PARTICIPATION = PROSPERITY + POTENTIAL

2007 ANNUALREVIEW

BUSINESS COUNCIL OF AUSTRALIA

2007 ANNUALREVIEW

BUSINESSBUSINESS COUNCIL OF AUSTRALIA

2007 ANNUALREVIEW

BUSINESS COUNCIL OF AUSTRALIA

PART 1

THE YEAR IN REVIEW 2President’s Message 3Chief Executive’s Message 10

TASK FORCE REPORTS 14 Business Reform 15Employment and Participation 20Education, Skills and Innovation 24Sustainable Growth 27Trade and International Relations 30

OUR PEOPLE 34 Members 34Honorary Members 35Board Members 36Task Force Members 36

OUR PUBLICATIONS 38 Reports 38Submissions 40

PART 2

ENGAGING OUR POTENTIAL 43The Economic and Social Necessity of Increasing Workforce Participation

Public policy must increasingly shiftto longer-term strategies and investments if Australia’s prosperity is to be sustained.

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THE YEAR IN REVIEW

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Prosperity and reform

Australia is in the midst of one of its most expansive periods of growth and prosperity. Individual opportunity, expressed through wealth and employment fi gures, is at record levels.

The BCA and other groups with an interest in seeing this growth continue have focused on further reform in important policy areas such as tax, workplace relations, infrastructure, business regulation, education and federal–state relations.

This reform agenda is aimed at preparing the economy to meet emerging global opportunities and challenges and to maintain a strong economic foundation. Reform is necessary because Australia is fast outgrowing the policy structures that have underpinned growth to date.

Australia’s strong expansion over the last 15 years has recast expectations of the economy’s capabilities. It has also highlighted that the policy focus must increasingly shift to longer-term strategies and investments if prosperity is to be sustained.

In last year’s annual review I emphasised the need for a systematic review of federal–state relations. The current system, characterised by blame-shifting and fi nger-pointing, is an outdated framework that will continue to struggle to effectively address immediate and longer-term issues. We need a better system – one that promotes strategic planning and greater consensus for solving issues of national importance.

The BCA’s vision is for Australia to enter the top fi ve of OECD countries in terms of living standards by 2012. This is an achievable goal, provided there is an ongoing commitment to reform, and that the unprecedented growth of today is not achieved at the expense of future growth and prosperity.

President’s MessageMr Michael Chaney AO

The ‘other’ AustraliaDespite Australia’s excellent economic performance, there are many in the community who have not shared in its recent good fortune. Consider these facts. In Australia:

Nearly three million people of working age (and not in education) remain outside of the labour force, a signifi cant number of whom have the potential to be employed.

One in seven children live in jobless households.

The participation rate for Indigenous Australians is about three-quarters of that of non-Indigenous Australians.

Lack of employment is highly correlated with other social problems such as crime, abuse and mental illness.

There are fi ve workers paying income tax for every person relying on welfare payments, compared to a ratio of one to 22 in the mid-1960s.

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For a country that prides itself on a ‘fair go’ and opportunity for all, these statistics are out of sync with basic Australian values. At a time when Australia has so many resources and capabilities at its disposal, the question we should ask ourselves is: will there ever be a better time for our nation to tackle entrenched disadvantage and welfare dependency?

Our current levels of prosperity allow us – indeed compel us – to think and act more proactively so that our economy is geared not just to those of us who fi nd it relatively easy to participate and prosper. It needs to better serve the many Australians who remain isolated from opportunity.

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Opportunity and equityThe BCA starts from the premise that in a developed economy, employment is the most effective way of achieving and sustaining participation in prosperity and increasing social equity.

The statistics noted above represent compelling reasons to do much more on social and community grounds. But addressing what for many Australians amounts to long-term dislocation from basic opportunity is also an economic imperative. Australia, like other developed nations, is starting to confront the challenges of an ageing population.

In a relatively short space of time we will see large numbers of working Australians retire or reduce their workloads. This will open up signifi cant gaps in our workforce that need to be addressed if we are to see a continuation of growth and the maintenance of current living standards.

We need to examine all potential avenues to maximise human capital. Leaving a large number of individuals isolated from economic participation and community life and dependent on a safety net of welfare is not acceptable. Economic isolationcontributes to growing social dislocation, whichbrings costs to individuals and the wider community.

The strategic investments needed to support higher participation and engagement will create the conditions necessary for a prosperous, dynamiceconomy that provides opportunities, rewards engagement, and enables us to educate, attract and retain skilled workers.

Workforce participation: a prescription for broader prosperityThe challenge of increasing workforce participation does not belong to specifi c government departments or the community or welfare sector alone. The fact that hundreds of thousands of Australians are not sharing in the benefi ts of record growth is everyone’s responsibility.

The BCA recognises that business must be part of the solution to entrenched disadvantage and non-participation. Business has a clear vested interest in lifting participation and labour supply. Strong and healthy communities founded on engagement and participation allow businesses to prosper, and vice versa. As the engine room of prosperity and job creation, it is business that will ultimately provide the opportunities for sustained participation and employment.

Employment is the most effective way of achieving and sustaining participation in prosperity and increasing social equity.

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For these reasons the BCA has elevated the issue as a priority area on its policy agenda and in May I convened a roundtable of government, business and community leaders to discuss ways in which Australia could break through entrenched barriers to workforce participation.

Participants in the roundtable discussion raised many important issues and challenges from a wide range of perspectives. It is clear that the problems that remain today do not exist because of a lack of commitment or effort. Equally, though, a key theme to emerge was that collectively we are not learning enough from our successes and failures.

The roundtable highlighted that there are many innovative approaches that have contributed to improved participation and engagement. But often these are undertaken as isolated or narrow programs. As a result, the potential for broader application and adaptation of these policies and programs is not being fully realised. More needs to be done to share these experiences and identify the conditions for success so that they can be applied elsewhere.

Because policies and programs are well intentioned, we are sometimes reluctantto fully and openly learn from approaches that have not proved effective, often choosing instead to quietly move onto the next effort. The risk is that, over time, we go on making the same mistakes.

From the BCA’s perspective the starting points for new and lasting solutions are new partnerships and sustained collaboration, based on frank and transparent assessments of previous efforts and outcomes.

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New learnings on educationStrengthening our education system is necessary to provide people with the skills and capabilities toenter and remain in the workforce and to achieve their potential. It is fundamental to securing the ability of businesses to compete effectively in global markets based on their innovation and skills.

BCA research shows that restoring Australia’s competitive edge in education requires a fundamental re-evaluation of basic approaches to the management of the school education system. In August we released a paper, Restoring our Edge in Education, which proposed a fi ve-point plan to overhaul school education so every young Australian can have access to a world-leading education system. The paper recommended anumber of measures, including greater earlyintervention, increased customisation, strengtheningof the teaching profession, increased investment and improved school governance.

Engaging Australia’s potentialThe BCA’s Engaging our Potential paper, which forms part of this review, represents the outcome of the May workforce participation roundtable. It is an initial contribution on policy directions that could reduce entrenched disadvantage and broaden prosperity through greater workforce participation.

The paper calls on the business sector to engage more determinedly and broadly to lift participation, including among very disadvantaged and isolated communities, including through the development of a framework for best-practice program design, delivery and monitoring.

It recommends a major review of current policy settings to increase the participation of women andmature-age workers, and also calls on business to support the broader dissemination and take-up of best-practice workplace strategies to achieve higher rates of participation and retention among those groups.

It will take a prolonged commitment and focus for business, the community and governments to bring about lasting solutions and the BCA will be part of that effort.

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A climate for changeThe signifi cant policy breakthroughs that can be achieved when business, government and the community resolve to participate and work together to tackle diffi cult challenges have been demonstrated by Australia’s response to climate change.

Rapid progress over the past year towards a lasting national solution to reducingAustralia’s greenhouse emissions over the long term underlines how important change can be achieved if strategic thinking and national interest provide a consensus for action.

The BCA’s preferred position – of a cap-and-trade emissions scheme that can be linked to other global schemes and is underpinned by carefully considered reductions targets – is now central to Australia’s response to the issue.

As a result, Australia is well placed not only to make an appropriate contribution to reducing emissions, but also to guide other nations to a practical and long-termframework for emissions reductions without damaging economic growth.

Maintaining Australia’s prosperity requires action on a number of fronts. The BCAwill continue to focus its activities on those areas where it believes it can be mosteffective. Its aim is to help ensure that Australia is the best place in the world in which to live, learn, work and do business. I believe that this is a realistic goal.

I take this opportunity to thank all Members for their support and encouragementover my two-year term as President, and acknowledge the professionalism and dedication of the secretariat headed by Katie Lahey.

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Reform in an election year

Over the past year, the BCA has continued to argue the case forstrategic reform to build the foundations for long-term growth and prosperity.In an election year, the need for strategic thinking is even greater. Elections represent an opportunity for politicians to outline their visions for the country,and how those visions can be achieved through policies that seek to make Australia an even better place in which to live, work, learn and do business.

Of course, the temptation in any election year is to focus predominantlyon short-term tactical approaches or quick fi xes. But as the BCA has arguedfor some time, Australians are becoming increasingly sceptical about seeing issues of national importance become captive to short-term political point scoring.

We are now into our 16th year of growth and many Australians aremore confi dent than before about their future and their ability to realise moreambitious goals. In our research and discussions with the community wedetect a more aspirational outlook to meeting challenges and opportunities.

Chief Executive’s MessageMs Katie Lahey

The business vision: Australia in the top tier of world economiesThis year the BCA has framed its policy development and advocacy around a single, clearobjective: ensuring Australia attains a position among the world’s top fi ve developed countries. Currently, we are seventh, having lifted ourselves from a ranking of 17th in 1991.

This signifi cant turnaround in economic fortunes during the past 25 years is the result of hard decisions and thinking beyond the short term. We have transformed our economy from one that was inward looking to one that is dynamic and capable of competing successfully with the best in the world.

But we also know that Australia has not always been good at managing prosperity. Asthe benefi ts of previous reforms fade, it is tempting to believe, as we have in the past,that slower growth is inevitable and therefore a decline in living standards and opportunitiesis acceptable. This is neither inevitable nor acceptable. In line with the more aspirational mindset of Australians, we have an opportunity to set our sights higher.

The BCA’s work and advocacy this year has been focused on achieving the reforms needed to enable Australia to lift itself into the top-fi ve tier of prosperous nations. Only through a consistent commitment to ongoing reform in areas such as federal–state relations, red tape, workplace relations, tax and education will we be able to pass on our current prosperity to future generations of Australians.

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Progress towards passing on prosperityIn the last 12 months we have seen important aspects of the BCA’s reform agenda pursued and adopted by governments, political parties and policymakers.

We have seen major progress in our regulation reform agenda, with the Commonwealth initiating a series of reforms aimed at strengthening regulatory processes and reducing the volume of federal business regulation at its source.

The scorecard for states is more mixed. Some jurisdictions are moving strongly on structural reform, while others are clearly lagging behind. The BCA will continue to scrutinise performance and policy outcomes.

Governments are now addressing issues of infrastructure planning and investment to make up for serious shortfalls in transport, energy andwater, and are looking for more innovative solutions to addressing critical supply issues, particularly in regard to water. Even so, delays in implementation, particularly those stemming from a lack of consensus across jurisdictions, continue to frustrate the business sector.

States released audits of their infrastructure capacities and gaps, a development that was broadly in line with strong recommendations madeby the BCA two years ago. These audits will provide an important reference point from which governments can assess, and be assessed on, their infrastructure performance and planning.

While progress in these areas is welcome, there has been little action, and even the threat of reversal of gains, in other key areas. Tax reform continues to stall. We released a major report inApril titled Tax Nation, which highlighted the increasing complexity and ineffi ciency of Australia’sbusiness tax regime. Despite the strength of this evidence there appears to be no appetite for further business tax reform, perhaps refl ecting the extent to which business tax revenues are currently underwriting fi scal surpluses.

And while the ALP has led the way on federal–staterelations reform by setting up a major review to examine a wide range of initiatives, it has been verydisappointing to see Labor adopt such a retrogradepolicy on workplace relations. If unchanged this policywould re-regulate Australia’s workplaces and inevitably damage the economy.

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Workplace relations advertising: a necessary step

The BCA recently participated in a national advertising campaign on the need to stay the course on workplace reform. This campaign was undertaken by a broadly based coalition of businesses, large and small, concerned about the risks associated with any signifi cant winding back of workplace reforms.

While some have sought to characterise the campaign as being political in its intentions,the campaign, and our involvement in it, was guided entirely by policy considerations. Research clearly shows that workplace reforms undertaken over the past two decades, and initiated by the Hawke–Keating Labor government, have underpinned the strong growth and prosperity that Australia is currently enjoying. To wind back these reforms now will not only undermine these benefi ts, but also the benefi ts that could fl ow from reforms to other areas of our economy.

Australia’s sustained economic success refl ects the fact that successive governments have built on, not dismantled, the reforms of previous governments. Australia’s reform agenda is a prerequisite to remaining competitive and prosperous. For the BCA to stayquiet, or to say anything other than this, would have been a disservice to our membershipand the reform agenda that we continue to pursue with determination.

New opportunities, ongoing challengesWhile Australia’s reform agenda has recently been dominated by the forthcoming federalelection, the reform issues that the BCA continues to highlight will remain of fundamentalimportance to all governments, current and future.

Credible responses to modernising our education system and achieving emissions reduction objectives will remain central to the community’s thinking.

The imperative of fl exible workplace relations will continue to be a cornerstone for our future prosperity. The pressing need for business tax reform will remain, and pressures to reform our dysfunctional system of federal–state relations will only grow.

The BCA will continue to advocate the importance of reforms so Australia can successfullyparticipate in the global economy and meet the aspirational vision of achieving the statusof a top-fi ve economy by 2012.

Finally, I would like to thank BCA President Michael Chaney for his commitment and strong support in advancing the BCA’s agenda, and the BCA Secretariat for again playing a major role in achieving our objectives this year.

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TASK FORCE REPORTS

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Business Reform

Over the past 20 years, reforms have guided Australia from an

insular economy to one oriented to international markets and opportunities.

The dividends of this transition have been sustained growth and

widespread prosperity.

Despite this fundamental change, signifi cant aspects of Australia’s

economy and business environment remain inward looking and outdated,

and act as counterforces to Australia participating as effectively as it might

in the global economy.

Australia’s tax and business regulation systems continue to be a focus

of strong concern for business, and in particular the BCA, for this reason.

As the BCA has continued to demonstrate, Australia’s tax and regulation

systems divert scarce business resources into compliance and complexity

and act as barriers to businesses, large and small, reaching their potential.

Much of the problem is due to the inability of federal, state and local

governments to work together to develop streamlined or harmonised tax

and business regulations systems that support, rather than detract from,

productivity and growth.

As a relatively small economy distant from major global markets,

Australia urgently needs a common market that minimises unnecessary

impediments to the free fl ow of skilled labour, capital and services.

While there have been some breakthroughs in line with BCA

advocacy in both the tax and red tape areas, the fundamental reforms that

would lead to a common market are still awaited. As a result, there remains

a long way to go before both the tax and regulation systems are suitable

for Australia’s modern economy.

Task Force Chairman Mr Robert MillinerChief Executive PartnerMallesons Stephen Jaques

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TaxationIn April the BCA released a comprehensive report examining the interrelationship of federal, state and territory taxes on business, and their overall impact on business and the economy.

Typically, the debate on business tax and tax reform focuses on the tax systems of individual governments, and in doing so ignores the collective impact of taxes levied by all governments on business.

The report, Tax Nation: Business Taxes and the Federal–State Divide, demonstrates how Australia’s tax system has become an unproductive maze. It found that in total there are 56 different taxes levied by federal, state and local governments on business. This is more than twice the number of business taxes levied on business in the United Kingdom – an economy three times the size of Australia’s.

The Tax Nation report found that many business taxes raise relatively little revenue and that as a result, compliance costs for business remain signifi cant.

It revealed that 92 of Australia’s largest companies contributed $27 billion in business taxes in 2006. This is the equivalent of all federal and state government spending on Australia’s schools system.

Given that business tax revenue underwrites many of the social and community programs and personal tax cuts being offered by governments, policymakers should be increasingly sensitive to the complications and burdens of their business tax systems that act to reduce company competitiveness.

Although the Tax Nation report focused on large business, the problem is obviously more acute for small and medium-sized businesses, which do not have the resources and expertise to negotiate the complexities of the tax system.

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The 2007–08 federal Budget brought some additional personal tax relief. There were also someminor changes to business taxation. Once again,these changes were more characteristic of responsesto electoral pressures than the result of a strategic plan for long-term, structural tax reform.

Modernising Australia’s taxation system and reducingthe effect of multiple and inconsistent tax rules between governments was one of the objectives associated with the introduction of the goods andservices tax in 2000. The fact that seven years on,Australia’s business tax system remains cumbersome,underlines the need for it to be subject to constant review and reform and not just ad hoc change.

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The BCA has called for a Productivity Commission review to examine the tax systems of all Australian governments, how they interact with each other, and the cumulative burden on business.

RegulationAs with the management of tax systems, ongoing review and a focus on broad policy objectives are prerequisites for well-functioning business regulation systems.

Over the past three years, the debate on business regulation, which has typically been marked by politicians making superfi cial promises to cut red tape, has become more sophisticated. Governments are now implementing more structural reforms to their regulation systems in order to achieve lasting reductions in regulation at the source and, in doing so, help refocus business energies from wasteful paperwork back onto productive activities.

These reforms, focused on cost–benefi t analysis of all new regulation, regular reviews of existing red tapeto test its relevance, and improved consultation process with business, are now being implemented. These are signifi cant steps and are welcomed.

Reform at a state and territory level tells a somewhatdifferent story. In May, the BCA released A Scorecardof State Red Tape Reform, which assesses regulationreform efforts by the states and territories.

Pressure from groups such as the BCA provided fresh impetus for public debate. In 2005 the BCA highlighted how growth in regulation making was three times that of economic growth. Thathelped to provide a catalyst for change and the federal governmenthas since moved to put in place far-reaching reforms.

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The results were mixed. Some states, such as Victoria, are moving ahead with reforms designed to systematically rid their regulation making of ineffi cient processes. Others, notably Western Australia, have barely moved on the issue.

The scorecard again highlighted the extent to which different jurisdictions continue to develop regulatory structures and processes that are inconsistent with other states and territories. Despite agreement by the Council of Australian Governments to make regulation reform a national priority, little progress has beenmade towards a national solution that involves consistency of principles and approaches to regulation making.

In the absence of an independent and robust oversight mechanism to monitor the progress of regulatory reform the BCA will continue to act in a watchdog role. As well as scrutinising the states, the BCA this year has joined with other business groups to form the Business Alliance for Red Tape Reform to monitor implementation of the federal government’s red tape reform package.

As with tax, barriers to the removal of red tape are ultimately failures of Australia’s system of federal–state relations. The most effective way to break through these barriers is through the creation of a common market. Only through a common market that supports streamlined and transparent tax and regulation systems will the fl ow of business resources and activity within Australia achieve global competitiveness.

, barriers to the removal of red tape ely failures of Australia’s system ofate relations. The most effective wayrough these barriers is through thea common market. Only through a

market that supports streamlined andt tax and regulation systems will the

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Employment and Participation

Australia’s workplace relations system continues to be the subject

of considerable political and community focus. In an election year that is

understandable given the policy differences between political parties. But the

implications and impacts of choices made for our workplace relations system

extend far beyond electoral cycles, and the interests of specifi c groups.

The story of Australia’s prosperity over the course of the past

20 years is also the story of changes to the way Australians work, and the

relationships between employers and employees. Moving to a system

that has provided greater fl exibility, choice and engagement in workplace

relations has underpinned a return to long-term productivity improvements,

employment and economic growth.

Task Force Chairman Mr Charlie Lenegan Managing Director Rio Tinto – Australia

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Workplace reform: a process of evolution

Economic research by the BCA and other groups has consistently demonstratedthat workplace relations reform has been a major factor in creating hundreds of thousands of new jobs, greater opportunity for those on the margins of the economy, and an overall rise in living standards.

The current reforms that are the subject of so much debate are, in reality, the latest stage in an evolutionary process of change to Australia’s workplaces that began in the 1980s.

To some extent, the concern and uncertainty about further workplace transformation refl ects a nation still coming to terms with its unprecedented prosperity and the reasons for it.

On the one hand, prolonged prosperity has afforded many Australians a more aspirational outlook. As a nation, we are generally more outward-looking and confi dent.

On the other hand, the memory of past economic cycles continues to play a role in shaping perceptions. And while many younger Australians have never experienced a recession, there are many in the community who can still recall times of economic uncertainty and scarce opportunity.

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In a relatively short period of time we have come a long way from economic protection, double-digit unemployment, high infl ation and stagnant growth. But at the same time, there is a part of the Australian psyche that remainsattached to the old ways of regulation and intervention in the workplace, anda view that business can play a de facto role in the social security safety net.

A campaign of misinformation has raised fears about workplace reform – ignoring its key role in contributingto opportunity and prosperity – and seeking a rollback to systems that failed Australia and Australians in the latter part of the last century.

If the lessons of the past 20 years have taught us anything, attempting to retain or reinstate failed policies that focus on protection and mix the role of business in promoting opportunity with that of governments in maximising equity runs counter to Australia’s economic and social interests.

As the BCA has consistently argued, the most effective way to provide opportunity is through fl exible workplace relations, as Australia’s record high employment numbers demonstrate. We recognise the need for a safety net as part of any modern workplace relations system. This safety net should recognise appropriate minimum standards whilst also supporting the objectives of fl exibility and employment growth. Equity is best served by a strong economy and tax revenues for governments to redistribute.

That is why the BCA has been focused on highlighting the importance of continuing workplace reform, rather than turning the clock back.

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The risks of turning back the clockIn August, the BCA, along with 18 other key employer and business groups – employing more than 4.5 million Australians and representing all sectors of the economy – engaged in a program of public advertising to highlight the importance of keeping workplace reform.

The key message of the advertising was that the impacts of abandoning workplace choice and fl exibility, and the resulting implications for individual and national prosperity, will be immense and long-lasting.

It was not a step taken lightly. But all business groups involved in the advertising program believed that, as a result of the signifi cant amount of misinformation about the reforms, and the importance to the economy of keeping workplace reform, it was critical that community debate was better informed.

While policy decisions continue to be considered, the BCA will remain fi rm in advocating to political parties the need to maintain workplace reform as a key platform for a strong economy for both current and future generations.

The workforce participation challengeAs the President’s Message outlines, record high job numbers mask a major challenge for Australia in breaking the cycle of disadvantage for those who cannot easily gain employment. The BCA is actively examining workforce participation issues in order to fi nd new ways to engage these groups.

This goal will not be met through platitudes or short-term fi xes, but through developing new and more innovative policy pathways that will enable us to tackle a challenge that,for too long, has been viewed as secondary to generating mainstream job growth. We cannot expect to address entrenched unemployment or underemployment, in aggregateor within specifi c groups, by reverting to a system of workplacerelations that limits growth and detracts from generating the economic resources needed to deal with these more systemic issues.

Participation for all requires a fl exible economy that can generate opportunities for all, not one preoccupied by regulation and rigidity.

Education, Skills and Innovation Regaining our edge in education

If Australia is to continue to enjoy the benefi ts of participating in a

global economy, a skilled workforce to drive productivity growth is vital. In

a world where knowledge and information is increasingly tied to prosperity

and rising living standards, the key to a skilled workforce is a world-leading

education system.

Australia’s education system has many positive attributes. We have

a professional and committed teaching profession; our best students are

equal to, or surpass, their global peers in important areas of learning; and

we hold competitive advantages in key facets of research and development.

However, many aspects of our education system are outdated and

unable to support the learning and skills development Australia’s economy

now requires. We are concerned that, while far-reaching changes have taken

place in the way the community works, communicates and is organised,

most aspects of our school system have not changed since the 1960s.

In particular, for a large proportion of schools, the same centralised

governance and management structures have been in place for 40 years or

more. The poor condition of infrastructure, including buildings and technology,

refl ects a lack of investment and outdated priorities for education.

Task Force Chairman Mr Hutch Ranck Managing Director, Australia and New Zealand DuPont (Australia) Ltd

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While our education system does well in amplifying the talents of our best students, there are doubts about whether it serves those in the middle or lower rankings of achievement as well as it should.

There are more than 300,000 young people aged between 15 and 24 who are eitherunemployed or working part-time and who are not participating in education. This is not an acceptable situation if we are to meet two of Australia’s biggest challenges: accelerating the development of skilled workers and increasing the level of participationin the workforce to offset an ageing, declining workforce.

Clearly, we need to modernise our education system so all students receive a high-quality education regardless of their background or which school they attend.

Based on these challenges, the BCA’s Task Force on Education, Skills and Innovation is refocusing its energies on what should be done to update the provision of Australia’s secondary school education and training.

In a discussion paper released in August – Restoring ourEdge in Education – the Task Force identifi ed a number of important issues that warrant close examination andconcerted action. They include the need for a standardisednational curriculum; more accountability and training for principals; a standard national, competency-based teacher certifi cation program; and incentives for the best-performing teachers.

More productive engagement between business and secondary schools aimed at helping to make students ‘job ready’, and integrating broadband technology andwebcast teaching into the centre of secondary education,should also be priorities.

These proposals will be promoted by the Task Force inthe coming year as it develops an action plan to infl uencedebate on modernising the secondary school system sothat students have the opportunity to build rewarding careers and to continue to learn throughout their lives.

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InnovationThe Task Force’s focus on developing Australia’s innovation capacities has continued over the past 12 months. Late last year, the BCA proposed the creation of a national innovation framework, based on new policy pathways and directions for government–business engagement on innovation, to help Australia meet emerging economic challenges.

The New Pathways to Prosperity report has been endorsed by a number of Australia’s leading innovationexperts, including representatives from companies such as Microsoft, DuPont, Deloitte and ResMed.

The report, prepared in conjunction with the Society for Knowledge Economics, outlines fi ve priority areas for achieving greater innovation outcomes. They are:

Elevating innovation to a national priority.

Strengthening collaboration across the many contributors to Australia’s innovation.

Boosting support for research networks and institutions.

Developing workplace skills and a culture of innovation through education and training.

Creating a stronger business environment to support innovation.

The New Pathways to Prosperity report has been a focal point for the BCA’s advocacy on innovation and it has been pleasing to see the framework incorporated into policy thinking and development at both state and federal levels over the past year.

Further progress needs to be made in this area and our advocacy work will continue into next year. As a central part of this advocacy, a second national innovation summit should be held with the aim of achieving a national consensus for a comprehensive new approach to innovation policy.

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Sustainable Growth

Climate change

Refl ecting an ongoing and intense community concern about climate

change, during the last 12 months the Sustainable Growth Task Force has

focused on developing a credible and lasting business response to reducing

global carbon emissions.

The objective has been to translate into reality the BCA’s view that

the best solution to reducing greenhouse emissions is through a suite of

emissions reduction strategies built on a market-based framework.

Much of the current debate fails to recognise the most signifi cant

challenge we face: that a realistic solution to climate change requires a

long-term transition from a high-emission to a low-emission global economy.

Because high-emission activities are embedded in current business

and community behaviour, the transition is probably the most challenging

task facing the modern world since the Industrial Revolution.

An effective and sustainable solution requires a combination of a

global emissions market, fast-tracking the development of new low-emission

technologies, increasing energy effi ciency and improving energy conservation.

Task Force Chairman Mr Rod Pearse CEO and Managing Director Boral Limited

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Business, as a major emitter, is a major participant in any solution. The BCA has worked closely with the federal government’s Task Group on Emissions Trading, announced by the Prime Minister at the BCA’s 2006 Annual Dinner. This group released its conclusions on Australia’s response to climate change in May. Many of these conclusions refl ect the BCA’s policy work and thinking, including that:

A national approach to climate change policies is required.

A cap-and-trade market mechanism is the most cost-effective method to reduce emissions and to ensure that schemes from different countries and regions can be linked together into a global response to emissions reduction.

Increased research and development investment is required to speed up the development of low-emission energy technologies.

These conclusions, in turn, have been broadly endorsed by political parties and policymakers as the way forward.

Responses to climate change need to minimise the impact on Australia’s competitive advantage. Only a strong economy can provide the means to fund the range of solutions needed to reduce emissions in the long term.

The solution being advanced by Australia involves mechanisms that can be readily used by other countries to participate effectively in a global response to emissions reduction.

The outstanding issue that is still subject to signifi cant discussion and debate is setting emissions reduction targets for Australia. Business recognises the need to set clear goals. But goal setting must be done in a transparent and considered way.

The BCA’s view is that Australia needs a combination of three sets of targets, including long-term of between 30 to 40 years, rolling annual fi xed targets, initially over fi ve years and then 10 years. The targets must be reviewed on a regular basis to take account of factors including changes in our knowledge of climate science, changes in technology, global developments and the impact on Australia.

Considerable progress has been made in achieving agreement on a response framework to climate change. But there is still much to be done in turning the framework into practical steps, and the hard work is just beginning.

TASKFORCE REPORTS

#28

PART 1

Water and energyWhile much of our work this year has been focused on climate change, we continue to engageon major infrastructure issues, particularly water and energy reform.

Water continues to be a high-profi le issue, particularly due to water shortages affecting Australia’s population centres and farming areas. Despite recent rains that have alleviated some of the shortages, the underlying problems due to the lack of planning and management of water resources still need to be addressed.

Since the BCA released its Water Under Pressure report in September 2006, which outlined a blueprint for national water reform, there has been encouraging progress by governments and water authorities in tackling the issue at a more systemic level.

Plans are being made to use non-traditional watersources such as desalination and to expand recycling. Pricing of water is now at the forefront of the debate. Interstate water trading systems are now in place and the level of water trading has increased substantially over the past year. Water conservation is fi rmly embedded in the consumer mindset.

With energy reform, we have seen moves towards the creation of a national market for energy that will smooth the way for greater investment and planning for future energy needs.

The BCA is pleased to see that, in line with its calls for jurisdictions to be far more proactive in infrastructure planning and development, governments have generally increased their spending and are starting to prioritise projects in a more transparent manner.

The BCA’s push for infrastructure audits is being implemented by various jurisdictions, although they need to occur more frequently than the current fi ve-year cycle and with a greater emphasis on providing the necessary information for planning and investment.

TASKFORCE

REPORTS

#29

Trade and International Relations

Trade is the ultimate form of economic participation. Countries leverage their competitive advantage to trade with others, and as markets become more open and opportunities for participation in the global market grow, living standards and prosperity inevitably rise.

Australia has become a fully fl edged participant in the global economy, a far cry from the 1980s when decades of protectionism combined to make our economy insular and uncompetitive.

The reform agenda proposed by the BCA is aimed ultimately at increasing Australia’s ability to participate effectively in the global market. As the pace of change increases, the rules for effective participation changetoo. The BCA advocates continuing reform of the economy so that Australia is equipped to recognise new economic opportunities and respond to challenges.

Trade policy needs to be tested against modern realities. The economy has changed radically in the past 20 years. Our competitive advantages involve new areas, especially in services, which is a signifi cant global growth area. However, our trading performance in services has not been strong for almost a decade.

The BCA is calling for a review of economic and industry policy to incorporate a greater focus on new and emerging international

opportunities for Australian businesses.

Task Force Chairman Mr John W.H. Denton Partner and Chief Executive Offi cer Corrs Chambers Westgarth

TASKFORCE REPORTS

#30

PART 1

Review of trade and investment policy settings

At a time when the global free trade movement is under threat from a resurgent protectionism, Australia needs to focus even more on the

opportunities that are available.

In mid-2007, the BCA commenced research intothe alignment of Australia’s trade and international economic policy settings with business interests. The study is examining whether emerging economicand business developments overseas are given suffi cient focus in current foreign and trade policy settings. This includes consideration of whether policysettings are fl exible enough to adjust to new international economic developments. The capacityof government institutions to respond to new information about market opportunities needs to be reassessed on a regular basis.

Business experience shows that government-to-government relationships are often crucial to removing barriers to trade and new markets.

The Task Force regards this review as important for the nation’s future growth and prosperity. The research will also look at how other nations are aligning policy settings and institutions to meet new opportunities. The fi ndings of the review will form the basis of a paper on Australia’s foreign and trade policy to be released later this year. This paper will complement a key aspect of our ongoing work, which is the development of a new investment framework for Australia.

TASKFORCE

REPORTS

#31

Getting more from Australia’s services sectorAs part of our ongoing evaluation of Australia’s trade policies and priorities, we consider that Australia nowneeds to undertake a fundamental policy rethink on how to improve its fl agging performance in services exports.

In July the BCA released a paper, Underserviced: Why Australia’s ServicesEconomy Deserves More Attention, which called for a more proactive policyapproach by governments and policymakers in developing our services sector.

The global demand for services is rapidly growing, and though Australia’s domestic economy boasts sophisticated services businesses in industries such as communications, business, property, health, andfi nancial services, the country’s proportion of international trade in services is declining. This trend, if allowed to continue, is signifi cant for Australia’s future growth prospects.

The BCA is calling for a broader discussion and recognition of the importance of services, and for more emphasis to be placed on policies and programs that improve productivity and innovation in services industries, promote better understanding of the role of inward and outward investment to services growth, and improve Australia’s access to global services markets.

The multilateral systemThe Doha Round of trade liberalisation remains stalled as major trading nations refuse to grant signifi cantconcessions. The Task Force has continued to advocate the importance of achieving further improvementsin market access for business in the key areas of agriculture, industrial goods and services. Failure to bring the Doha Round to a conclusion this year is likely to see it delayed until at least 2009. Such a scenario wouldbe a setback for the international trading system, which relies on multilateral agreements to set the basic framework for 150 countries.

TASKFORCE REPORTS

#32

PART 1

Other agreementsAustralia–China free trade negotiationsIn the absence of progress with the Doha Round, free trade agreement (FTA) negotiationsoffer the prospect of developing new opportunities for Australian businesses in key markets.

The BCA has continued to advocate the development of a comprehensive FTA withChina. We have stressed that a comprehensive FTA must include adequate improvementsacross the board, but particularly for the services sector, as this is an area where Australiahas signifi cant opportunities. This position was emphasised in representations by BCA President Michael Chaney to Prime Minister John Howard in September 2006.

In October 2006, the BCA released a paper titled Services, Investment and Intellectual Property in the China–Australia FTA, outlining the interests of BCA companies in relation to the proposed free trade agreement. We recommended that Australian negotiators seek substantial concessions from China, particularly in removing barriers such as restrictions on foreign investment and the ability of Australian businesses to provide professional services. We are continuing toadvocate an agreement that is based on substantial removal of barriers to investment and trade.

Australia–Japan FTA negotiationsFormal FTA negotiations between Australia andJapan commenced in April 2007. In its initial submission to the Australian Government, theBCA identifi ed three priority areas where Australiashould be seeking to strengthen trade and economic relationships with Japan: Australia’s services exports to Japan; manufactured exports;and investment levels both in respect of Japaneseinvestment in Australia and Australian investment in Japan.

FTA negotiations represent an opportunity to further develop Australia’s economic relationship with Japan, which is our largest export market. Given the importance of this relationship to Australia’s future economic strength, the BCA will be making a further submission on this issue to the federal government in 2007.

The BCA will continue to advocate the role of freetrade in Australia’s ongoing growth and prosperity.

TASKFORCE

REPORTS

#33

OURPEOPLE

#34

Members

ABB Australia Pty LimitedMr John Gaskell

ABN AMRO Australia and New ZealandMr Angus James

Accenture AustraliaMr Doug Snedden

Accor Asia Pacifi cMr David Baffsky AO

Adelaide Brighton LtdMr Mark Chellew

AGL Energy LimitedMr Paul Anthony

Alcatel-Lucent AustralasiaMs Hilary Mine

Alcoa of AustraliaMr Wayne Osborn

Allens Arthur RobinsonMr Michael Rose

Alumina LimitedMr John Marlay

Amcor LimitedMr Ken MacKenzie

ANZMr Michael Smith OBE(from 1 October 2007)

Australia PostMr Graeme John AO

Australian Securities ExchangeMr Robert Elstone

Australian UnityMr Rohan Mead

AWB LimitedMr Gordon Davis

AXA Asia Pacifi c HoldingsMr Andrew Penn

Babcock & BrownMr Phillip Green

Bendigo Bank GroupMr Rob Hunt AM

BHP BillitonMr Marius Kloppers (from 30 September 2007)

Blake Dawson WaldronMr John Atkin

BlueScope Steel LimitedMr Paul O’Malley (from 1 November 2007)

BOC LimitedMr Colin Isaac

Boeing AustraliaMr Craig Saddler

Boral LimitedMr Rod Pearse

Boston Consulting Group, TheDr Patrick Forth

BP AustralasiaMr Gerry Hueston

Brambles LimitedMr Mike Ihlein

Brickworks LimitedMr Lindsay Partridge

Caltex Australia LimitedMr Desmond King

Citi Australiaand New ZealandMr Stephen Roberts

Clayton UtzMr David Fagan

Cochlear LimitedDr Chris Roberts

Commonwealth Bank of AustraliaMr Ralph Norris

Corrs Chambers WestgarthMr John W.H. Denton

Crane Group LimitedMr Greg Sedgwick

Credit SuisseMr Rob Stewart

CSR LimitedMr Jeremy Maycock

David Jones LimitedMr Mark McInnes

DeloitteMr Giam Swiegers

Deutsche Bank, Australia/New ZealandMr Chum Darvall

DuPont (Australia) LtdMr Hutch Ranck

EDS Australia Pty LtdMr Chris Mitchell

EnergyAustraliaMr George Maltabarow

Ernst & Young AustraliaMr James Millar

ExxonMobil Australia Pty LtdMr Mark Nolan

Fletcher Building LimitedMr Jonathan Ling

FOXTEL Management Pty LimitedMr Kim Williams

FreehillsMr Gavin Bell

GM Holden LtdMr Chris Gubbey

Goldman Sachs JBWereMr Craig Drummond

Hanson AustraliaMr Leslie Cadzow

IBM Australia and New ZealandMr Glen Boreham

ING AustraliaMr Paul Bedbrook

Insurance Australia GroupMr Michael Hawker

James Hardie IndustriesMr Peter Baker

PART 1

As at 30 August 2007 unless indicated otherwise.

OUR PEOPLE

#35

Jones Lang LaSalle Australia Pty LimitedMs Christine Bartlett

JPMorgan Australia and New ZealandMr Rob Priestley

KPMGMr Michael Andrew

Leighton Holdings LimitedMr Wal King AO

Lend Lease Corporation LimitedMr Greg Clarke

Macquarie Bank LimitedMr Allan Moss AO

Mallesons Stephen JaquesMr Robert Milliner

MBF Australia LimitedMr Eric Dodd

McDonald’s Australia LtdMr Peter Bush

Merrill Lynch International (Australia) LimitedMr Kevin Skelton

Metcash LimitedMr Andrew Reitzer

Microsoft Pty LtdMs Tracey Fellows

Minter EllisonMr Guy Templeton

Mirvac GroupMr Greg Paramor

Mitchell Communication GroupMr Harold Mitchell AO

Mitsui & Co. (Australia) LtdMr David Fukatsu

Morgan Stanley Australia LimitedMr Steve Harker

National Australia Bank LimitedMr John Stewart

Nufarm LimitedMr Douglas J. Rathbone AM

O-I Asia Pacifi cMr Greg Ridder

OneSteel LimitedMr Geoff Plummer

OptusMr Paul O’Sullivan

Oracle Corporation Australia Pty LimitedMr Ian White

Orica LimitedMr Graeme Liebelt

Origin Energy LimitedMr Grant King

Oxiana LimitedMr Owen Hegarty

PaperlinX LimitedMr Tom Park

Perpetual LimitedMr David Deverall

PricewaterhouseCoopersMr Tony Harrington

Qantas Airways LtdMr Geoff Dixon

Ramsay Health CareMr Patrick Grier

ResMed LimitedMr Rob Douglas

Rio Tinto – AustraliaMr Charlie Lenegan

Shell Australia LimitedMr Russell R. Caplan

St.George Bank LtdMr Paul Fegan (Acting Chief Executive Offi cer)

StocklandMr Matthew Quinn

Suncorp-Metway LtdMr John Mulcahy

Telstra Corporation LimitedMr Sol Trujillo

Thales AustraliaMr Norman Gray AM

Toyota Motor Corporation Australia LimitedMr John Conomos AO

Transurban GroupMr Kim Edwards

UBS Investment Bank, AustralasiaMr Brad Orgill

United Group LimitedMr Richard Leupen

Visy IndustriesMr Harry Debney

Washington H. Soul Pattinson and Company LimitedMr Robert Millner

Wesfarmers LimitedMr Richard Goyder

Westpac Banking CorporationDr David Morgan (until 31 January 2008)

Mrs Gail Kelly (from 1 February 2008)

Woodside Energy LimitedMr Don Voelte

Woolworths LimitedMr Michael Luscombe

WorleyParsons LimitedMr John Grill

Zinifex LimitedMr Tony Barnes(Acting Chief Executive Offi cer)

Honorary MembersMr Greig GaileyMr Hugh Morgan ACDr John Schubert

PART 1

Secretariat

Ms Katie LaheyChief Executive

Ms Melinda Cilento Deputy Chief Executive

Mr Mark Triffi tt Director, Strategic Communications

Mr Patrick ColemanDirector Policy

Ms Allesandra FabroDirector Policy

Ms Freya MarsdenDirector Policy

Ms Maria TarrantDirector Policy

PART 1

Task Force Members Mr Michael AndrewAustralian ChairmanKPMG

Mr John AtkinManaging Partner and Chief ExecutiveBlake Dawson Waldron

Ms Christine BartlettCEO – AustraliaJones Lang LaSalle Australia Pty Limited

Mr Peter BartlettPartnerMinter Ellison

Ms Paula BensonGeneral Manager Corporate AffairsAlcoa of Australia

The Hon. Mark BirrellSpecial CounselMinter Ellison

Mr Kevin BrownExecutive General Manager PeopleQantas Airways Ltd

Mr Russell R. CaplanChairmanShell Australia Limited

Mr Mark ChellewCEO and Managing DirectorAdelaide Brighton Ltd

Dr Breen CreightonPartnerCorrs Chambers Westgarth

Mr Ian CumminExecutive Vice President People and PerformanceBlueScope Steel Limited

Mr Chum Darvall Chief Executive Offi cerDeutsche Bank, Australia/New Zealand

Board Members

Mr Michael Chaney AOPresidentBusiness Council of Australia

Mr Geoff DixonManaging Director and Chief Executive Offi cerQantas Airways Ltd

Mr Greig GaileyHonorary MemberBusiness Council of Australia

Mr Angus JamesChief Executive Offi cerABN AMRO Australia and New Zealand

Ms Katie LaheyChief ExecutiveBusiness Council of Australia

Mr Charlie LeneganManaging DirectorRio Tinto – Australia

Mr Robert MillinerChief Executive Partner Mallesons Stephen Jaques

Mr Rod PearseCEO and Managing Director Boral Limited

Mr John StewartGroup Chief Executive Offi cer National Australia Bank Limited

OUR PEOPLE

#36

As at 30 August 2007 unless indicated otherwise.

Mr Harry DebneyChief Executive Offi cerVisy Industries

Mr John W.H. DentonPartnerand Chief Executive Offi cerCorrs Chambers Westgarth

Mr David Deverall Managing Director and Chief Executive Offi cerPerpetual Limited

Mr Geoff DixonManaging Director and Chief Executive Offi cerQantas Airways Ltd

Mr Rob DouglasChief Operating Offi cer – SydneyResMed Limited

Mr Craig DrummondChief Executive Offi cer and Managing DirectorGoldman Sachs JBWere

Mr John EganSenior Executive – Offi ce of the PresidentToyota Motor Corporation Australia Limited

Ms Tracey FellowsManaging DirectorMicrosoft Pty Ltd

Mr Ian FliednerDirector – External Affairs BP Australasia

Dr Patrick ForthManaging Partner, Australia and New ZealandThe Boston Consulting Group

Mr Greig GaileyHonorary MemberBusiness Council of Australia

Mr John GaskellPresident and CEOABB Australia Pty Limited

Mr Norman Gray AMManaging DirectorThales Australia

Mr Patrick GrierChief Executive Offi cerRamsay Health Care

Mr Tom HarleyPresidentCorporate DevelopmentBHP Billiton

Mr Gerry HuestonPresident BP Australasia

Mr Rob Hunt AMManaging DirectorBendigo Bank Group

Mr Angus JamesChief Executive Offi cerABN AMRO Australia and New Zealand

Mr Graeme John AOManaging DirectorAustralia Post

Mr Charlie LeneganManaging DirectorRio Tinto – Australia

Mr Rod McDonaldGroup Manager, Human ResourcesAustralia Post

Professor Geoff MastersChief Executive Offi cerAustralian Council for Educational Research

Mr James MillarChief Executive Offi cerErnst & Young Australia

Mr Robert MillinerChief Executive PartnerMallesons Stephen Jaques

Dr David MorganChief Executive Offi cerWestpac Banking Corporation

Mr Mark NolanChairmanExxonMobil Australia Pty Ltd

Mr Wayne OsbornManaging DirectorAlcoa of Australia

Mr Rod PearseCEO and Managing DirectorBoral Limited

Dr Noel PurcellGeneral Manager Stakeholder CommunicationsWestpac Banking Corporation

Mr Matthew QuinnManaging DirectorStockland

Mr Hutch RanckManaging Director, Australia and New ZealandDuPont (Australia) Ltd

Mr Stephen RobertsChief Executive Offi cer, Markets & BankingCiti Australia and New Zealand

Mr Greg SedgwickManaging DirectorCrane Group Limited

Mr Doug SneddenManaging DirectorAccenture Australia

Mr Guy TempletonChief ExecutiveMinter Ellison

Ms Alison TerryExecutive Director, Corporate AffairsGM Holden Ltd

Mr Don VoelteManaging Directorand Chief Executive Offi cerWoodside Energy Limited

OUR PEOPLE

#37

PART 1

Reports

1 September 06Water Under Pressure: Australia’s man-made water scarcity and how to fi x it

5 February 07BCA Budget Submission 2007–08Passing on Prosperity

2 October 06Reshaping Australia’s Federation: A New Contract for Federal–State Relations

6 April 07Tax Nation: Business Taxes and the Federal–State Divide

3 November 06New Pathways to Prosperity: A National Innovation Framework for Australia

7 April 07Strategic Framework for Emissions Reduction

4 December 06Corporate Taxation: An International Comparison (2006 update)

8 April 07Policy that Counts: Reform Standards for the 2007 Federal Election

1

5

2

6

3

7

4

8

OURPUBLICATIONS

#38

OUR PUBLICATIONS

#39

9 May 072006 AGMs: Review and Results

12 June 07Corporate CommunityInvestment in Australia

9

131312 14

10 11

10 May 07Setting Achievable Emissions Targets for Australia

13 July 07Underserviced: Why Australia’s Services Economy Deserves More Attention

11 May 07A Scorecard of State Red Tape Reform

14 August 07Restoring our Edge in Education: Making Australia’s Education System its Next Competitive Advantage

PART 1

September 2006

Council of Australian Governments (COAG)

Energy Reform Implementation Group (ERIG)

Submission to ERIG

October 2006

Australian Government

Department of Foreign Affairs and Trade

Submission on Priorities for a Free Trade Agreement with China: Services, Investment and Intellectual Property in the China–Australia FTA

Productivity Commission

Submission regarding the ‘Performance Benchmarking of Australian Business Regulation’ Issues Paper

November 2006

Treasurer of Australia

Submission regarding a Regulatory Proposal by theAustralian Taxation Offi ce

December 2006

Productivity Commission

Submission regarding the ‘Performance Benchmarking of Australian Business Regulation’ Discussion Draft

January 2007

Productivity Commission

Submission to the Inquiry into Public Support for Science and Innovation

Australian Government

The Treasury (Corporations and Financial Services Division)

Submission regarding the Corporate and Financial Services Regulation Review Proposals Paper

February 2007

Australian Government

The Treasury (Competition and Consumer Policy Division)

Submission on the Amendments to the Trade Practices Legislation Amendment Bill (No. 3) 2006 relating to Component Pricing

Submissions

OUR PUBLICATIONS

#40

Australian Securities Exchange

ASX Corporate Governance Council

Submission to the Review of the Principles of Good Corporate Governance and Best Practice Recommendations

March 2007

Australian Government

Prime Ministerial Task Group on Emissions Trading

Submission to the Task Group

June 2007

Australian Government

The Treasury (Corporations and Financial Services Division)

Submission to the Review of the Operation of the Infringement Notice Provisions of the Corporations Act 2001

July 2007

New South Wales Government

Owen Inquiry into Electricity Supply in New South Wales

Submission to the Inquiry

Parliament of Australia

Senate Standing Committee on Economics

Submission to the Inquiry into the Provisions of the Trade PracticesLegislation Amendments Bill (No. 1) 2007 and Trade Practices Amendments (Predatory Pricing) Bill 2007

August 2007

The Board of Taxation

Submission to the Review of Off-Market Share Buybacks

ment of Australia

e Standing Committee conomics

OUR PUBLICATIONS

#41

Reports, papers and selected submissions are available at www.bca.com.au

#42

Despite one of the longest periods of sustained growth and prosperity in the nation’s history, nearly three million people of working age (and not in education) remain outside the labour force, a signifi cant number of whom have the potential to be employed.

PART 2

ENGAGING OUR POTENTIALThe Economic and Social Necessity of Increasing Workforce Participation

#43

PART 1Introduction 45

Where things stand 56

Raising aggregate participation 59

Maintaining participation: a focus on retention 64

Addressing multiple barriers 67

Preventing disengagement and non-participation 70

Conclusion and recommendations 71

CONTENTS

Introduction

Prosperity, but not for everyone

The Business Council of Australia (BCA) is an association of the

CEOs of 100 of Australia’s leading corporations, representing a combined

workforce of more than one million people. It was established in 1983 as a

forum for Australia’s business leaders to contribute to public policy debates

to build a prosperous Australia.

The BCA develops and contributes to policy directions in a diverse

range of areas such as education, innovation, climate change, infrastructure,

taxation, federal–state relations, regulation and workplace relations.

Workforce participation is an important part of the BCA’s agenda and is

recognised as a vital component of the BCA’s aspiration to make Australia

the best place in the world in which to live, learn, work and do business.

After 15 years of continuous economic growth, there is a unique

opportunity to consolidate high levels of prosperity and pass its benefi ts on

to future generations of Australians. To do this, business and governments

need to build on current gains by looking at new challenges and opportunities.

Over the past decade, the economy has grown by 40 per cent.

Unemployment is at 30-year lows. Average household wealth has multiplied.

But this is not the whole story.

#45

PART 2

INTRODUCTION

#46

Many Australians are not part of mainstream economic growth. Despite one of the longest periods of sustained growth and prosperity in the nation’s history:

Nearly three million people of working age (and not in education) remain outside the labour force, a signifi cant number of whom have the potential to be employed.1

One in nine Australians aged 50 to 64 is on the disability support pension, including one in fi ve men aged 60 to 64.2

One in seven Australian children live in jobless households (i.e. households in which no residing parent is employed).3

The participation rate for adult Indigenous Australians is about three-quarters of that of non-Indigenous Australians.4

There are around 2.3 million Australians of working age on welfare benefi ts.5

There are just fi ve workers paying income tax for every one person reliant wholly or mainly on welfare payments, compared to 22 workers for every welfare participant in the mid-1960s.6

INTRODUCTION

#47

Population ageing will lead to the departure from the workforce of increasing numbers of Australians. This means that sustained growth and prosperity will potentially be constrained by chronic labour and skills shortages.7

Ironically, it is those Australians who have not so far benefi ted from strong economic growth who will play a key role in the country’s future prosperity.

Removing multiple barriers to participation and employment will not only assist in reducing chronic labour shortages but will also provide real opportunities for these individuals to directly benefi t from Australia’s long-running prosperity.

This is not just an economic issue. It is also an important equity issue. Limiting opportunities for individuals to workrestricts their living standards, their ability to provide for themselves and their families and their potential to bepart of the wider community.

Challenging the assumptions about workforce participationThe focus on the unemployment rates obscures the pressing challenges we face. Claims that Australia is nearing, or at, ‘full employment’ ring hollow given the large number of Australians who are able or wantto work and cannot fi nd suitable or stable employment.

Ensuring we engage as many of these people as possible in the workforce necessitates a major shift in the way we defi ne and measure the performance of Australia’s labour market. In today’s world of capacity constraints and supply shortages, the foundation of the debate about employment policies and their effectiveness needs to move from labour demand, as measured by unemployment rates and employment numbers, to one that also encompasses labour supply.

PART 2

‘Pro-growth policies, focused on participation and productivity, offer the best prospects of meeting the looming fi scal challenge without compromising the living standards of future generations.’

Ken Henry, Secretary, Department of the Treasury

Quoted in J. Abhayaratna and R. Lattimore, Workforce Participation Rates – How Does Australia Compare? Productivity Commission Staff Working Paper, December 2006, p. 55.

‘Paid work is the means through which many people obtain the economic resources needed for day to day living, for themselves and their dependants, and to meet their longer-term fi nancial needs. Having paid work contributes to a person’s sense of identity and self-esteem.’ABS Catalogue No. 1370.0, Measures of Australia’s Progress 2006, p. 19.

In order to challenge many of the assumptions that underpin employment policies, we need to reorient our thinking and set a new goal: to make Australia a ‘full participation economy’ by increasing participation levels for key groups currently outside the workforce in the medium and long term, and in the process, widen and deepen overall participation rates.

This will require:

+ Recognition that broad-based employment policies focused on aggregate outcomes lack the precision required to address the often complex barriers to participation for many potential workforce participants. (The recent welfare-to-work reforms represent a positive development in this respect.)

+ A sustained effort to develop and implement structured and multifaceted policies and programs that target specifi c barriers to the participation of different groups.

+ Setting realistic but ambitious targets and timelines to assess the results of policies and programs.

INTRODUCTION

#48

The need to focus on participation in addition to employment

INTRODUCTION

#49

In order to cover the broader issue of those who are not working and, for a range of reasons, are not seeking employment but have the potential to work, the BCA has focused its efforts on participation rather than the more limited employment defi nition.

Employment fi gures only show part of the labour market picture (see Exhibit 1). Those not actively looking for work are classifi ed as ‘not in the labour force’ which means that the unemployment fi gures do not represent the full extent of people who would like to be employed, and certainly under-represent those with the potential to be employed. Policies are needed to address both participation and unemployment.

In focusing on lifting participation, the fi rst priority is to encourage people to move from non-participation to looking for work.

By entering the labour force and seeking employment, individuals facing barriers to employment can receive assistance and support to address those barriers.

Ultimately, the objective in getting people into the labour force is for them to be successful in gaining and retaining employment.

In terms of the outcomes sought, therefore, we focus on measured rates of participation(see Figure 1, p. 56) as a stepping stone to improving the employment-to-population ratio (see Figure 2, p. 56) which is the fi nal measure of success.

In addition to low participation, Australia continues to have unacceptably high rates ofunemployment among specifi c groups and in specifi c regions (and in fact unemploymentand low participation often go hand in hand, as the former discourages others in the groupsfrom looking for work). In focusing on lifting participation, the BCA is not downplaying unemployment as a priority; the end goal is improved employment outcomes.

AUSTRALIANS

20.9m

NOT WORKING AGELess than 15 years old

4.0m

WORKING AGE15 years and over

16.9m

PARTICIPATING

11.0m

NOT PARTICIPATING

5.9m

PART 2

#50

EXHIBIT 1:

From a labour market perspective, unemployment figures only show part of the picture

SHORT-TERM UNEMPLOYED

0.39m

UNEMPLOYEDActively sought work in the last

12 months

0.47m

LONG-TERM UNEMPLOYED

0.08m

MARGINAL ATTACHMENT TO

EMPLOYMENTAt risk of falling out and

staying out of employment for sustained periods

SIGNIFICANTDISADVANTAGE,

INCLUDING WITHINSPECIFIC GROUPS

e.g. Indigenous adults, disabled, sole parents, immigrants (particularly those fromnon-English speaking

backgrounds)

OTHER BARRIERSe.g. welfare payments

affected, and thosecaring for: children, the ill,the disabled, the elderly

UNLIKELY TO BE ABLE TO WORK

Including fromgroups such as:

70 years and over:2.0m

Illness or disability:0.53m

STUDENTS

0.8m

ABLE TO WORK BUT FACE BARRIERS OR

DISINCENTIVES

Potentially well over 1m

STRONGATTACHMENT TO

EMPLOYMENTLikely to retainemployment

throughout most oftheir working lives

IN EMPLOYMENTIncluding part-time and

casual employment

10.5m

Source: Based on data from the Australian Bureau of Statistics and the Department of Employment and Workplace Relations.

#51

PART 2

The BCA Workforce Participation RoundtableIn May this year, the BCA convened a roundtable of business, community, welfare, employment and government leaders to discuss the issue. The discussions highlighted both the need and desire for new thinking and approaches to lift workforce participation, as well as the economic and social importance of bringing more people into the workforce.

Participants agreed it is now time to fundamentally rethink the employment and participation equation and develop a new cooperative framework between governments, business and the community to raise workforce participation levels.

Through the representations of community and welfare groups, the roundtable heard how the aspiration of many in the community to join the workforce is being frustrated by barriers to participation.

The roundtable discussions acknowledged the long history of efforts to boost opportunities for groups facing a range of barriers to participation and employment. More recently, substantial research has been undertaken on the impacts of population ageing and the benefi ts of lifting participation, with federal and state governments elevating their approaches to the issue, including through COAG.8

Nevertheless, there is considerable scope for improvement, and it is clear that business can be more closely involved in order to improve participation outcomes.

There are many examples of businesses and business groups that have made signifi cant contributions in this area already. There is a need for a more strategic and coordinated approach between business, government and the community, building on what has been learned to date.

INTRODUCTION

#52

The business sector provides the vast bulk of employment opportunities; it can help to develop the strategies needed toincrease and maintain higher rates of participation and employment.

This paper:

+ Outlines why we need a fundamental change in our assumptions and our approach to employment and participation if we are to effectively engage those who remain outside, or on the periphery, of the workforce.

+ Identifi es the segments of the community that, despite labour shortages, are continuing to miss out on participation and employment opportunities.

+ Highlights policy priorities and methods to raise participation and employment.

+ Provides the basis for future BCA policy work and consultations.

INTRODUCTION

#53

Participant

DR MARK BAGSHAW

MR GARY BANKS AO

MS JILLIAN BROADBENT AO

MS CINDY CARPENTER

MS NATALIE CARR

MR GRAHAM CARTERS

THE HON. FRED CHANEY AO

MR CHRIS DRUMMER

MR DICK ESTENS

MR IAN FITZGERALD

MR NORMAN GRAY AM

MR PATRICK GRIER

MR TOBY HALL

PROFESSOR IAN HARPER

MS ELAINE HENRY OAM

MR GERRY HUESTON

MR ROHAN MEAD

MR TERRY MORAN AO

MR TONY NICHOLSON

MR SEAN ROONEY

PROFESSOR PETER SAUNDERS

MS JANE SCHWAGER

MS ANN SHERRY AO

MS SALLY SINCLAIR

DR JOHN SPIERINGS

MR JOHN STEWART

MR DAVID THOMPSON

MR ROGER WILKINS AO

PROFESSOR MARK WOODEN

MR DAMIEN WOODS

Co-Chairs

Mr Michael Chaney AO President Business Council of Australia

Mr Charlie Lenegan Managing Director Rio Tinto – Australia and Chairman, BCA Employment and Participation Task Force

Facilitator

Mr Peter Thompson Director, Centre for Leadership

PART 2

#54

The BCA Workforce Participation Roundtable

Position Organisation

Business Development Executive IBM Australia and New Zealand

Chairman Productivity Commission

Director Reserve Bank of Australia

Executive Director Human Resources and Marketing Corrs Chambers Westgarth

Human Resources Adviser ABN AMRO Australia and New Zealand

Deputy Secretary Workforce Participation Department of Employment and Workplace Relations

Former Deputy President National Native Title Tribunal

General Manager Community and Government Relations MBF Australia Limited

Chairman Public Aboriginal Employment Strategy

Head of Strategy and Metrics, People and Performance

Westpac Banking Corporation

Managing Director Thales Australia

Managing Director Ramsay Health Care Limited

Chief Executive Offi cer Mission Australia

Executive Director Melbourne Business School

Chief Executive Offi cer The Smith Family

President BP Australasia

Group Managing Director Australian Unity

Secretary Department of Premier and Cabinet Victoria

Chief Executive Offi cer Brotherhood of St Laurence

Director, Sustainable Communities Initiative CSIRO

Social Research Director Centre for Independent Studies

Chief Executive Nonprofi t Australia

Group Executive Westpac Banking Corporation

Chief Executive Offi cer National Employment Services Association

Director Dusseldorp Skills Forum

Group Chief Executive Offi cer National Australia Bank Limited

Chief Executive Offi cer Jobs Australia Limited

Head of Government and Public Sector Group Citi Australia and New Zealand

Professorial Fellow and Acting Director Melbourne Institute of Applied Economic and Social Research

Manager, Business Advisory Services Ernst & Young Australia

This table lists the individuals who took part in the roundtable discussion on 23 May 2007.

#55

PART 2

Where things stand Trends in workforce participation

Strong economic growth and policy changes aimed at supporting

higher participation have increased the share of people looking for and

gaining employment (see Figures 1 and 2).

The increase in the share of people participating and employed

refl ects a strong and steady improvement in participation and employment

outcomes for women. The share of men participating and/or employed, on

the other hand, has fallen over time, although this trend has stabilised and

reversed somewhat in recent years.

80

60

40

20

01980 1985 1990 1995 2000 2005 Aug. 07

Figure 2 Share of Population Employed (%)

#56

80

60

40

20

01980 1985

Total Female Male

1990 1995 2000 2005 Aug. 07

Figure 1 Workforce Participation Rates (%)

In addition, while Australia ranks reasonably well in terms of aggregate participation rates, there are a number of groups for which rates of participation are markedly lower than in other OECD countries. For example, compared to the 30 OECD countries, Australia has low participation rates among the following groups:

+ Males aged 25 to 54 years: Australia rates 23rd in the OECD, with participation rates below comparable countries such as New Zealand and Canada.

+ Child-bearing aged women, 25 to 44 years: Australia rates 20th in the OECD, with rates well below those recorded in Canada, and below those in the US and UK.

+ Older men and women aged 55 to 64 years (people nearing retirement): Australia ranks 14th for both men and women in the OECD in contrast with New Zealand, which ranks 3rd and 4th respectively.13

If, in 2005, Australia had raised its aggregate participation rate to the same level as New Zealand’s (from 65.5 per cent to 67.5 per cent), GDP per capita (living standards) would have improved by an estimated 1.75 per cent.14

Gaps in workforce participationIncreases in participation and employment have been important to Australia’s economic growth. Increasing the number of people participating in the labour market not only provides the benefi ts of a larger workforce, but acts as a major lever to improving the living standards of the individuals participating. It also has the potential to reduce demands on welfare services over time.

Despite the existing strong employment and participation environment, there is still signifi cant scope for improvement. It is widely recognised that there are specifi c groups where workforce participation rates remain particularly low. For example:

+ Participation rates for Indigenous adults across all age groups remain well below those for the non-Indigenous population. In 2006, 67.34 per cent of Indigenous adults aged 15 to 64 were in the labour force compared with 76.3 per cent of the non-Indigenous population.9

+ Approximately 45,000 to 55,000 early school leavers are not taking up full-time work, education or a combination of both.10

+ Nearly 40 per cent of sole parents are not in the labour force.11

+ Immigrants from non-English speaking backgrounds have signifi cantly lower participation rates than those from English-speaking backgrounds (52.6 per cent and 65.9 per cent respectively).12

WHERE THINGS

STAND

#57

PART 2

In considering the gaps in participation, the BCA roundtable identifi ed the need for urgent action on three fronts:

+ Raising aggregate participation: achieving the greatest improvement in aggregate participation (and therefore the most signifi cant economic impact) through targeting the largest groups of non-participants able to join the labour force in the near term.

+ Maintaining participation and a focus on retention: Ensuring individuals currently in the workforce but at risk of dropping out or being made redundant are able to continue in employment (e.g. workers approaching retirement or those with experiences or skills that are becoming outdated).

+ Addressing multiple barriers: developing new approaches to facilitate the participation of individuals facing signifi cant or multiple barriers or disadvantages.

In addition, it was agreed that there needs to be a greater focus on preventing disengagement and non-participation. This includes, in particular, longer-term strategies that prevent circumstances that lead to non-participation, particularly in the area of multiple and sustained disadvantage.

There was a strong consensus among roundtable participants that there needs to be greater recognition and promotion of programs that succeed, and analysis of the underlying causes of program failure. Roundtable participants agreed that further collaboration would be benefi cial, and supported the establishment of a working group to develop priorities for an agenda and future work program.

Finally, the roundtable stressed the need for greater recognition of the positive aspirations and goals of those individuals currently not participating in the labour force. Experience suggests that these aspirations are too often underestimated or downplayed.

The next section considers key issues to be addressed to improve participation rates and possible priorities for future work by the BCA.

WHERETHINGSSTAND

#58

‘When I get a job I will feel like I am a person.’ 29-year-old female on Newstart Allowance

‘There are no down-sides, nothing I’d rather do than work.’ 20-year-old male on Youth Allowance

Source: Quoted in M. Horn and L. Jordan, Give Me a Break! Welfare to Work – A Lost Opportunity, Melbourne Citymission, June 2006, pp. 35 and 36.

Raising aggregate participation

As stated, one reason for raising aggregate participation is to

lessen the adverse effects of population ageing on the size of the labour

force and economic growth. A focus on participation, underpinned by

opportunities for education and training, is required to ensure that labour

supply needs are met.

In order to maximise economic growth and shareprosperity with as many Australians as possible,the right economic settings are needed. Increasedeconomic growth will lift living standards andpromote participation and employment, supportingdistributional equity. Increased participation and employment also assists economic growth.

The BCA has highlighted the importance of choosing a strong-growth rather than a low-growthfuture. Correct macro-economic policies are needed to ensure that economic growth is stable, sustainable and limits downturns and therefore employment losses. The workplace relations reforms over the last 20 years have combined with other crucial reforms, including reduced barriers to trade, the fl oating of the Australian dollar and improvements to the taxation system, to assist economic growth.

Workplace reforms have been particularly important because, in addition to their impact on productivity in the workplace, economic growth and employment, they directly affect employment options and the capacity of business to provide increased fl exibility. This will become increasingly important as the need to attract workers such as mature-age individuals and those with caring responsibilities intensifi es as a consequence of Australia’s ageing population.

EXHIBIT 2:

Employment andParticipation Requires

Economic Stability and Growth

#59

PART 2

RAISINGAGGREGATEPARTICIPATION

#60

The roundtable concluded that, in order to address labour shortages,

the fi rst step is to focus on the largest groups that are most likely and able

to increase participation in response to changes in the relative costs and

benefi ts of participation. The most likely target groups in this context are

mature-age individuals15 and women not currently participating.

Some women are the ‘generation in the middle’,caring both for children and ageing parents.

For women with caring responsibilities the mainissues inhibiting participation include the following:

+ Poor incentives resulting from the interaction between the tax and benefi ts systems that result in relatively little net fi nancial return for work (higheffective marginal tax rates, known as EMTRs).

+ Availability, cost, quality and fl exibility of care options, particularly child care.

+ Limitations in job design and workplace fl exibility,specifi cally the lack of fl exible employment options, including in terms of maternity, parentaland carers leave provisions.

Women returning to work from caring may face similar issues to some mature-age workers such as the relevance of skills and experience, and self-confi dence.

For mature-age individuals the key issues inhibiting higher rates of participation include:

+ Incentives to retire related to pension and superannuation benefi ts (e.g. the incentives to continue earning compared to accessing retirement benefi ts, and the age of eligibility for benefi ts).

+ Age discrimination based on stereotypesand associated prejudices.

+ Applicability of the skills and experience of those who have been out of the workforce for some time.16

RAISINGAGGREGATE

PARTICIPATION

#61

Priorities for action Against the backdrop of a tight labour market – refl ecting a strong economy and emerging demographic pressures – much is being done to lift participation among these target groups.

For example, the federal government has made changes to benefi ts, superannuation and personal income tax rates aimed at lifting participation, and efforts to raise workforce participation feature on the agenda of the Council of Australian Governments. In addition, for a range of reasons, businesses are being more proactive in this area. Competition for workers means businesses must compete to be employers of choice (see Exhibit 3).

There is also a signifi cant body of research and experience, and the Productivity Commission has committed to undertaking further research on the topic domestically.17

However, as discussed earlier, there is a substantial role business can play as part of a coordinated approach to increasing participation.

EXHIBIT 3:

Competition for workers: The ACCI/BCA National

Work and Family Awards

The winner of the 2007 ACCI/BCA Work and Family Awards in the small business category, Benbro Electronics, offers a range of workplace measures including paid carers, external study and bereavement leave, fl exible working hours, eight weeks paid maternity leave, workplace modifi cations for employees with disabilities, and fl exible arrangements for employees returningto work from leave as part of ensuring staff loyalty and retention.

In the fi nancial sector, St.George Bank, winner inthe large business award category, offers a rangeof measures to attract and retain staff includinggrandparental leave, fl exible working arrangementsfor mature-age workers, job sharing, up to six weeks additional purchased leave per annum, and 13 weeks paid parental leave.

Source: The 2007 ACCI/BCA National Work and Family Awards Winning Workplaces publication, www.workplace.gov.au/WorkFamily.

PART 2

Over the next six months the BCA will identify where it can best contribute. Possible areas for future work include:

+ Cost of care: The availability and affordability of appropriate caring options (see Exhibit 4) including the effectiveness of current subsidies and tax arrangements and the incentives for new supply of child care to be made available, including by employers.

+ Effective marginal tax rates: The impact of high effective marginal tax rates on participation decisions.

− Debate continues on what impact high EMTRs have for different groups and whether they are a long-term deterrent to participation.

− The complexity and diverse range of payments can make it diffi cult to determine EMTRs and their impact, although detailed estimates are prepared by organisations such as the Melbourne Institute. High EMTRs are a consequence of a targeted and means-tested system of benefi ts. Understanding the impact of EMTRs in practice is important to understanding how they might be offset.

+ Diversity: Better promotion of the benefi ts of workplace diversity and fl exibility.

+ Discrimination: For example, the extent to which age-related stereotypes continue to act as barriers to employment for mature-age individuals. In 2006, the most commonly reported main diffi culty in fi nding work for unemployed people aged 45 years and over was ‘considered too old by employers’.18 This indicates that age discrimination remains an issue.

RAISINGAGGREGATEPARTICIPATION

#62

EXHIBIT 4:

Caring responsibilitiesextend beyond child care

While much of the discussion around caring responsibilities focuses on children and the availability of child care, the broader issue of caring responsibilities (including for children, the elderly and people with disabilities) needs to be considered and addressed, particularly because population ageing will increase caring needs and responsibilities associated with the elderly. Research by the Taskforce on Care Costs (TOCC) has found that:

+ One in four employees with caring responsibilities is likely to leave the workforce in the future because of care costs.

+ One in four employees with caring responsibilities has already reduced their hours of work because of care costs.

+ Thirty-fi ve per cent of employees with caring responsibilities would increase their hours of work if care was more affordable.

+ The cost of care infl uenced the departure of 64 per cent of employees with caring responsibilities from the workforce.

Source: Taskforce on Care Costs, Where to Now? 2006 TOCC Final Report, www.tocc.org.au.

The BCA has studied some of these issues in the past as part of a survey of its membership on work–family policies. This analysis resulted, among other things, in the release of guidelines to support the participation and retention of mature-age workers. As part of its future work on increasing participation the BCA will examine how it might work with organisations that have developed toolkits to assist business in establishing participation and retention strategies and measuring progress against these strategies,with the aim of increasing their take-up.19

The BCA will also continue to work collaboratively with organisations such as the Productivity Commission and other relevant organisations and stakeholders to ensure that policy settings and developments provide the best possible incentives for participation.

RAISINGAGGREGATE

PARTICIPATION

#63

PART 2

Maintaining participation: a focus on retention

Roundtable discussions highlighted the importance of fi nding

ways to retain workers, particularly as they approach retirement age.

Financial incentives related to superannuation and government

benefi ts, poor health, and skill redundancy (and retrenchment) can all

signifi cantly infl uence decisions to retire early and permanently from

the workforce.

Recent policy changes (see Exhibit 5) and a strong economy

have helped to improve participation rates among mature-age individuals,

especially men. These developments have also been supported by

improved health among older groups.

RAISING

#64

EXHIBIT 5:

Recent policychanges support

mature-ageparticipation

The availability of the Disability Support Pension(DSP) has impacted on the participation of males, particularly those who have lost jobs in declining industries and older males. About halfthe men aged 25–64 years old who are outside the labour force are in receipt of the DSP.*

DSP eligibility requirements have been tightenedand should support higher participation, althoughthe grandfathering (i.e. exclusion of existing DSP recipients from the changes) means that a signifi cant pool of older males is likely to remain outside of the labour force. In addition, there is currently a disincentive for those permanent pension recipients to volunteer for work, as this triggers a review of their pension. Fear that they may not retain their pension precludes many in this group from volunteering to participate even though they want to work.

The Mature Age Worker Tax Offset was introduced in mid-2004 and provides a tax rebate for people aged 55 or over who choose to remain in the workforce. From July 2005, those aged 55 or over are able to access theirsuperannuation in the form of a non-commutablepension while still working. Since July 2007, superannuation benefi ts have been tax-free or subject to a reduced rate of tax after age 60.

Sources:*R. Lattimore, Men Not at Work: An Analysis of Men Outside the Labour Force, Productivity Commission Staff Working Paper, Canberra, January 2007, p. xxix. See also S. Kennedy and A. Da Costa, Older Men Bounce Back: The Re-Emergence of Older Male Workers, Treasury Working Paper, Department of the Treasury, 2007.

MAINTAINING PARTICIPATION:

A FOCUS ONRETENTION

#65

PART 2

Mature-age workers can be provided with opportunities for job rotation and career change, and encouraged totake advantage of such opportunities.

A perceived lack of opportunities for career advancement, and age discrimination, results in workers disengaging from work long before retirement, which reinforces perceptions that they are no longer willing or able to contribute as effectively in the workplace.20 As noted in the previous section, the development of toolkits to assist business in establishing participation and retention strategies, and measuring progress against these strategies, could help to increase retention across a number of groups.

MAINTAINING PARTICIPATION:A FOCUS ONRETENTION

#66

Issues and strategiesIn order for these positive trends to be maintained over time it is important to ensure that available incentives continue to support participation and that workers have the skills relevant to rapidly changing technologies and market conditions.

Training and skills development via fl exible training pathways, whether on or off-the-job, is vital. Improving training take-up and completion rates among mature-age workers will not only support greater retention, but will also help to maintain productivity and employability. A fl exible and responsive education and training system that recognises the needs of mature learners is essential, as is employer recognition of the benefi ts of education and training.

#67

Addressing multiple barriers

Many of the groups facing multiple or signifi cant barriers

to participation and employment are small in absolute numbers.

From an economic or labour force perspective, this can mean that

they are overlooked. The costs associated with achieving sustained

improvements in participation and employment outcomes, and an

often narrow consideration or perception of the benefi ts that fl ow

from this, can reinforce this tendency.

But considered from the perspective of the link with disadvantage, the compounded costs of inaction over time, the impact that even ‘isolated’ community dysfunction can have more broadly, and the aggregate costs across all such groups, the case for action becomes compelling. The challenge of raising and sustaining improved participation within this area was the key focus of the roundtable. This refl ected the fact that most participants considered this to be the area in which progress and outcomes relative to effort have been the most disappointing.

Many Indigenous Australians, sole parents, long-term unemployed, people with disabilities, geographically isolated individuals and individuals from culturally and linguistically diverse backgrounds confront multiple barriers to participation.

PART 2

ADDRESSINGMULTIPLE BARRIERS

#68

These individuals will often experience a combination of interrelated problems and intergenerational disadvantage, including:21

Signifi cant defi ciencies in relevant education, training and skills

+ There is a strong correlation between unemployment and low participation and level of education.

+ People who obtain a Year 12 qualifi cation are more likely to continue their involvement in further education and training and be employed. In 2006, Indigenous students were half as likely to continue to Year 12 as non-Indigenous students.22

+ Limitations in more general or generic employability skills (such as teamwork, reliability, and communication skills).

Poor incentives or fi nancial returns for work effort

+ The interface between wages, taxation levels and welfare benefi ts can lead to adverse outcomes, such as high effective marginal tax rates.

Poor health

+ According to the ABS, in 2006 ‘own ill health or disability’ was cited by 10 per cent of unemployed people as the major obstacle to employment.

Limited job availability (i.e. limited employer demand)

+ For business, the perceived and actual risks of hiring individuals without good employment track records provide tangible barriers to employment. The higher the perception of business risk, the less likely it is that business will hire.

+ Perceived and actual costs and risks for business can include insuffi cient skills or capacity to undertake the work; the costs of workplace modifi cations or additional services to ensure the employee can participate effectively; and rapid staff turnover.

A lack of adequate and stable accommodation

+ Housing instability and homelessness can act as signifi cant barriers to successful welfare-to-work transitions.23

The roundtable discussions raised a number of key issues related to the lack of access to and effectiveness of support programs. In particular, participants outlined a long list of criticisms based on their own experiences, including the need for:

+ better targeting of assistance to individual needs;

+ multifaceted approaches;

+ the need for community-based policies and programs;

+ sustained commitments and program investment;

+ streamlined administration and governance arrangements; and

+ greater accountability and measurement of program outcomes.

ADDRESSINGMULTIPLE BARRIERS

#69

Issues and strategies

It is clear from the roundtable discussions that acollaborative approach could improve participationamong the most disadvantaged groups througha number of areas. A working group of business, government and community groups could makea fundamental contribution by working to strengthenthe institutional processes and frameworks throughwhich support and assistance are provided.

The formulation of a framework for good program design, delivery and monitoring processes wouldsignifi cantly enhance the effectiveness of assistanceand support programs, and hence participation outcomes. Based on experiences to date, such a framework could articulate the key features of successful programs and steps to be followed, as well as highlight factors that are likely to undermine or limit the achievement of improved and sustained outcomes and measures that have worked to dissipate these factors.

The aim would be to use such a framework to increase the likelihood of success of future programs by establishing the foundations for sound and effective programs and program follow-through.

The purpose of this paper is to promote the economic and social necessity

of increased workforce participation and to earmark areas for future scrutiny

and involvement by business.

The framework should incorporate the experiencesand needs of providers, administrators and users of the programs, as well as other stakeholders such as state and federal government agencies, community and welfare organisations, the target individuals, and business and employers.

Once such a framework is developed, the dissemination of best practice could be supportedby the establishment of a collaborative mentoring program led by those who have hands-on experiencein the design, implementation and monitoring ofsuccessful programs (both large and small). Resources could be provided collaboratively by the government, business and community sectors. Over time, more rigorous monitoring frameworks could be applied to existing programs with a view to replacing or eliminating those that are ineffective.

PART 2

#70

Preventing disengagement and non-participation

While reducing the current pool of individuals not participating in

the labour force is an immediate priority, over the longer term it is preferable

to reduce the likelihood that people fi nd themselves in such circumstances.

This is clearly vital for social reasons but it also makes good economic sense.

Funding spent on prevention has signifi cantly higher returns in terms of

positive outcomes for individuals

and society than funding spent

on individuals already caught in

unemployment and poverty cycles.24

Roundtable participants highlighted the role that early intervention, based on the identifi cation of important risk factors, can play in changing the participation expectations and experiences of individuals later in life. The need to engage with families of individuals at risk was raised as a determinant in the effectiveness of support and assistance. Particular emphasis was placed on the role of education, including early childhood learning. The BCA has taken a lead role in advocating increased participation in education and training and will continue these endeavours.

#71

Conclusion and recommendations

Signifi cant improvements in labour force participation and

employment outcomes have been achieved in recent years as a direct

result of strong economic growth. This has played an important role in

helping to spread the benefi ts of economic growth and prosperity more

widely through the community.

Refl ecting the need for greater focus on participation as well as employment outcomes, the BCA will:

+ Review policy settings as they relate to theparticipation of women and mature-ageworkers with a particular focus on the affordability of, and access to, caring options for dependants.

+ Support the broader dissemination and take-up of best-practice workplace strategies to achieve higher rates of participation and retention among women, mature-age workers and Indigenous Australians, building on the work that a number of businesses have already undertaken.

+ Propose that the working group of participants from the BCA’s participation roundtable:

− develop a framework for best practice programdesign, delivery and monitoring processes; and

− consider and recommend other methods that will assist government to develop effective program delivery and outcomes.

Nevertheless, too many people remain disenfranchised and disengaged from participation,employment opportunities and the wider community.This comes at a high individual, community and economic cost – a cost that will become increasingly apparent as our population ages. There is also a risk that reduced social cohesion could erode support for the policies necessary to sustain economic and employment growth.

Signifi cant efforts have been made to address barriers to participation and to achieve improved employment outcomes, and there are examples of very effective programs and positive results. The challenge is to see these examples become the norm and improve employment outcomes for the many who presently fi nd themselves excluded from mainstream opportunities.

Business has made a contribution to lifting participation, including among disadvantaged and isolated communities, but given the complexity of the challenge, a broader and more enduring engagement from business will assist in addressing these issues. The BCA considers there is a need for a more strategic and coordinated approach between business, government and the community building on what has been learned to date. This view was supported and welcomed by government and community organisations who participated in the roundtable discussion convened by the BCA.

1 There are 10,985,300 persons over the age of 15 in thelabour force and an estimated 5,889,200 over the age of15 not in the labour force (ABS Catalogue No. 6202.0, Labour Force, August 2007, p. 7.); of these, the Australian Government Department of Employment and Workplace Relations (DEWR) estimates that there are 800,000 personsin education and training. The estimated number of personsaged 65 years and over is 2,809,891; a number of those are in employment (ABS Catalogue No. 3222.0, Population Projections, Australia, Table A9, June 2006 [re-issue]).

2 Data provided by DEWR.

3 ABS data available on request, Survey of Income and Housing 2003–04.

4 Steering Committee for the Review of Government Service Provision, Overcoming Indigenous Disadvantage: Key Indicators 2007, Productivity Commission, Canberra, 2007, from ‘Headline Indicators’, p. 39.

5 Data provided by DEWR.

6 P. Saunders, ‘Tax, Welfare and Jobs: A First Step to Reform’,paper presented to the ‘Pursuing Opportunity and Prosperity’ conference, Melbourne, November 2003, p. 12.

7 The total labour force participation rate for people 15 andover has risen gradually from 60.7 per cent in 1978–79 to 64.5 per cent in 2005–06. On current estimates the participation rate will fall gradually from 2008–09, reaching 57.1 per cent by 2046–47 (Intergenerational Report 2007, Commonwealth of Australia, 2007, pp. 19–21).

8 See, for example, the Intergenerational Report 2007, Commonwealth of Australia, 2007; Economic Implications of an Ageing Australia, Research Report, Productivity Commission, 2005; D. Gruen and M. Garbutt, The Output Implications of Higher Labour Force Participation, Treasury Working Paper 2003–02, Department of the Treasury, 2003; and Victoria: Working Futures, report of Victoria’s Workforce Participation Taskforce, Department for Victorian Communities, 2005.

9 ABS Catalogue No. 6287.0, Labour Force Characteristics of Aboriginal and Torres Strait Islander Australians, Experimental Estimates from the Labour Force Survey 2006, 2007, p. 30.

10 Australian Industry Group and Dussledorp Skills Forum, It’s Crunch Time: Raising Youth Engagement and Attainment, 2007, p. 17.

11 ABS Catalogue No. 402.0, Australian Social Trends 2007, p. 3.

12 Victoria: Working Futures, 2005, p. 41.

13 The Productivity Commission Staff Working Paper (J. Abhayaratna and R. Lattimore, 2006) uses cross-country comparisons, adjusting the data to refl ect data discrepancies in the treatment of defence personnel, institutionalised populations missing data from some age brackets, and paid maternity leave.

14 ibid., p. 59.

15 Raising the participation rate of men aged 25 to 55 would also produce a signifi cant aggregate impact, althoughmany who are currently not participating are likely to fall within the group facing multiple barriers such as lack of education, disability and long-term unemployment.

16 See Victoria: Working Futures, 2005, p. 35.

17 Abhayaratna and Lattimore, p. xiii.

18 ABS Catalogue No. 6105.0, Australian Labour Market Statistics, January 2007.

19 See, for example, ‘The CEO Kit for Attracting and RetainingFemale Talent’, Chief Executive Women, 2006.

20 See Business Council of Australia, Age Can Work: A Business Guide for Supporting Older Workers, 2003.

21 Statistics are from ABS Catalogue No. 6105.0, Australian Labour Market Statistics, January 2007, unless otherwise indicated.

22 Overcoming Indigenous Disadvantage: Key Indicators 2007, Productivity Commission, Canberra, 2007, pp. 3–14.

23 Melbourne Citymission, Give Me a Break! Welfare to Work – A Lost Opportunity, p. 50.

24 See, for example, J. Heckman, ‘The Economics of HumanSkills: Evidence and Policy Implications’, Research Schoolof Social Sciences, ANU, 2006; Professor M. Keane, ‘Quasi-Structural Estimation of a Model of Child Care Choices and Child Cognitive Ability Production’, Departmentof Economics, Yale University, March 2006, and Mission Australia’s ‘Pathways to Prevention’ project, which also notes that programs in the United States have provided benefi ts in the range of $7 to $17 for every $1 spent.TheSmith Family has achieved progress using dual generationallearning where educational activities and support address the developmental needs of more than one generation.

Note: the source for Figures 1 and 2 is ABS Catalogue No. 6202.0.55.001, Labour Force, Australia, Spreadsheets, August 2007.

Notes

#72

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© Copyright October 2007 Business Council of Australia ABN 75 008 483 216 All rights reserved. No part of this publication may be reproduced or used in any way without acknowledgement to the Business Council of Australia. The Business Council of Australia has taken reasonable care in publishing the information contained in this publication but does not guarantee that the information is complete, accurate or current. In particular, the BCA is not responsible for the accuracy of information that has been provided by other parties. The information in this publication is not intended to be used as the basis for making any investment decision and must not be relied upon as investment advice. To the maximum extent permitted by law, the BCA disclaims all liability (including liability in negligence) to any person arising out of use or reliance on the information contained in this publication including for loss or damage which you or anyone else might suffer as a result of that use or reliance.

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42/120 COLLINS STREETMELBOURNE 3000

T 03 8664 2664F 03 8664 2666www.bca.com.au