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The chief executives of more than 100 multinational corporations are growingly reluctant to invest in Australia, according to a report in our national broadsheets this morning.
The confidential survey was conducted by Australia’s CEO Forum Group, and found more than 60% of those surveyed said there was more uncertainty surrounding their investments than a year ago. The fear for Australia is that some corporations are considering shifting their Australian subsidiaries to Asian nations. The survey found 45% of respondents said they were less likely to invest in Australia than they had been a year ago.
Our federal government minority position in the parliament hasn’t stopped from legislating bold laws that will affect the bottom line of many corporations. Not all these projects are bad for business. But with the opposition pledging to roll back many of them, the uncertainty surrounding such initiatives can make life hell for leading companies. For global executives, who can have a range of countries to ramp up or ramp down efforts in, this can make Australia more trouble than it’s worth.
Of course, we’re not expecting our elected representatives to always get along. An oppositional opposition is one of the greatest strengths of the Westminster system. It ensures government policies are properly vetted from all angles before they are implemented. But it also makes things pretty uncertain at times, especially when policies take years to implement and are not easily reversed.
Here are five reasons global executives are right to be worried.
1) The carbon tax
The most controversial policy introduced by Julia Gillard’s Labor government has without doubt been the carbon tax.
A levy on Australia’s biggest polluters, it’s designed to incentivise their shifting away from high-polluting activities in a bid to combat climate change. Investing in greener technology is expensive. A tax on dirty business makes green technology relatively less so.
But despite its logic, there’s no consensus over the carbon tax. Gillard said before the last election she wouldn’t be introducing a carbon tax, and her decision to go ahead with one has been seen as a betrayal of the electorate. The Coalition says repealing the carbon tax will be its first priority upon winning government.
For many businesses, this leaves them in an impossible situation. They can invest in their operations now to make them less polluting to the environment, and pay less under a carbon tax. Or, they can sit on their hands, pay more for a few years and hope a Coalition government repeals the tax. Either way, they lose money, though it’s not clear how much.
It’s hardly the certainty needed to prompt investment in our economy.
2) The national broadband network
As much as many business leaders complain about the carbon tax and industrial relations, it’s hard to find many who will speak out against the NBN.
All businesses benefit from fast, reliable internet, but improving broadband infrastructure is too big an investment for anyone but the government to undertake.
The government has pledged $36 billion to roll out high-speed fibre-optic cable to homes (and it is already going beyond its budget). The price tag has the Coalition worried.
"If you want to cut spending, look at the NBN," said opposition leader Tony Abbott in 2010. "Not proceeding with it could save billions of dollars."
The Coalition has softened its policy in recent weeks. In July, shadow Communications spokesman Malcolm Turnbull told Fairfax that a Coalition government wouldn’t cancel the $1.8 billion in contracts already signed to deliver the NBN. But that’s a long way from guaranteeing to continue to build the $36 billion network.
3) Industrial relations
Our industrial relations (IR) framework is vital to business. It determines how they can hire and fire, the conditions they have to provide, and the likelihood of having to fund wage increases.
The current government overhauled the previous government’s WorkChoices legislation, which provided great flexibility to employers in managing their workforce. In its place, it introduced the Fair Work Act, which established a tribunal to mediate between employers and employees. The government has just released the results of an independent report that found, overall, the Fair Work Australia system was working “as intended”.
But business leaders aren’t happy. A recent survey of chief executives by Business Spectator found 82% thought the Fair Work Act had been bad for productivity, and 60% said their own company was worse off because of it. And the CEO Forum Group survey reported today found many executives were concerned about the industrial relations system in Australia delivering unsustainable wage increases that weren’t reflected in productivity gains for the business.
The Coalition was burnt by the unpopularity of WorkChoices in the 2007 election, and is avoiding making IR an election issue. But will the party push for changes if it gets into government? It’s anyone’s guess, but we recently spoke to Melbourne University industrial relations expert Peter Gahan, who said he thought the whole issue was too highly charged for even the Liberals to touch in the next few years … but that doesn’t mitigate the uncertainty.
4) The mining tax
Some businesses love the mining tax because the two-speed economy is making life hard. Others (small miners) don’t like paying it.
Miner Fortescue Metals Group has launched a High Court challenge to its constitutionality, and it’s the Coalition’s current policy to scrap it.
A lot of foreign investment in Australia is about mining. Love it or hate it, the mining tax puts off foreign investors from joint-ventures in the industry. Mining projects take years to come to complete, and it’s even harder to plan ahead when you don’t know if there’ll be a special tax on your industry or not.
5) Maternity leave
If current polling holds out, Tony Abbott will remain Coalition leader in the lead-up to the next Federal election. He has a radical plan for maternity leave (which not all in his party agrees with).
At the 2010 election, Abbott took a scheme to the electorate for 26 weeks of paid maternity leave for Australian women. Who would have paid? Big corporates. Abbott proposed a 1.5% tax on the profits of Australia’s largest 3200 companies to fund the $2.6 billion scheme.
There are possible societal and economic benefits to the policy, but it’s unlikely to make many leaders happy. They can add it to the other big taxes they may have to pay in coming years.