Andrew Leigh

E&OE TRANSCRIPT
TV INTERVIEW
AFTERNOON BRIEFING
WEDNESDAY, 28 FEBRUARY 2024

SUBJECTS: Bigger, better, fairer tax cuts for more Australians; monthly inflation figures; Government’s cost-of-living relief; non-compete clauses hurting wages and innovation.

GREG JENNETT, HOST: Treasury Portfolio Minister Andrew Leigh is Assistant Minister for Competition and he joins us in the studio. Welcome back to the programme.

ASSISTANT MINISTER FOR COMPETITION, CHARITIES, TREASURY AND EMPLOYMENT ANDREW LEIGH: Thanks, Greg.

JENNETT: Andrew, tempted to ask if you've given any thought to what you'll do with your tax cuts, but I imagine it's something mundane like the rest of us. The Government, though tactically seems a bit disappointed it sailed through so quickly. The Prime Minister and others have been baying in the House of Reps, where you are for rapid passage all week. And then they got it last night. No delay, no examination. Is that a good thing or a bad thing from your point of view?

LEIGH: I’m delighted to see the strong support in the parliament for our bigger, better fairer tax cuts. Greg. We want Australians to earn more and keep more of what they earn. The Coalition, when we first announced our package, said that they'd roll it back, they said we should have an election and then eventually they voted for it. That's all to the good. That means every Australian will get a tax cut and it's particularly good for young Australians, 98% of whom will be better off under this package.

JENNETT: No voter gratitude to speak of as these things are tracked by at least two opinion polls, news poll and resolve this week, there's not much to measure. And surely that was a part of the original intention, particularly timed around the Dunkley by election.

LEIGH: Greg, I've paid no attention to horse race polls since I was an academic at ANU, writing papers as to the poor predictive power of polls. When I speak to my constituents, they believe that this package is a better one, it's a fairer one. It will increase workforce participation. It won't place upward pressure on inflation because it'll increase workforce participation and it will deal with some of those labour supply shortages we've got through the economy.

JENNETT: That's the Treasury analysis but speaking of inflation, we got the January figure out today. It was a little bit below market expectations at 3.4 per cent but then again, January is an extraordinary month, isn't it? With post-Christmas discounting I think petrol also came down in the month of January. Should we reasonably expect the next movements to be upwards?

LEIGH: Well, Greg, you don't want to place as much emphasis on this figure, but I think for a different reason than you've articulated. That's because it's the monthly survey, which covers a smaller share of the basket of goods than the quarterly number. But it is reflecting the same results we're seeing in the quarterly figure. It is the best inflation result we’ve had for two years. It does suggest that the Government's policies are working. The Australian Bureau of Statistics has very clearly said that inflation would be higher were it not for our energy relief plans, Commonwealth Rent Assistance, and the important work that we're doing in other areas. All of that is targeted towards dealing with inflation. And then at the very same time, we’re looking to make sure that we're getting productivity-driven real wage growth.

​JENNETT: We'll come to productivity and that's your work around competition in a moment but just the narrow envelope that's left in not being positive to inflation growth between now and the May Budget, there are further expectations of support in the near term so that people get something immediate, and then the tax cut in July. Just how narrow is that envelope? You don't have much room to manoeuvre, do you?

LEIGH: Well, the Government's increased income support payments. We saw that through last year's Budget; significant increases. The changes to bulk billing, our cheaper medicines policy, all rolled out last year. On top of that, now we've got a tax cut for all Australians flowing through. And then supporting that Greg, you've got our wages policy. We backed in a pay rise for aged care workers. We supported increases in the minimum wage, and you're seeing that reflected in figures such as the gender pay gap, which is now at a historic low of 12 per cent and we hope can be driven down lower still.

JENNETT: We're also seeing some analysis through freedom of information documents earlier this week from the Treasury showing that wages were contributing in a way greater than publicly reported anyway through the tail end of last year. Should people moderate their wage expectations now that inflation is dropping away?

LEIGH: Liberals like to pretend we're in a wage price spiral, but that's not serious economics. The fact is, the inflation pressure has not been driven by minimum wage workers asking to be paid what they're worth. It's been driven by supply chain problems which had built up under the former government and, of course, the impact of the war in Ukraine. We believe it is appropriate to see real wage growth. We're pleased we've now had two consecutive quarters of real wage growth after a former government for whom keeping wages low was a deliberate design feature of their economic architecture.

JENNETT: All right, let's move on to productivity and your work in the competition area. It's actually quite vast. We won't even attempt to cover all of it. But there is one previously rather obscure area you're looking at, non-compete clauses. We've discussed it on this programme, restraining the sharing of information or the movement of people from job to job. It turns out, because the ABS measured it, that it's used by almost half of employers in this country. How can governments outlaw this? Can it be done with a piece of legislation? How does the free-market work when you arrive at a point of realisation that these are to the detriment of workers?

LEIGH: Well, freedom is exactly the right place to start here, Greg. Ultimately, non-compete clauses impede the freedom of workers to move to a better paying job. And we know that switching jobs tends to be the time in a worker's career when they get the biggest wage gains. Non-compete clauses have become ubiquitous through the economy, not just applying to executives, but to early childhood workers, security guards and yoga instructors. It used to be the case that when a CEO moved from one job to another, they had to go on a period of ‘gardening leave’. Now gardening leave is being applied to gardeners.

These clauses have become ubiquitous because standard form employment contracts have become commonplace. They are potentially dampening wage growth. They're also potentially getting in the way of innovation because if you're a new startup firm, you need talented workers and non-compete clauses make it harder for you to get those workers. So, the Competition Taskforce is looking at it. They'll be reporting with an issues paper to government and then we'll take measured decisions to work out the way forward, which might even involve working with the states and territories as well.

JENNETT: I see but what would the model be here? Would it be restraining or constraining their use or banning them completely? Surely they must have a valid application in some circumstances where intellectual property is concerned and the like.

LEIGH: We haven't landed on a settled model but one fact that sticks in my mind is that in Silicon Valley, one of the most innovative places on the planet, non-compete clauses are banned under California state law. That hasn't stopped a whole lot of innovative startups. In that jurisdiction, firms protect their confidential information directly, rather than doing it indirectly through restraining worker mobility. We've got a lot of stakeholders who are engaging on this and it's been a really productive and constructive process. I do think there is a recognition that it is a strange state of affairs when so many Australian workers are constrained, including hairdressers and security guards.

JENNETT: I hear you make the economic argument and the worker wage argument, but how would you counter when employers say; "But this has real value to us and that value is in retaining it as is?" Would you just steamroll over the top of that with outlawing them?

LEIGH: We never steamroll, we always engage constructively. But I wouldn't be surprised if incumbent employers wanted to hang on to their staff. Yet what's good for a particular firm isn't necessarily good for the economy at large. If we had firm rules that block new entrants, then the incumbents might love it, but ultimately productivity and wage growth would suffer. So, we need to encourage the growth of new firms. If you look at employing small businesses, then the startup rate of employing small businesses has begun to slow over recent decades. That's a worry because that's a marker for the health of an economy. You need new dynamic firms starting up and growing. That's the source of prosperity for Australians in future decades. We have, after all, just had the worst decade of productivity growth in the postwar era.

JENNETT: Well, exactly. And I know you are coming at those problems from all sorts of perspectives, way too many than we can possibly cover here today. But I promise we'll keep an eye on non-compete clauses with you and others as we move ahead. Andrew Leigh, we'll wrap it up there. Thank you.

LEIGH: Thank you.