Company directors say ‘we must do better’

| April 7, 2018

In 2017 the Australian Institute of Company Directors released a comprehensive blueprint for the nation’s future, which included recommendations across six key policy areas to help improve economic and social outcomes for all Australians.

The AICD has now released a report card marking progress towards achieving these reforms.

AICD Managing Director & CEO Angus Armour said that at best, the nation’s progress could be summed up as ‘must do better’.

“Last year we put forward a suite of recommendations that would boost productivity and prosperity. Among these were constitutional reform, comprehensive tax reform, a fit-for- purpose regulatory regime to encourage innovation, and a de-regulation agenda to support our vital NFP sector,” he said.

“Unfortunately, progress has been slow or non-existent. Despite a year which saw unprecedented focus on the need to modernise our constitution and national governance, momentum for change seems to have been lost.

“As for the NFP sector, if our business sector faced the same red tape and regulatory burden as our charities and NFPs continue to endure, there would be uproar.

“Elsewhere, it’s essential that industry and government work together to prepare for disruption and build the jobs of the future.

“Focusing on the long-term is a key element of good governance. The reality is however we need commitment and action now if we’re going to set Australia up for a prosperous future.”

AICD Chief Economist Stephen Walters said the greatest focus for the political class and others ahead of the next election needed to be on securing Australia’s fiscal future.

“The Government should be commended for making progress towards budget repair. However, Australia’s fiscal position remains unsustainable,” he said.

“It’s time to stop tinkering around the edges and deliver a real plan for our financial future. We need to have a discussion that is much broader than imputation credits or company tax alone.

Mr Armour said the AICD has a diverse membership of more than 41,000, who are collectively responsible for millions of jobs and billions of dollars in investment.

“That’s why we’re serious about advocating for and achieving change that’s in the national interest. This isn’t a job for government alone, collectively we have a responsibility to help deliver change.”

National Governance – Overall Grade: C-

Constructive conversation began on extending Parliamentary terms, but COAG continues to underperform and trust in business remains low.

Fixed, 4 year terms for the House of Representatives = C-
Review the Federation to clarify roles and accountability = D
Reinvigorate COAG with a forward reform agenda and independent secretariat = D
Leadership in governance standards and practice by Australian directors = C

Fiscal Sustainability – Overall Grade: C

Some progress towards Budget repair, but comprehensive tax reform remains off the agenda.

Fiscal restraint to reduce Commonwealth expenditure to pre-GFC levels as a percentage of GDP = C+
Comprehensive tax reform, incorporating:
• Lift the GST rate to 15% and broaden the GST base, with targeted compensation = F
• Significant reductions in personal income tax rates = B
• Incentivise states to remove inefficient taxes = D
• Reduce the CGT to 40% = C
• Review negative gearing and the nexus with the CGT = C
• Reducing the Corporate Tax Rate = C

Innovation – Overall Grade: B+

Safe harbour laws and the firm push back against protectionism are worthy achievements.

Push back on protectionism to support an open, export-orientated economy = B+
Develop a regulatory environment to better foster innovation = B+
Boost Australia’s innovation system, prioritising collaboration in R&D and targeted skills = B-

Human Capital – Overall Grade: C

Welcome resistance to changes to immigration laws and rising female labour participation rate.

Further workplace system reform to simplify the award system and improve IR regulation = C
Increase workforce participation by women, including in governance and leadership roles = C
Expand Australia’s focus on education and skills training, including STEM and VET = C
A non-discriminatory immigration program with a strong skilled migration stream = C-

NFP Sector – Overall Grade: C

Slow, but positive, progress on regulatory consistency, but funding challenges and duplication remain.

Set best-practice target of five-year funding cycles with 12 months’ notice = C
A ‘fit for purpose’ regulatory environment with nationally consistent definitions = C

National Infrastructure – Overall Grade: C+

Treasurer’s positive position on borrowing offset by ongoing infrastructure governance faults.

COAG commitment to a 15 year infrastructure plan = C+
Careful distinction between “good” and “bad” government borrowing = B+
Funding of infrastructure = C+
Boosting private sector infrastructure investment = C

The Australian Institute of Company Directors has over 40,000 members, including directors and senior leaders from business, government and the not-for-profit sector.

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