Australia's economy weaker than should be - Transcript, ABC News Radio

E&OE TRANSCRIPT
RADIO INTERVIEW
ABC NEWS RADIO
FRIDAY, 6 MARCH 2020

SUBJECTS: Morrison Government’s lack of a plan for productivity; wages; innovation; investment and growth; debt doubling under the Abbott-Turnbull-Morrison Government.
 
MATT O’NEIL, HOST: Labor's Andrew Leigh is a former economist, now Federal Member for Fenner in the ACT, and joins us now. Good morning, Andrew. Thank you for your time.
 
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: Good morning, Matt. I always figure once an economist, always an economist.

O’NEIL: [laughter] Andrew, what would Labor be doing to shield the economy from the coronavirus fallout?

LEIGH: I think it's pretty clear that the economy does need appropriate stimulus. What we did during the Global Financial Crisis was to move quickly, even before the first impacts of the global downturn were apparent in Australia, with stimulus that saved around 200,000 jobs and tens of thousands of Australian businesses. The trouble is that we're entering this challenge with an the economy which is much weaker than it should be. We used to have growth sitting between 3 and 3¼ per cent, and now we're getting 2 to 2¼ quarter per cent. We've had years of wage stagnation - not by accident, but through deliberate government policy, as the Finance Minister has pointed out. Anti-union attacks, penalty rate cuts - all of that has acted to dampen down wage growth, which of course then flows through to household spending because earnings flow back into the economy. You cut pay packets, you cut household incomes, and there's a negative spiral as a result of that. Business investment is lousy and construction and retail are in a very bad way at the moment.

O’NEIL: Andrew, many comparisons have been made with Labor's 2009 response to the Global Financial Crisis, but this is a very different beast, isn't it? Surely would require a different response?

LEIGH: I think the principles of fiscal stimulus are pretty well established, Matt - that you want to make sure you're doing things which are as timely as possible and you recognise there's some lag in money flowing into the economy so you've got to act quickly. You want to take measures which are temporary, and which have multiplier effect wherever possible. One of the useful things we did in the Global Financial Crisis was to invest in infrastructure, which then not only has the short term payoff in construction – which is the most cyclical sector of the economy – but also the long term benefit in terms of productivity. We really need that right now, because productivity actually went backwards last year. The average Australian worker produced less than they had the year before - the first time that’s ever happened. So some of these deep seated problems in the economy really mean that we're approaching the challenges now from a position of weakness rather than a position of strength.

O’NEIL: Your critics say the scale of Labor's response to the GFC was excessive and the components like the pink batts scheme were disasters. It will be necessary for the Morrison Government to avoid a fiscal overkill on this issue, won't it?

LEIGH: Our political critics say that. If you look at what the experts say – the OECD, the IMF - they're strongly praiseworthy of what Labor did during the Global Financial Crisis. Nobel Laureate Joe Stiglitz described it as perhaps the best designed fiscal stimulus package in the world. We were able to avoid going into recession, one of the very few countries that managed that through the global downturn and the economy was growing strongly a couple of years afterwards. We had 3.3 per cent [trend] growth in 2011. We haven't got anywhere near that under this Government. In fact, we haven't got [calendar year] growth above 3 per cent. So the problems that we're seeing in the economy are being reflected in the household experience of many of your listeners. They'll be aware that their incomes just aren't growing to keep pace with prices, that a lot of the growth we're seeing in the economy is coming out of population growth, not because living standards are rising.

O’NEIL: So why hasn't Labor been able to put a particular figure to the size of the stimulus package you want? One would assume you have a rough estimate of the dollar amount.

LEIGH: The right construction of the stimulus package will always be a matter for Treasury. We’ll work cooperatively with the Government, as the Liberals did not do while we were in government. But we recognise that it's important to deal with some of these more long term challenges. When you've got investment in the lousy state it's been, when you've got a fall in new business formation, a reduction in the rate of job switching and geographic mobility, you really are in a situation in which the economy is less dynamic than it used to be. It’s not just me saying that - that was reflected in testimony from the Reserve Bank Governor when I was speaking to him a couple of weeks ago. I think many people recognise that there are serious structural challenges that the economy needs to address. The Government hasn’t been interested in that. They have a one point test of good economic management – to run a nominal surplus. It looks as though they may even fall short on that.

O’NEIL: So is Labor going to blame the Government if the Australian economy tips into recession as a result of this crisis?

LEIGH: The Australian economy has been weak throughout the period this government has been in office. We're witnessing a reduction in the share of firms who say they produce innovations that are new to the world. We're having a slump in wages, the likes of which we've never seen before. A reversal in labour productivity for the first time on record. And all of this predated the bushfires and coronavirus. So we do think that the Australian economy can be doing much better. I'm ambitious for Australia, I'm ambitious for the Australian economy. I've been really disappointed at the lack of focus on some of these big structural issues over recent years, at the same time as the Government has allowed government debt to skyrocket. Now net debt’s at $430 billion - a record amount, most of it accumulated by the Liberals. So a majority of Australia's debt has been taken on since the Abbott-Turnbull-Morrison Government came to office.

O’NEIL: Andrew Leigh, we’ll have to leave it there. Thank you for your time this morning.

LEIGH: Thank you, Matt.

ENDS

Authorised by  Paul Erickson, ALP, Canberra.


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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | Andrew.Leigh.MP@aph.gov.au | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.