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Tuesday, 28 October 2014
Page: 12218


Mr HUSIC (Chifley) (12:25): I also wanted to echo the remarks of the chair, who extended thanks to the colleagues and to the secretariat as usual. I sometimes remark that questioning the RBA at these hearings is like quizzing the Sphinx: you don't really get much out of them and you're left to sustain yourself on a few grains of sand! But there were a few things that emerged out of that last hearing and also a pattern that is emerging across hearings.

I go to what has been observed at these hearings. Back in March the RBA noted two things. First, growth in wages is at its lowest level since records began within the RBA in 1997. Second, the governor observed at our March hearing that the gap between costs and price is widening because profit margins have gone up. Some other observations have made along the way about the weakness of consumption and high level of savings. Fast forward to this hearing, and we have had the governor provide a long list of reasons why now is the time for business to invest and not to be so narrowly intent on sustaining dividend flows and returning capital to shareholders. This call to invest was done because the RBA through bank liaisons observed an unwillingness of business to dedicate itself to investment until business detects sustained demand. This has prompted the RBA to observe an absence of what it called 'animal spirit' or confidence to add to the stock of physical assets. It is clear the RBA is concerned because, as they noted, the level of gross investment within some sectors right now is barely above depreciation rates for capital.

Let's draw those threads together: lowest level of wage growth, consumption barely growing and savings levels at solid highs. On the other hand there are profit margins lifting, investment hardly growing and dividends and returns to shareholders picking up pace. Some of this is not new; we can dig up stats comparing wages versus profit share of GDP and see that wages really have not been the winner in that contest for some time. But it is clear there are concerns that people's costs of living are not really being matched by growth in wages, and that is causing considerable discomfort in the broader community, which makes it the worst time to slice support for families or other groups through what we have seen in the budget.

It is hardly any wonder that consumer and business confidence is taking a hit and it is hardly surprising that business will not invest due to lack of sustained demand. Those linkages are not hard to draw. The test for government is to engender confidence in the broader community to ensure business can start to detect the type of demand it believes the RBA has detected will trigger investment decisions.

Another comment made by the RBA at its hearing, principally through Deputy Governor of the RBA Dr Philip Lowe, attracted quite a bit of interest, specifically where he said:

If we are going to sustain ourselves there, people need to be able to take risk … and we need to innovate to find new ways of doing things better. I think it is about somehow enlivening the entrepreneurial, risk-taking and innovation culture so that we can be the type of country that has high value-added, high wages and high productivity

This is not a new message from the RBA. It has been nudging business for some time on this front. In fact, earlier in the year its CIO, Sarv Girn, was highlighting the need for business to be prepared for and accommodate disruptive technology.

Both the Leader of the Opposition and the shadow Treasurer have highlighted that a challenge for our economy is to harness innovation to drive future growth, and we have been particularly mindful of finding ways to—paraphrasing Dr Lowe—enliven entrepreneurialism. Technology start-ups within our nation best embody that attribute of enlivened entrepreneurialism, and we do need to promote a stronger, more conducive investment environment.

While the government's recent innovation statement finally addressed reform of the employee share ownerships program, a process commenced under the former government, it has walked with leaden feet in other areas that can help these start-ups. Notably, it has failed to meaningfully respond to calls for the reform of the regulatory environment around crowdsourced equity funding, which will provide access to valuable, much needed capital for start-ups. While numerous ministers have suggested they are big fans of this platform, we have hardly seen a response to the Corporations and Markets Advisory Committee report proposing a new way ahead for this funding platform. It is a comprehensive, well-researched report probably taking a conservative approach to future regulation for CSEF. I also wonder whether having Treasury manage that response will slap a further layer of conservatism to the CSEF regulatory framework, but in due course you would hope to see a formal response from the government.

For now, I am very mindful that the sector is demanding from the government a formal statement on where it is at in developing the framework, because people are seeing colleagues leave Australia, heading to New Zealand because there is a more accommodating regulatory environment there. Again, if we want that enlivened entrepreneurialism that the RBA has called for, we need to put a framework in place to encourage it. It is now up to the government to get its act together to deliver that for them. I commend the report to the House.