Business News’ CEO survey has unearthed strong views on the turbulent 12 months just gone, while also offering some timely advice to our political leaders.
Business News’ CEO survey has unearthed strong views on the turbulent 12 months just gone, while also offering some timely advice to our political leaders.
See what CEOs are predicting for business.
And what they want from our politicians.
IF ‘challenging’ best describes how business leaders in Western Australia feel about the year just past, then ‘uncertain’ sums up the mood for 2015, as the downturn in mining investment and commodity price falls flow through the state’s economy.
More than 60 CEOs provided Business News their insights on current business conditions.
The news wasn’t all bad, however, with predictions of strong performances to come in health and agriculture, while many firms will use the opportunity of a softer labour market to reduce costs and lift productivity.
There was no shortage of policy prescriptions served up, either, with tax reform, red tape reduction, industrial relations reform and economic diversification all featuring prominently, while the federal government’s focus on trade agreements was also a winner with business leaders.
Diversification
There was agreement among CEOs surveyed by Business News on the need to move the state away from its reliance on mineral and energy resources, particularly iron ore.
Deloitte managing partner WA Michael McNulty said the state needed to build on its strengths while extending to focus on agriculture, higher education and tourism, where he said it had a competitive advantage.
Agricultural exports from WA were just less than $7.6 billion last financial year, lead by wheat, canola and sheep products.
Education and tourism were the state’s two top services exports.
Larry Jorgensen from Wines of Western Australia said while the state had been very fortunate its mining industry had sheltered it from the GFC, there was a need to diversify economically.
“I would like to see a sustainably profitable agribusiness sector (of which the wine industry will be an important part), a successful manufacturing sector focused on market segments that cannot be easily replicated, an even more successful tourism industry, and an innovation sector that provides new ideas and products for all the above to monetise and bring to market,” he said.
Executives were also in favour of building and capitalising on the state’s human capital, whether through major scientific projects, or exporting resources industry knowledge globally.
IT Vision chief executive Nigel Lutton said he could see no reason that the world’s next Silicon Valley, Large Hadron Collider, or major biotechnology centre should not be in WA, while Allen & Overy managing partner Geoff Simpson said the state had the opportunity to become the global centre of excellence, expertise and development for the resources industries.
This would mean the state’s universities and other centres would export resources industry knowledge, lessening the reliance on the physical resources themselves.
But Mr Simpson agreed that other industries would be key contributors to help WA move away from the hard commodity cycle.
“(It’s) also important we make best use of our natural advantages and position our tourism industry and agricultural industries to be more important contributors,” Mr Simpson said.
“The Australian dollar coming off should help that and some other sectors.”
FTAs get nod
The state’s business community is excited about the opportunities globalisation presents, with a desire for a focus on industries where WA has a competitive advantage.
David Reid of David Reid Group, Mr Jorgensen, and Michael Heath of St Ives Group all felt recent FTAs presented opportunities for their industries.
Trade and Investment Minister Andrew Robb signed three FTAs in 2014, with China, Japan and South Korea, while a further agreement with India is under negotiation.
KordaMentha partner Cliff Rocke said while many were predicting a busy year ahead for his firm, he was cool on any benefits flowing from the FTAs, in the short term at least.
“I don’t think the resulting benefits will be seen soon enough, let alone be sufficient,” he said.
Tax reform
WA business leaders are also keen to participate in the national debate on tax reform, with the total burden, the complexity of the system and the reliance on specific taxes all raised as problematic.
Chris Galvin, who heads Galvin Engineering, was among those most forthright in his views on the need for reform.
“We need to increase the GST to at least 15 per cent to provide the government revenue needed for health, education, transport, safety, etc, and to decrease the reliance on income tax, and a whole lot of other very inefficient and very hard to manage taxes like CGT, FBT, state taxes/duties and royalties,” Mr Galvin told Business News.
This echoes a December report by the OECD, which said Australia was over-reliant on direct taxes and should increase the GST by 50 per cent or more.
The business leaders surveyed by Business News also said payroll tax needed to be cut, indicating that increased GST revenue could potentially be linked to state payroll tax reduction.
About 40 per cent, or $3.8 billion, of the state’s taxation revenue this financial year will be raised through payroll tax, but the government delayed plans to reduce payroll tax in its most recent mid-year budget review.
The tax is set to come under more scrutiny as many businesses turn to cost reduction, particularly in their workforces.
Labour and productivity
Deloitte’s Mr McNulty said the difficult market conditions that would extend through much of 2015 meant a continued focus on productivity and efficiency would be critical.
Swan Chamber of Commerce chief executive Sandra Wallis said WA needed a rationalisation of the gap in wages created by the resources industry, (and a) flow-on effect to bring overall costs down.
Business leaders again highlighted that good government policy could lift some of their burden when it came to cost reduction, preferring lighter regulation to reducing employees.
Quick Service Restaurant Holdings chief executive Rob Coombe said that, as one of the state’s biggest employers, labour reform was among the top of his firm’s wish list, and urged the federal government to address the issue.
“Unskilled labour costs and awards run the risk of the nation losing its global competitiveness,” Mr Coombe said, adding that the Labor opposition should offer bipartisan support for reform.
QSRH employs more than 2,000 people in the hospitality industry.
Red tape reduction
The burden of compliance wasn’t just limited to labour markets, however, with mining magnate Gina Rinehart among those who called for regulations to be cut.
“Politicians spend time talking about productivity but the biggest time waste for many projects and small businesses is time lost on costly and time-consuming over-regulation and complicated taxation,” Mrs Rinehart said.
“I constantly hear as patron of small business, from small businesses that government paperwork and compliance is crippling, keeping them up at night, or into the early hours.
“This cuts into margins and can be the difference in small companies between keeping staff or letting them go in tough times.”
Leadership
In terms of political leadership, above all, the state’s business leaders are looking for federal and state governments (and oppositions) to lift their game.
Raw Hire chief executive Byron Smith said the federal government needed to sort out the budget and create an economic and social plan to get consumer and business confidence going, while SwanCare chief executive Graham Francis said Mr Abbott should “continue making the hard decisions”.
Opposition leader Bill Shorten didn’t escape unscathed, with Variety WA chief Michael Pailthorpe suggesting he “drop the negativity, (and) be supportive of reform that is good for Australia”.
IT Vision’s Mr Lutton was more forthright.
“Pass the baton of leadership to somebody else who has a hope of inspiring leadership, change, innovation and a chance of winning the next or a future election,” he said of Mr Shorten.
Read the responses from our leaders below:
Colin Barnett
Premier
What are some of the big decisions you made in 2014 that you are most satisfied with?
A highlight for the Government in 2014 was the Anzac Centenary commemorations in Albany —a fantastic program of events that well and truly put Albany on the map and cemented its place in history by forging the nation’s character. The completion and opening of the Fiona Stanley Hospital was another key achievement. It is the first tertiary hospital built in this state in more than 50 years and is a major boost to healthcare in metropolitan Perth. From a personal point of view, the appointment of Kerry Sanderson as Governor was a highlight.
What can you see ahead for WA business in 2015?
2015 will be a year of consolidation, both in the private and public sector. It won’t necessarily be a year of austerity but I don’t expect a surge in new private investment in WA so it will be about productivity improvements. I believe the fundamentals of the WA economy remain strong.
What are the key decisions you anticipate having to make in 2015?
In 2015 my focus will be on diversifying the economy: value-adding in the resources industry, making sure our agricultural sector is in a position to capitalise on growing demand in China and Asia for our products. A key role for the State Government will be continuing our progress in reducing red tape across all sectors.
What is your vision for the State and what is needed to maintain our lifestyle?
WA is still the best place in the country to live. To maintain our lifestyle we need consistent Government, stable employment, and a modern capital city.
What are some of the big decisions you made in 2014 that you are most satisfied with?
A highlight for the Government in 2014 was the Anzac Centenary commemorations in Albany —a fantastic program of events that well and truly put Albany on the map and cemented its place in history by forging the nation’s character. The completion and opening of the Fiona Stanley Hospital was another key achievement. It is the first tertiary hospital built in this state in more than 50 years and is a major boost to healthcare in metropolitan Perth. From a personal point of view, the appointment of Kerry Sanderson as Governor was a highlight.
What can you see ahead for WA business in 2015?
2015 will be a year of consolidation, both in the private and public sector. It won’t necessarily be a year of austerity but I don’t expect a surge in new private investment in WA so it will be about productivity improvements. I believe the fundamentals of the WA economy remain strong.
What are the key decisions you anticipate having to make in 2015?
In 2015 my focus will be on diversifying the economy: value-adding in the resources industry, making sure our agricultural sector is in a position to capitalise on growing demand in China and Asia for our products. A key role for the State Government will be continuing our progress in reducing red tape across all sectors.
What is your vision for the State and what is needed to maintain our lifestyle?
WA is still the best place in the country to live. To maintain our lifestyle we need consistent Government, stable employment, and a modern capital city.
Lisa Scaffidi
Lord Mayor of Perth
What are some of the big decisions you made in 2014 that you are most satisfied with?
The year was so busy but I would suggest some of the stand out things were:-
Changes to building height and setback controls were introduced across large parts of the city, following gazettal of Amendment No. 26 to the City Planning Scheme No. 2. The changes included removing maximum building height controls in selected areas of the city. Instead, maximum building heights are now indirectly controlled through plot ratio, street building height and setback controls.
- Smoking was made illegal in the Malls and Forrest Place, creating healthier and more appealing spaces in the City’s prime retail precinct. Council also decided to trial mobile food vans in parts of the city from February.
- The Council endorsed a partnership with ISPT for demolition and reconstruction of the Forrest Place upper walkway, clearing the way for redevelopment of the Forrest Chase retail complex which will be a very important for the city retail sector.
- The Council put considerable effort into making the case for a stronger capital city as part of the local government reform process. However, our well-researched submission to the Local Government Advisory Board to expand into parts of Burswood, Subiaco and Vincent was rejected. It would have led to better planning coordination. We were pleased with the Premier’s subsequent decision to create capital city legislation which should go some way to achieving our aims.
- The City of Perth and the Metropolitan Redevelopment Authority (MRA) signed a Memorandum of Understanding to guide co-operation and planning for areas of the city being redeveloped by the Authority.
What can you see ahead for WA business in 2015?
Indications would suggest it will be a tough year for our economy. The State Government is dealing with the deficit (AAA credit rating loss) and unemployment is on the rise. Economic conditions and lower commodity prices impact on investment and this can have flow-on effects for city businesses and service providers. Its important for our competitiveness that greater efficiencies are achieved and customer focus and service delivery are given top priority. And that applies to local government as well.
For us in the City we are working hard to we hope achieve a City of Perth Act that will give Perth the capital city legislation it has sought for decades. The meetings are on and we are keen to show our vision which is bold.
What are the key decisions you anticipate having to make in 2015?
Undoubtedly, making sure that Capital City legislation meets the needs of our growing city for years to come will require strategic and responsible decision-making. It’s important that the legislation is properly drafted, not rushed, and that City of Perth, City of Vincent and other key stakeholders have meaningful input. We will do everything we can to ensure that happens. Combining the finances, staff and other resources of the two local governments will have to be well managed. City growth presents many challenges and it’s important that the Council makes decisions that ensure growth is as sustainable as possible.
In 2015 the process of handing over MRA assets to the City will begin and will likely take several years to complete. This includes assets associated with Elizabeth Quay, Perth City Link and Riverside which the Council will ultimately be responsible for managing.
What is your vision for the State and what is needed to maintain our lifestyle?
We are on the west coast of a strong (top 20 world economy) island continent but also on the rim of the Indian Ocean and equally "in the zone" (TM) looking North to Asia so Perth and the City of Perth can capture, capitalise and benefit all citizens (for all local governments throughout the State).
Across business and the community, we are in a position to harness the benefits of sharing ideas, innovation, technology and research across a multi-dimensional cultural and commercial landscape.
Managing movement around a growing city is vital as it helps people meet, trade and participate. In doing so safely and with ease they are providing well for the human capital behind the industry sectors that are being encouraged to flourish. This in turn drives services and other opportunities and through that comes improvement and renewal, while we maintain our highly regarded liveability. It’s a win-win cycle that can survive and flourish for subsequent terms of State Governments and Councils.
Taking advantage of these opportunities requires new forms of interaction with the world on our doorstep, across sovereign borders and cultural boundaries, and an appetite for partnering with, attracting investment from, and learning from this dynamic region of the world that we fortunately find ourselves in.
Getting the narrative right can propel our city forward in ways will ensure not only a robust, sustainable future but that will empower our citizens, attract the right investment and create more opportunities because people will see the energy and commitment is enhanced via the interconnected approach. We can demonstrate via effective government at work, astute planning and considered decision making that we are a city to take notice of.
Future generations are finding themselves in a world that is smaller than it used to be due to globalisation, technology, economics and the sheer pace of change. This is making viability and relevance very significant and those cities who don’t recognise this are going to be less attractive and competitive, A city that is smart, connected, vital, ready for business and culturally aware will win in the big city stakes and be seen as one who is leading through having a good local focus with international vision.
We are at a very special place in time and must seize the opportunity to bring a sharper focus on Perth when we are only 14 years out from our 200th anniversary of being founded and known as a city. Our bicentenary in 2029 should be a celebratory time as we note our significant achievement of having gone from being a Swan River Colony to a world liveable city of some 3.5 million. With a recognised brand, enviable life style and world class industry sectors that are viewed globally as being best practice and leading edge, it is our responsibility to keep them that way and maintain conditions to ensure continued growth.
