Let AI boost productivity and growth, business leaders urge against 'over-regulation' || Insiders: On Background

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Well, we're about to find out exactly what the government plans to do with its supersized majority.

The reform roundtable getting underway from Tuesday is easy to dismiss, and plenty of critics on both sides have already written it off.

Some of those who are hungry to see serious reform fear this will just turn into a talkfest that produces nothing.

Good ideas left in the bottom drawer.

On the other side, the coalition reckons it's all a stitch-up, the carefully choreographed and cunning plan to deliver a union agenda that will only further damage productivity.

And maybe the critics on both sides are right.

But maybe this is a moment when a government, in a far more comfortable political position, and with the worst of the cost of living crisis in the rearview mirror, interest rates are now coming down, maybe the government can pick up on some good ideas at this roundtable and show some courage.

Maybe We'll see.

The Prime Minister has played down any sudden moves on tax.

He wants to maintain trust with the electorate.

No major surprises so soon after winning this mandate.

Any major tax changes?

Look like they'd only be taken to the next election.

But on a whole bunch of other areas, it looks like we could see more immediate action.

We've already heard a fair bit from the union movement over what they want to see at this roundtable.

I'm keen to hear what business wants, what are they putting forward, and what are they willing to accept to get the economy moving in a more productive fashion.

I'm David Spears on Ghana Country in Adelaide this week.

Welcome to Insiders on Background.

Andrew McKellar is the head of the Australian Chamber of Commerce and Industry.

It's Australia's largest business network covering small, medium and large firms.

He'll be at the roundtable.

Andrew, welcome.

Great to be with you, David.

So look, what's on the top of your wish list for this roundtable?

What would you most like to see come from it?

Well, I think it's a great opportunity.

Obviously, we are pleased to be participating.

We commend the government for taking this initiative.

There's a huge imperative there.

And I think recognition that we do need to do something to address the productivity challenges that we have in the Australian economy, I think that's the first step.

We want to see an ambitious agenda for reform.

There are some things that can be done in the near term.

And then, of course, there's a much longer longer-term agenda that will require

a stronger consensus and ultimately will probably require government to spend some of its political capital.

But I think the first step is recognising the need to do it.

So, for us, we'll be coming with some practical ideas.

We do put things like regulatory reform at the top of the agenda.

There are a number of areas we'll focus on there.

Business investment, capital deepening, that's critical to the productivity equation.

and maybe we have to do something in tax if we're going to address that.

And the other area I think is technology.

How do we make the most of things like artificial intelligence?

We can't tie it in knots.

We can't hold it back.

It is a huge opportunity and ultimately business thinks that it will be job positive.

So let's get on with it.

Well there's a bit to explore in what you've just said there.

If dealing with regulatory red tape is top of the agenda for you, give us an idea idea of those ideas that you're going to put on the table.

What's the red tape you would cut first?

Well, a number of areas, and I do think the first area we would point to would be housing and construction.

So I think that ties in with a couple of

challenges that we face.

Obviously, there's a lot of talk about housing affordability, housing crisis, the opportunity for young Australians to be able to get into the property market, to get on that

bottom rung of the property ladder and move up through their career and through their life.

So the idea being talked about is freezing any changes to the construction code, which has grown and grown over the years.

This was talked about in the election.

I think Peter Dutton wanted to do this.

Labor said, no, this would end up with all sorts of building problems if we didn't have

a thorough construction code.

But now it sounds like Labor is going to move on this.

How big a problem is the construction code as it is and the prospect of further additions to it.

Oh, look, it's an important part of the puzzle.

So, the construction code, the National Construction Code, it's now out to about 2,000 pages of detail attached to that.

There's about 165 standards that are applied.

When you put all of that together, that's about 70,000 pages of regulation.

And that's even before you get to the impact of planning approvals, the building approvals process, environmental approvals that apply at a state and local level.

That's before you get to the issues of occupational licensing,

skills requirements, all of those things.

So we think there's a rich vein of opportunity there.

It is an area that involves federal government with that national approach

equally state governments and their planning laws and local governments.

governments.

So really it's all three levels of government.

But it shouldn't take, it shouldn't take, in some cases, you know, 10 years or more to get a land release, land development, all the approvals that go with that, to start construction,

to get to the point where you're ready to put the key in the door.

We think there should be really one approval for one home.

Once you've got that initial land approved for residential construction, you should only need to get one more approval after that.

And the timing of that process, shortening that, making it quicker to get to market.

That's That's the only way we're going to address housing supply, and that's a fundamental part of the affordability equation.

Yeah, when you talk about the difficulties with speeding up housing approval, environment laws are a big part of this as well, but not just housing.

With the renewables rollout, we know the environment laws have slowed things down as well.

The government tried in the first term but couldn't push through the changes that were talked about.

Where are you at now on the environment laws and the idea of setting up an EPA in Australia.

Is there scope for consensus on this?

Well, look, I think there is scope, and I guess the signals that we're getting out of government,

working very closely with the new minister in that space, Murray Watt, I think there's a practical recognition that we need to strike an appropriate balance.

The EPPC

is not achieving its goals in terms of environmental protection, so it needs to be focused more closely on that.

But at the same time, we're seeing major projects which are being held up.

They're not proceeding.

It took what was it, six years or more to get the expansion of the North West Shelf project through.

That was an existing project.

It should have been able to be done much more quickly.

of the

processes that have to go through.

Well, exactly.

And I mean, and these things are absolutely critical to the vision that's there in terms of the energy transition.

So were you willing to give on this?

Would you accept an environment protection authority or agency, an EPA, that does have enforcement powers?

Is that something you'd be willing to accept?

Look, I think we're going to have to look at those issues closely.

I think we'll be very cautious about handing over a remit to an authority like that without some pretty clear parameters.

So I think let's step through the discussion next week.

I think that's an indicator of the value of having that discussion because you'll have a number of different perspectives at the table.

But I guess what I'm asking is to fix this problem, couldn't be fixed in the last term, problems got worse.

Is there a willingness on the part of a business group like yours to give a little more ground on something like an empowered EPA?

Look, I think we're going to be very cautious about that because I think once you hand over those powers, there's no clawing it back.

We've got to get the basic fundamentals right, and I think we're still at that point before we see the shape of how that's going to be implemented in practice with a regulator with significant powers.

Okay, well, let's talk tax.

As I mentioned at the outset, the PM is signalling he's not going to do anything major, no big surprises just after winning an election.

You know, he's not about to jack up the GST or knock out negative gearing.

These things might be looked at, you would think, down the track, might have to go to the next election.

What do you think of that approach?

Is that fair enough given politics is what it is, or do you think there should be more immediate and major steps on tax taken?

Well, I think we have to have a comprehensive

approach to tax reform.

It's been a while since we've seen that attempted.

Of course,

back in the

end of the first decade of the 2000s, we had the Henry review.

I mean that was a comprehensive review.

It laid out a roadmap with a lot of

you know

very

fundamental reforms in the end it was most of those ideas have sat behind the

they're still on the shelf so look I think there are things that we've got to come back to and here you know we would tie this back into what's the fundamental objective and and we do come back to productivity so the most urgent thing we would say that needs to be looked at if you're going to shift the needle

is business investment capital deepening, this challenge of capital deepening.

If we are not getting investment at competitive levels, then we're really not getting the productivity outcomes that we need.

You do need more capital to augment

the labor that is out there in the economy.

So how do you do this?

I mean the Productivity Commission came along with an idea

on changing the company tax structure, much lower company tax rate for most businesses, those under a billion dollars, and get a 20% company tax rate, then you'd introduce a turnover tax.

But groups like yours have said no to that.

Well, and look, as we've consulted and spoken to many businesses through the economy,

the practical difficulties

of implementing what's been put forward in that interim report, and it's fair to note it is only an interim report at this stage.

So I think the

Commission has the opportunity to take stock, go back, look at whether that is the best recommendation.

But the thing here is you've got an idea about lowering company tax,

the company tax rate, but it's got to be paid for somehow.

So how would you pay for lowering the company tax rate?

Well, and look, to be clear, I mean, we have said that lowering the company tax rate is a priority.

I think there are other ways to do this, and there are other options that can be on the table.

What's your idea there?

I think in across the board,

investment allowance is one of the options that should be contemplated.

Certainly in the discussions we've had with other business groups that may be more cost effective in the short term.

You may get a bigger bang.

So rather than a company tax cut, a investment allowance across the board?

Well that I think is an option that should be canvassed next week and we are talking to other business groups about what that would would look like at a minimum, at an absolute minimum, things like the instant asset write-off, which at the moment applies at a very small level down to an investment maximum claim of about $20,000,

and it applies really only to small business.

You could expand that.

You should make it a permanent feature of the tax system.

So I think

there's a layer of taxes.

You've got to pay for this stuff.

Does the government have a point saying, you know, it doesn't just want people coming to the table and saying, give us all this stuff that's going to help us, but no idea of how to pay for it.

I mean, what would these sort of things cost, and where do you find that money?

Yeah, well, look, and I think this is why you need a comprehensive review of the tax system.

If you're going to take piecemeal measures, then, of course, you've got to look at what are the savings options that are on the table.

Do you feel you have any obligation to come to the table with one of those options to say, here's how we should pay for the thing we really want?

Yeah, and we do.

And in our submission, we've made the point.

The government doesn't have a revenue problem.

It has an expenditure problem.

In the current financial year, we're looking at

total payments, government payments pushing up towards 27% of GDP.

That's true.

So

are you putting forward a proposal to cut spending in a particular area?

Is there something you can identify to say here's how we pay for what we want?

Yeah, well, look, I think there are a number of areas

where further reform is required.

We did see the government grasping the nettle last year.

They made reforms to the NDIS.

They made reforms to aged care.

Those are areas which are growing rapidly.

There are other areas of expenditure which need to be looked at.

But are you saying

further into the NDIS and aged care to pay for the business allowance that you're calling the investment allowance?

I think

there are some obvious targets there.

The reforms to the NDIS were important, but that area of expenditure is still growing at 8%.

We've got a target rate, 8% growth in NDIS.

I think common sense tells you that's not sustainable.

So we do have to look at how we make some further areas of consolidation in government expenditure.

No one's pretending that's easy.

I don't for a moment.

Well, that's the thing.

I mean, that's the reality, isn't it?

Can the government really stand up and say we're going to hack into the NDIS for people with a disability to give business a tax break?

Well, I think the question here is: you know, it is a great initiative.

It's a fundamental reform in the economy, the NDIS.

So I think that's there to stay.

But we have to ensure that it doesn't stray from its original intentions.

I think everybody knows that that has been the case.

There's been some cost shifting that's occurred at different layers in the economy.

So I think there are still further challenges.

And it's not just NDIS.

There are other growing areas of expenditure.

So that has to be on the table.

And I think this is one of the things with what the Productivity Commission recommended in its recent report.

I mean they kind of made a rod for their own backs because

they wanted to have a closed loop just within company taxation and honestly that is not going to work.

No you'd rather find the money from the NDIS.

Just a couple of other things.

The road user charge looks like we will see some steps towards finding a way for electric vehicle drivers to contribute.

Of course they don't pay fuel excise.

With more people driving EVs, there's a need for change here.

It looks like there is going to be some movement.

Are you in support of moving to a road user charge system, however that might look?

Look, we're very open to looking at those sorts of reforms.

It's been talked about for a long time.

We need to have an effective

signal in terms of future infrastructure investment, particularly around our road network.

It's a vital part of our economy.

And we know that revenue sources like fuel tax, they're not growing.

There are now significant parts of

the tax base there which are now outside the net with more electric vehicles in the network.

And that's only going to grow.

So

it's a problem.

It's not just a revenue problem.

I think this is about sending the right market signals or the right price signals to users

in the system

that are impacting on the infrastructure.

We need to be able to support that critical infrastructure for the future.

So we do need a new model.

I think there needs to be a proper examination of what that should look like.

And if there's support for it next week, then I think that's something that positive that government can take on board and move forward with.

And artificial intelligence that's on the table for these discussions.

Look, it's already with us.

You'd know this better than most.

Businesses are all rushing to apply it as best they can.

We're seeing it in the health sector as well, education,

certainly journalism, all sorts of areas.

There are fears around our creative content.

We know authors, musicians, writers, and so on have been concerned about their intellectual property being ripped off by AI.

They don't want any changes to the Copyright Act.

But more broadly than that, from what you said in your opening remarks,

you don't think there should be too many guardrails around the use of AI across the economy to try and deliver more productivity?

Look, I think here

we are broadly aligned with the sorts of comments that we've heard from the Treasurer in this space.

We do see huge opportunity with artificial intelligence.

We think it will be a boost to productivity and to growth.

So if we want to lift some of those constraints on the economy in the future, then it makes sense that we've got to ensure that we can take that up rapidly.

A big step is ensuring ensuring that business understands the opportunity, they're managing the risks, but they're not running into constraints when they're trying to apply it.

So, what we don't want to see is we don't want to see some of the proposals that have been put forward by the union movement, by the ACTU, about very heavy-handed regulation with AI stewardship or co-design or implementation

plans that have to be worked up and agreed and signed off in triplicate before you can download the latest

update of one of these AI

platforms or agents.

But I guess at the other end of the scale, I mean, how do employers think about how AI can be adopted in their businesses?

Should it be okay to replace workers with AI for admin, data entry,

the sort of things that AI can do very well?

Should employers be free to replace workers if AI can do the job more efficiently?

Well look, I think the ultimate situation is going to be that AI will create more jobs than it ends up ultimately better.

Well ultimately that's exactly right.

So of course there are going to be parts of jobs

which can be

made more effective,

where you won't have to take up time with data entry or other processing tasks and things like that.

So we think it'll deliver

better quality jobs for the future.

Of course, the areas where that's likely to occur

are in parts of the knowledge economy, whether that's in accounting or financial services, whether it's in

public administration, whether it's in areas like healthcare.

And for some of those firms in those sectors, if it means a smaller workforce and using AI as a more efficient way of doing the job, but less staff, are you saying they should be free to do that?

Well, of course, and that's always been the way.

Now,

we would say, you know, let's not focus on the negatives and the downsides.

Let's look at where the smart new jobs are going to be that will pay more, that will have higher productivity.

If you want to end up

with higher real wages, you've got to have that productivity.

That's just a fundamental link.

So let's not focus on the scare campaign or the negative side of this.

Let's focus on where the opportunities are.

Let's not hold people back from jobs that will be more satisfying.

Well, just give us a sense of that.

I mean, look, people are going to be worried if jobs are being cut, clearly.

Where are the jobs being created by AI at the moment?

Where's the glass half full to look at here?

Oh, sure.

Well, look at the sorts of forecasts that groups like the Tech Council have put forward.

They've said we will need, between now and 2030, we'll need about another 200,000 people in the tech sector, with knowledge of, with IT knowledge, with knowledge of applications as to how to roll out this technology and make the most of it, you know, with some of those fundamental skills.

So, you know, they're saying that they'll need to move from around 900,000 people working in that sector currently up to

over a million, 1.2 million people, something like that.

So

they're pointing to the fact that there are going to be significantly more jobs in that sort of space.

We think that's an opportunity and we should seize that opportunity.

Well, there's lots to discuss

over the coming days at this roundtable.

Andrew McKellar, really good to get your thoughts ahead of it all and good luck with it.

Great.

Thanks, David.

Well, if you have any thoughts on this conversation, do drop us a line at insiders at abc.net.au.

We'll be talking more about the roundtable on the show Sunday morning, 9am ABC TV.

PK, back in the Feed with Politics now on Monday, and we'll be back towards the end of the week wrapping up what has been achieved at this roundtable.

See you there.

You're making us all feel very excited about being here.