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G20 Business Summit/B20

2014 B20 Briefing

Richard Goyder, chair, Australian B20 Leadership Group, and Robert Milliner, sherpa
Sydney, July 16, 2014

Unofficial transcription by Madeline Koch,
co-editor, G20 Australia Summit: Brisbane, forthcoming from Newsdesk Media
[Responsibility for typos rest with the author. Facts should be checked with the B20 for accuracy.]

Robert Millner

Good morning, it is great to be here. This is a major milestone in the B20 process this year. Richard will talk more about some of the things we're going to do over the next two days. I'll give a brief background on the B20 and process for this year.

The B20 has only been part of the G20 process for a short period - over the last five years. It doesn't have a permanent secretariat and changes in structure from year to year as we move the presidency from country to country. This allows a degree of vibrancy into the dynamics and we tried to build on the great work of Russia and Mexico to drive in the value that the B20 can provide the G20. The role is to lead engagement of the international business community with the G20. B20 brings together international and domestic business groups, multinationals, regional and national businesses either directly or indirectly through local business organizations, to focus on issues across the G20 countries. We have tried to drive an inclusive and multistakeholder approach to get deep understanding across the G20 and input from all countries.

The B20 offers a real economy perspective and delivers real practical recommendations. The B20 was first convened just before the summit in Toronto June 2010. So it's only five years in the making.

This year we've organized it through an Australian leadership group chaired by Richard, comprising 32 organizations including firms and business associations, under the auspices of the previous and current governments. In terms of our role, in St. Petersburg at the G20 summit the challenge to the leaders was to put decisive action to return the global economy to a strong sustainable growth path.

In January at Davos the PM committed to focus the Australian presidency to promote strong economic growth and make the global economy more resilient to global shocks. The February meetings of finance ministers and central bank governors built on this with members pledging to drive collective GDP by 2% above trend over the next five years. That's the most important target: an early target, clearly defined outcome.

The PM at Davos said the challenge facing all countries was to promote sustainable and private sector led growth and employment. If countries don't foster private business they do not work at all. These comments don't imply a business friendly environment. They show that business plays an important role in the global economy. Recent work by the OECD over the last two quarters has emphasized the need for global growth. This will require the co-operation of the world's developed and developing countries. The global financial crisis in 2008 showed the world needs a stable multilateral economic system. That's what we're focusing on this year.

Richard Goyder

Thanks for coming to the most significant gathering of business leaders in Australia ever. We have around 400 delegates commencing this afternoon. It's a significant event that we hope will make a real contribution to increasing economic growth around the world and therefore increasing jobs.

When the Australian leadership group got together over 12 months ago we said let's bring a pragmatic Australian approach to our chairing of the B20 through the process Robert identified. Let's through that pragmatic approach have an absolute focus on delivering policy recommendations that can deliver higher economic growth around the globe and as a consequence more jobs. Everything we've looked at as been through that prism of more growth and more jobs. Why? Post the global financial crisis, where the G20 did a terrific job in co-ordinating actions to that crisis, the world has experienced anemic growth and in some places negative growth, and as a consequence there are significant employment and labour issues. How does the person in the street understand the importance of the B20 and G20? Simply, it's about jobs. I'm the father of four children, two in the workforce, one in university who will get a job when he finishes, and one most likely to go to university and get a job — because we live in a country with an economy that has had relatively high growth and has opportunities for people, with an open trading economy. I can't imagine what it's like to be a parent in Spain, where too many people face the prospect of no or under employment for a sustained period of time. Economic growth solves a lot of issues.

Early on we said that's our focus but lets also take the opportunity to showcase Australia as a business location and partners in business. The sun is going to shine this afternoon and we'll have wonderful weather, and we're well set up.

Australian B20 leadership group took the decision to narrow focus of the B20. We focused on four areas: trade, infrastructure, financing for growth and human capital. We also had a working group on transparency and anticorruption that crosses all areas. A narrower focus with fewer actionable pragmatic actions is what the leaders will want in Brisbane in November. That's being supported by the ambition of the finance ministers set by Hockey in February of 2% additional growth over next five years.

So we focused on those four areas. We've had David Thodey leading the taskforce on infrastructure, Michael Smith on growth, Steve Sargent on human capital and Andrew Mackenzie leading trade taskforces. There are more than 300 participants on those task forces from business around the world. We had the CEO forum, which will meet tomorrow morning and met in London last November with 120 leaders, where we've tested our thinking and recommendations over the 12 months. We will see how the next two days unfold, but Robert and I are struck by the unanimity of views from business leaders that the key things that business desires from the G20 to generate growth and jobs. We've seen this as two-way thing, not putting our hand out to government to say you need to implement these policies, but saying if you implement them then business will invest and generate jobs. Business is a big part of the solution we're looking for.

That's how we're focusing things. We'll hand our recommendations and debate them over the next day or so and on Friday afternoon we'll hand them over to the PM, treasurer and trade minister who have been strongly engaged in this process since day one, since Australia took over the chairmanship of G20 from Russia. I will not go through the recommendations yet because we have some work to do on prioritizing.

The themes that the B20 is looking at are structural flexibility, free movement across borders, consistent and transparency regulation and transparency in how business is done. Those will be the key themes of our recommendations when we submit them.

I'm confident the recommendations, if implemented by G20 countries, will lead to economic growth, whether that's in trade infrastructure, how finance flows and how we address the issues around flow of human capital. The challenge we have post this week is to ensure there's an advocacy program that means these things can be delivered out of the Brisbane meeting in November and that there's progress through the finance ministers and central bank governor meetings, in Cairns in September and in Washington in October. After this week we will have a strong advocacy program, and one of the advantages of having all these CEOs here this week is that we expect the simple messages we have will make them able to go home and pass these messages on to the political leaders in the G20 countries. I'm confident the trade and finance minister are doing what they can to make sure their goals are met.

Rob will be on his bike again soon after this week again to [continue this advocacy].

We have had strong support and co-ordination from the G20 sherpa, Heather Smith, and from government and also strong interaction with the other 20s: Labour 20, Civil 20, Think Tank 20, Youth 20. We've engaged strongly and well with each of those groups to ensure that issues each of those groups have raised are in our work.

We have a function tonight to kick things off. The PM will speak tomorrow morning. Great speakers. There'll be conversations with task forces and then prioritizing the recommendations and then we'll submit them on Friday afternoon to the PM and treasurer.

Questions and Answers

Q: Business is still on the nose around the world, maybe not in Australia but in Europe and North America, still being blamed for everything. You're focused on a pro-market agenda of last 25 years has stalled noticeably and we're seeing backsliding — movement of human capital, visas for offshore platforms. We see movement in our parliament that is not encouraging. But what's different about this time, this gathering, this year that will make a difference? Is it helpful for the treasurer to threaten to name and shame countries that don't deliver?

Richard: I'll leave that to the treasurer. I think what will be helpful is a strong advocacy program from the treasury, G20 sherpa and others to encourage countries to come up with viable and actionable policies to deliver the 2% target. On business reputation, that's absolutely an issue for business, but the best thing businesses can do, from my experience of business, is to generate and create value over time for all stakeholders, including our shareholders, but all stakeholders. If you do that over a sustained period of time that means taking risks, investing money and creating employment. That's why business is important to G20, because it will be the private sector businesses large and small that invest and generate jobs. What's different this year? The B20 has been going for five years, we had good cooperation from our predecessors, but last year with the Russian presidency there were 128 recommendations or something like that — arguably too many to prioritize. We'll have a lot less, and a handful are capable of being actions and producing what we're seeking, such as higher activity in building infrastructure.

Every year business can shine a light on something — I might not get numbers right but post Bali last year, which was a significant step forward in terms of the whole trade agenda, but not one country signed up has yet passed the enabling legislation. Since last year's G20, when there was a standstill agreement agreed by the leaders, there's been something like 550 measures put in place by G20 countries that have created more barriers to trade. So it is relevant for business to shine a light on that so when the leaders get together to say not only do we have to agree but we have to agree to action. There is genuinely — the G20, I'm convinced, has a very valid role. It's an economic grouping, with no secretariat — that's a great thing so it doesn't create an industry in itself, just like the B20 doesn't — but there's a wide expectation that Australia has to achieve something, the B20 has to achieve something under the Australian presidency.

Q: But what's different about the atmosphere this year?

Richard: From a business point of view, absolutely there is a willingness and desire for things to happen. Australia has credibility. We're a trade nation, with 23 years of interrupted growth because we're an open nation, and some of the recommendations we've go will go the way of Australian business. The way the trade minister and treasurer have tackled this will have traction with political leaders.

Robert: At St. Petersburg there was an emerging view of the current state of the global economy. The growth estimates have been downgrading since, and the world up to the February meeting and the agreement on targets give indication of how the G20 began to see the issue. The fact that they agreed to target more growth is important. The indications are that the interests of government in investment particularly in infrastructure and trade suggest it's different from previous years.

Q: Russia was not just the previous G20 chair, is now the subject of European and American sanctions. I don't want to force you to make a political statement, but do these sanctions make your cooperation inside the B20 framework more difficult or is the B20 insulated from that?

Richard: Not that I'm aware of. We had significant involvement from Russian businesspeople in all the task forces and ongoing cooperation from Alexander Shokhin and his sherpa, Oleg. We've got a significant contingent from Russia this week. It has worked well. The contribution that Russians made to the task forces continues to be significant.

Q: Is there a lot of private sector capital siting on side lines tied up and not willing to invest because of impediments you've identified?

Richard: The collective view from the infrastructure and financing for growth taskforces is that supply of money is not an issue. There's more than enough to cover the shortfall from now to 2020, trillions, so the issue is not that there's not enough money.

Robert: It's also money in pensions funds, long-term investment funds, there's substantial amounts of money available for investment and we have session on Friday looking at that. There's capital available for investment.

Richard: We've focused on how does that money flow to developing countries and SMEs as well.

Q: What's the risk of the lower growth trickles through to Australia?

Robert: Australia is a trading nation, and direct investment into Australia is an issue so it depends on our own domestic settings and attractiveness to global investment, and our trading partners and their level of activity. That example is a global example: one thing that comes out strongly in our work is global interdependence. We tend to think of that around financial system, but if you look at the global supply chains, for examples, there's a clear case of global growth and how it affects developing countries and how growth lowers, it becomes an issue for all countries.

Richard: Australia not immune. We've got our own house in order on a number of fronts, but we're not immune for growth. I hasten to add that I'm delighted to be running a business in this country with the economic growth and opportunities here because we're well positioned in the growth economies of the world.

Q: Finance ministers in their February statement was on profit shifting and taxation around the world. This is the B20 and you as a CEO of public company have to do the best you can by shareholders, how do you address that?

Richard: I actually did mention to the treasurer that Wesfarmers plays about 30% of our pre-tax profits in tax. Happily, because it's a significant contribution. When we kicked off the Australian B20 we said let's look at recommendations that can lead to economic growth and the issue of profit shifting and tax came up. That's a government issue and governments need to sort that out. We support taxes being levied where the profits are made but leave it to governments to be made. One reason is that we're trying to tackle things we have a good opportunity of being enacted in November and you can see in today's media that's a highly emotive issue that will have country-specific reactions. We'll leave that to the policy makers and focus on the four areas we chose.

Q: So you don't' think the leaders will have a breakthroughs?

Richard: They may well get an agreement in terms of policy. Whether they can then take that into real action would be —

Q: Some members of the B20 would be into transfers because it would be of interest to the shareholders

Richard: We don't have members but I know what you're saying. Pragmatically we said that's for the leaders.

Q: Where do you identify structural flexibility as a priority? Public needs to understand the B20 in terms of jobs. Does that mean lessoning of conditions for workforces in Australia and other G20 countries? Is it a prescription for austerity measures?

Richard; When I said economic growth solves a lot of issues, one thing it does is that real wages in Australia have increased because of economic growth, so we hope that you get greater employment and standards of living because of growth. So we talk about it from the point of view of important and exporting product, challenge of employing labour in different markets, the way we set up education systems where you train people for skills for which there's no demand. Those are the things we're talking about?

Q: Climate change — is there a risk of setting up a regearing of the global economy without consideration of the climate change and financial impacts you'll have to regear down the track?

Richard: On the impacts of climate change, business is very aware of this as an issue and I think individual business like the one I run have our own strategies in place to reduce energy intensity and CO2 emissions regardless of what the political processes may be, carbon tax or trading scheme or whatever. The B20 not tackling this because we're focused on four areas where we can drive economic growth. Business is a part of the solution but we'll leave individual countries to deal with that.

Q: We've seen how hard reform is to get through and that capital is not a problem and there's a need to take risks.

Richard: I don't think — you can say that about some business and there may be some truth, but what financiers are saying is that infrastructure projects aren't bankable for a number of reasons. They're also saying that we need to get all these Basel III recommendations enacted so we have a clear view of what the impact to banks and capital adequacy is. So on the one hand there's a big gap in the need for infrastructure projects, significant — everywhere, not just developing countries but even here in Australia. So there's enough money but why aren't these happening. So maybe xxx whether it's greenfields or brownfields and transparency in anticorruption and many things. There are real things stopping real businesses in engaging in significant projects, and we think there's a way through that, that is actionable and we can get outcomes reasonably quickly.

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