Talking economics with Arthur Sinodinos - 12 November 2013

On parliament's first day back, I joined Jonathan Green and Arthur Sinodinos to discuss taxation, the RBA, government debt and inequality on ABC RN Drive. (as well as to say nice things about one another). Here's a podcast. The transcript is below.

JONATHAN GREEN: Welcome to you both.

ANDREW LEIGH: Good day Jonathan.


GREEN: Well you're back. How does it feel?

LEIGH: Well it's exciting. Andrew Leigh here, I was particularly excited that Arthur and I got to have parallel roles once more. I think that was, of all the changes of responsibilities, the bit I enjoyed the most. The symmetry of what I think Walleed Aly called the two knights.

GREEN: Very nice indeed.

SINODINOS: Absolutely.

GREEN: Arthur Sinodinos.

SINODINOS: We're living in a parallel universe Jonathan.

GREEN: In so many ways.

LEIGH: But for me Jonathan there is something genuinely nice about shadowing somebody who personally I respect a great deal.

SINODINOS: And vice versa. Anyway.

GREEN: I'm glad to hear the love in the room. Clearly the kinder, gentler Parliament is off to a flying start. Arthur Sinodinos why can't we see the figures that demonstrate the need for this rather large lift in the debt ceiling?

SINODINOS: You will Jonathan. You will see them in the Mid-Year Economic and Fiscal Outlook, which will be out before Christmas. I think the Treasurer has already been pretty transparent about the reasons for this. I think Labor, when it put down its last budget in May, should have been prepared to have another debate on the debt limit then and raised it then. And the reason we're raising it now, is because we need to accommodate, on Treasury advice and the advice of the Office of Financial Management, is the increase in debt that's required given the budgetary settings that we have at the moment and to take into account potential fluctuations in the amount of debt that will be needed to finance Government activity within the year as well. The advice…

GREEN: Andrew Leigh, wouldn't you like to see that financial update before you vote on this debt increase?

LEIGH: That's absolutely our position Jonathan. Somebody last year put the argument as follows, he said: "our money, our future is too important to be mortgaged like this without the Government giving us the strongest possible arguments for it." That's Tony Abbott speaking about the debt limit increase, which the Coalition opposed. We are happy to support a debt limit increase, which covers where debt was expected to peak on the last budget update. If Mr Hockey thinks that debt is going to peak at a higher level, if the decisions he's made is going to push us past that, then I think the Australian people are entitled to some information. It's a bit like if you're asking for an increase in your credit card limit, well the bank's going to want to see some evidence of how you're going to repay the debt and why you need that. This is a bit like going to the bank and expecting a low doc mortgage.

GREEN: This is a problem is it not, that, Arthur Sinodinos, you're arguments of May last year around this specific issue are now coming back to bite you.

LEIGH: Jonathan, I need to excuse myself, there is a division in the House. I am sorry. Apologies for slipping out. The respect I spoke about for Arthur now extends apparently to him taking both sides of this debate. I'm sorry, but I do have to go.

GREEN: Andrew of course you're excused. Arthur you now have the floor unimpeded.

SINODINOS: No look, Jonathan, there is complete transparency around this and you will see it all laid out in the Mid-Year Economic and Fiscal Outlook. The point I would make, is that we had asked, at the time of the last budget, that if there were to be a debate around this we'd need all the information. The Government should have been prepared to raise the debt limit then. The advice we received on coming to Government is that the debt limit should go up. 450-460 was the amount. The Treasurer decided that by going to 500 he would obviate the need to come back, hopefully within this term of Government.

GREEN: And yet you did argue pretty strongly, you know, in the middle of last year, against an increase for the previous Government. As Tony Abbott said then, the Government should be forced to specifically justify this, not just sweep it under the carpet and allow it to go through in the appropriations. I mean you're asking this of the Opposition now, are you not? To approve the increase, no matter how reasonable, but to approve that increase ahead of the information that would justify it.

SINODINOS: Jonathan, I think Andrew is able to come back so we'll have a proper debate. But to your point, the justification will be fully laid out in the Mid-Year Economic and Fiscal Outlook. There is no point doing this in dribs and drabs and the Government should have taken responsibility for doing this in May, they weren't prepared to, they didn't want to have another debate on debt. We're happy to have another debate on debt this week, next week and right up until Christmas, because that will focus on how we got to a debt of $300 billion in the first place.

GREEN: The problem there for you Andrew Leigh, is, you know what I mean, there is a sense that this is the Labor Government legacy, is the debt of this extent.

LEIGH: Jonathan, certainly Australia has a level of debt, it's a modest level by developed country standards. I suspect pretty much any economic policy maker in another developed country would happily take on our level of debt rather than theirs. We took that on in order to save jobs. But the Coalition, since taking office, has added to that debt and that's what we want more information about. So, some detail on why it was necessary to give another $9 billion to the Reserve Bank, about whether now is really the right time to be giving a big tax break to mining billionaires. So some of that sort of information, I think it would be useful to have on the public record before Parliament votes for what is really a massive increase in the debt ceiling, 66%.

GREEN: And apart from debt, Arthur Sinodinos, as Andrew Leigh points out there, the $8 billion, the Reserve Bank is building into what's going to be a steadily increasing deficit as well.

SINODINOS: Look, in relation to the Reserve Bank, they were very happy for us to put another $8.8 billion in at the beginning of the term to replenish their capital. It's an investment in them being better able to deal with economic and financial volatility in the global economy over the next little while. Their capital had been run down, they were uncomfortable about providing, I think, the last dividend to the Labor Government. So they were very happy to have this infusion and I think it took some courage on the part of the Treasurer to be prepared to wear this increase of 8.8 billion now, in order to give them that comfort. And most Australians, I think, would say it's better to be safe than sorry and rather than do things under the pressure of a crisis, have that money in the bank as it were and have the Reserve Bank ready to deal with whatever might come our way.

GREEN: That outlook is looking a little (inaudible) isn't it? I mean we've got debt increasing, the possibility of stronger deficits, we're sacking, well not, removing numbers in the public service, the potential for the pulling out of subsidy to the auto industry, the signs aren't, well they're not bullish, are they Arthur Sinodinos?

SINODINOS: Look Jonathan, on that front, there is a balancing act here. We do need, I think, to get the public sector into better shape. A lot of the budget challenges are medium term challenges, particularly in the second half of this decade, as we start to pay for the ramp up in the National Disability Insurance Scheme, as there are further payments on education, as the impact of aging of the population further increases, health and age spending. There are all these drivers around, which are going to be causing the budget to deteriorate further over that medium term period. So in a sense the budget emergency that we spoke about before the election, there is a short term impact, but there is a medium term impact as well and it's very important for us to start to address that, but to do it in a way, which doesn't put the state of the economy at further risk, in a context where unemployment is edging up and growth has been below trend. And you're right, business and consumer confidence has gone up since the election, but we need to build on that, we need to rebalance government spending with a greater emphasis on investments and infrastructure and get proper controls over the other elements of government spending.

GREEN: Are you confident Andrew Leigh that the Government can pull off that tricky balance?

LEIGH: Well Jonathan, I certainly agree with the goals that Arthur is talking about, but I do think that we differ on how to get there. I for example would think it's important not to take away the Mining Tax, a tax which has been put in place during a period in which there has been unprecedented level of investment in the mining industry and where you've got $4 billion of revenue, which are pretty important to Australians. I'm not sure it's an appropriate time to be putting in place an extremely expensive parental paid leave scheme, which unlike the present system gives the most to those who have the most. Yet at the same time you've got the Coalition effectively cutting income support, taking away the Schoolkids Bonus and you've got the Prime Minister's handpicked advisor Maurice Newman questioning whether or not initiatives such as disability care and better schools should go ahead and whether perhaps Australian wages are too high. I think that that low wage road is the wrong one for Australia to go down. I certainly for one, would prioritise the most disadvantaged Australians ahead of the mining magnates.

GREEN: And I wonder Arthur Sinodinos what we ought to do about foreign investment. We had the decision today from the Treasurer on Warrnambool Cheese and Butter. GrainCorp, is that decision on Warrnambool concern an indicator of the Government's attitude to foreign investment that might also apply to GrainCorp?

SINODINOS: I think Jonathan, both the Prime Minister and the Treasurer have made the point that we look at these on a case by case basis. If you go back to the Howard era, pretty open attitude to foreign investment but there were cases like Shell and Woodside, where that takeover of Woodside wasn't allowed to happen. In Labor's time we had the Singapore Stock Exchange takeover, which was not allowed to happen. So there are circumstances in which on a case by case basis you have to judge whether a particular proposal is contrary to the national interest or not. So I can't comment specifically on the GrainCorp one, but as a general proposition, on both sides of politics, I think, there is strong support for continued foreign investment in Australia. And if I look at the agricultural sector for example, it's quite clear, foreign investment will be crucial to developing that potential we've got, including in the north of the country.

GREEN: Andrew Leigh..

LEIGH: I think…

GREEN: Go on then.

LEIGH: I was just going to say Jonathan, I think Arthur is exactly right in terms of the importance of foreign investment and agriculture and you just need to go back to companies like CSR and look at the importance of Japanese investment in the beef industry. I do worry though that with this decision it's getting too much caught up in internal politics between the Liberal and National Party, with Warren Truss suggesting that the Australian Stock Exchange will fall over if a company that constitutes 0.2 per cent of it becomes foreign owned, Barnaby Joyce threatening to throw a dummy spit and Joe Hockey responding that he won't be bullied by anyone. This isn't, this doesn't bode well for the Government making these decisions in a mature, sensible fashion that put the national interest first. And I fear we might for example get to a place where Mr Hockey wants to please both sides and ends up putting in place an approval with so many conditions attached that effectively it's a rejection.

GREEN: I must say gentlemen that if your conduct between each other this evening is any guide, we can in fact look forward to a more civil and considerate Parliament.

LEIGH: Thank you Jonathan and my apologies from my end for mistaking an adjournment for a division, which you're parliamentary wonkish friends will appreciate.

GREEN: Rookie error Andrew, rookie error. Thank you both for your time and …


GREEN: Good wishes to you both for the coming engagements.


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