Additional Comments by Coalition Members

Additional Comments by Coalition Members of the Committee to Improve Australia’s Economy

Introduction

A strong economy requires a diverse and dynamic business environment.

This inquiry sought to investigate and promote economic dynamism, competition and business formation. The Terms of Reference specifically noted a focus on anti-competitive behaviour, business consolidation and economic barriers which all have potential to negatively impact productivity and wages and contribute to anti-competitive market structures and increasing costs.

At a time when Australians and Australian businesses are experiencing cost of living pressures, the findings of this Inquiry are more critical than ever before.

Improvements to Australia’s competitive environment, such as more efficient supply chains, reduced regulatory barriers, appropriate regulatory frameworks and flexible employment arrangements, may help to address high inflation and falling productivity.

The Coalition Members of the Standing Committee on Economics note the Inquiry’s Final Report and make the following additional comments.

Opposition Comments

The Coalition Members of the House Standing Committee on Economics were pleased with the process of the Inquiry and the information obtained on a diversity of issues (including productivity, market concentration, competition and regulation) across a range of sectors (including mining, banking, aviation, digital platforms and retail).

Over a six-month period, the Inquiry received 61 submissions and interrogated almost 100 witnesses at public hearings held in major cities and regional locations, including Toowoomba which is located in the Deputy Chair’s electorate of Groom in Queensland.

Productivity

• In relation to Chapter 2 Paragraph 1 (The opportunity for higher living standards), Coalition Members note the following:

• The “persistent decline in Australia’s productivity performance” (p. 3) is an accurate reflection of the current environment.
• Productivity has fallen by 5.4% in the past 21 months under the Albanese Labor Government. Contributing factors include red and green tape, new taxes, market interventions and onerous approval processes.
• Productivity is a key factor in economic growth and long-term prosperity is impossible without increased productivity.
• Increased productivity comes from working smarter – not longer – and using all the tools at our disposal to make our workplaces more effective, efficient, and innovative.
• With a continuation of this Government’s policies of additional regulation and Government interference, the findings of this Inquiry, and its recommendations, will be futile in achieving a dynamic business environment.
• Australia’s lost dynamism is reflected across many economic indicators including wages growth and productivity growth.

• There are many underlying reasons for this loss of economic dynamism. They include rising risk aversion, increased uncertainty (including over government policy), dwindling foreign investment (and inbound talent), a rigid and heavily regulated labour market, a heavy burden of tax and regulation, dwindling market competition, declining trust in institutions, and unaffordable housing (Business Council of Australia, 2023).[1]

• Unfortunately, this government is undertaking to implement policies that hurt Australia’s productivity performance, including:

• A poorly managed migration system that is increasing pressure on the housing market, increasing rents and making housing unaffordable.
• Intervention in the energy market that has cost the taxpayer billions, hurt investment and failed to reduce energy prices.
• Rushed, poorly designed and unbalanced workplace laws that have added red tape for businesses, removed flexibility for workers and imposed new powers for unions that will lead to further economic harm, such as experienced with the DPWorld shutdown.
• Higher taxes and broken promises that are reducing the incentive for Australians to invest and are undermining confidence in the consistent approach of the Australian Government, including in relation to franking credits, superannuation and personal income tax.

• Productivity is fundamentally connected to industrial relations, and each impacts significantly on the other.

Industrial relations

• In relation to Chapter 4 Paragraph 97 (How to improve conditions for new-entry businesses), Coalition Members note the following:

• A key area for reform, expressed by the Tech Council, was “an industrial relations system that upholds the rights of workers while enabling flexible forms of employment that can deliver better productivity and wage outcomes”.[2]
• Industrial relations reform is without a doubt one of the most important of all the economic reforms required to make Australia more productive and competitive and to ensure all Australians enjoy greater prosperity.
• A modified industrial relations framework should not add cost, confusion and complexity at a time when households and many businesses are struggling to pay their bills. We do not ease the cost burden on people by making life harder for business, nor do we drive productivity by tying businesses up in red tape.
• An industrial relations framework must be designed to improve productivity, grow wages, and enhance competition. However, the myriad of reforms undertaken by the Albanese Government have isolated employers and peak employee groups.

• Recent changes to industrial relations, including the restoration of multiemployer bargaining could lead to increased disruption and a less innovative and dynamic economy (Business Council of Australia, 2023).[3]

• The Minerals Council of Australia gave evidence during the Inquiry that labour hire workers are necessary to ensure surge capacity for variable production industries such as mining, and that recently introduced Industrial Relations legislation undermines a dynamic business environment:

• A dynamic economy relies on very dynamic arrangements across that economy to accommodate industries. We have seen two tranches of legislation that have sought to address issues. The government has gone well and truly beyond what they explained was a problem, as a starting point, and this applies much more broadly than just to labour hire. It reaches and extends, virtually, into any situation where a business provides a service to a contractor or another business, from major project teams across businesses and not just the mining industry; it goes to small business and to administrators. The government said that this was supposed to apply to limited circumstances, and it doesn't. It certainly creates barriers to rewarding workers for hard work and experience… it undermines enterprise bargaining arrangements, overrides agreements that are in place (Minerals Council of Australia, 2023).[4]

• The industrial relations system in Australian needs to be easier for businesses to navigate, promote employment and support people to start and run successful businesses – particularly small and family businesses. It should promote fairness, underpin decency and enable flexibility. A genuinely fair workplace relations system must be pro-employment, it must be small-business friendly, and it must be flexible to respond to both the needs of employers and employees.
• The current set of draconian reforms, based on an ideological agenda and introduced by the Albanese Labor Government, do the opposite and are making life more difficult for industries, businesses and families.
• The lack of consultation prior to the Industrial Relations legislation being finalised is another serious concern, and has been noted by the Minerals Council of Australia and the Council of Small Business Organisations Australia:

• The minister saying that he's consulting doesn't mean that he actually has listened to the whole business community (Minerals Council of Australia, 2023).[5]
• The Council of Small Business Organisations Australia is hugely disappointed the Government has rammed through significant elements of its latest industrial relations changes (COSBOA, 2023).[6]

• Australia needs a modern workplace relations system that delivers a safety net for workers, recognises the shared interests of managers and workers in an enterprise’s success, and gives all enterprises the agility they need to compete and succeed.

‒We need to allow workers and employers to come up with smart ways to increase incomes for both businesses and employees too. This is how you drive productivity and growth.

‒We need to decentralise decision making to employers and employees – the opposite of what the Albanese Labor Government has done. They are centralising decision making to the Fair Work Commission and handing power to unrepresentative unions.

‒We need a system that empowers agreement between employers and employees – not one that encourages disputes and fights in the Fair Work Commission.

Regulation

• In relation to Chapter 2 Paragraph 46 (Regulation), Coalition Members note the following:

• Regulation can significantly enhance or reduce economic dynamism, especially in the banking sector.

• Banking customers… need a vibrant, dynamic and innovative retail banking market…. high regulatory costs hurt consumers because resources are diverted away from investment in product innovation, better service, and better pricing (Customer Owned Banking Association, 2023).[7]

• New regulations mean that businesses must negotiate the mine field that has been created by the union-backed Albanese Labor Government. This minefield makes it harder for small businesses to survive and grow and create more jobs.

• Australia has become a more difficult place to do business. There is burdensome regulation and paperwork required across, and even within, governments (Business Council of Australia, 2023).[8]

• It would be useful for the Government to address the unfair funding advantages of the major banks and develop policies to address regulation and lower housing funding costs for customer owned banks.

Inflation

• In relation to Chapter 2 Paragraphs 85 and 90 (The impact of inflation), Coalition Members note the following:

• Inflation is a problem in Australia and increasingly inflationary pressures are home-grown. Increasing government spending by the Albanese Labor Government – with at least $200 billion in additional spending over the last 22 months – is fuelling inflation.
• Inflation is running at 4.1 per cent and is persistent and well above the target of two to three per cent.
• Australia’s core inflation is 4.2 per cent, higher than the US, Spain, the Netherlands, Germany, Singapore, France, Italy, South Korea, Canada, Japan and the entire Euro Area.
• During the Albanese Labor Government’s term, the Reserve Bank has met on 19 occasions, increasing rates 12 times and keeping them on hold seven times.
• Inflation is putting significant cost pressures on households and businesses: food has gone up 9 per cent, electricity up 20 per cent and gas up 27 per cent.
• Australia is in an entrenched GDP per capita recession, a consumer confidence recession, and we are experiencing the slowest two quarters of consecutive GDP growth in almost 18 years outside of the pandemic.
• Inflation continues to be a key concern.
• Chapter 2 Paragraph 85 notes “there was no clear evidence about the effect on competition of the higher inflationary environment that Australia has endured in recent times” and Chapter 2 Paragraph 90 notes the rejection of ‘greedflation’ by the Productivity Commission. However, this fails to reflect the reality that limited price competition, in areas such as grocery retailing which is dominated by large organisations with significant buyer power, does have some impact on food price inflation.[9]

Other

• The Coalition Members of the Standing Committee on Economics note that the Albanese Labor Government announced on 11 March 2024 that it will introduce a financial sector regulatory initiatives grid.
• It is disappointing that this announcement was made prior to adoption and tabling of the report from this Inquiry, and prior to the Government’s formal response to the report.
• Under the Albanese Labor Government, Australians have experienced a collapse in their living standards - with no plan to reverse it.
• Real household disposable income fell 2.2 per cent over the past year - and is down 7.5 per cent since Labor took office.

Conclusion

The Coalition Members of the Standing Committee on Economics thank all Committee members for their participation and contributions throughout the course of this Inquiry, and also thank the Committee Secretariat for their professional support of the Inquiry.

The Coalition Members also note the considerable time and effort of all witnesses and members of the community that developed and provided submissions, attended hearings and provided witness evidence.

Footnotes

[1]Business Council of Australia, Submission 3, p. 15.

[2]Tech Council of Australia, Submission 32, pages 12-13.

[3]Business Council of Australia, 2023, Submission 3, p. 10.

[4]Ms Tania Constable, Minerals Council of Australia, Committee Hansard, 31 August 2023, p. 7.

[5]Ms Tania Constable, Minerals Council of Australia, Committee Hansard, 31 August 2023, p. 7.

[6]COSBOA media release, 7 December 2023, https://www.cosboa.org.au/post/rushed-ir-changes-bad-for-small-business

[7]Customer Owned Banking Association, Submission 33, p. 2.

[8]Business Council of Australia, Submission 3, p. 11.

[9]ACCC, Submission to the Senate Select Committee on Supermarket Prices.