Create pie, then allocate: Wesfarmers
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Philippa Yelland is a journalist with InvestorDaily, a Morningstar publication.
Wesfarmers (WES) head Richard Goyder has challenged politicians to focus on stable economic policy and reform rather than attacking productivity because "unless you create the pie, you can't talk about allocation".
Markets had to be allowed "to work within reasonable constraints," Goyder said at yesterday's Financial Services Council Deloitte Leadership Series function in Sydney.
There would be some winners and some losers, but ultimately that would lead to increased productivity and efficiency if businesses were allowed to give people what they wanted, he said.
Companies needed infrastructure, investment in people and tax reform so businesses could be wealth creators.
"Unless you create the pie, you can't talk about allocation. Innovation is really important," Goyder said.
"If we're allowed to get on and create value, and if government will let us get on with that, then we can have the debate about allocation."
One of the challenges facing Australian businesses, he said, was access to funding. Wesfarmers' size and balance sheet - which was in "impeccable shape" - had allowed it to go offshore to raise bonds "so we are not beholden to the banks," he said.
Another challenge was the continued reliance on the resources sector, which "has driven most of the growth," he said.
"We need to find other sources of growth," he said.
There was a "worrying lack of confidence in consumers and businesses," he said.
This was "fairly simple to understand," he said. "If people hear and read that their super funds are going down, that their house prices are going down, then there is the 'wealth effect'. Consumers are behaving perfectly rationally - where they can, they are saving," he said.
Goyder spoke to the problem of short-termism among investors. Wesfarmers' ammonium nitrate plant at Kwinana, Western Australia, would take three years to build and there would be no return until the plant was in production, he said.
"If people are impatient for returns, then they will just have to wait," he said.