the opportunity it presents to lower income taxes for lower tax bands. A review could examine the implications of ending the free rides from negative gearing and capital gains tax discounts.
The review could ride off the back of the states which favour a move from stamp duty to broad-based land taxes that capture the super profits earned by Sydney harbourside house flippers. Also, it could explore the benefits from implementing the world-leading innovation incentives found in Israel.
Business could back this Financial Review taxation probe with unique research analysing customer data. This could help policymakers understand how to best compensate poorer Australians hit by a higher GST.
Energy is another obvious area crying out for policy reform. It would benefit from business being at the vanguard of exploring new ways of looking at carbon reduction strategies.
Ideas worth exploring include increased government investment in a smart energy grid to accommodate more renewables, and intervention in the gas market on the eastern seaboard to secure lower domestic gas prices.
It is obvious we need to put a price on carbon to stimulate private spending on energy efficiency and electric cars. Business research into the upside from such a change would not only help frame the debate, but it could also reinforce the good sense in rational decision-making.
A switch from advocacy to ideas by the business lobby could allow realistic exploration of truly radical propositions that can never be debated as part of the current political process.
A good case in point is the idea pushed by Microsoft founder Bill Gates for the use of small modular nuclear reactors. There are about 18 SMRs operating in the world.
It is strange and more than slightly hypocritical that Australia has the largest uranium resources in the world and exports the raw materials for nuclear power but has ruled out being a beneficiary of the ore.
Understanding the economics of controversial options such as nuclear power make sense when the government settings arguably have Australia on the path towards a worst-case scenario on climate change with possible catastrophic consequences.
Other radical ideas that could be floated and explored by business, or business-funded think tanks, are a review of the federation and the possibility of removing a layer of government. That could be part of national simplification and alignment of all administration between states.
The concept of business contributing to the national debate in a nonconfrontational way appears to underpin the funding of an independent inquiry into the COVID-19 pandemic.
The inquiry is led by former senior public servant Peter Shergold, who was secretary of the Department of Prime Minister and Cabinet from 2003 to 2008. It is being funded by the Minderoo Foundation, Paul Ramsay Foundation and the John and Myriam Wylie Foundation.
Who knows, maybe ideas generated by this and other private sector initiatives can one day help a politician develop a reform agenda that resonates with Australians.