Beverley Head
November 20, 2017

Westacott on our sleepy future

The Establishment

Westacott on our sleepy future

Jennifer Westacott: 'Innovation' focus has been too narrowly focused on geek culture

After 26 years of uninterrupted economic growth, Australian business is asleep at the wheel warns Jennifer Westacott, chief executive of the Business Council of Australia.

Unlike other nations which were prodded into reformation by the global financial crisis, Australia has lolled on its laurels. Ms Westacott said the nation was at a “pivot point” and needed to “shake ourselves out of that slumber and get our act together on tax, get our act together on regulation, on the technology infrastructure that our economy needs, and on making our people really skilled.”

She said that the BCA’s “Philosophy is that economies thrive when businesses thrive, and particularly when big businesses has leads in the supply chain thrive.”

However with regard to the Government’s innovation agenda Ms Westacott said; “The thing that has frustrated us constantly in this debate is that innovation is often confused with invention, and also confused with pure technology.

“Digital technology alone isn’t recognition of huge innovation happening in the enterprise end of the economy around process, around supply chains, around workforce, products and services as well as technology.

"The focus on the geek economy is not very helpful, because it also alienates a very large part of the community because they don't see themselves in that world.”

If the impact of innovation was better conveyed she said it might get more traction, but that many people remained concerned about how automation might impact workers’ jobs.

“Your job will change and our job as employers is to manage that transition and the job of governments is to manage the skills and education system to interface with business so people have access to opportunities to upskill.”

She added that while the BCA was happy to work with unions it was folly to expect traditional contracts and industrial structures to persist. The Unions aren’t however anchored to old industrial models, many are already exploring new structures and strategies to guard against worker exploitation in the emerging gig economy.

According to Ms Westacott; “I'm happy to work with the unions, but not on the traditional structures because that won't work and people won't want to do that. These choices are being made by people, not by corporations.

“Every Uber driver I drive with I ask how long have you been doing this why are you doing this – and many of them say ‘it gives me great flexibility – I do this from 7-10 during the week, I'm studying or doing this other job’.”

“People will demand these other employment structures, and we need to make sure that we don't try and solve this important problem by putting up barriers to that and put up traditional occupation structures – because that activity will go further under the radar or go somewhere else.”

The BCA worries a great deal about business going elsewhere. It has of late has been particularly exercised by tax and skills issues; it likes Donald Trump’s 20 per cent tax target, and it wants to shake up education and training in Australia.

According to Ms Westacott; “Australia has incredibly high integrity in the tax system. The major companies 12 companies pay 30 per cent of all of the corporate tax.” (The Establishment spoke to Ms Westacott just before the release of the Paradise Papers, a trove of 3.4 million documents which revealed the extent to which some organisations and individuals will go to reduce their tax bill.)

“Certainly the BCA wants the corporate tax rate to drop. While pleased the Government has pledged to reduce the corporate rate to 25 per cent, the decade that will take is too long, and the rate is still only at the OECD average. “It would not take us to anywhere near best practice,” said Ms Westacott.

“Our frustration is that we see countries across the world – the US is now talking going to 20 (per cent) the British at 17 – even the French talking about lowering their rate, and the Asians on average are at 22 [per cent].”

She said serious innovation will only come from capital deepening after tax returns.

“Innovation drives productivity, productivity drives higher wages, the only way you can do that is to drive innovation.” There has however been a decoupling in recent decades between productivity and household income, so the causal link between productivity and higher wages is already eroding.

She acknowledged that the conversation with the community about lowering corporate taxation can be difficult but maintained: “If we want to drive a more productive economy with higher wages we have to drive innovation and so much of that is linked to investment.”

Productivity is also aligned to access to skills and the BCA wants a rethink there also.

The Commonwealth Bank’s jobs and skills report released earlier this month, and penned by futurist Ross Dawson notes that fully half of survey respondents do not believe young people have the skills they need to succeed in tomorrow’s workforce.

But it also posits that they might not get those skills through orthodox education means. It notes that “formal degrees and diplomas will continue to be important in the future, however they will be less necessary. Algorithms are increasingly able to analyse data about your work and study to indicate your capabilities in a work environment often better than a formal academic qualification can.”

It suggests the rise of shorter “nano degrees” to build specific domain knowledge rather than the broadbrush learning of a degree or diploma.

The BCA wants a similarly radical overhaul of adult education where people are provided with a lifelong skills account that they can tap for university or VET training so that they can quickly update themselves.

“If the skills and training and education system isn't good enough to do that then people will not be able to get new skills quickly and companies will have to insource that and that adds cost to the economy,” said Ms Westacott.

“I want people to be able to access this lifelong skills account for the rest of their lives ...to say ‘I need this module from university x, or this VET,’ and a credentialling system so the employer is confident to say ‘I am sure that person has solved that competency problem’.”

The BCA is not advocating employers foot the bill for the ongoing reskilling that innovation demands, or even manage the training – it instead sees that as an individual worker responsibility – but it is prepared to do some of the lifting in term of identifying the impact of innovation and the skills people might need.

Cindy Hook, CEO of Deloitte , who chairs the BCA’s Skills, Education and Flexibility Committee is leading a project exploring the impact of innovation and automation on Australia’s skills landscape that might provide some clues.

“We are also tapping into the Alphabeta work where they talk about tasks. Some of these are good stories where tasks that people don't want to do that are repetitive and not rewarding get replaced by artificial intelligence and robotics. It’s potentially a good story if we can maintain employment, productivity and wage growth,” said Ms Westacott.

She also wants companies’ regulatory burden reduced. “Companies need much more agility to adapt and they have got far too much regulation.

“If you cannot quickly turn your business model around you can't get ahead of that transition, if you can't renegotiate your enterprise agreements fast you can't stay ahead of that, if you can't take up new technology quickly, you can't get licences quickly, can't get your products to market fast.

“In the world we are talking about you are not going to do as well as you could.”

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