Businesses have greeted the recent Federal Budget with a mixture of relief and anticipation.
Despite this optimism, the Federal Government must in parallel address the legislative and regulatory inhibitors that are stopping businesses from hiring more skilled workers. Without this parallel reform, the financial enablers in the current budget will be insufficient to promote any impactful improvement on Australia’s economic outlook in the medium term.
Preliminary findings from research due to be launched in mid-June from the University of Queensland and ANZ Chief Economist unit, stated the future of Australia’s economic prosperity lies in the high skill services sector. These findings are echoed in the 2016 Federal Budget.
The research highlights the shift towards increasingly affluent consumers looking for experiences rather than tangible goods in the future. This shift will increase the share of the Australian economy in the services sectors. It also highlighted the labour-intensive nature of the service industry and that increasingly the industry will require highly skilled and highly qualified Australian workers.
In fact, holding on to skilled workers will require new kinds of incentives and an industrial relations framework that enables and motivates businesses to create the jobs of the future for the employees of the future. But we are not there yet.
The 2016 Budget had the objective of creating an ideas boom through innovation and entrepreneurship that will support the creation of new jobs and improve the lagging start up culture in Australia.
This is supported by a range of tax incentive and co-funding schemes, with the lowering of the company tax rate over time to match global standards.
These tax incentives are valuable, as much of the innovation envisaged by the Turnbull Government, and a large part of Australia’s future productivity will be from medium to small business businesses and their ability to employ people.
These incentives in promoting economic growth make good business sense provided that the industrial relations system can be adjusted to meet business needs and match these workers of the future.
The Budget's understanding of this need is demonstrated by the enabling and reforms to develop more creative sources of funding for business including employee share schemes and crowd source equity funding.
As the Federal Treasurer Scott Morrison stated in his Budget speech:
“Reforms to employee share schemes and crowd-sourced equity funding will make it easier for start-ups to raise capital and our changes to company tax loss arrangements will make it easier for existing businesses to reinvent themselves.”
This acknowledges that employee share schemes have been not well understood or utilised to date, including the positive impact schemes have on business productivity due to increased employee engagement and buy-in to the business.
The Australian industrial relations regulation requires some adjustment to maintain relevance to such schemes, particularly when the historical power disparities between employer and employee are dissolving in this new world of work.
Entrepreneurship and innovative new businesses envisaged by the Budget do not lend themselves to an employer-employee culture. Agile teams of highly skilled workers require an environment of mutual appreciation in an agile and innovative workplace, particularly when such workers have an equitable interest in the business.
As the Treasurer argued in his speech:
“Harnessing the power of innovation and entrepreneurship, to create our own ideas boom, lies at the heart of our plan to support jobs and growth in a stronger new economy.”
The University of Queensland and ANZ forthcoming research identified that the industries with the most intensive demand for labour are the ones with the strongest capacity to influence Australia’s economic growth, and have the strongest growth potential as industries. Thus, labour, the way we regulate labour and the way we hire labour will be crucial to Australia’s economic future.
While businesses should be pleased about these budgetary enablers of innovation, what is needed now is a clear strategy for implementation and a robust assessment of how the current industrial relations system promotes or detracts from a workplace culture that promotes agility and the responsiveness required to foster innovation and compete in the world economy.