Labor in power: Big business braces for the Albanese era

From bus drivers to factory workers, there are few corners of the economy that have managed to escape skilled worker shortages. And for the chief executive of food manufacturer SPC, Robert Giles, the difficulties of getting staff is compounded by another shortage: housing.

“We’re short on labour in the Goulburn Valley at the moment. It’s affecting our ability to manufacture food. So we still need access to skilled labour and housing – there’s a shortage in the region at the moment, so even as we bring workers in we’ve got nowhere to put them,” Giles says.

Businesses that relied on foreign workers have long felt the pinch, but the problem is now wider than that.

Mike Hirst, an AMP director who is also deputy chairman of Racing Victoria, points to shortages of stablehands and others in racing, while also citing the example of bus drivers. “I was in Hobart recently, and they can’t get enough bus drivers because they are all going to drive trucks,” he says.

A chorus of business leaders this week highlighted skills shortages — a long-running complaint of corporate Australia — as a top priority for the incoming Albanese government. The comments reflect a deeper economic challenge facing the new prime minister: an economy running at close to full capacity.

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With unemployment at its lowest rate since 1974 and the cost of living rising sharply, businesses face demands for higher wages from their staff. Albanese has backed a 5.1 per cent pay rise in line with inflation for those on the minimum wage, but this is opposed by employer groups, and it remains to be seen how wages across the wider economy will respond to higher inflation.

The other big issue raised by business heavyweights this week was climate change, amid hopes the election result can bring about clarity in Australia’s plan to cut emissions.

So, what does business want to see from the new government in these three key areas of skills, wages and climate policy? And how much difference might the election result have on such deep-seated challenges?

‘Crippling’ labour shortages

Well before election day, in early May, National Australia Bank chief executive Ross McEwan declared the top priority for an incoming government should be lifting the availability of labour.

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It was a view echoed across big business this week, including from Business Council of Australia chief Jennifer Westacott, who said the economy was “poised for a world-leading recovery”.

“Achieving this will require cooperation between business, government and workers, and it must start by managing the crippling labour shortages and investment drought that risk holding us back,” Westacott said.

In the campaign, Albanese argued his promise to lift childcare subsidies would improve workforce participation. He also vowed to fund extra university and TAFE places – though this will take a long time to produce more trained workers.

But the shorter-term response many business leaders want is more migration – an issue that didn’t really feature in the campaign.

Carol Schwartz, a prominent director and member of the Reserve Bank board, says the country needs to “address” the issue of skilled migration, saying she hopes migrants will want to come to Australia.

“We need to grow our economy, and I think the incoming government realises that. We’re not going to do it if we don’t have the people who have the skills who are going to enable us to perform the sorts of things we need to perform, which includes innovation, transformation and investment,” Schwartz says.

Beyond migration, many businesses realise they have a role to play through their training of staff, and policies to increase participation in the labour force, such as promoting greater flexibility in how their staff do their jobs.

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Commonwealth Bank chief executive Matt Comyn says the country needs “a better system for building skills and fostering creativity”.

“To drive faster and more sustainable growth, we must be able to rapidly train and reskill people for new jobs as they emerge, foster higher participation rates and encourage greater numbers of women to not just work but pursue careers,” Comyn says.

Debate over wages catch-up

Closely related to skills is the question of wages, which are failing to keep up with high inflation, therefore sending “real” wages backwards.

Albanese rammed home workers’ concerns about wages in the campaign, and business leaders have cautiously backed the need for higher pay. However, most are wary about specifying how much wages should increase.

“We need to grow our economy, and I think the incoming government realises that.”

Carol Schwartz, member of the Reserve Bank board

ANZ Bank chief Shayne Elliott, for example, this week expressed hope wages would “catch up a little bit,” but also warned against the risk of a “horrible spiral” in pay packets and inflation. Speaking about ANZ staff, he said wages had risen by 2 per cent to 2.5 per cent a year in recent years, and that would no longer cut it.

“Clearly it’s got to be more than that, it’s probably going to be in the 3 to 4 per cent, maybe even a bit higher. I don’t know,” Elliott said on radio station 3AW, which like this masthead, is owned by Nine.

While Albanese backed a 5.1 per cent increase in the minimum wage during the election campaign, the decision will be made by the Fair Work Commission.

In any case, market economists such as AMP Capital’s Dr Shane Oliver say a Labor government won’t make a significant difference to overall wages growth in the economy. Oliver says fewer than 200,000 workers receive the minimum wage, and like many economists, he didn’t change his forecasts for economic growth, inflation, wages or interest rates after the election result.

It’s not clear that which side of Australian politics is in charge of the country has much impact on sharemarket performance, either.

Since the World War II, the Australian sharemarket has on average performed better under the Coalition, Oliver said this week. However, he added that such comparisons are somewhat arbitrary, noting the Whitlam, Rudd and Gillard governments coincided with “severe” global bear markets, while the Hawke/Keating era was the strongest period for shares since WWII.

Clear climate policy ‘absolutely crucial’

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The other critical issue named repeatedly by corporate leaders this week was climate change policy – which Schwartz calls the “pre-eminent issue” on the minds of business people.

“This is the thing that’s precluded businesses from making the necessary investments, and also changes that we need to make because there’s been a lack of certainty around climate regulation and what that might look like,” Schwartz says.

“So I think that having a very focused and definite framework for what climate action is going to look like in this country is absolutely crucial, and I’m hoping that that’s what the incoming government is actually going to prioritise.”

Some of the country’s biggest emitters and energy users – and the banks and investors that fund them – this week welcomed Albanese’s more ambitious decarbonisation agenda, and expressed confidence the new government will be up to the job of balancing emissions cuts with ensuring security of power and gas supplies.

Ahead of a goal of “net-zero” emissions by 2050, Albanese has promised Labor will maintain its target of cutting Australia’s carbon emissions by 43 per cent by 2030, compared to the outgoing Morrison government’s commitment to a 28 per cent reduction.

Fertiliser and explosives maker Incitec Pivot, the largest commercial gas user in the country, says major Australian companies have been ratcheting up their own efforts in recent years on how to “move faster on climate change” including setting concrete targets to meaningfully reduce their carbon footprint this decade.“One of my hopes is that government policy will actually drive clarity on how they expect to move forward,” Incitec chief executive Jeanne Johns says.

AGL, whose fleet of coal- and gas-fired power stations account for about 8 per cent of Australia’s carbon footprint, has also voiced support for the Albanese government’s climate commitments.

AGL managing director Graeme Hunt says the utilities giant “shares the ambition for decisive action on climate, while ensuring affordable energy, and looks forward to working with the Albanese government to achieve this”.

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Among the financial sector, which is eyeing off a massive green investment boom, leaders are also keen for Albanese to lock in greater clarity on how Australia will achieve its “net zero” ambitions.

Paul Schroder, chief executive of $260 billion fund AustralianSuper, says investors are already putting more focus on environment, social, governance factors, and he supports a clear “transition” policy that cuts emissions while managing the impact on affected communities.

“From the election result it appears that more Australians than ever before want considered action on climate change,” Schroder says.

CBA’s Comyn says transitioning to a lower-carbon economy is a major opportunity to “reshape” the economy, and the bank will use its financial clout to support net-zero commitments.

“While we are facing a number of challenges as the country emerges from COVID, we see real opportunities to reshape the economy. The biggest is the transition to a lower carbon economy,” Comyn says.

“Australia’s natural resources provide us with the opportunity to become a global source of renewable energy and carbon offsets.”

Against these high hopes, it’s worth remembering that climate change has been one of the most divisive issues in Australian politics for well over a decade. Whether an Albanese government can change this — and meet the community’s high expectations — remains to be seen.

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