Australia’s lure will last only as long as its reform – The Australian Financial Review

I was speaking to a friend of mine who employs hundreds of people in Silicon Valley and he said that he did a simple survey of his staff in the United States asking, who would like to move to Australia? and more than half put their hand up, Frydenberg tells The Australian Financial Review.

The level of recognition Australia has attained across the world for our performance on the health and the economic front as well as the opportunities it creates is very significant.

Frydenberg says these opportunities are perfectly timed to deliver genuine reform in the key area of skilled immigration and domestic skills matching.

We have work under way to identify those opportunities. We have departments that have come together to look at a whole range of issues that affect Treasury to immigration to state governments. The goal is very clear, he says.

I have spoken to state Treasurers. I recently met with the new CEO of Rio Tinto Jakob Stausholm and I told him about this idea of attracting the best and the brightest.

Ultimately, in the long run, human capital is even more important than working capital, Frydenberg says.

Prime Minister Scott Morrison has left no doubt that skills reform over and above tax reform will be the likely key target for productivity improvements and long-term economic growth prospects.

Building the scale, capacity and skills of our workforce, I believe, is the single greatest economic challenge our country faces, Morrison said at The Australian Financial Review Business Summit last week.

It is why we established JobTrainer and are working closely with the states and territories to develop a new and reformed National Skills Agreement.

The chief executive of Wesfarmers Rob Scott along with plenty of other corporate leaders have suggested the reforms need to be wider and deeper.

Regulation and delays, outdated state taxes, difficulties with enterprise bargaining agreements all impact the future risk of projects and this outweighs the benefits of the short-term cost of funding, Scott told the Business Summit.

The chief executive of Australias biggest diversified property developer Mirvacs Susan Lloyd-Hurwitz has also been asking whether Australia can accelerate the silver linings of COVID-19.

Can we leverage the spirit of co-operation to together solve the global challenge of climate change? Can we maintain collaboration between government and business to drive a sustainable job-based recovery?

We cannot afford to slip back to the older, unsustainable ways of doing things. I am hopeful that we can take the opportunity to recast the nation into a better version of itself.

Frydenberg defends the efforts made so far and those efforts marked in the governments diary.

Reform is a never-ending task, Frydenberg says, There is no starting point, and there is no finishing line.

What we have shown through the pandemic is that we can simultaneously respond to the immediate needs of the community with targeted temporary economic support, including significant regulatory changes while at the same time putting in place longer term structural reforms.

The work weve done on micro economic reform with the digital platforms, the changes we have made to insolvency law, the improvements weve made through super, the tax cuts including the abolition of a full tax bracket are all structural reforms.

Before parliament now, the Morrison government is trying to push through reform that seeks to cut back onerous regulations on industrial relations and responsible lending obligations. These will be key tests for how realistic any federal reform will be this year.

With respect to industrial relations reform, weve been opposed every step of the way, Frydenberg says, Even after extensive deliberation between employer and employee representatives, something as simple, as important as extending the life of enterprise agreements as they apply to Greenfield sites has been opposed by Labor.

The reforms may not have to be the big bold ideas of floating the currency, introducing a Goods and Services Tax or striking an accord between workers and employers.

Productivity Commissioner Michael Brennan has said that the future of productivity gains will be more likely to come from a thousand smaller reforms than one big reform.

For all the success of past waves of reform, the future economic policy agenda will necessarily look a bit different. And it wont be helped by nostalgia or pessimism, Brennan has said.

It is likely that the bigger challenge for the Australian economy today is one of dynamism: the capacity to generate new ideas, products, business models, production techniques and diffuse them quickly through the economy.

There are dozens of suggestions; a further simplification of income taxes, more competitive rates of corporate tax, potentially even a business cash flow tax to replace the GST; broader based GST; reforms such as replacing stamp duty with land taxes as NSW has proposed. Road user charge to replace fuel excise, motor vehicle registration fees and stamp duties on motor vehicles, exemptions from tax all scholarships, pensions and other government transfer payments.

Then there are ideas around permanent incentives.

In the October budget the Morrison government offered 3.5 million businesses with turnovers of up to $5 billion to deduct the full cost of eligible capital assets in what is called the business investment allowance.

It has started working fast.

The Business Council are now pushing for the allowance to be much more broadly based so that companies with turnover of more than $5 billion will be allowed to participate. The BCA also wants to make the allowance cover digitisation-type spending, which doesnt necessarily fall within traditional notions of business investment.

Opening the allowance up to greater digital investments is something the Treasurer is conscious of.

There will be new opportunities for Australia, on the other side of this crisis, the way we work, the way we shop, the way we communicate,is changing with the the rollout of new technology, and the adoption of technology through this crisis, and it has been so much faster than would otherwise have been the case, Frydenberg says.

The likelihood of people travelling interstate for one meeting will reduce as they use the Zoom call, the likelihood of people working from home is going to increase as people get comfortable with those new settings. And the likelihood of people moving to the regions where theyre digitally enabled will increase.

We have undertaken a lot of work to enable the digital transformation across the economy. We announced a number of new initiatives before the budget, he says.

Frydenberg likes to point out the governments reforms in the digital space should encourage businesses that there will be clearer regulatory path for businesses navigating the rapidly advancing technologies.

Its also the competition reforms, the micro economic reforms that we announced in the context of big tech and the digital platforms. This was world-leading economic reform based on more than three years work by the ACCC.

The approach that we adopted is similar to our approach in other areas of reform.

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Australia's lure will last only as long as its reform - The Australian Financial Review