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Companies receiving jobkeeper wage subsidies should not give executive bonuses and should think twice before paying dividends, the head of the Business Council of Australia has said.
Jennifer Westacott made the comments in a wide-ranging interview on ABC’s Insiders program on Sunday during which she also decried the mooted extension of Melbourne’s lockdown and called for investment in renewable energy to kickstart the economy out of the Covid-19 recession.
On Tuesday, the Senate passed the government’s jobkeeper 2.0 legislation despite concerns companies are using it to pay dividends, the rate is being reduced even as Australia enters the first recession in 30 years, and the scheme allows employers who previously accessed the scheme to cut workers’ hours.
Jobkeeper, which pays workers of companies suffering revenue downturns $1,500 a fortnight through their employer, is now set to continue until March 2021. But the rate of jobkeeper will reduce to $1,200 a fortnight in September and $1,000 in January, with lower rates paid to part-time workers.
Westacott said jobkeeper had been a “blunt but nation-saving instrument”.
“We believe that the government has stayed the course in phasing it out, because it’s having a lot of distortionary effects,” she said.
“You hear of restaurants making a 75% increase in profits when they haven’t been open. That doesn’t make any sense.”
Westacott said “companies should not be paying executive bonuses if they are receiving jobkeeper” because “it wasn’t designed for that, it was designed to keep people working”.
Paying dividends was “more complicated” because they are “usually a long-run policy of companies to [pay] their shareholders”, many of who are self-funded retirees and mum and dad investors, she said.
“If I were those companies, I would exercise some very careful judgement about these. Certainly on executive bonuses, I think that companies should not do that.”
The Australian Financial Review has reported that Domino’s Pizza, Southern Cross Austereo, K&S Corporation, Adairs, ARB, Ingenia, and Korvest have averaged profit of 70% but received a combined $57.5 million in jobkeeper payments.
Labor’s Andrew Leigh has highlighted examples in parliament of bonuses including:
IDP Education, which received $4m in jobkeeper payments and gave chief executive Andrew Barkla a $600,000 bonus;
Shoe retailer Accent Group, which received $13m in jobkeeper and paid its CEO, Daniel Agostinelli, a $1.2m bonus; and
Star Casino, which received $64m in jobkeeper and gave CEO Matt Barkier an equity bonus worth $800,000
On Friday the BCA made a pre-budget submission calling for the government to boost growth by bringing forward stage two and three of personal income tax cuts, introducing a 20% investment allowance for business, and investing up to $53bn in energy investments to de-carbonise the economy and lower prices.
Westacott said the submission reflected that Australia “is in the worst position we’ve been in for 100 years and there’s no guarantee that we’ll just easily find our way out of this”.
Westacott said business investment is in “free-fall” and a 20% tax deduction “will make things that don’t stack up now, stack up”.
“We think that it should be broad, it should be simple, and it should be available to all parts of the economy,” she said, including both big mining companies and retailers.
Westacott blasted Australia’s two-tier company tax rate, renewing calls to lower the 30% rate for big business down to 25%.
Despite the BCA now advocating for the government to pick industries to receive support to lead the recovery, Westacott reiterated that the BCA opposes underwriting energy projects for favoured sources of electricity generation.
“We’ve always been calling for that to not occur, because we think that it squeezes out important investment that the private sector would do,” she said.
“There’s a lot of pent-up investment in the energy sector.
“So let’s prioritise investment in those projects that are going to lower prices, in those projects that are going to lower our emissions, so we get our energy system set up for the future.”
Westacott called for governments to remove moratoriums on conventional and unconventional gas, but demurred on whether Australia should pursue a gas-led recovery as advocated by the National Covid-19 Commission Advisory Board.
“Let’s have a look at that,” she said. “Be very careful about spending taxpayer money when the private sector would do it.
“When governments do things that the private sector would normally do, they discourage private sector investment. More importantly, they divert important taxpayer money away from other vital areas.”
Source: The Guardian
Keyword: Australian companies getting jobkeeper shouldn’t be paying bonuses, business council head says | Business