A budget for cigar-chomping plutocrats - Breaking Politics transcript

MONDAY, 12 MAY 2014

SUBJECT/S:  Budget to axe or privatise Commonwealth agencies; Deficit levy.

CHRIS HAMMER: Well, the federal budget is now just one day away and you have to wonder what's left to announce, so comprehensively has features of it been leaked during the past week or more. Joining me to discuss it is Andrew Leigh, the member for Fraser here in the ACT, the Labor member.  


HAMMER: Also Shadow Assistant Treasurer. So a big week for you. And from Brisbane, Andrew Laming, the Federal Member for Bowman. Andrew Leigh to you first, the stories in the papers today are about cutting or merging government agencies and depending on which paper you believe, somewhere between 50 and 70 government agencies are going to be either abolished or merged. If that's delivering the same services with greater efficiencies, surely that's something to be supported. 

LEIGH: That's a big ‘if’ Chris. We look at the Preventative Health Agency, an agency which is investing and making sure that we reduce of rates of obesity, rates of smoking – including cigar smoking – and other preventable health conditions. We look at Indigenous Business Australia which is aiming to increase the number of entrepreneurs in the Indigenous community. These are just some of the agencies that are on the chopping block with no clear plans to replace them. Then there's the expert agencies. [This is] a government that thinks it doesn't need experts to provide advice on climate change. Now we've seen the National Water Commission being cut into and corporate advisory groups which provide vital advice to governments on markets. You just let it all rip, guided only by your big business donors and your gut. Good governments take advice from great experts and they draw-in a wide range of views which is why these bodies were established.

HAMMER: Andrew Laming, do you accept that in cutting back on the public service, there's mooted to be something like 16,000 to go, either abolishing or merging these agencies, that it's not simply about efficiencies, some services will go?

ANDREW LAMING: Look Chris, these won’t be simple decisions, otherwise they would have been made by the Labor Party. We’ve had six years of an effectively out-of-control house party and we’ve all woken up, the music has stopped and we’ve got sore heads and it’s about a general agreement that something must be done. On the issue of authorities and structures within government, of course you can keep expanding this, every time there’s a front-page headline, you can create a new authority. But I think the Abbott Government is about revisiting and reviewing these functions and bodies of government which could be better brought together and not off on their own with large back-ends to fund and large numbers of public servants. What we don’t need are so many of these groups and bodies that all tell you is that it is somebody else’s job, we’ve dealt with that personally. If you’re looking at the Public Health Agency, there are nine other bodies collecting public health information. Indigenous Business Australia simply puts every other group off the hook as far as getting Indigenous Australians into business. We need to be pulling these groups together, not breaking them up and making them larger, that’s what you’ll see the Abbott Government doing.

HAMMER: But do you accept that there will have to be some sort of drawdown on services to the public as part of this sort of efficiency drive?

LAMING: Well it’s not about whether there is a drawdown. It’s about whether these services are absolutely essential and need to be delivered by government, or can be efficiently. Ultimately, of course there are going to be tough decisions, but in the end Australians also don’t want to be paying for services that are either not used effectively, or are not greatly appreciated. We have plenty of government services that all of us could agree we simply do not need.

LEIGH: We have some great organisations among these Chris, the Australian Institute of Health and Welfare is world-renowned and it’s off the back of its data collection that so much policy is made. When the government scrapped the Alcohol and Other Drugs Council, a body which had decades of experience and a reputation in the field, it really made many Australians ask is this Prime-Minister serious about tackling binge-drinking?

HAMMER: But haven’t we been through this process before? Back in 1996 when the Howard Government was elected, there were big cuts, agencies shut down, and something like 20,000 public servants lost their job. Within a few years it had grown back and in retrospect, it was probably a good thing.

LEIGH: In retrospect I think it was a bad thing Chris. You lost that embedded experience. Tax-payers ended up paying more because services were purchased from consultants rather than obtained in-house and the government failed to ask the simple question —do we have more public servants than the typical developed country? And the answer to that is clearly no. We’re at the developed country average for public servants per head and we have about the same number of public servants per head as we did six years ago.

HAMMER: So what then will the impact of these be? Will it be worse than 1996?

LEIGH: I think this could well be shaping up to be a savage blow for Canberra and the lack of concern by the Abbott Government for the nation’s capital deeply concerns me. But also, I’m concerned about the impact on all Australians of a denuded public service which ultimately isn’t able to support the government as it needs to.

HAMMER: Andrew Laming, back in 1996, in a drive to achieve a budget surplus, the Howard-Costello Government did sell-off government assets, but then they hired them back. As Andrew Leigh was making the point, they sacked public servants but then hired expensive consultants. Is it sensible to privatise such things as the Australian Mint and the Defence Housing Agency and then have to pay out of consolidated revenue for the same services?

LAMING: I think Andrew’s just made a very good point that it could be done well or it could be done poorly. I think what the leadership team will be looking at is are there obvious benefits in doing so. In a situation where it’s going to cost you more to divest those assets, then of course that decision is likely to be to retain it within the public system. But there’s many examples of incentives and efficiency drives that the private sector can offer. Already we’re seeing the Joondalup hospital run privately over in in Western Australian now providing the most efficient, effective and popular access to emergency services in the country. This is just one example of where you can really freshen up services by moving them out of the public sector where ratios of staff per operating theatre are utterly fixed, where the number of nurses are actually locked to the number of beds regardless of whether there is a patient in the bed. These are some of the public issues we need to be able to stand up and say we can do them better, but Andrew makes a very good point, there’s public services you wouldn’t want to get rid of.

HAMMER: You touched on the area of health. Andrew Leigh this is a complex area of policy - the efficiencies that private hospitals can deliver. But what does it do for the overall view of our health system and how universal it is?

LEIGH: Well I am concerned Chris that universal health care may be on the chopping-block. Andrew is one of parliament’s great experts on health, himself a former doctor and somebody who has served as Shadow Parliamentary Secretary for Indigenous Health, and I’m sure that like me, he is concerned about anything that would reduce Australians’ access to necessary healthcare. The GP tax, I think, risks doing that. It risks putting people with chronic conditions in a position where they don’t feel like they can afford to go and see a doctor and then they end up in a hospital waiting room. We know when we look across developed countries that Australia has a bigger than average share of people in hospitals which are much more expensive than seeing a GP.

HAMMER: Andrew Laming there’s going to be a fair bit of pain in this budget and I guess one of the issues is how easily it is spread. If a deficit levy only cuts in at $180,000 of income, does it then become a real sharing of the burden or is it just a kind of a token effort?

LAMING: Look, it’s potentially neither. I’m sure the focus is to spread the burden, you’d do that for political reasons alone, but as has been pointed out, there’s not an enormous total that can be picked up by looking at incomes above $180,000 per annum. But it’s important symbolically that they’re paying a significant amount simply because there’s a sense within the community that they’re able to do it. So you are correct, as you move it down into the upper-middle class of Australia, you do start picking up people who have factored in two potentially mid-sized earnings, have significant mortgage expectations and don’t have a lot of head-room.  So while moving it up is one way to leave the middle-class alone, you also significantly reduce the amount you collect.

LEIGH: Well look Chris, I think even the sheriff of Nottingham occasionally annoyed some of his knights and dames, but let no one be fooled into thinking that Joe Hockey has suddenly become Robin Hood. This really is a budget for the cigar-chomping plutocrats. This is a government which is delivering cuts to mining billionaires, which is cutting superannuation taxes for people with more than $2 million in the super balance and at the same time while giving those benefits to the top end – including parental leave – it’s taking away support from the bottom. The income support bonus, the Schoolkids bonus, the low-income super contribution are all means-tested assistance to the most vulnerable. I'm worried that the effect is going to be to drive up unemployment. Who loses their jobs? Well, it tends to be the most disadvantaged in the community. So after a generation of rising inequality, I'm really concerned that this will be the budget that widens the gap.

HAMMER: So where should the deficit levy cut in?

LEIGH: Well I don't think Mr Abbott should be breaking his promises.

HAMMER: So there should be no deficit levy, the rich should be totally left off the hook?

LEIGH: Let's be very clear where we're at now Chris. This is a government that came to office and within a few months doubled the deficit. For purely political reasons, the government said no to 55 tax measures and decided to spend more, for example, the $9 billion to the Reserve Bank. You say no to the carbon price, mining tax, and soon you've got yourself into a fiscal hole. But it's a manufactured crisis. Australia needn't be in this position here because Mr Abbott wanted to score a political point rather than focus on the economic fundamentals.

HAMMER: But on the deficit levy itself, the government is framing a budget where there is going to be pain for lower and middle-income earners. That’s not Labor's position, but it is the government's and is going to happen, do we need a deficit levy and at what level should it cut in?

LEIGH: I don't think we need a manufactured budget crisis Chris and I think all of this could have been avoided if Mr Abbott was willing to keep in place a carbon price which is doing its job of reducing electricity emissions but also adding to budget revenue. Mr Abbott is in a situation now where nominal growth is ahead of the Treasury forecast. So all this crisis talk is confected. Australians will I think see through the Treasurer's spin and his attempt to suggest that somehow, we ought to be in for slash and burn.

HAMMER: Andrew Laming, is this a confected crisis?

LAMING: Well much of the long-list of Andrew’s Coalition cuts are really just mining-tax paper promises from Labor which most families in Australia never got to see anyway. The mining tax almost raised no money at all. So he can talk about the Coalition withdrawing Labor commitments, but most of them were simply paper promises, nothing will change for the Australian public. Services will be more sensible. Instead of going in and having every child’s ear checked at the GP, just taking the sick child. You’ll look at the other two and say if they are snuffly, let’s give them supportive measures, but you don’t get a Medicare charge on each of those other children. There’ll be common-sense approaches which will actually reduce queues in GP practices because we’ll see a doctor when we need to and not take the whole family in because we happen to be there anyway. That will be the main change in health and of course, when it comes to everyone pulling their own share of the load, I think most Australians out there realise that this will be a hard budget. But this is a government elected to do just that and the last thing you want is Mr Shorten sitting in the corner on a couch, responsible for the out-of-control party, nit-picking about whether we use a broom, or a mop, or a vacuum cleaner. In the end, our overwhelming promise is to fix the budget and we’re going to do that for the sake of our kids.

HAMMER: Andrew Leigh, if it is a confected budget crisis [and] there's no real need for it, what do you say then to politicians’ wage freeze? Would you oppose it? Do you think it is unnecessary or is it important symbolically if the government does announce a politicians’ wage freeze, that Labor accept it?

LEIGH: Labor's accepting this but let's be clear. This is a measure that Tony Abbott labelled a ‘populist stunt’ when it was done when we had a real crisis, the Global Financial Crisis, the biggest economic downturn the world had seen since the Great Depression. Labor put in place a freeze at that stage and he called it a populist stunt. Now he's doing it off the back of his confected crisis and I don't know what's appropriate to call it.

HAMMER: So it's a populist stunt but you feel compelled to support it?

LEIGH: Well we'll support it, but the issue for us is the household budgets of ordinary Australians. If Mr Abbott wants to re-politicise politicians’ salaries, that's a matter for him, but ultimately, the things that we will fight on will be making sure that regular Australian households are supported – get those important health and education supports – and that we lay the foundations for our prosperity, which is really about making sure health, education and the NBN work. We don't have ideology driving infrastructure decisions, but we actually have cost-benefit analyses which would say go public transport and not just your favourite boondoggle project.

HAMMER: Andrew Laming, I assume that you are quite willing to have your wages frozen?

LAMING: Yes, very willing too. It has happened before and I’m prepared to do it again. There is tremendous focus on politician’s income and entitlements and that’s absolutely appropriate, particularly in a time when things are tough and we are asking big things of Australians. But let’s go a month after this budget Chris [and] I think you’ll find that Australians will be accessing services routinely as they always have. The actual changes I think will be far less than a lot of the smoke and mirrors and confected stories that we have had leading up to this budget. I think we’re looking forward to putting our shoulder to the wheel and getting this budget deficit under control, $123 billion in six years, that’s quite a party. And lastly, I think all Australians are unified that we need to have smaller government. We need to review the size, the functions and the authorities and we need to merge where we can so we can have back-end savings and I guess we’re actually relieved that we have a government that’s doing this Chris. We had 6 years where the only tough measures were in the last six months of the Gillard government when they knew that the Coalition would be inheriting them after the election. This was a Labor government that didn’t take tough decisions, but they’re happening this year.

HAMMER: As a final question then, you say we need smaller government, what is the proper size for government? At the moment expenditure is running at something like 26 per cent of GDP, relatively low compared to say European countries. Andrew Laming, can you nominate a figure that suits Australian circumstances?

LAMING: Yes, I’d like that figure closer to 23 per cent, obviously knowing that mining revenues affect the 23 per cent figure that is government income. Whether the 23 per cent comes up or the 26 per cent comes down, we’ve got to meet somewhere in the middle, so you’d have to be looking at a 1-2 per cent revision of the size of government. I think that is utterly doable without initiating new discussions around the GST which we know all states and territories wouldn’t sign-off on anyway, so let’s get realistic. It’s about the size of government and it’s having discussions with states and territories about exactly the same thing and finally, you’ve got a Coalition government that’s doing that with states and territories to reduce overlap and I’m delighted that’s happening here in Queensland to get our economy going. Final point, Andrew Leigh is talking about rising unemployment, but in reality, it’s about getting Australians into the most productive jobs we can as a low population economy and that can only happen by having this major revision of the way we fund government first.

HAMMER: Andrew Leigh, what's the proper size for government?

LEIGH: Well I certainly agree with Andrew Laming in saying that we ought to do things as efficiently and effectively as we can. But it strikes me as passing strange that Andrew is talking about shrinking government while backing a parental leave scheme that gives $50,000 to the most affluent families. I mean it's just hard to see how this government's strategy comes together. In terms of spending, in government, we put in place fiscal stimulus during the Global Financial Crisis to save jobs. After that, we stuck to a 2 per cent spending cap all the way through. And that's why according to the independent secretaries of Treasury and Finance, the Budget was going to be back in the black by 2016.

HAMMER: Good critique, but what's the answer to the question? What is the proper size of government expenditure as a percentage of GDP over the long term?

LEIGH: Well I think federal spending of around a quarter of the economy is appropriate and places us somewhere in the lower range of developed countries. That certainly is well away from the high-government-spending European countries which are the only countries that provide the sort of parental leave schemes that Mr Abbott advocates for Australia.

HAMMER: Gentlemen, thank you for your time this morning.

LEIGH: Thanks Chris, thanks Andrew.


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