Business leaders claim bold policy is being confused with good policy: Bartholomeusz

It is an indication of just how much trouble the Gillard Government is in that business people are now openly and aggressively critiquing is major “reforms”. Don Argus, never a shrinking violet, has now added his considerable voice to the list of those accusing the government of confusing change with reform.

The former BHP Billiton chairman referred to “lazy reform” in a speech to a conference in Perth this afternoon, and said he feared future generations would look back with regret that Australia’s leaders opted for the most politically expedient outcomes rather than those in the best long-term interests of the country.

The speech’s primary focus was on productivity, labour markets and taxation.

The discussion about productivity has become far more intense in recent months and has been the subject of recent speeches and commentary from Treasury Secretary Martin Parkinson and the Reserve Bank Governor Glenn Stevens. Australia’s productivity growth has deteriorated significantly in the past decade after improving significantly in the 1980s and 1990s.

Argus described productivity growth as woeful and in need of urgent attention, and said that it “certainly needed more careful consideration than throwing billions of dollars at projects which have not been risk-assessed” and whose benefits hadn’t been analysed by the Productivity Commission.

Labour productivity had, he said, halved since the 1990s and recent developments suggested a regression in labour market flexibility that could undermine future living standards.

While Argus referred to the potential to improve productivity by introducing more competition into the provision of government services and by businesses better using technology, his main theme was that even under Work Choices Australian labour markets were regarded as less flexible than many other countries.

The initial concerns about Labor’s Fair Work Act were, he said, now proving well founded and instead of bargaining between unions and employers delivering increases in productivity, his research suggested unions were resisting to achieve efficiency-related trade-offs or productivity improvements and many employers now regarded the bargaining process as successful if they managed to retain prior concessions paid for in previous negotiations.

On taxation, Argus – who chaired the government’s Minerals Resource Rent Tax policy transition group – said Australia’s corporate taxes were not low and if the tax regime continued to change and new taxes were added some projects would be delayed or not undertaken at all.

Higher tax rates shifted revenue over time from the distant future to the present, he said. Tax increases were easier to justify if the interests of political parties were focused on the present generation or the electoral cycle but the longer run negative effects of high corporate taxes needed to be carefully considered.

He took a big swipe at the proposed carbon tax, saying he had deep reservations about Australia being a world leader when it represented less than two per cent of the world’s emissions. But he also criticised the exclusion of carbon capture and storage from the $10 billion Clean Energy Finance Corporation, apparently on political grounds, and for the way in which gas had “slipped under the radar” in the debate despite, he said (citing ERM Power), delivering five times more carbon abatement than wind for the same dollar outlays, 10 times more than solar and 100 times more than the same money spent on a carbon tax.

“This example highlights just how politically expedient this government’s tax reform agenda has been. The government has rushed ahead with proposals that are simply designed to navigate the political landscape of the day, and not in the best interests of our country,” he said.

There was more, but that underlying theme of short-term political expediency producing compromised policy that would have adverse effects in the longer term is one that corporate Australia has been muttering about for some time and is now proclaiming publicly and with increasing aggression.

While there are those who have described the Gillard government as reformist – and there have been a number of big policy announcements after negotiations with the Greens and the independents – they don’t appear to make the distinction between bold policies and good policies.

The questionable quality of recent policies is not necessarily entirely Labor’s fault given that it can’t do anything without the support of the Green’s and the independents, whose pounds of flesh have tended to be both expensive and distortive.

There is, for instance, no doubt that the carbon tax package has been distorted by the Greens’ aversion to fossil fuels of any kind, hence the lack of support for carbon capture and storage and the virtual exclusion any discussion of the role gas will play in abatement, despite the reality that the Greens’ beloved renewables represent a very expensive source of abatement and in any case can’t produce reliable baseload power.

There are, of course, some measures for which responsibility can’t be shared with the minorities.

The national broadband network, if built, may turn out to be visionary, but there was no attempt to analyse its costs or benefits before tens of billions of dollars were committed to it and the stimulus packages may or may not have saved Australian from recession but the quality of the spending and execution of the programs was extremely questionable.

As Argus said, and regardless of whether the MRRT is warranted or not, using the proceeds from the tax imposed during a commodity boom of historic proportions for recurrent spending is something that deserved more critical evaluation.

Argus, having retired as chairman of BHP last year, can probably be freer in speaking his mind than most business people, not that he has ever been that inhibited.

The fact that senior business people are now prepared to talk openly and plainly about the perceived poor and compromised quality of policies flowing from Canberra, however, is an indication of both how frustrated and concerned they are becoming and of how impotent a target they now believe the government has become.

This article first appeared on Business Spectator.