2CC WITH MARK PARTON
Member for Fraser
WEDNESDAY 17TH JULY 2013
TOPICS: Austerity, changes to fringe benefits tax, live exports
Mark Parton: Andrew Leigh is a thinker and he’s got a piece in the Canberra Times this morning about austerity measures, and he says that when the Great Depression hit the United States, US treasury secretary Andrew Mellon famously advocated austerity. His formula was simple – liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate – it’ll purge the rottenness out of the system. The theory behind austerity is elegant; Proponents argue that government crowds out business and the tax payers will equate spending cuts today with tax cuts tomorrow. There’ll be some short term pain as prices and wages fall, but from cuts will come growth and on the face of it, you can understand why they bought it as a concept back in the 1920s and 30s. But in its simplest form, it just doesn’t really work. Andrew Leigh joins us right now, of course, the federal member for Fraser here in the ACT. G’day Andrew
Andrew Leigh: G’day Mark
Mark Parton: You are obviously correct in what you say about the way that they dealt with the Depression in the 20s and 30s because it just died in the bum, it didn’t work at all did it? It extended it for such a long period of time.
Andrew Leigh: Yeah, all the way up until World War II in fact, Mark. I mean World War II is the only thing that eventually gets the developed world out of the Great Depression. The monetary policy makers in the era just fall apart.
Mark Parton: And you’ve basically suggested that the Conservative government in Britain at the moment is essentially heading down the same path.
Andrew Leigh: They are Mark. They’re terribly worried about debt, which is no bad thing in itself, but the consequence is that they’re cutting back so far that they’re hitting into growth. So they’re cutting back on hospital services, they’re cutting back on education services, they’re shutting down libraries. You’ve got about 10,000 more people in the UK homeless now than before. The result is that Britain’s got its slowest recovery than from any other crisis going back. Even slower, in fact, than Britain’s rate of recovery in the Great Depression itself.
Mark Parton: Andrew, I think that there’s truth in what you say, in that obviously austerity measures can harm. But I think that the great challenge here is finding the line that’s somewhere in the middle between reckless spending and cutting things back. There’s got to be a line in the centre somewhere doesn’t there?
Andrew Leigh: That’s right Mark so, you know, we made savings this week, for example, on tightening rules around fringe benefits allowances for cars. We believe that that’s a responsible saving and I would [inaudible]…
Mark Parton: Do you seriously think it’s a responsible saving Andrew? Because the mail that I’ve got this morning is that Australia’s largest leasing companies have stopped deliveries of new cars, as of now, until at least next week, until they can assess the impact of the Rudd government’s overhaul of company car tax rules.
Andrew Leigh: Well Mark, we’ve known for a while that the fringe benefits tax arrangements were problematic from an environmental standpoint, That they were encouraging people to drive too far because they had these thresholds. What we’re saying now is that you can have your car under the log book method and you’ll get the appropriate tax rebates according to how far you drive it, but you won’t simply get a bigger tax rebate for picking out a bigger car.
Mark Parton: Which again, all sounds sensible but isn’t there the chance that you could do the same to the car industry, exactly the same as, for argument’s sake, what you’ve done to the live cattle industry?
Andrew Leigh: Well, the live cattle industry has a much better future for actually getting its supply chains right Mark, so I’d dispute you on that one. I think it was a real risk for that whole industry if we’d gone on as we were before.
Mark Parton: Just, I mean this Smart Salary have issued a bulletin to dealers. It went out late yesterday, ordering them to halt deliveries until further notice. This email distributed says, “due to the uncertainty, and until we have further clarification of details from the Department of Treasury, all settlements are to be suspended as of close of business today, Tuesday 16th of July.”
Andrew Leigh: Mark, I’m sure people want to make sure that they’re buying a car under the right arrangements and if people end up waiting a week to make sure that they’re still making the right decision on a sale that sounds pretty sensible to me. But I don’t think people ought to be worried about moving to a log book method. Certainly many firms are already using log books to assess business use. So that’s, I think, a reasonable savings measure. You know what I’m trying to do in the piece in the Canberra Times today is to contrast that with cut backs that see patients on oxygen getting fewer visits from district nurses. These sorts of across the board cuts to really vital services which seem to have driven Britain just about back into recession.
Mark Parton: Andrew, always good to get you on the radio. Thanks for coming along. Andrew Leigh, the federal member for Fraser.
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