Here’s the fiscal challenge for the Coalition

Budget seasons is a time for parties to elevate debate above political point scoring and sloganeering, and to outline to the Australian people their respective visions for our future and their agendas for government. For this reason, it’s probably Tony Abbott’s least favourite time of year.

Instead of howling ‘no’ at every policy put forward by the government, Mr Abbott needed to step up as Leader of the Opposition and present an alternative. Instead of using nominal figures and juvenile scare-mongering on the state of the economy, Mr Abbott’s own policies – assuming he has any – will have to undergo scrutiny from the Parliamentary Budget Office and then the Australian public.

Tony Abbott is taking it for granted that he will become Australia’s next Prime Minister in September. This misguided sense of entitlement has distracted him from his current job. It’s simply not good enough for him to persist with catch phrases; he must come clean with the Australian people on his plan to fund his laundry list of bizarre policies.

As Treasury Secretary Martin Parkinson has pointed out, if the Pre-Election Fiscal and Economic Outlook (PEFO) had been released last week, it would have contained precisely the figures that were in the budget. This means that Tony Abbott knows the numbers. The election is now less than four months away, so he must have some idea what his policies are. The Parliamentary Budget Office is standing ready to cost the Opposition’s policies. The time for bluster is over; the time for details has arrived.

The fact is that Australia is facing a significant budgetary challenge, with the high dollar weighing heavily on government revenues. The amount of tax revenue that the Government has collected this year is $17 billion less than was forecast in our Budget last year.

Labor has made the tough decisions to accompany our spending with structural saves; for example by means-testing the private health insurance rebate. This is a structural save which generates more money in the longer term and can be used to support important priorities like DisabilityCare.

Only Labor has put forward a plan to make sure no Australian will be left behind, through introducing initiatives such as DisabilityCare, the National Plan for School Improvement and increases to pensions and superannuation. We know these are important investments in Australia’s future and we know the value of achieving these reforms now. The Coalition does not share this vision. It persists with their policy of giving tax cuts to big miners and big polluters, which must ultimately be paid for by middle Australia.

The Opposition doesn’t want to take these tough decisions before the election, because they know that Australians will be concerned with their plans to drastically cut spending. If Mr Abbott wants to be taken seriously as a manager of the economy, he should have used his budget reply to outline the tough decisions he will take and the details of how he will fund his policies. Unfortunately, he spent too much time talking the Australian economy down, and not enough time outlining the cuts he will need to make. Mr Abbott has demonstrated time and again that he does not take the task of managing the economic future of this country seriously.

This article originally appeared in Inside Canberra Vol. 66, No. 17

TRANSCRIPT – CAPITAL HILL
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
22 May 2013

E&OE

TOPICS:                Coalition costings.

Lyndal Curtis:                     Being Shadow Treasurer in budget week can be a little like being the understudy. You get to help prosecute your side’s case in the media, but the glory of the parliamentary reply goes to the Opposition Leader. It may be a little under a week since the formal budget reply, but Joe Hockey got his day in the spotlight today with the now traditional Shadow Treasurer’s post-budget address to the National Press Club. The government was calling on Mr Hockey to reveal the Coalition’s policy and costings – he didn’t do that, but he did make one or two announcements. Joining me this evening is the Shadow Small Business Minister Bruce Billson, and Labor Parliamentary Secretary Andrew Leigh. Welcome to you both. We’ll start this evening with Mr Hockey’s explanation of why, when the Coalition says there’s a budget emergency, it’s still electing to keep the carbon price compensation by way of tax cuts and pension rises.

Footage of

Joe Hockey:                        …We make no apologies for delivering tax cuts, I think it was every year for our last five or six years. And in fact Labor were so impressed with that that they went on to deliver our tax cuts when they got into government – and thank you for that. I think the challenge going forward is to have stability in tax. Now, we do not apologise for tax cuts that involve the abolition of the carbon tax and the mining tax, because they are a handbrake. Those two taxes are a handbrake on the Australian economy, and I think, if there is a change of government on the 14^th of September, there will be a surge of confidence. I believe that in my heart, and it’s true. And if that is the case, then part of that will be about the fact that the mining industry is not going to have a mining tax, and every household is going to be liberated from additional costs associated with the carbon tax. So we make no apologies for those.

Lyndal Curtis:                     Bruce, does it seem a bit odd that if you declare a budget emergency, and then you don’t elect to take $4 billion of savings you could have had by pulling back the carbon price compensation, which I assume you’d think would be needed because there’s no carbon price?

Bruce Billson:                     Well, Lyndal it’s not just the Commonwealth government that has a budget emergency because of the reckless spending and waste of the Labor government, it’s households as well. Households have budget emergencies, you’ve seen figures released this week about the pressure in household rising right across Australia. Cost of living pressures keep coming at them, very little opportunity for discretionary expenditure, real concern about paying the bills at the end of each month. And that’s something that we recognise; Australian’s want to get ahead, it’s a country that’s built a reputation of getting ahead from one generation to the next. That’s not what the Australian people feel night now, and our approach to remove the cost of living keeps those income tax and pension payments is about releasing the budget crisis in many Australian households.

Lyndal Curtis:                     But you doing it effectively twice over? You say the price of electricity and gas goes down if you remove the carbon price, that cost of living pressure is presumably eased if that happens. And then you relieve it again, by keeping the tax cuts and pension rises.

Bruce Billson:                     Well, an excellent account about how positive this is for the households, Lyndal. Removing the cost pressures that are created by a carbon tax that’s way out of step with anything that’s going on in the rest of the world, putting upward pressure not only on the costs of households face but Australian businesses face as they seek to compete internationally and seek to secure markets. And some opportunity to relieve the budget pressures in those households, with the tax cuts and also the additional pension payments paid fortnightly.

Lyndal Curtis:                     We might go now to some of the announcements in Joe Hockey’s speech. Andrew, it seemed like a pitch to small business to make the Tax Office nicer, to make it more accountable, have the Tax Commissioner appear as the Reserve Bank governor does before a parliamentary committee, have an inquiry into the structure of the tax office, and perhaps even break it up into administrative and policing functions. Do you believe that there’s anything wrong with what Joe Hockey proposed?

Andrew Leigh: Well Lyndal, I look at this as a federal representative for the ACT, and it’s pretty strange here when you see that the Coalition’s promise is to get rid of 20 000 Canberra public servants –

Lyndal Curtis:                     I think they’ve only actually said 12 –

Andrew Leigh: Mr Hockey has repeatedly referred to there being 20 000 more public servants than there were, and the need to cut back. I think that it is pretty clear that he is moving up –

Bruce Billson:                     It’s 12.

Andrew Leigh: – from 12 to 20. But regardless, there will be a big hit on the ACT economy and as a result to that, many small businesses will be sent into a tailspin. And yet at the same time that he wants to get rid of 20 000 hard-working public servants, Mr Hockey wants to add more senior public servants into the Tax Office. I mean, the first policy position Mr Hockey comes up with that is actually consistent will be his first. There is nothing for ACT small businesses in Mr Hockey’s smash-and-grab plans, and small businesses across the nation are going to be hard hit by the tough austerity that the Coalition has in promise. What we’re going to see if Mr Abbott is elected is similar to what the United Kingdom has seen, where David Cameron’s brutal austerity is closing libraries, and sending that economy back into recession. That’s clearly their textbook.

Lyndal Curtis:                     If we could just stay on the Tax Office for a minute – Bruce, if the Tax Office is split into two, isn’t that effectively creating a second bureaucracy?

Bruce Billson:                     My head is still spinning after Andrew Leigh, he must be on that Labor kool-aid, hardly anything that he said was actually grounded in facts, but let’s try and bring it back to what Joe was actually saying. He was saying the Tax Office has been particularly insensitive to the real life and commercial realities that small businesses are facing. He pointed to a potential conflict where the agency has its administrative function – the day to day work of collecting taxes that are needed to fund the important work and services of the Commonwealth provides – sitting alongside those that are in a prosecution role. And we’ve seen for instance the number of garnishees issued against small business up by about 450%. I get reports every day, every day about an insensitivity to the pressures that small businesses are facing, that there are assumptions of profitability that lead to claims of tax avoidance when the reality is margins are very thin, things are very tough out there, this ongoing attack against independent contractors. And those extra bureaucrats that Andrew is talking about are actually second commissioners with business experience out in the real economy making sure that the executive group in the Tax Office has a reality check about what is going on in the real economy, and that people have an opportunity to be treated with respect whilst adhering to their lawful obligations to pay tax. And that’s perfectly reasonable, perfectly adult, perfectly sensible.

Lyndal Curtis:                     We might move on now to the bigger picture, Joe Hockey is continuing to dispute the government’s budget figures. It’s the reason he’s saying the Coalition costings can’t be released until the pre-election fiscal outlook into the election campaign. The government says a speech by the Treasury secretary yesterday shows he’s wrong.

Footage of

Penny Wong:                     …Dr Parkinson made clear that the budget numbers are the numbers, he made it clear that if the – what’s know as the PFO, the pre-election fiscal outlook – had been released on budget day, the numbers would have been the same. You know what that adds up to? It adds up to Joe Hockey’s excuse for not releasing his figures being completely destroyed, that’s what it means.

Lyndal Curtis:                     Andrew, your side of politics is continuing to pressure the Coalition to release all of its policy and costings now. But if you look at it from the Opposition’s point of view, why would they put the out before election time? It just gives you more chance to attack what you perceive to be the holes in it.

Andrew Leigh: Well the question Australian families have to ask, Lyndal, is if the Coalition’s polices were so good for families, would they really be sitting in the bottom drawer rather than being out in public view? And we have a taste of where the Coalition is going from some of the policies that they’ve announced. They’ve said, for example, that they want to give a tax cut to Gina Rinehart and Clive Palmer, and that’ll be paid for by raising superannuation taxes on low-income Australians. They want to give a tax cut to the biggest polluters in Australia, and they want to pay for it by taking away money from kids on their first day of school.

Lyndal Curtis:                     But you also had a rise in family benefits you promised at the last budget that you rescinded at this budget.

Andrew Leigh: Lyndal, we have never cut back on income support for families, unlike the Coalition who has said it is going to take away an income supplement that benefits hundreds of thousands of Australian families. They’ve said that they’re going to decrease the tax-free threshold , which means that a million more Australians are going to be filing tax returns. Every one of their policies that is out is a policy that is going to hit those at the bottom to help those at the top. It’s a standard Coalition playbook, and the cuts in the bottom drawer are, if anything, going to be worse.

Lyndal Curtis:                     Bruce, the Treasury secretary Martin Parkinson disputed things some Coalition spokespeople have said, that the Treasury gives the government a range of economic forecasts and the government gets to choose which one it wants. He says that is not true, and he also said effectively that if PFO had been released now, the figures would have been the same, that he doesn’t expect to see much difference. Why do you take him at this word and say the economic forecasts that are produced in the budget are those that come from Treasury?

Bruce Billson:                     Well the Treasury secretary is doing what he’s paid to do, and that’s to provide advice and support the government of the day. That’s perfectly reasonable and that’s the expectation of senior public servants as they work hand in glove with the government of the day. So there’re no surprises in what the Treasury secretary said. What is surprising is some of the assumptions that are embedded in that document, spectacular assumptions about the carbon price movement and what’s happening in the mining industry, about a miraculous ending to the boat arrivals and the millions of dollars that have been blown out there, about some mucking around with the rate of indexation in the rate of education. That’s what the concern was, and in relation to PFO, Lyndal, it was only a few short weeks ago that in the space of about twelve days that the supposed revenue loss went from $7 billion, to $11 billion, to $17 billion over the course of twelve days. Now there’s ten times that period of time between now and the next election, who will believe none of that will change?

Lyndal Curtis:                     But some of that was measuring MYEFO to that period, and other bits of it was measuring budget to budget, that’s why it seemed to jump so rapidly.

Bruce Billson:                     So this is where you had the Prime Minister, the Treasurer and the Finance Minister roll out this $10 billion change in supposedly revenue lost in under a fortnight, yet we’re to believe that these numbers released recently are not going to change over 120 days? I mean, you can’t be serious about that suggestion Lyndal, there’s no evidence whatsoever under this government that they are competent and capable of nailing any of these economic forecasts and it’s perfectly reasonable for the Coalition to wait and see the last word on the state of the finances which is PFO – the pre-election fiscal outlook – before responding to this chorus call from Labor.

Lyndal Curtis:                     We might move on just quickly because we’ve only got a couple of minutes left. It seems that an analysis of the structural budget surplus or deficit is now the new black, we’ve had two today, one from the Parliamentary Budget Office. Bruce it does seem to suggest that the tax cuts delivered by the Coalition and then in the first in office by Labor have contributed to the structural budget deficit. It does show that decisions made have had an effect over a long period of time, doesn’t it?

Bruce Billson:                     Well of course decisions made have an effect Lyndal, and in terms of the budget cuts that were funded, affordable and reasonable under the Howard government – and they were thought to be so reasonable that the incoming Labor government kept them – what that structural budget outlook shows is that for every year that was analyses, that the Coalition was delivering surpluses, that there was a structural surplus. A structural surplus, so those tax cuts were responsible and measured and kept the budget in a structural surplus. Contrast that with the Labor years, every year  not only is there a deficit, there is an enormous structural deficit.

Lyndal Curtis:                     A quick response Andrew?

Andrew Leigh: Lyndal it’s pretty clear from this analysis that what the IMF said recently holds up: that the Howard government wasted mining boom mark one. I also want to return to a point that Bruce made about forecasts. When he is attacking the integrity of the Treasury secretary, he is doing so because the Coalition want to use a dodgy private accounting firm to do their costing, rather than the experts in Treasury and the Parliamentary Budget Office.

Bruce Billson:                     My attacks are on a dodgy Treasurer –

Lyndal Curtis:                     I’m sorry Bruce, we’ve run out of time, that’s where we’ll have to leave it. Andrew Leigh, Bruce Billson, thank you very much for your time.

MEDIA RELEASE

Andrew Leigh to represent the Australian Government at the 19th International Nikkei Conference on the future of Asia

Tonight, I depart Australia for Japan to represent the Australian Government at the 19^th International Nikkei Conference on the Future of Asia.

This will be my first visit to Japan as Parliamentary Secretary to the Prime Minister.

The Tokyo conference will examine the future of economic growth and development in the Asia-Pacific region, with a particular focus on Southeast Asia.

Whilst in Japan I will be meeting the Bank of Japan’s Assistant Governor, Mr Kazuo Momma to discuss ‘Abenomics’ – Japan’s new fiscal and monetary strategy under the Abe Government.

I will also be meeting with senior officials from Japan’s Ministry of Foreign Affairs, the Ministry of Finance, and the Cabinet Office.

During the Conference I will participate in a Roundtable with foreign policy and economic commentators from the University of Tokyo, Keio University and the Japan Centre for Economic Research.

This trip will be an opportunity to discuss the Australian Government’s Asian Century White Paper and to reaffirm the importance of our economic and security relationship with Japan.

Australia has an important contribution to make to the region’s economic growth and stability and I look forward to representing our country at this conference.

TRANSCRIPT – AM AGENDA WITH KIERAN GILBERT
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
21 May 2013

E&OE

TOPICS:     Equal marriage, school funding

Kieran Gilbert:   This is AM Agenda, thanks for your company. Joining me now from Melbourne, the Shadow Parliamentary Secretary for Small Business, Scott Ryan, and the Parliamentary Secretary to the Prime Minister, Andrew Leigh here in the Canberra studio. You heard what Senator Brandis had to say, Andrew Leigh, about Kevin Rudd; that this is all about him, not about same-sex marriage. What do you say to that?

Andrew Leigh: Well Kieran, it’s pretty clear that views on this issue have shifted and shifted pretty markedly. We’ve seen just over recent months same-sex marriage become law in New Zealand and Britain because Conservative leaders allowed their Party room to vote the way they wanted to. If Mr Abbott will do that in Australia, we’ll bring the vote back to the floor…[inaudible]

Kieran Gilbert:   But specifically on Kevin Rudd, that this is more about him than it is the issue?

Andrew Leigh: Ah look, Kevin is a backbencher. He’s entitled to his views and he articulated them well.

Kieran Gilbert:   Senator Ryan, on the prospect of any change, what Andrew Leigh points out there is accurate; there’s got to be a change within the Coalition formally to allow a conscience vote if there’s going to be any legislative move.

Scott Ryan:         Well, I’m not going to be lectured on a conscience vote from a member of the Labor Party. I mean, it’s a special occasion when a member of the Labor Party gets to display their own conscience. It’s something every Liberal Party member has always been able to do. We had a discussion on this issue in the Party room recently, and you know, any future decisions are a matter for a future Party room. But our view is clear. We support the Marriage Act as it currently stands.

Kieran Gilbert:   And Kevin Rudd incidentally holds a press conference at 9:30 this morning in Brisbane we’ll have that news conference for you live when it happens. On the issue of school funding, Senator Ryan, it really comes down to the projected growth rate in the indexed funding for state schools. Tell me, it’s all very complex but the Federal Government is pointing to the numbers provided to the Department and Treasury, surely we’ve got to rely on that?

Scott Ryan:         Well, no we don’t actually because we’ve learned we can’t rely on numbers in Labor Treasurer’s budgets just over the last few years. What is clear is that they have cut over $300 million from education, they’ve cut just under $3 billion dollars from higher education and they’re saying that in 2018/19 they’ll put some of it back. Now, that is up to three elections away. We can’t trust Julia Gillard’s budget, and Wayne Swan from week to week on the budget as we learned in the weeks leading up to it. You can’t take money off people in the next four years and promise to give it back them in years five and six, three elections away, and be taken seriously.

Kieran Gilbert:   Andrew Leigh, the point that Christopher Pyne made as well yesterday, was that you look at the last decade and the growth in school funding, stayed school funding, was six per cent, now, if that’s the record over the last ten years, why is there now this assumption that it will be half that figure?

Andrew Leigh: Because Kieran, state governments have changed. We now have more conservative premiers and they have a cuts agenda. They’re making big cuts to their school funding. And the way our formula works is that the Commonwealth funding is indexed to what the states spend. I don’t think that’s a particularly sensible formula which is why we put in place the Gonski reforms. It’s why we want to fix this system. But the fact is, when states and territories cut their spending, Commonwealth spending automatically comes down, and so the projections going out are not this six per cent growth, they’re now well down to four projected to fall lower still. And so this cuts agenda that is implemented at the state and territory level automatically feeds in to cut commonwealth funding unless you change the system, as we’re suggesting you should do.

Kieran Gilbert:   Senator Ryan, do you feel comfortable with the suggestion that Barry O’Farrell has been conned? A senior Liberal, one of the most senior Liberals in the country and you’ve got your colleagues saying that he’s been conned, he’s been duped?

Scott Ryan:         Well I think what’s clear is that Labor are trying to con the entire country. You know, a week after the Budget now we know that they’ve halved the indexation rate, it’s been reduced from the papers they released only six months ago, and all in an attempt to make the proposed increase outside the budget period in 2018 and 19 look bigger. Now, the Coalition’s got a track record in school funding. We funded growth in state schools. We funded growth in parental choice and gave that funding to independent and non-government schools.

Kieran Gilbert:   Well I suppose, Andrew, that’s the point that Scott Ryan, Senator Ryan pointed to there, that why’s it halved in the space of what, six months since October when the mid-year Budget update was delivered?

Andrew Leigh: Significant cut backs by state and territory governments is the simple answer to that Kieran. If you want…

Kieran Gilbert:   But are you now saying that it’s going to be the case for the next six years? It just seems to be a big, big assumption.

Andrew Leigh: Look, Scott is running here with sort of hyperventilating hyperbole which assumes there is some grand conspiracy occurring in Treasury. The Treasury officials who put together these projections are the same capable Treasury officials who worked for the Howard Government. They are putting their best estimates of what’s going to happen to funding, unless we fix this broken model, unless we put back in what will amount to about a million dollars per school.

Kieran Gilbert:   And Senator Ryan, if the states do sign up, that does make your position a lot more difficult. Obviously it’s just one state at the moment. But if Victoria, Queensland, WA, if they eventually do sign up before the June deadline, it changes, well, it’s a game changer, isn’t it?

Scott Ryan:         We’ve said that we’ll support a national school funding model if it’s a national school funding model. And you know, you remember back in the days of the Howard Government, David Kent went to a great deal of trouble to make sure non-government schools, particularly the Catholic system, signed up to the National School Funding Model the Howard Government introduced. We’re not going to have a hodge-podge of mechanisms across the country. But Andrew Leigh there, makes what Peter Garrett did earlier, just another series of Labor excuses. You know, they’ve been caught out halving the indexation rate and of course now they’ve got to find someone to blame so they blame the state governments. These are not numbers that Australian parents can trust and they’re not numbers that we believe those who run our schools, government and non-government should trust.

Kieran Gilbert:   We’ve only got a minute left on the program. I want to look quickly at analysis in the Financial Review on the polls, the Nielson Poll, which suggests the Coalition could likely have control of the Senate after the election as well. Does, that would be a concerning prospect for you Andrew Leigh?

Andrew Leigh: Kieran, you know I pay no attention to polls and there’s good science behind that. But, Australians will have a clear choice come September. They’ll have a choice between the nation-building reforms of Labor; DisabilityCare, important schools reforms which you’ll see big increases in funding for every school, and Tony Abbott’s agenda which is savage cuts including 20,000 public servants, cutting out income support – he’s said he’s going to do that, cutting back on superannuation, reducing, probably never increasing superannuation…

Kieran Gilbert:   Scott Ryan, 20 seconds, your final thoughts on that?

Scott Ryan:         Look, polls don’t change what the Coalition’s going to do between now and September 14. We’ve got a plan to improve Australia. We know we’ve got to convince people and earn their trust so you know, the only thing Andrew and I might agree on is that the polls aren’t actually going to change what we actually do for the next 116 odd days.

Kieran Gilbert:   Gentlemen, thanks for your time…

Andrew Leigh: There’s many things we agree on Scott!

Kieran Gilbert:   I’m sure there are. We’ll get to those on another date and morning. Thanks for those gents. That’s all from AM Agenda, the latest Sky News is next.

http://media.smh.com.au/news/national-times/softly-softly-4290016.html

TRANSCRIPT – ‘BREAKING POLITICS’ WITH TIM LESTER
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
21 May 2013

TOPICS:                Marriage Equality, baby bonus, negative gearing.

Tim Lester:          Senator Fiona Nash, Andrew Leigh, welcome back here to Breaking Politics.

Andrew Leigh: It’s good to be here.

Tim Lester:          Former Prime Minister Kevin Rudd now says he supports same sex marriage, inspired partly by an unnamed political staffer who he had coffee with and turned out to be gay, and wants to marry. Andrew Leigh, is Mr Rudd right?

Andrew Leigh: I believe he is, Tim. I understand that there are deeply held views on both sides of this debate in the community, and I’ve had hundreds of email exchanges, phone conversations, discussions in my electorate office, about the issue. But fundamentally I do believe that attitudes are shifting, and they’re shifting much faster than they did on big issues such racial equality and gender equality. Just recently we’ve seen conservative leaders in the UK and New Zealand move same sex marriage through their parliaments, not because they thought it was an issue of the left, but actually because they thought – in David Cameron’s words – that as a conservative, they should be a supporter of same sex marriage. So I think that there’s a case from liberalism and even conservatism that supports a change like this.

Tim Lester:          Fiona Nash, your views on what Kevin Rudd has had to say?

Fiona Nash:        Well it’s interesting, isn’t it, that he should change his view and make a point of it at this time of the cycle. I think that people will rightly think is it really just a straightforward change of mind or are there any other motives behind Kevin Rudd coming out and changing his view on same sex marriage. But with the Labor Government at the moment every day is a new day, you never know what is going to happen around the corner.

Tim Lester:          So what motive do you think Mr Rudd might have?

Fiona Nash:        Well look, who would know? It may be very genuine, he may have just had an epiphany of a change of mind, it may well be to raise his own profile again, who would know. He’s certainly done that in the past and maybe it is a profile raising exercise, but we’ll have to wait and see.

Tim Lester:          What about your view, Senator, on the question of same sex marriage? What do you believe should happen?

Fiona Nash:        Well I support the status quo, that marriage is obviously between a man and a woman. I certainly understand that there are many people who have a different view on this, I’ve spoken to many of them. But at the end of the day it is the Coalition’s view that marriage is between a man and a woman, and that hasn’t changed.

Tim Lester:          Kevin Rudd tells a story of a simple change of a point of view, of having a coffee with a gay man, a gay political staffer that he knows here in Canberra. Isn’t his case an argument for at least a conscience vote, or don’t you see it that way?

Fiona Nash:        Certainly within the Coalition we haven’t seen a need to date for a conscience vote, we are supportive of the current situation. Kevin Rudd is entitled to his own view, he’s entitled to change his mind on his position of course. Our view in the Coalition hasn’t changed, and that’s where we stand at this point in time.

Tim Lester:          And Andrew Leigh, your views on the fact one, no doubt you oppose the lack of a conscience vote on the Liberal side of politics. But there are plenty on your side of politics who speak exactly as Fiona Nash does on this issue, don’t they?

Andrew Leigh: Absolutely Tim. I think there are people of good heart on both sides of this debate and I would certainly include Fiona in that. I do think, though, that it’s a bit cute to overplay Kevin’s views. I think Mr Rudd could change the name of his cat and somebody would find an angle on that which would have something to do with national politics. Fundamentally this is a backbencher expressing his change in views, and I think the way that he’s found that one story has affected him reminded me of the Washington State legislator, who voted against same sex marriage and then a few years later left the parliament, and one year her daughter came home for Christmas and said that she was gay. And the legislator just broke down in tears because she knew that she had voted against her daughter being able to marry, and that she could never go back and reverse that vote.

Tim Lester:          Fiona Nash, a big search on now inside the Coalition for the cuts that would balance an Abbott government’s budget, ultimately. Has the time come to end the tax break that 1.2 million Australians claim on their investment properties, the one we know as negative gearing?

Fiona Nash:        Well, certainly we are going to have to have a look at everything from one end to the other because of the disaster financial state that Labor has got this country into. We’re now looking at $257 billion of gross debt, and the economic mismanagement is just extraordinary. So obviously if we’re fortunate enough to win government we’re going to have to look at everything. But in terms of negative gearing, in 2005 the Productivity Commission looked at this, it was determined at the time that it was appropriate for negative gearing to be part of the taxation system. Certainly within the Coalition the view has always been supportive of negative gearing, and at this stage certainly that position hasn’t changed. And interesting to know, I think it was around 1985 that Paul Keating got rid of it, rents went through the roof and I think in 1987 the Labor Party reversed that decision to get rid of negative gearing. So there are going to be a lot of things that need to be considered down the track to try and get the country back on track, out of this economic mess that the Labor government has got us into.

Tim Lester:          Ok, and you personally though support the continuation of negative gearing?

Fiona Nash:        Well at this stage I see no reason to change my mind, I have supported it in the past as the Coalition have. But as I say, we are going to have to look everything when and if we are fortunate enough to get into government, we’re going to have to try and look at everything to fix this mess so the country can actually get back on its feet. I think the Australian people understand the very dire situation that the country economically now is in.

Tim Lester:          Andrew Leigh, would it be worth the government revisiting the question of negative gearing or no?

Andrew Leigh: Well Tim, come September I think Australians are going to face a pretty clear choice. They’re going to face a choice between a Labor Party that has put responsible taxes on carbon pollution and on the mining sector, and a Coalition that has promised to rip those taxes away to give tax breaks to big miners and big polluters. And that’s the reason that we’re having this conversation over Coalition costings, not because there is a budget crisis – it’s quite clear that Australia’s debt level is at 10%, very modest by international standards, and responsible to get us through the financial crisis. But it’s also clear that because the Coalition wants to give these big tax cuts, because they want to put in place this very expensive, very unfair parental leave scheme – maybe $12 billion – that they then need to start, as Fiona has said, considering all the options. Putting everything on the table, raising GST, cutting pensions, cutting income support, getting rid of negative gearing for people who just bought a house last year and thought that that was an investment property that they could rely on. This is a scary world indeed when these Coalition cuts come into force, which they would if Mr Abbott were to become Prime Minister.

Tim Lester:          So you personally support the retention of negative gearing as it is?

Andrew Leigh: Negative gearing is in accord with our tax system, which allows people to deduct certain expenses when they’re claiming income. Certainly what we’ve done at the moment is to make a series of responsible savings: we’ve done things like removing the baby bonus, and that is in accord with $180 billion of savings we’ve made on payments we thought were unfair or outdated, like the dependent spouse tax offset. We get attacked on these every single time by the Coalition, but the point is when Australians go into the ballot box on September 14, they’ll be choosing between Labor’s investments and the Coalition’s cuts.

Tim Lester:          Fiona Nash, was the baby bonus good policy? And is it now good policy to get rid of it?

Fiona Nash:        Well certainly there have been discussions around the baby bonus over the years, but at this point in time the Coalition will ensure that as we go down the track towards an election people are very aware what we’re going to have in place for families. Now there’s been some discussion around the baby bonus, obviously there’ve been discussions around changes to the Family Tax Benefit Part A that the government is now talking about, but at the end of the day we are looking at an economic disaster in this nation, we’re looking at the gross debts reported in the budget going out to $370 billion over the forward estimates. We cannot let this economic situation continue, we’re now paying a billion dollars a month in interest because of this Labor government. Those are the sorts of things people in Australia want fixed, and they want us to make sure that we get this country back on track.

Tim Lester:          Ok, but under that, those tough choices that you talk about, one of them that Joe Hockey at least looks like supporting is the abolition – the total abolition – of the baby bonus. Do you back Mr Hockey doing that?

Fiona Nash:        Well look I support Joe Hockey, and what he’s trying to do to get the country back on its feet. I think there’s absolutely no doubt about that we’ve seen this Labor government just run rampant with this economy, they’ve got no idea how to manage the economy. We’ve got Australian people right across the nation trying to balance their household budgets, trying to do the right thing, and at the same time looking at a Labor government that is particularly irresponsible and looking at a gross debt at over $370 billion over the forward estimates.

Tim Lester:          What do you say to stay at home mums who look at the generosity of the Coalition’s paid parental leave scheme and the removal of a relatively small payment that would have gone to them when they had a child, how is that equitable?

Fiona Nash:        We are certainly aware of the stay at home mums and the wonderful jobs that they do, I was indeed a stay at home mum for many years. Certainly it will become very apparent in the time running up to the election that we will indeed be looking at those stay at home mums and making sure that they have the support they need.

Tim Lester:          Senator Fiona Nash we know you’ve got a plane to catch from Hobart so we’ll let you be, thank you for joining us this morning. Andrew Leigh, appreciate you coming into the studio.

Andrew Leigh: Thanks Tim, thanks Fiona.

TRANSCRIPT – RN DRIVE WITH WALEED ALY
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
20 May 2013

Topics: Federal budget, paid parental leave, GST.

Waleed Aly:        Both sides this week are assessing the impact to last week’s Budget, and the Budget Reply, as they shape their campaigns for the election that’s coming in September. Just seventeen weeks away, incidentally. We know it wasn’t a traditional pre-election budget, it wasn’t full of vote-winning spending initiatives. In fact the big surprise was that the Government is axing stuff, moving to axe the baby bonus for example. And you might be surprised to learn that that has gone down very well with voters. What will the politicians make of that, will it influence their campaigns on other issues perhaps? To discuss the politics and the policies we can expect, I’m joined now by our political panel: Senator Arthur Sinodinos, Parliamentary Secretary to the Opposition Leader and Coalition Deregulation Taskforce chairman, he was previously chief of staff to then Prime Minister John Howard; and Dr Andrew Leigh, who is now Parliamentary Secretary to the Prime Minister. Thank you gentlemen for joining us. I think I should congratulate you, Andrew Leigh – you’ve been promoted since the last time we spoke.

Andrew Leigh: Thanks Waleed. It just occurred to me that it’s almost as though we’ve got the seconds for the Prime Minister and the Leader of the Opposition. It made me think of the old way lords would resolve disputes by each choosing a knight to go forth and fight their battles for them.

Waleed Aly:        That’s a very flattering way of describing both of you, I appreciate that, the imagery is wonderful. Let’s start with this Nielsen poll, and I don’t really want to talk about the headline issue. The support for the baby bonus, or the scrapping of it, was really interesting. 68% of respondents backed the move of scrapping it, only 27% opposed. Arthur Sinodinos, does this suggest that it wasn’t really great policy to begin with?

Arthur

Sinodinos:           Firstly congratulations to Andrew on the Parliamentary Secretaryship, he richly deserves it. Look, it’s easy for us after the event to rationalise this result about the baby bonus because you think on the face of it people would favour more spending on anything. But I think the political environment has changed pretty significantly in the last few weeks, if not the last few months. And in a sense, the politicians are catching up to where the public have been for a while, where the public have raised their own savings post-GFC. Household savings are now about 10% of household income, so if we’re going out there and saying as a political class that some things are no longer affordable, or that we should borrow to have X or Y, I think it actually resonates with the public. Now some people will say that sounds a bit self-interested, but I’m willing to bet that people are saying ‘well, if the politicians are axing something because they don’t think it’s affordable, they’re telling the truth’ and it will resonate with them.

Waleed Aly:        Yeah, I just got a text though on this: ‘Baby bonus gone-ski, but why did we ever have it?’ That’s from Shane. There seems to be a feeling, not just that its time has come, but that it was always just a middle class welfare handout, that was of dubious use and benefit to the economy, that it was always just more political than policy.

Arthur

Sinodinos:           Can I just say – and I think my recollection of this will be slightly hazy – but I think that this was an alternative to having a paid parental leave scheme, from memory. It was an alternative that was put up and it was meant to be available to whoever was having a baby, whether you were in the workforce or a stay-at-home mum. But that, I think, was the context in which it originally arose. So it makes some sense that, now both sides of politics have embraced paid parental leave schemes, to review the efficacy or the need for this particular benefit.

Waleed Aly:        Sure, but that didn’t stop your side of politics opposing it when the Government tried to reduce it in previous budgets, even though a paid parental leave scheme was both parties’ policy.

Arthur

Sinodinos:           Well I think we came to the right decision on that in this context.

Waleed Aly:        Ok. Andrew Leigh, first home buyers’ grant stays though. Wouldn’t that be something that would be ripe for the chopping block, if you’re going to go down this path?

Andrew Leigh: Well I think that certainly both sides of politics have come around on the baby bonus, and it’s really interesting for me to see that greater focusing on targeting. First home buyers’ grant deals with a different challenge. But I certainly think that on this one, it was a policy that was not particularly well targeted, we means tested it down to $150 000 but that only took out the most affluent 3% of parents. So really you had a policy that wasn’t in the spirit of the highly targeted Australian social safety net. A typical developed country gives twice as much to the bottom fifth as it does to the top fifth. We give twelve times as much to the bottom fifth as the top fifth, and I think that’s the genius of the Australian income support system, that it is so powerfully targeted, through the assets and means tests on the pension, for example, in the early ‘80s, and a whole lot of means tests that surround other programs. That’s how you make a system that’s sustainable in the long run.

Waleed Aly:        And I suppose that you could say the first home buyers’ grant is in a way means tested, because it’s for first home buyers. But the effect of it hasn’t really been that helpful for first home buyers, it’s really just pushed up the prices in that sector of the market. So it makes it even harder to enter the market.

Andrew Leigh: Well, the effect of the price is going to depend – I’m just trying to do the models in my head – you want to think about the share of all buyers who are first home buyers, say that’s one in five, or one in ten. And then you want to think about what economists call the incidents, or basically the split between the buyer and the seller – say that’s half – you’re going to get something like a tenth or a twentieth of the money goes to push up house prices. So I think the effect of pushing up house prices tends to be over played on this. But yeah you’re right, it’s a benefit that’s going to all, and given that the least affluent are less likely to buy homes, then they’re less likely to claim the first home buyers’ claim.

Waleed Aly:        So why not get rid of it?

Andrew Leigh: Well, all of these things need to be considered in their time. I think that, at the moment, our decision has been that the baby bonus isn’t sustainable and that comes off the back of looking at a whole range of other programs: means testing the family tax benefits, getting rid of the dependant spouse tax offset. So we’ve got a strong record of things in this area.

Waleed Aly:        Are we seeing a philosophical shift here? Is it just about the baby bonus, and parental leave, and the timing of it? Or is there something here where both parties are recognising that the era of middle class welfare should be over?

Andrew Leigh: Well I thought Arthur’s comment about the savings rate was fascinating, because Australia does – now that 10% savings rate is now higher than Japan’s, and it’s against our standard psyche, we don’t think of Australians as being more frugal than the Japanese, we think of ourselves as being as spend-thrift as the typical Anglo country. I thought it was really interesting the way Arthur characterised that, and the way it plays into political debate, but I suppose the extra thing I would add to that is that Australians also want to see income support go to the neediest, unlike say Europeans, who have this idea that when the Government spends, it ought to spend across the income spectrum. And I think that defines the difference in the two parties’ parental leave programs. I would characterise ours as being much more in the Australian spirit, because it’s the minimum wage for everyone. The Coalition’s is a much more European-style one, where it’s replacement wage, therefore it gives more to those than earn more.

Waleed Aly:        Would you like to respond to that, Arthur Sinodinos?

Arthur

Sinodinos:           A couple of comments, Waleed. On the paid parental leave plan, Tony Abbott has been pretty clear I think in that he sees it as a workforce entitlement, rather than just income support, and that’s what it’s got the payment levels we’re talking about. He wouldn’t characterise it necessarily as a European style payment, but as more of a workforce entitlement and its rationale is to keep women more in touch with the labour market during that period, so they’ve got an incentive to return. So they’ve got paid leave, they go back to their place of employment. We’re trying to find ways of encouraging labour workforce participation. We don’t want a situation where women just drop out of the workforce completely after having kids, or if they have an aspiration to have a full time job, they feel that they can only put up with a part time job, and helping women who want to move from part time to full time.

Waleed Aly:        But it’s not a workplace entitlement though. Because a workplace entitlement comes from your employer, like leave is a workplace entitlement. Your boss, or your employer, grants you leave, that isn’t a handout from the Government. So you can call it a workplace entitlement, but doesn’t that really mask what it is?

Arthur

Sinodinos:           Yes, but I mean, yep. You can go into semantics but it will be funded by companies at the big end of town, so in that sense we are matching the accountability with the responsibility for the money. Now it’s separate whether we have a modest company tax cut, and we can come back to that. But the point is, that’s the mentality that Tony is trying to emulate, the idea of a workforce or a workplace entitlement.

Waleed Aly:        But it’s more than a semantics difference isn’t it? Because the top end of town is funding this with its levy, but all employers will be passing it on. So there will be a whole lot of employers, a majority of employers, across Australia, who will not be contributing money to this –

Arthur

Sinodinos:           But recognising, Waleed, that smaller employers don’t have the same capacity to pass it on –

Waleed Aly:        Right, which is why it’s not a workplace entitlement, it’s a government handout.

Arthur

Sinodinos:           Yes, but we’re trying to entrench a certain approach to the treatment of women in the labour force, promoting that attachment to the labor force. And the second part is of course what you do to improve the affordability and access to childcare as well.

Waleed Aly:        Ok, Andrew, I want to pick up on some more points on this in a moment, but Andrew Leigh I might throw that to you. You’ve spoken a lot, and your government has spoken a lot, about wanting to keep people in work, and get people working, this sounds like the kind of thing that would lead to that. Why would you not adopt something that is as generous as this?

Andrew Leigh: Well I guess you have to look at the total government spend in order to achieve this outcome, Waleed. And we’re looking at a government spend that might well be as large as $3 billion a year, $12 billion over the forward estimates period. And then you’d have to say well, could you more effectively to boost workforce participation. And I’d say, for example, if you’re sitting down from the Coalition’s perspective, they could keep the reductions in superannuation taxes that we’ve put in place. Two thirds of those go to women, because women are disproportionately low income earners. They could, for example, support the continuation increase of the superannuation increase from 9% to 12%, because disproportionately those who are on lower superannuation contribution rates are going to be at the bottom of the income spectrum, and are therefore more likely to be women. Those retirement savings incentives are important, as is the big agenda we’ve driven through childcare – and not only improving access and quality, but increasing the rebate there. I think childcare costs are more likely to be a larger disincentive. This kind of very regressive paid parental leave scheme is, I think, unlikely to have much impact on workforce participation, and as Arthur well knows, the company tax from which is raised is ultimately a tax that is being paid by workers. We know that the company tax doesn’t get paid by the other two sources of income: land and capital. It gets paid by labour.

Waleed Aly:        Arthur Sinodinos, just to pick up on the politics of this, I mean whatever the benefits or otherwise of the parental leave scheme proposed by your side, can you stand here now, hand on heart, and tell me that this is actually going to get through the party room given that there is so much opposition within the Coalition?

Arthur

Sinodinos:           Comrade Tony Abbott is potentially taking us to an election victory. If he gets us there, this policy will stand, it will be a signature policy of his, and there would not be a reason for people to oppose it.

Waleed Aly:        But there’s such deep opposition within the party. I mean you can’t deny that.

Arthur

Sinodinos:           There’s an even deeper opposition to staying in opposition, let me put it that way.

Waleed Aly:        Well once you’re in government, you won’t be staying in opposition, so that’s the point at which you can talk about it.

Arthur

Sinodinos:           Look no, I don’t, I seriously don’t believe that a majority of people in the party room would oppose this scheme, if we get into government. If we don’t get into government, all policies get reviewed, clearly. But if we get into government and he’s promised this policy at the election, it’s a promise he’s going to have to keep. We made such a meal of Julia Gillard breaking her promise on the carbon tax eight days out from the last election, Abbott’s made it pretty clear he’s going to be judged on keeping his commitments. He’s got to keep it.

Waleed Aly:        He’s snookered the party room, I love it. That’s very good.

Arthur

Sinodinos:           No hang on Waleed, I want to say one thing on that. I know why you say that, but by the same token, it’s part of a series of measures that if we’re serious about gender diversity particularly in the workplace, we’ve got to tackle. I’ve mentioned childcare, there’s the white paper on tax reform, which is coming in the first term if we get elected. These are all areas where the tax transfer system can play its role, these are all issues that can work together when it comes to promoting workforce participation.

Waleed Aly:        Ok, fair enough, I was just being cheeky. Before I let both of you go, I do want to talk about GST. Should we increase the rate of GST, and thereby fix this structural problem in our current tax base which puts the burden overwhelmingly on the corporate sector rather than on individuals, and we end up with this structural problem in the budget whenever the profits decline. Andrew Leigh, you first?

Andrew Leigh: Waleed, I think that we’ve got the tax mix there right. I certainly don’t support increasing GST, against a tax that ends up basically falling on labour. It worries me when I hear Tony Abbott say that he’s absolutely committed to getting rid of a carbon price, and moving the profits-based mining tax back to the much less efficient royalties mining tax. Neither of those are reforms that could be supported by consensus of economists. Most economists think pricing carbon is efficient, most economist think that you ought to have a profits-based mining tax rather than a royalties-based mining tax. So Mr Abbott’s problem is that once he has made those decisions is that he has a big revenue gap, and he has to plug it by using things like the GST.

Waleed Aly:        But it’s not just Tony Abbott saying this is something he might look at, and that’s all he said, he didn’t say he’d adopt this. He just said that if you’re going to do a tax review you may as well do a review of everything and the GST is clearly part of that. And there’s a lot of the Government for leaving the GST off the table when the Henry tax review happened, and its various attempts to reform taxation policy. And the main problem, or one of the big structural problems is that we don’t tax individuals enough, and that we tax companies heaps, and then when prices go down in the mining sector, there’s a huge hole in the budget. Isn’t this in fact a really good way to fix it?

Andrew Leigh: Saying you’re going to review something is sort of a standard trick for pushing it off but just keeping it at arm’s length. I guess what troubles me is that Mr Abbott is not saying that he’d like to get expert opinion on the carbon price, on that he seems to be listening to the folks who, I sort of characterise, as soil magic, you know the Direct Action. On the mining tax, he doesn’t seem to be wanting to see what the experts have to say there. But on a tax that will fall heavily on Australians, and of course of all Australians it will fall disproportionately on those with lower incomes who tend to spend their entire pay check rather than saving anything, there Mr Abbott is suddenly saying he’s open to considering it. So when you say you’re open to considering the tax that has one of the most regressive impacts in the system, I begin to worry a bit. I’d be fascinated to hear Arthur’s views on this, I mean he was right next to John Howard when he introduced the GST, he’s seen this all the way through.

Waleed Aly:        Well Arthur, final word to you. It does suggest that the Coalition certainly doesn’t have a problem with regressive taxation, when you look at the GST and the parent leave scheme.

Arthur

Sinodinos:           Two comments, the first is proceeds of the tax go to the states, and what Tony has said is obviously we’re prepared to consider it but we’re not proposing anything, certainly not for this election. But we’re happy, and in a constructive spirit, to have the debate if we win the first term. So he’s really inviting people to put their views on this and other matters on the table, and as you’ve seen from some of the reports from state premiers and others, they’re willing to put stuff on the table. The other point I’d make about things like the GST is that they never happen in isolation as you would’ve seen from the new tax system in 2000. So nothing ever happens in isolation and it’s always a mistake when people try and focus on just one tax and say ‘well this tax, is this changes it is a bad thing’, you’ve got to look at the totality of what you’re doing and that was certainly the case with 2000. And Tony’s made it clear that anything that comes out of the white paper process would go to an election, so you’d be looking at systemic change rather than change focused on one or two things. I think, with respect to Wayne Swan, one of the downsides to what he did with the Henry tax review, was that he was very quick to pick and choose, rule out a whole variety of items, we never got to have a genuine dialogue on tax reform. And this goes to the process by which you make some of these reforms stick.

Waleed Aly:        Alright, well it’s a long way down the track no matter which way it goes, but we have to leave it there. Gentleman, it’s been wonderful to speak to both of you shining knights of Australian politics, I hope we can do it again sometime soon.

Arthur

Sinodinos:           I’ll get my lance.

Andrew Leigh: I’m looking forward to it, Waleed.

Listen to the interview

Response to Mark Latham’s Quarterly Essay

It’s occasionally been forgotten since he left the Labor leadership nearly a decade ago, but when he chooses to engage in policy, Mark Latham has a lot to say. He is optimistic about the intellectual and organisational future of the Labor Party, and appropriately proud of the role we have played in opening up the Australian economy in the 1980s and 1990s and dealing with climate change today.

One big question Labor thinkers are always willing to wrestle with is how the party’s guiding philosophy should evolve. Political parties invariably adapt as society changes, but Labor’s options have particularly opened up as the Coalition has shrunk into what Anthony Albanese has tagged ‘the noalition’. When Tony Abbott calls for a ‘people’s revolt’ against a market-based mechanism for dealing with climate change, it’s hard to know whether to criticise him for abandoning conservatism or trashing liberalism.

The same holds for other issues. A true Burkean conservative would acknowledge that Australia’s minerals belong as much to future generations as to ours, and that we have an obligation to our successors to tax mining profits appropriately. A true liberal would support the fuel tax reforms that were introduced by Peter Costello in 2003, rather than back-flipping at the last moment to win a tabloid headline. And it’s hard to see how either conservatism or liberalism justifies the opposition’s relentless critique of means-testing. Each time the government has reduced the welfare paid to millionaires, the Opposition has sprung to their defence.

In delivering the Deakin Lecture in 1973, Deputy Liberal Leader Phillip Lynch said ‘It is naively believed by some people that the one and only job of an Opposition is to oppose. This is a gross oversimplification. An Opposition’s function is to compose as well as to oppose; it is a constructive as well as a destructive role. An Opposition is the alternative Government and, as such, must initiate and promote positive and constructive policies if it is to be regarded as a potential Government by the electorate. No electorate can be expected to endorse a political party which has become expert at criticism at the expense of its own initiative.’

Indeed, it is Deakin himself who best pegged today’s Opposition. In 1906, he spoke of ‘a party less easy to describe or define, because, as a rule it has no positive programme of its own, adopting instead an attitude of denial and negation. This mixed body, which may fairly be termed the party of anti-liberalism, justifies its existence, not by proposing its own solution of problems, but by politically blocking all proposals of a progressive character, and putting the brakes on those it cannot block.’

A century on, there is a good case that the mantle of social liberalism, carried by Deakin in the early twentieth century, rests most easily on Labor shoulders. Latham mentions my own arguments to this effect, but he might also have noted Chris Bowen’s excellent 2008 speech to the Sydney Institute: ‘Reclaiming Liberalism for the Left’. Labor’s liberal legacy includes trade liberalisation, competition policy, carbon pricing, and the publication of test scores. These sit comfortably alongside our party’s egalitarian legacy: fiscal policy that saved jobs in the GFC, a school system that wants everyone to finish school (not just ‘the right kids’), Medicare and Disability Care to protect all Australians.

Latham is very comfortable with market liberalism, but worries that social liberalism might not be matched with appropriate responsibilities. He gives the example of multiculturalism, where he argues ‘Labor celebrates diversity for diversity’s sake’, and contends that laws to address discrimination and prejudice can harden public attitudes against the intended beneficiaries. And he goes on to argue that one of the reasons for the decline in social capital is the ‘free exercise of human rights’.

In each case, I’m not sure the evidence is as strong as Latham proposes. Multiculturalism, as philosopher Tim Soutphommasane argues, draws on both liberalism and egalitarianism. It recognises that everyone has equal rights, but also that different cultures are valued. As to the hardening of public attitudes, I’m not aware of any evidence that racism or sexism increased upon the passing of the Racial Discrimination Act 1975 or the Sex Discrimination Act 1984. And on social capital, my own exhaustive analysis (Disconnected, UNSW Press, 2010) concluded that the key drivers were changes in technologies and working patterns.

Latham worries that liberalism could undermine community values, but in some cases, it might serve to strengthen them. For example, my own support for same-sex marriage is partly grounded in my belief that the institution of marriage exerts a stabilising effect on society. Indeed, a good case for same-sex marriage can be made from the standpoint of egalitarianism, liberalism or communitarianism.

That said, the communitarian strand to Latham’s thinking is one we shouldn’t ignore. Like British parliamentarian Jon Cruddas, Latham articulately taps into the needs for modern Labor Parties to connect with strong local communities, and traditional values. This is about understanding our history, and shaping policy solutions that work for regional and outer suburban Australia, as well as the inner city.

Since Mark Latham’s piece appeared, the Labor Party has endured what Prime Minister Julia Gillard described as an ‘appalling’ week, with the loss of five frontbenchers and three whips. (As both Malcolm Turnbull and Kevin Rudd can attest, attention from the Quarterly Essay – like the appearance of oranges in a Godfather movie – is not a good omen.)

The media have picked over the minutiae of those circumstances exhaustively (and perhaps quite rightly so), while the Opposition have looked on keenly. But they have been less keen to fulfil their responsibility as the nation’s alternative government. There is no evidence that the Opposition is any closer to putting forward properly costed policies on which the Australian public could judge their credentials. Those shards of Coalition policy that get announced are frequently illiberal. From Scott Morrison’s call for ‘behavioural protocols’ for asylum-seekers to its relentless campaigning against Keynesian economics, this is a Liberal Party in name only.

In this environment, I welcome Mark Latham’s desire to drop in on the Labor family for a Christmas drink. Ideas have always been the lifeblood of Australia’s oldest political party, and his – along with many others – will help to shape Labor’s future in decades to come.

Andrew Leigh is the federal member for Fraser. His latest book is Battlers and Billionaires: The Story of Inequality in Australia (Black Inc, 2013).

The Power of Fibre

When construction on the Sydney Harbour Bridge began in 1923, the city was home to fewer than 40,000 cars – not enough to cause a traffic jam. It may have seemed like a bold move, then, to build a bridge capable of carrying six lanes of road traffic, flanked by a further two lanes for trains. Upon completion, it would have cost you six pence to drive your car across the bridge, but only three if you were upon your horse.

Today the Sydney Harbour Bridge is an indispensable artery to the city’s transport system, with over 160,000 cars crossing it every day. Beyond its iconic aesthetics, the beauty of the bridge lies in the fact that it was never designed for a Sydney of the 1920s. It was designed for a Sydney of the future.

It was with this same view to the future that Labor first proposed the National Broadband Network. Without a doubt, the internet has been the biggest technological game changer of the past half-century. And its capacity for growth is still expanding: just think about how much your own use of the internet has changed in the past 10 years, and then imagine the same change over the next decade.

Like water or electricity, fast broadband is now essential infrastructure. Accessing it shouldn’t depend on where you happen to live or how much money you happen to have.

It is clear that having superfast internet provision will be vital to Australia’s communication systems and our economic development. This is why we need Labor’s National Broadband Network, the biggest infrastructure project in our country’s history. Upon its completion, every home and every business will have access to superfast internet connection via optic fibre, fixed wireless and satellite technologies.

For 93 per cent of all homes and businesses, this will be a national fibre network. Unlike copper, which transmits electrical current, fibre uses pulses of light to transmit information.

Over recent years, engineers have been steadily achieving more rapid fibre transmission speeds – up from 100 megabits per second a few years ago to over 1000 megabits per second today. That’s the difference between being able to download a CD full of information every 5 seconds rather than every 50 seconds. And the boffins don’t think they’ve yet found fibre’s maximum speed, with some tests suggesting it might be up to 1000 times faster again. Unlike copper, fibre direct to your home or business is an information superhighway without a speed limit. NBN Co will start offering 1000 megabits per second services from the end of the year.

At the moment Australia is mostly relying on an ageing copper network, so our broadband capacity already lags behind many countries. Dr Karl Kruszelnicki recently told me that he regularly talks to school classes using Skype. With Australian classes, he says the copper connection is unreliable and typically has to be reset once or twice in a one hour session. But with Korean or Japanese students, where fibre has been rolled out, he can expect an uninterrupted high-resolution videoconference.

The support that fast and reliable internet will provide our teachers (particularly in rural areas) will be of huge benefit to our schools. Health is another area where we will see big improvements flowing from the NBN. Families who are living outside capital cities will be able to consult with medical specialists from their homes or from their local GP’s surgery.

The NBN will transform how Australians communicate and share information with each other and the rest of the world. This will impact upon our businesses, our education and health systems, and also our community. I hope to see applications such as high-definition video-conferencing develop further to complement stronger community life. We’re already seeing this happen, from developing online mental health support groups to having year 10 students on the NBN in South Australia, Tasmania, and my hometown of Canberra, taking an astrophysics class with a teacher in Melbourne.

What about the Coalition alternative to the NBN? Tony Abbott and Malcolm Turnbull recently announced that they would spend over $20 billion to build a broadband network that still relies on copper. The Coalition would stop the fibre at suburban ‘nodes’ or street cabinets, leaving the copper in the ground to connect to your home (unless you want to pay up to $5000 for the equivalent of Labor’s NBN). Not only is this ‘get your water at the village well’ system inequitable; it will also result in connections that are 25 megabits per second at best (1/40^th of what the NBN can provide).

Tony Abbott’s brash statement that he is ‘confident 25 megs is enough for the average household’ reminds me how easy it is to underestimate the changes that technology can bring. When I bought my first computer in 1984, it had 3½ kilobytes of memory. That sounds tiny now, but it was about that time that Gareth Powell, the Sydney Morning Herald computer editor, wrote that he thought no program would ever need more than 16 kilobytes.

Those sorts of statements about technology are a warning to anyone who forgets that the things we can do with new technology often far outpace our imagination. Those that think that superfast broadband will just mean faster Facebook and YouTube do not get the power of technology.

Sydneysiders today are fortunate that the planners of the 1920s had the foresight to build for the future. Let’s hope we can do the same with by connecting all Australian premises to Labor’s National Broadband Network.

Andrew Leigh is the federal member for Fraser and Parliamentary Secretary to the Prime Minister. His website is www.andrewleigh.com.

SPEECH TO THE MINING FOR DEVELOPMENT CONFERENCE
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser

20 May 2013

(CHECK AGAINST DELIVERY)

Good morning – I’d like to welcome you to the Mining for Development Conference, on behalf of the Australian Government and the Minister for Foreign Affairs, the Honourable Bob Carr.

I acknowledge the traditional owners of the land, the Gadigal people of the Eora Nation.

I’d like to thank those of you who have travelled a long way to be here today, including elected representatives from Africa, Asia, Europe, Latin America and the Pacific, and leaders from civil society, academia and industry.

I particularly acknowledge my friend and parliamentary colleague Kirsten Livermore, the federal member for Capricornia in Queensland. Kirsten has a particular interest in mining in Mongolia, a country she has visited three times in the past four years. She tells me that over that time, she has seen major improvements in infrastructure and skills. Average incomes in Ulan Bator have risen – but so has inequality. Rio Tinto is working hard to meet the Mongolian government’s expectations that the benefits of the giant Oyu Tolgoi mine are spread across the Mongolian population. And AusAID working in Mongolia on development challenges such as managing the competing demands for water resources. Similar challenges confront Kirsten and me as we work with mining communities across Australia.

Let me start with the Australian mining story.

When Edward Hargraves announced in 1851 that he had found gold in Bathurst, it started an avalanche. Over the next decade, the population nearly tripled and our national income almost quadrupled, as people flooded in to take advantage of Australia’s mineral wealth.

It isn’t much of an exaggeration to say that central Melbourne is largely a product of the Gold Rushes, which continued until the late-1800s. The Royal Exhibition Building, opened in 1880, was modelled on the Duomo in Florence. By the end of the nineteenth century, Australians enjoyed the highest standard of living in the world.

While our nineteenth century mining boom was driven by supply, Australia’s most recent mining boom has been driven by demand. The past decade has seen world commodity prices triple. The terms of trade recently reached a 140-year high.

Urbanising China and India need steel to make their skyscrapers, and Australia happens to be the world’s biggest producer of iron ore, and a major producer of coking coal. At present, we export iron ore at the rate of 4 tonnes a second.

Australia has the world’s largest demonstrated resources of mineral sands, coal, uranium, nickel, zinc and lead. Australia is also among the top six worldwide in bauxite, copper, gold, iron ore and industrial diamonds.

According to Treasury official David Gruen, while the mining and mining-related sectors constitute only one-fifth of the economy, they have in recent years contributed more than two-thirds of Australia’s economic growth.

And yet compared with the 1970s terms of trade shock, the benefits of this mining boom are flowing more broadly through the economy. Inflation is low, unemployment is below most developed nations, and even the dispersion of unemployment has fallen. We’ve shifted policy settings too. Moving from the old royalty regime to a profits-based mining tax means that when prices rise, tax revenue goes up too. In an environment where parts of the non-mining sector are suffering from ‘Dutch Disease’, this seems a reasonable approach.

Through the mining boom, Australia has benefited from having highly skilled industry professionals, cutting-edge technology, world leading infrastructure, welcoming investment regimes and strong links to important export markets.

The Australian government is working with industry and Indigenous communities to

create much-needed employment and economic opportunities. In fact, the Australian Government and Minerals Council of Australia have had a memorandum of understanding in place since 2005 that seeks to do just this. It focuses on helping workers obtain drivers licences and housing, raising literacy and helping Indigenous people make the transition to school and work.

Mining jobs matter. But because mining is so capital-intensive, they cannot be the only way in which the benefits of mining are shared across the economy.

So I think Australia has an obligation to share our mining experience with developing nations and to work with multinational organisations such as the United Nations, Asian Development Bank and World Bank.

In economic jargon, managing natural resources is a comparative advantage of Australia’s aid program.

Like Australia, many developing countries are well endowed with natural resources. And yet we all know of the ‘resource curse’ – the fact that developing nations who have more natural resources tend to have lower growth rates and perform more poorly on indicators of democracy.

This ‘resource curse’ arises because mineral endowments are easier for non-democratic leaders to expropriate than incomes derived from other sources, such as farming, industry or services.

The curse can be seen in the history of the Democratic Republic of Congo, a country whose extraordinary mineral wealth has more often been a source of conflict than a wellspring of prosperity. The DRC’s troubled history reflects the challenges of ensuring that minerals benefit the whole population.

In developed nations, oil and mineral assets generally raise living standards across the board. But the term ‘resource curse’ was coined because of the tendency for developing countries with natural resources to grow more slowly than those without natural resources. Some developing countries have avoided the resource curse. But on average the paradox holds: natural resources generally fail to help poor countries grow rich.

My thinking on these issues is particularly shaped by Oxford economist Paul Collier, who is here today. Collier points out that if we can help developing nations to make better use of their natural resources, the resulting fiscal flows could help societies to transform themselves for the better.

If developing countries can benefit from their minerals, the payoff could dwarf anything that aid might hope to deliver. Collier points out that in rich nations (where geologists have carefully surveyed the land) the typical square kilometre has subsoil assets worth US$114,000.

In all probability, the same is true for the developing world. On those figures, Africa’s natural resources would be worth $3.5 trillion, more than 70 times the amount of foreign aid it receives each year. Indeed, $3.5 trillion is probably an underestimate. In recent years, the petroleum frontier has shifted south from the Middle East to West Africa. Central Africa is rich in everything from gold to coltan (used in mobile phones). Southern Africa has bountiful reserves of precious stones.

To help developing nations make better use of their natural resources, a group of ex-politicians and entrepreneurs (working with academics like Collier) have proposed a Natural Resource Charter, which they hope will be adopted by governments, businesses and NGOs.

The Charter offers practical ways in which governments can ensure the people get a better deal. Australia financially supports the charter.

First, the Charter proposes that financial flows be fully transparent. As I’ve noted, mining generates relatively few jobs, so what happens to the royalties is critical. Through the Publish What You Pay campaign and the Extractive Industry Transparency Initiative, mining companies (such as the estimated 230 Australian mining companies currently operating in Africa) are encouraged to release information about the payments that they make to governments.

Australia is committed to promoting anti-corruption activities internationally. We are a supporter of the UN Conventions against Corruption and of the OECD Conventions on Combating Bribery of Foreign Public Officials and Guidelines for Multinational Enterprises.

Australia is involved in the Anti-Corruption Initiative for Asia and the Pacific, and financially supports the Extractive Industry Transparency Initiative. This enables citizens to pressure governments into spending the money on much-needed infrastructure, such as hospitals, schools and roads.

I stress that we should apply initiatives such as this practically, collecting information to ensue transparent governance, while acknowledging that resources belong to entire nations and wealth is spread accordingly. We must make sure that governments and their people are in the best position to benefit from resource development through strong and transparent legislation, and adequately trained staff who apply regulations. It means ensuring communities are engaged throughout planning, development and closure; and governments are informed on how to best use revenues.

Second, the Charter argues that extraction rights should be sold by auction. Once a handful of bidders participate, it becomes difficult for them to collude, and the final price is likely to reflect what the rights are actually worth.

Collier uses the example of the UK, which was on the verge of negotiating a £2 billion deal to sell mobile phone spectrum when it was persuaded to try an auction instead. The auction raised £22.5 billion. His pitch to developing countries is simple: ‘if the UK Treasury can get it wrong by a factor of ten, what makes you think you’ll do better?’. As an economist, I firmly believe that where there is uncertainty about the value of an asset – such as a greenfields mining licence – an auction is the best way to ensure that it garners a fair price.

Australian history points to the importance of fairly allocating natural resources. In a recent article in the Journal of Economic Perspectives, Daron Acemoglu and James Robinson compare the Australian experience of gold prospecting in the nineteenth century with that of Sierra Leone’s alluvial diamonds in the twentieth century. By allocating mining rights in small lots, Australia spread the ‘lottery’ of mining, and created a pro-democratic force. By contrast, diamonds in Sierra Leone were exclusively mined by the Sierra Leone Selection Trust, which had its own security force. They argue that ‘The scene was set for the creation of one-party and authoritarian rule after independence in 1961.’

Third, the Charter suggests that developing country governments should maximise the amount of information about the country’s subsoil assets. If governments or aid donors conduct geological surveys and make them publicly available, then the people of that nation are more likely to get a fair share of their natural resources. One way the Australian Government has sought to achieve this is by establishing the International Mining for Development Centre at the University of Queensland and the University of Western Australia, A core aim of the Centre is to improve the quality of geological surveys in developing nations.

Another way to increase information is to require that auction winners begin prospecting within a fixed period of time. If one miner strikes it lucky, this will raise the sale price when nearby parcels are auctioned off.

The thing you notice about good management of the mining sector is how many of the challenges are truly global. That’s why the Department of Resources, Energy and Tourism have partnered with AusAID to share some of the lessons of Australia’s mining experience. The Department of Resources, Energy and Tourism recently held workshops in China, Indonesia, India, Mexico and Peru.

The sustainability program receives support at the national and state level by the Ministerial Council on Mineral and Petroleum Resources and by the Minerals Council of Australia.

The Minerals Council maintains its own Australian Minerals Industry Framework for Sustainable Development, known as Enduring Values.

This complements the International Council on Mining and Metals’ Ten Principles for Sustainable Development, with which many of you will already be familiar.

We don’t have all the answers, but we’re keen to be part of the conversation.

Currently, at a local level, Australia is working with African government counterparts to provide technical expertise in the minerals resources sector, trade policy, public sector reform and private sector development.

This includes working through the Australia-Africa Partnership Facility, Australian Development Scholarships and Australia Africa Fellowships program, supporting the establishment of the African Minerals Development Centre to help build capacity in governments and institutions across that continent.

We also have a strong focus on helping the world’s mining industry improve its safety record. Mining is hazardous work, and too many people have died worldwide extracting natural resources.

Our efforts in this regard include the Australia-China Coal Mine Safety Demonstration Project, which showcases mine safety technology and adopts leading practices to minimise mine injuries and fatalities.

Australia stands willing and able to help other countries however we can, whether through efforts to improve the lot of Indigenous communities, ensure protection of the environment and worker safety, or improve governance.

But we can achieve nothing without cooperation and communication within and between the global mining and development sectors. That is what makes events such as this and the upcoming Extractive Industry Transparency Initiative conference so important.

I encourage you to follow up with AusAID and the Department of Resources, Energy and Tourism to learn more about Australian efforts that interest you.

With your help, we can turn the old resource curse into a new resource blessing, and ensure that mining boosts living standards around the globe.

Update: Thoughtful reports on the conference from the ABC PM program and the Canberra Times.

TRANSCRIPT – 2CC WITH MARK PARTON
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
17 May 2013

TOPICS:                The Budget.

Mark Parton:     Andrew Leigh is the federal member for Fraser for the Australian Labor Party, he joins us on the line now. Hello Andrew.

Andrew Leigh: G’day Mark. How are you?

Mark Parton:     Excellent, I did have a chuckle this morning. I was half asleep when I got in and I read on the email from you think Tony Abbott should have said in the budget response.

Andrew Leigh: Well, we figured we’d have a bit of fun with imaging what Tony Abbott would’ve said last night if he was being upfront and honest with Australia.

Mark Parton:     See I think he is being quite upfront and honest, and I think that many of the worries that people in Labor and Labor supporters had about Tony Abbott, they’re starting to believe are not going to come to fruition. Of course one of the big dramas that we’re going to have is that Canberra’s going to get smashed, isn’t it?

Andrew Leigh: Well Mark, regardless of what you think is deep inside Tony Abbott’s head, I think the simple arithmetic means that he is going to have to cut to the bone. And that’s fundamentally because you can’t mathematically raise spending, cut taxes and pay down the debt faster, which is essentially what Mr Abbott promised he would do last night.

Mark Parton:     What if it works out the Joe Hockey is just a much better big-picture money manager?

Andrew Leigh: If Joe Hockey has a magic pudding, then that’s great.

Mark Parton:     I’m not talking about a magic pudding, I’m just talking about examining programs that aren’t important to a lot of Australians – cutting them, saving money in those areas.

Andrew Leigh: Mark, my general view of public policy is that if you think there are massive hollow logs around the place stuffed with cash, then you’re simply not a serious player in the game. Making cuts in the federal budget is an expensive thing to do, and a painful thing to do. Mr Abbot spoke last night about some of the household assistance that he would cut back, but he’s got to make swingeing cuts in order to fill his fiscal crater. Tax cuts to big miners and big polluters – they’re expensive tax cuts.

Mark Parton:     The really fascinating one to me is that the carbon tax is going to be scrapped, but all of the benefits from the carbon tax – and when I say benefits I don’t mean saving the planet, I mean the benefits to ordinary households – are somehow going to stay. Now it’s difficult to get your head around that as a regular Joe in the street, and sort of say ‘hey, now how can that work?’

Andrew Leigh: Exactly, and this is the sort of magic pudding economics that was on display last night: wanting to promise all things to all people, but being unwilling to say where it’s actually going to come from. We know that 20, 000 public service jobs cuts in Canberra are just a small part of what he needs to do in order to make the budget balance.

Mark Parton:     How long do you think it’ll be before the Direct Action plan to battle climate change gets scrapped?

Andrew Leigh: I think that’s probably first on the cutting board, were Tony Abbott to win office. The problem they have with that is the Grattan Institute puts it as a $100 billion program which is a third of the federal budget.

Mark Parton:     It’s a big lie, isn’t it? I mean, it’s only been put on the table so they’ve got something to say ‘this is how we’re going to deal with it’. It’s never going to happen.

Andrew Leigh: That’s right, and the reason is that soil magic doesn’t work. If you want to reduce pollution, the best way to do it is to put a price on it. And we’ve seen the effects of the carbon price already.  We’ve seen a 9% reduction in electricity emissions and that’s just the innovation of the market that you engender with a carbon price; electricity generators finding smarter ways to produce electricity cleaner. You’ll see that right across the economy – if you back the ingenuity of business, which a carbon price does, you get emissions reductions.

Mark Parton:     We’ve got a minute until news, Alistair’s just SMS’d us and said ‘I’d like to know if Andrew is going to pay for parking in Parliament House’, and he says ‘Andrew supports a $2 500 pay cut for public servants who work in the parliamentary triangle’.

Andrew Leigh: My response to Alistair would be, as we spoke about the other day Mark, Questacon has turned away 23 000 visitors every year as the result of people not being able to find a car park. I think that if you’re going to have national institutions working well, paid parking eventually had to be a part of the solution. Gai Brodtmann has got some concerns around amenities, I think they’re important ones, and if pay parking comes to the House I’ll pay my share like everyone else.

Mark Parton:     Right, so in essence you are supporting a $2 500 pay cut for public servants working in the parliamentary triangle?

Andrew Leigh: Mark, we’ve seen solid wage growth for public servants, as they deserve, they work hard. But the free parking in parliamentary triangle has turned it into a shemozzle for visitors and for workers.

Mark Parton:     I’m with you Andrew, on that particular issue. Thanks for coming on this morning.

Andrew Leigh: Thank you Mark, appreciate it.

Podcast of 2CC Breakfast With Mark Parton

Tony Abbott likes to claim that he supports honesty in politics. But if he was coming clean with the Australian people, what would he say in his budget reply? Here’s one possibility.

Tony Abbott, the Honest Budget Reply

Last year, I had a bit of fun with my budget reply. We didn’t have much policy, so I reworded my speech to the Young Liberals’ national convention, and delivered it in parliament. But at the end, I said the thing that really mattered in politics was to be honest. That got me thinking – maybe I should really be honest. So this year, I’m glad to deliver my first ever honest reply to the Government’s budget.

The uncomfortable truth is that the Australian economy is doing well – really well. We’ve grown 13% since 2007 – while Europe’s economy has shrunk and over half all advanced economies haven’t recovered lost output over this period. I was wrong when I said WorkChoices ‘was good for wages, it was good for jobs, and it was good for workers’, because productivity growth is higher now than it was under WorkChoices. The share market is up about 10% just since January. The level of expected business investment has never been higher.

We have one of the lowest unemployment rates in the developed world, and there’s few countries where you’d rather be looking for a job right now than Australia. Our net debt – as a share of GDP – is low. It is expected to peak at only 11.4 per cent of GDP, a fraction of the major advanced economies.   My own personal debt to income ratio is over 200%, So if I start accusing the government of taking on unsustainable debts, I don’t know what that would say about my own ability to manage money.

Former Prime Minister John Howard – a man I deeply admire – put it well last week, when he told a Sydney conference: ‘When the current prime minister and the treasurer and others tell you that the Australian economy is doing better than most – they are right. We are still fortunate that we have an unemployment rate with a five in front of it. I wouldn’t have thought that was going to be possible a couple of years ago, and I don’t think many people would have. Our unemployment has remained pleasingly quite low. And our debt to GDP ratio, the amount of money we owe to the strength of our economy, is still a lot better than most other countries.’

Tonight, I pledge to stop trash-talking the Australian economy. Rather than fearmongering on the cost of living, let me be honest: our best measure of the cost of living is the consumer price index, and it’s been consistently low over recent years. Interest rates are down, so a family with a $300,000 mortgage is saving over $100 a week compared to when the Coalition were last in office. So tonight, I pledge that the Coalition will scrap one of our promises: the promise that interest rates will always be lower under the Coalition. It’s a pity that getting rid of this pledge won’t save me any money.

Which brings you to my funding gap. The Coalition has spent the last few years saying ‘no’ to responsible budget measures and ‘yes’ to special interests. The result, as Andrew Robb and Joe Hockey have admitted, is a funding gap that a year ago we estimated at $50 to $70 billion. But that was before global economic circumstances and the high dollar helped wipe $17 billion off government revenues in 2012-13. So our gap today is $70 to $90 billion. That’s thousands of dollars for every Australian household.

And then there’s my spending problem. As a result of ongoing, unfunded promises, Joe Hockey and Andrew Robb now have a mammoth task ahead of them to see how it all adds up. Because we remain committed to:

• Removing the means test on the private health insurance rebate – $3 billion
• Bringing back the chronic disease dental scheme – $4 billion
• Bringing back the baby bonus – $1 billon
• Billions in unfunded infrastructure commitments – around $18 billion at last count.

The only way a Coalition government could spend more, tax less and have lower debt than Labor would be if we repealed the laws of maths. In my initial conversations, the Greens Party have been supportive of this, so I think I might be able to get it through the Senate.

In 2009, I told Lateline that Labor’s stimulus package was ‘not going to stop the recession being long and deep’. In the years since, it’s become clear that government stimulus saved over 200,000 jobs, and ensure Australia avoided going into recession entirely. So my response has been to pretend the Global Financial Crisis didn’t happen at all, and complain about debt, even although I know that two-thirds of our debt came through revenue write-downs during the GFC. Would the Coalition have taken the budget into debt if we’d been in power when the GFC hit? Of course we would have.

Similarly, I’ve spent the past few months pretending that the revenue write-down didn’t happen, hoping I could muddy things up with my usual lines about Labor spending. But tonight, I want to be straight with you: in a budget, revenues and expenses are different sides of the ledger. The revenue write-down has nothing to do with government spending. Following the fall in revenue, I have no idea how I’m going to make my costings balance. Even my regressive parental leave scheme doesn’t seem to add up, because since 2010 wages have grown and company tax revenues are down. Do you think Coles and Woollies customers would mind if I raised company tax by a bit more than 1.5%?

As Peter Costello wrote about me in his book, ‘Never one to be held back by the financial consequences of decisions, he had grandiose plans for public expenditure.’ So in that spirit, let me tell you about some of the grab-bag of ideas that currently constitute Coalition policy.

First we have a $30 billion policy to construct dams. Yes, some biased and uninformed groups – like experts – have characterised the plan as ‘unfunded’, ‘uncosted’ and ‘barking mad’. But what these elites don’t get is that this policy is the voice of the Australian people. Every day, people come up and tell me to announce some damn policy.

Second, I’m proud to re-announce our $4 billion centrepiece saving: re-introducing the 15% superannuation tax on low-income Australians. I expect people will support this measure because, I’ve said before, superannuation is a con job. This tax increase will mean 3.6 million Australians have to delay their retirement – so it’s not just a saving, it’s a job creator. Central to the Coalition’s values are senior Australians and hard work. Making senior Australians work hard is our ultimate aspiration.

Third, I’m especially happy have the chance to talk about my Paid Parental Leave scheme. Now Alex Hawke may say that it ‘does not pass the fair-go test’, Mal Washer may say that he doesn’t see how it will assist productivity, and Peter Reith might have argued that ‘it is obviously bad policy’. But the one thing everyone agrees on is that it was my idea. So I’m sticking to it. This is because I understand the needs of Australian families: it’s not people on Family Tax Benefits that need assistance through things like Labor’s Schoolkids bonus, it’s people who are earning over $150,000 that we should be helping most. High income earners are the true women of calibre, and they deserve fair dinkum assistance.

Fourth, continuing in this vein of providing assistance to those of calibre, the Coalition if elected in September will ensure that Manly Football Club, which has never won the wooden spoon in its 63 seasons, the longest period of any current club, receives another $10 million in addition to the $1 million I got them in 2005 to create some undercover seating.

Fifth, the Coalition is committed to meaningful tax cuts. So meaningful, we can’t say what they are, who they’ll be for or how much they’re going to cost. I’ve said that I aspire to a lower tax to GDP ratio, but given that it’s fallen from 23.7% to below 22% under Labor, even the dries in my partyroom have started to ask me how much lower it can go. In fact, someone reminded me the other day that another 1% reduction in the tax to GDP ratio would be equivalent to slashing the entire schools budget, cutting almost all Family Tax Benefit payments, or axing three quarters of the defence budget.

Sixth, there’s the interweb. Some call me old fashioned, but I am proud to be a man who believes in tradition.  I believe in Australia’s future as a constitutional monarchy, I believe that marriage should be between a man and a woman, and I believe in our decades-old copper wire. I’m no tech head, but I just don’t see the need to bring our technology into the 21st century. Personally, I get my staff to print out my emails and I dictate the responses and have them sent to the typing pool.

Seventh, we will use soil magic to mitigate that climate change thing. We call it ‘direct action’, because it directly acts to take money from the pockets of households and give it to big polluters. Households will need to pay $1,300 in new taxes annually in order to meet the $100 billion that the Grattan Institute said we’d need to put towards an abatement purchasing fund.

You’ll notice that there are a few things missing from this list. As I said in 2003, ‘Transport infrastructure is a state responsibility.  The Commonwealth Government should no more have to fund … [it] than the State Government should have to buy new tanks for the army.’ So don’t expect me to follow Labor’s historic investment in roads, rail and urban public transport. And under cover of a Commission of Audit, I’m hoping to cut spending on ports too. The experts tell me this is my best chance of stopping the boats.

As Coalition leader, I have been described as ‘not a policy-driven person’ who ‘sees politics as a game’. But by being honest and upfront tonight I have shown the Australian people what kind of Prime Minister I would be. And frankly, even I’m kind of worried. Honestly.

Matter of Public Importance – Australian Budget, 15 May 2013

Dr LEIGH (Fraser—Parliamentary Secretary to the Prime Minister) (16:12):  It is my pleasure to rise on this matter of public importance to speak about the strength of the Australian economy and the important choices that this budget makes. The Australian economy is performing strongly by international standards. As previous speakers have noted, we have grown 13 per cent since 2007. It is a period when the United States has only grown a couple of per cent and when all of Europe has actually shrunk. The European economy is smaller now than it was then. Australia’s economy has moved up the rankings from being the 15th largest to the 12th largest in the world. We have seen faster productivity growth over recent years than we saw under Work Choices, giving the lie to the notion that all that stands between Australia and stellar productivity performance is cutting back workers’ entitlements. We have seen the sharemarket up. In fact the sharemarket is up more than 10 per cent just this year.

You do not have to take my word that. As former Prime Minister John Howard has noted, ‘our debt to GDP ratio, the amount of money we owe to the strength of our economy, is still a lot better than most other countries’. Former Prime Minister Howard has been willing to speak the truth on this. While the member for North Sydney used question time to fearmonger about debt, former Prime Minister John Howard has acknowledged that Australian debt levels are low. In fact the Leader of the Opposition himself has a debt-to-income ratio well over 200 per cent, so it is hard to see why he would envisage a debt-to-income ratio of 11 per cent as being unsustainable.

If we go back to 2009, we had the Leader of the Opposition telling Lateline that Labor’s stimulus package was ‘not going to stop the recession being long and deep’. He was of course completely wrong about that. Thanks to the stimulus package, Australia avoided going into recession entirely. We did not cut back on government spending when the private sector turned bad. Two-thirds of the debt that Australia took on was due to revenue write-downs with just one-third being due to the stimulus spending we put in place. So when you hear those opposite fear-mongering about debt, they are really saying that the Australian government should have cut back when the private sector was cutting back. That would have led to a long and deep recession of the kind the Leader of the Opposition forecast incorrectly in 2009.

Mr Deputy Speaker, if you believe those opposite, you would believe that coalition governments spend more, tax less and have less debt than this government. Indeed, I even heard a voice from one of those opposite. ‘Yes, we can do that,’ they said. The problem is it is mathematically impossible. You have got to make choices. You actually have to make choices—and our budget does that. We make difficult choices but they are responsible savings measures: $43 billion in savings adding up to $180 billion in savings under this government. We understand those trade-offs. It is not sure those opposite do. Those opposite have a fiscal crater which was $70 billion before the revenue write-downs and now, with nearly $20 billion of revenue write-downs, it must surely be in the order of $90 billion.

Part of the reason they have that is their unfair paid parental leave scheme, which gives the most to those who have the most. Of course, you do not need to hear my criticisms of this scheme, which may cost between $12 million and $17 million over four years, as you can simply go to those opposite. The member for Mitchell said it did ‘not pass the fair-go test’. The member for Tangney said he was ‘aware of a number of colleagues that have similar concerns on this policy’. The member for Moore said, ‘The Labor Party scheme is quite good.’ He said he was not sure ‘why it is necessary to go to this level and how it will assist productivity.’ The member for Wentworth said he was ‘not going to comment on whether it should be reviewed or not’. Senator Cormann said that he is yet to announce how they will fund it, and they have not released the costings yet. Peter Reith goes further. He just says ‘it is obviously bad policy’. Nick Minchin: ‘I have been on the record many, many times as saying that I’m not a supporter of the paid parental leave scheme of the opposition.’ He says, ‘I think Tony and the opposition should now put that in the aspirational category.’ And Peter Costello says, ‘My view is that it is a very generous scheme.’ Well, yes, it is generous but it is generous to the most affluent; it is not generous to the neediest.

The opposition leader claims that he can pay for paid parental leave with a 1.5 per cent impost on Coles and Woolies customers. The trouble is that was predicated on company tax revenues being up and we have seen company tax revenues being written down, so 1½ per cent likely does not cover the cost of the opposition’s unfair paid parental leave scheme. It is likely they would have to increase company taxes and therefore increase grocery prices by even more.

They have claimed that the tax increase combined with parental leave could even save the affected businesses money. But, unfortunately, business leaders have quickly come out to say that this did not fit the mathematical test—again similar to the claim that they can increase spending, cut taxes and pay down the debt faster. The opposition leader could not name a single business that would be better off under his parental leave scheme, because there is not one. It is no wonder that former Liberal leader John Hewson said the opposition leader has no interest in economics and called him ‘innumerate’.

That brings me to the opposition’s soil magic plan, a direct action plan which they originally said would cost $3 billion over four years and now will cost $2 billion over three years. But that is at odds with the costings of independent experts. The Grattan Institute say that it will cost $100 billion to achieve the coalition’s emissions reduction target via soil magic, with $1,300 in new taxes because the opposition will not deal with foreigners in order to combat climate change and that again drives up the cost. If they were serious about this policy, they would submit it to the Parliamentary Budget Office for scrutiny. They would come clean with the Australian people. They would not go around making statements like the Leader of the Opposition has made that ‘we will spend no more and no less on reducing emissions than we allocate’. The fact is that something has to give. Clearly the opposition cannot both meet its budgetary targets and meet its emissions reductions targets. It will have to do one or the other.

Then there is the coalition’s $30 billion policy to construct dams. That shows the priorities of the coalition: $30 billion on a very odd dam scheme which seems to bear a curious resemblance to a major coalition backer’s plans to develop the north. But there are no plans for investing in the education of Australia’s children and no plans for paying for disability care. The opposition want to spend $1½ billion on drones, another thought bubble. When I first heard of this policy I thought we should just remind them that their coalition with the Nationals still remains strong. So there is $1½ billion on drones apparently and there is $10 million for upgrades to the opposition leader’s football club, Manly-Warringah Sea Eagles, and there is $400 million for a green army.

I could go on all day but the coalition’s fiscal woes are the result of saying yes to every special interest and no to every sensible revenue-raising measure. What the opposition leader must do tomorrow night is come into this place and back Labor’s responsible saves. He must come into this place and he must say that he backs our revenue measures, because if he does not all he has done is dig deeper into his $70 billion crater. As the advice goes, when you are down deep the best thing you can do is stop digging. The opposition leader could stop digging by backing Labor’ measures to get rid of the baby bonus and replace it with a targeted $2,000 for those on Family Tax Benefit Part A. He could back our company tax changes which see a fairer and more responsible company tax system being put into place. He could back the series of these measures but then he would still have to make swingeing cuts. When he is asked about his cuts he likes to speak about the cuts that he will make in my electorate of Fraser and the 20,000 Canberra public servants that he will get rid of. But that is only a small drop in the ocean compared to the budget gap that the coalition leader finds himself in. He wants to give tax cuts to big miners and big polluters. They have been guaranteed. But he does not want to provide tax cuts to the Australians who are at the bottom of the income spectrum. He is going to reverse Labor’s cuts to superannuation taxation for low-income earners. He is going to reverse our tripling of the tax-free threshold. Both are policies that will disproportionately hit women. Budgets are about priorities and values. It is time for the opposition leader to show tomorrow night where his are.

MEDIA RELEASE

Liberals must use Budget Reply to be upfront about cuts hurting Canberra

ACT Senator Kate Lundy, Member for Canberra Gai Brodtmann and Member for Fraser Andrew Leigh are calling on Tony Abbott and Joe Hockey to be upfront about any planned cuts on Canberra in the Opposition’s formal budget reply on Thursday.

With only one day until the budget reply speech to Parliament, they are calling on the Coalition to use this unique opportunity to make clear their plans for Canberra.

The Coalition has already proposed a number of cuts that would hurt local workers and families, including:

• At least 20,000 jobs from the public service in Canberra
• Household assistance payments typically worth over $1000 a year to local families
• The School Kids Bonus – used by 14,000 local families in our electorate
• The Instant Asset Write Off that 34,100 of small businesses in our electorate are eligible to use if they purchase new equipment
• The re-introduction of a 15% superannuation tax on 46,500 of Canberra workers earning below $37,000.  This is worth up to $500 a year to their retirement savings.
• Labor’s fibre to the home NBN now confirmed for roll out in the suburbs of the Inner North and Gungahlin, and the whole of Canberra within 3 years.  The Coalition will make people pay up to $5,000 to get optic fibre all the way to the premises

Given the Coalition’s track record, ACT Labor representatives are concerned the Coalition may also cut:

• The Income Support Bonus payments going to 9321 people in Canberra.  Payments of $210 per year for singles, and $350 to couples – the next payments are scheduled for a week after the election.  The Coalition voted against this cost-of-living help only a few months ago in Parliament.
• The Fair Entitlements Guarantee scheme that supports workers who would otherwise lose entitlements if their employer goes bankrupt or into liquidation.  Since 2007, 829 local workers have received $8,699,566.73 in entitlements under this scheme

If these concerns about possible cuts are unfounded, then Tony Abbott should use his Budget reply on Thursday to make absolutely clear that he will not take the axe to these programs if elected.

If Tony Abbott is going to be honest and upfront with our community, he needs to assure us that important help for local families and communities won’t face the axe.

If he is not prepared to give that assurance, then he must clarify what is on the chopping block.

Canberra deserves detailed candour in Thursday evening’s budget reply so voters can make an informed choice on 14 September.

Labor have been absolutely clear about our future investment and spending plans – it is there for all to see in Tuesday’s budget.

ANU to receive $3 million endowment to establish Tax Studies Institute

Dr Andrew Leigh, Federal Member for Fraser and former professor at the Australian National University has welcomed the establishment of the Tax Studies Institute (TSI) at the ANU.

As part of last night’s Budget, the Labor Government will provide a $3 million endowment to establish the TSI with ANU providing additional support and funding worth $750,000 each year plus $500,000 upfront.

With plans to establish the Institute in 2013, the TSI will help raise the quality of national debate on tax reform and the awareness of taxation policy issues.

The TSI will be a centre of excellence which will collaborate with academics and institutions across Australia and overseas. A new Chair in tax policy, to be taken up by an internationally renowned tax and public finance expert, will direct the new institute.

Member for Fraser, Dr Andrew Leigh said that continuing the national debate on ways to reform our tax and transfer system will help position Australia for the challenges and opportunities of the 21^st Century.

“Labor has delivered a budget that will make Australia a stronger, smarter and fairer country,” said Dr Leigh.

“It’s very fitting that the Tax Studies Institute be placed at the Australian National University given the reasons why ANU came into being in the first place,

“The Crawford School is fast gaining an excellent reputation not only in Australia, but in our region too. It’s fantastic to see an Institute that will play such an important role in future policy housed in one of Australia’s most prestigious and fast growing schools,” said Dr Leigh.

TOPICS:               The Budget

Andrew Leigh: The Budget that was handed down last night lays the framework for what will be a very clear choice for Australians come September. A choice between a Labor Government that’s chosen to make responsible saves in order to invest in road infrastructure, in better schools and in disability care, and the Coalition which must either back in all of our responsible saves and then make more cuts of their own, or else, keep their cuts in the top drawer as they’ve been continuing to do. I think Australians will recognise that the high dollar has been a big hit to the government revenues and they will recognise too, that it is time for Tony Abbott to stop saying yes to every special interest and no to responsible savings measures, back in the Government’s saves and then be clear about how he will balance his budget. Happy to take questions.

Journalist:          Is the Treasurer being again, too overly optimistic? With the carbon tax and the mining tax in this budget, there’s been $13 billion lost out of those two initiatives together, and then the Treasurer is still forecasting a return to surplus in 2-3 years?

Andrew Leigh: Our forecasts are based on the best available data and what we saw over the course of last year was a once-in-fifty-year episode in which nominal growth for a sustained period was below real growth and that’s driven in large part by the high Australian dollar. Australians recognise, I think, the high dollar hurts our revenues. But our choice then is to make the responsible savings that you saw in last night’s budget or take the alternative that Tony Abbott would have of cutting to the bone.

Journalist:          The believability factor here is going to be a big issue with four months out from the election. Last budget, Treasurer Wayne Swan promised a surplus, this year we’re getting a $19.4 billion deficit. How can voters believe Labor?

Andrew Leigh: What you’ve seen from Wayne Swan and what you never saw from Peter Costello is a willingness to have a serious economic discussion with the Australian people. I mean, when you look at the great Australian Treasurers, Paul Keating and Wayne Swan, each of whom won the Euromoney Finance Minister of the Year Award, they’re people that were willing to talk about nominal and real growth, to talk about the impact of the high Australian dollar and to talk about trade-offs. That’s why I think Wayne Swan is a terrific Treasurer and it’s why Joe Hockey hasn’t measured up, because Mr Hockey talks ‘age of entitlement’, but when it comes to making tough decisions he compared our modest changes to the Baby Bonus last time round to China’s One Child Policy. This is a guy that just can’t make the serious trade-offs that are required to be a Treasurer. He gets rolled by shadow cabinet every time he tries to make a responsible saving, and then as he said last night to Laurie Oakes, “I’m a team player”. Well, that doesn’t cut it when you have big revenue downgrades on top of the $70 billion dollars the Coalition starts behind.

Journalist:          How do you think those in your electorate will react to the axing of the Baby Bonus? Do you think it will be met well in the electorate?

Andrew Leigh: I think there will be a recognition within my electorate that we have to make responsible saves and that changing the Baby Bonus and so it’s targeted to people receiving Family Tax Benefit Part A and comes down to $2000, is a responsible savings measure. We know that the Baby Bonus didn’t have a big impact on fertility. A Melbourne University study coauthored by Mark Wooden had the cost of each new baby induced by the Baby Bonus at $150,000 a year. So, this was never good public policy and what we’ve done by means testing it and bringing the amount down has been in the spirit of the means-tested, targeted, Australian social safety net which has served Australia well for decades.

Journalist:          How can you rectify scrapping the Baby Bonus but keeping a cash hand-out like the SchoolKids Bonus?

Andrew Leigh: The SchoolKids Bonus is targeted at those school expenses. It comes regularly in the beginning of each school term and it’s designed to encourage Australians to invest in their child’s education, to help ends meet around uniforms, books, we know school is expensive and we want to make sure no child turns up on the first day of school without an essential textbook, exercise book or uniform. The SchoolKids Bonus does that in a targeted way.

Journalist:          The mining tax raised ten per cent of what was originally forecast. Surely now is the time to rethink the design?

Andrew Leigh: When you look at the Petroleum Resource Rent Tax over its 25 year history, if you’d analysed the PRRT one year in, you would have said, “well this tax isn’t raising what we wanted it to raise”. But over the course of the last quarter century, the PRRT has bought in, I think, around $25 billion. The Minerals Resource Rent Tax depends on commodity prices and it also depends on the deductions that mining companies are making, and that will change with the point of the cycle. But anyone who says going back to the old royalties regime is better than a profits based mining tax has got rocks in their head. There’s no sensible economist that would argue that.

Journalist:          But, you’re a sensible economist, no doubt you’d agree with me in saying that, surely you would agree that there’s a structural flaw here that needs to be rethought into the future because Wayne Swan’s predictions about what that tax will raise are again, very overly optimistic over the forward estimates.

Andrew Leigh: But Laura, I don’t think it’s a structural problem that we’re not forecasting mining tax revenues down to the last dollar. I don’t think it’s a structural problem that we…

Journalist:          (inaudible) at all, this raised ten per cent of what was originally forecast: $200 million dollars.

Andrew Leigh: I don’t think it’s a structural problem that mining tax revenues are going to fluctuate up and down. There’s two things here. First of all there’s the slight drop-off in commodity prices. Secondly, the timing of deductions and companies are putting a lot more deductions in in the investment phase than they will be in the volume driven phase of the mining boom that we’re now shifting to.

Journalist:          Ok, you know how forecasting works and there’s been a lot of criticism of Treasury and how these forecast have been so out. Is Wayne Swan taking the high end of forecasting, the range given to him, or is Treasury getting it wrong?

Andrew Leigh: These forecasts are not a political choice. The forecasts are economic judgements done by our best forecasters. Now they’ve never been precise down to the last dollar. In the Howard years we saw underestimates of revenue and last year we’ve seen an over estimate of revenue. That’s not because of any mendacity by the people doing the forecasts; it simply reflects the fact that forecasting is an inexact science and changes in the global economy such as the huge demand for Australian bonds affect government revenues. All right folks, thanks very much.

TRANSCRIPT – 2CC BREAKFAST WITH MARK PARTON
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
15 May 2013

TOPICS:                The Budget.

Mark Parton:     Andrew Leigh is the Federal Member for Fraser, for the ALP. He’s an economist of some note, and he’s a contributor to this program of some note, he joins us right now. Hello Andrew.

Andrew Leigh: G’day Mark. Does that make me a commenter of calibre?

Mark Parton:     That it does. Now obviously you are happy with what Wayne Swan delivered last night, because you have to be.

Andrew Leigh: Well Mark, it’s a tough international situation for our budget. This high dollar has had a big hit on government revenues and we’ve had to make a set of hard decisions last night, decisions that in an ideal world, you certainly wouldn’t want to be taking. But the choice that Australian families will have come September is between the sort of strong Labor investments and the cuts that Mr Abbott will have to make because he spent the last few years saying ‘yes’ to special interests and ‘no’ to any sensible revenue raising measure.

Mark Parton:     So many interesting things about this document from last night, among them that we’re only three or four months away from an election. And I’ve never seen a pre-election budget like this because there are no carrots, there are no sweeteners. There’s a stark honesty which I think is extremely responsible.

Andrew Leigh: Mark we’re being level with the Australian people about the challenges for the revenue. What we’ve seen over the last year is a $17 billion fall in what the government takes in. That’s got nothing to do with what we spend; just a large fall tax revenue, driven to a large extent by the high dollar driving down company taxes. That’s a challenge for us, but it’s a challenge for everyone in parliament and I really hope that Mr Abbott is going to stand up on Thursday night and he’s going to be able to say ‘well, I’ll back Labor’s saving here, I’ll back Labor’s saving here, I’ll back Labor’s saving here, I’ll back Labor’s saving here’. If he can’t, then he’s basically hiding cuts in his top drawer, hoping he can keep them secret until after the election.

Mark Parton:     I guess the other fascinating thing about it is so much of the pain here comes, in theory if there’s a change of government, not under you guys but under them. And it will be interesting to see how much they want to tinker with. So many of these measures won’t even be passed in this current term of government, will they?

Andrew Leigh: Mark I know there’s many people on the Liberal side of politics who think they’ve got the election sewn up. I take a different view, I’m pretty respecting of the voters and I think they’ll make a considered judgment in September. But the budget invests over a long horizon – we’re looking at putting in place important road building measures in Australia’s big cities, like we saw with the Majura Parkway investment for the ACT in last year’s budget. We’re looking at putting place DisabilityCare, which is going to be a pillar of our social safety system, hopefully for generations to come. And we’re putting in place that school investment that you’d expect from a responsible Labor government, recognising that great schools drive prosperity.

Mark Parton:     We spoke with Alex Malley from CPA, from the accountancy group earlier, and he was suggesting that there were massive missed opportunities here in shoring up Australia’s competitiveness, that it’s all well and good to beat the corporates over the head and try and get as much money out of them, but ultimately if we can’t compete on the business front, well the whole country is not going to be served well.

Andrew Leigh: But our company tax changes Mark, and I don’t know if he’s talking about the thin capitalisation deductibility rules, they’re driven by shifts that we’re seeing around the world. Countries trying to make sure that firms don’t shift profits in order to avoid paying tax. You and I can’t shift our salaries over to avoid paying tax, and we’re basically applying that principle to companies. That strikes me as being pretty fair and responsible in a budget in which we’re asking a lot of people to give a little to build a better country.

Mark Parton:     Andrew, thanks for your time this morning, we appreciate it.

Andrew Leigh: Thank you Mark. Appreciate it.

TRANSCRIPT – BREAKING POLITICS WITH  TIM LESTER
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
14 May 2013

TOPICS:                The Budget.

Tim Lester:         Andrew Leigh, Senator Fiona Nash, welcome into the Breaking Politics studio – on budget day, which makes it a fascinating one. This morning we’re told that the government will outline in tonight’s budget ten year plans for big spending programs: Gonski and NDIS. Andrew Leigh, can we really honestly forecast ten years out, meaningfully, given that revenue forecasts went awry in a year?

Andrew Leigh: Tim I think it’s important to have that big picture, long-term thinking. And Treasury actually has a track record of doing that. The Intergenerational Report, which was produced under the Coalition, looked decades ahead. Our view is that with big and important reforms, like the schools reforms and DisabilityCare – which is so sorely needed by families whose child has a disability, people who are watching this program that were awake in the middle of last night caring for an adult child with a disability. Those people want DisabilityCare, and they want to know that it will last and so this is about outlining the saves we will make, and hopefully saves that Mr Abbott will come on board and support.

Tim Lester:         But Fiona Nash, surely big social objectives like deserve long-term planning, so wouldn’t the Coalition at least support the principle of taking big-ticket plans out to ten years?

Fiona Nash:        Well I think that’s one of the criticisms of the Labor government, that there hasn’t been any vision. There hasn’t been any look to the future of the nation and how we want to look since they’ve been in government. And it must be a little frustrating for Andrew, with his economic credentials, watching his government make a mess of it. The things is that people out there in our communities just simply don’t believe Wayne Swan any more. His forecasts from one budget to the next have fallen over, what he said in last year’s budget hasn’t come to pass, he’s predicted surpluses and now we’ve got a $17 billion black hole. So for him to now say ‘I have this ten year plan and everybody believe me I’m going to lead you to the promised land’, it’s a bit of a stretch and people are just really questioning whether or not he has the ability to deliver it, and whether or not he’s actually telling the truth. It just seems like a last minute opportunity to convince the Australian people that he has some vision for the future.

Tim Lester:         Credibility problem with the Treasury, you say. What about the philosophy though of ten year planning in our budget? Good, bad or indifferent?

Fiona Nash:        Well it depends obviously on the cycles, what’s coming up in the future, you can’t have a crystal ball. It’s obviously admirable to look towards the future, right, for the nation, where do we want to be in ten years. For those big ticket items, how are we going to get there? Unfortunately for the Treasurer, nobody believes a word he says anymore, because everything that he has said has turned out not to be true.

Tim Lester:         Just before we return to Andrew Leigh, do you think – given you support the idea but not the person delivering it, or the record of the person delivering it – do you think the Coalition will back these longer term plans? Or do you think they’ll say uh uh, it’s got Wayne Swan’s fingerprints, we don’t want to be near it.

Fiona Nash:        We’re going to have to look at the budget tonight and see what the government’s actually going to deliver. There’s no way you can make any commentary now about what post the budget until we’ve seen it. So we’re going to very carefully and methodically work through what the budget has, what the government brings us this evening, and then we’ll make decisions on that basis.

Tim Lester:         Is it fair for the Coalition to say we’re not going to commit these plans til we’ve looked right through them, we can’t talk about the philosophy of ten year plans. And indeed to say they want to leave their hard-nosed budgeting for the election campaign, when they get the budget numbers then?

Andrew Leigh: Tim, I was actually a bit worried, listening to what Fiona had to say. I’m sure she, as I, have spoken to people with disabilities in the electorate, but then what I heard from Fiona just now when you asked her whether she’d support the long-term DisabilityCare reform was wait and see.

Fiona Nash:        No, no I didn’t – to be fair, I said how that would be funded, we’d wait and see what the budget is. Of course we support those principles, absolutely.

Andrew Leigh: It is one thing to support DisabilityCare, it is another thing to say how you’ll pay for it.

Fiona Nash:        There are different ways for paying for things, yours will not be the only way. We don’t have to sign up now to the way you say you’re going to pay for it, when we haven’t even seen the budget. That would just be ridiculous.

Andrew Leigh: What you need to do, if you back a big reform, is to say how you’ll manage to pay for it. The Coalition are starting $50 to $70 billion behind, not my figure, Joe Hockey and Andrew Robb’s figure. Beginning from that starting point, they have to make massive cuts, and that’s before they even get to the point of thinking about how they’ll pay for DisabilityCare. Words are cheap, but if Mr Abbott decides that his top priority is a tax cut for big miners, and a tax cut for big polluters – two things he’s locked into – and he is going to oppose the responsible Labor savings measures that will set up DisabilityCare for the next decade, then that is a scary future for people with disabilities.

Tim Lester:         There is a disconnect here a bit in that the Coalition’s position, Fiona Nash, in that you are saying that we support these worthy projects – certainly disability insurance as one. Support for it, but we’re not going to tell you how we’re going to fund it, we don’t know the numbers and we don’t want to base any numbers on tonight’s budget, and we’ve got to wait until the election campaign two weeks out from when we get to vote. That’s a bit of a leap of faith for voters to assess all of that in such a crammed time before the election isn’t it?

Fiona Nash:        I don’t think so at all, I think they want the Coalition to be sensible about how we’re going to plan for the future for the economy. Now they can trust that, to the current Labor government, that has continually told the Australian people that economically certain things were going to happen, we saw that in the budget last year for Wayne Swan and clearly, clearly what he predicted has been incorrect. So I just think it’s sensible that we take a very pragmatic view. We in the Coalition make sure that we have a very clear view of the base we’re working off economically before we go and say to the Australian people this is how we’re going to fund what we’re going to do. I think that’s actually what the Australian people expect of us. No one wants to run in half-cocked and say ‘yes we’re going to do this or we’re going to do that’. They actually want the contrasted view of the Coalition of a measured, well-though out approach to managing the economy, which they’re not seeing from Julia Gillard and the Labor government.

Tim Lester:         Andrew Leigh, doesn’t Fiona Nash have a point in as much as she says the long term plan is great, but when you’ve got a Treasurer who’s just sworn black and blue that he’s going to deliver a surplus, black and blue, time and time again, did not – and now he’s going to come back and promise another surplus and a ten year plan, who is going to believe it?

Andrew Leigh: Tim, I think that everybody understands the high Australian dollar has a big impact on government revenues. The Australian economy is performing strongly – we’ve gone from the 15^th largest to the 12^th largest economy in the world over the last 6 years. We’ve got debt to GDP of 10%, well below most other countries.

Tim Lester:         But can we forgive Wayne Swan the mistakes?

Andrew Leigh: We’ve taken a hit to revenue and Wayne Swan has been honest enough to talk to the Australian people about the implications of that hit to revenue, and what it means to how we’ll pay for important reforms. Mr Abbott and M Hockey seem to hiding their policies in the top drawer, and I think Australian people are entitled to say if these policies were really so good for households, would they be sitting in that top drawer, or would they be out in the open? There are swingeing cuts that the Coalition will have to put into place to if it is to pay for the promises it has signed on to. This gold-plated parental leave, you know that is a $5billion plus scheme. If you’re committed to that, if you’re committed to the tax cuts for big miners and big polluters, then you’re going to have to make bigger cuts: not just the hit to low-income earners on superannuation, not just taking away the schoolkids bonus, but tax rises, pension cuts, cuts to major social expenditures that people rely. We’ve seen this with past Coalition governments, we’ve seen this with the Newman government in Queensland, where a commission of audit has acted to hide some cuts which have seen nurses, police officers, teachers losing their job. That’s a scary future. The Australian people, if they’re going to vote for it, ought to at least be given the dignity of seeing those choices, those trade-offs, put forward by major parties. Not at a minute before the election, but months in advance so they can be properly debated. And this in the Coalition’s interests as well. Good policy rarely comes out of a smoke-filled backroom with two or three blokes gathered around a table. Policy improves by being put into the public air. The Coalition’s policies would be better if they were to put them out, have that public debate, talk about the things they’re going to cut, be honest, come clean with the Australian people.

Tim Lester:         Well in fairness to Tony Abbott, there is some policy out, there’s probably not the costings back it that you’d like to see in its place in a detailed budget, but the policy is at least partly out there. I’d like to ask you both before we close is to nominate a year in which you think we ought to be back to surplus, if the road back to surplus is going to be a credible one. Cast aside your views of Wayne Swan for a moment and just say which year in the forward plans ought we see a black number on the bottom line of the budget and go ‘yeah that’s fair enough, I believe that we can do that’. You first, Fiona Nash?

Fiona Nash:        Well I think that if the Labor government had done a decent job of managing the economy since 2007 that year should be this year.

Tim Lester:         Right – that’s in a perfect world. From the world we now sit in, the position we now enjoy or don’t enjoy, where do you believe we should arrive at a surplus if it is to be a credible one?

Fiona Nash:        Look I’m not an economist, I can’t give you a 2015, 16 or 17 date. I just know that the Australian people want a government that’s going to start managing the economy properly, because there is no confidence out in the communities. Andrew talks about all the headlines figures of how well as a nation we’re going, I don’t think the Labor government is spending enough time walking up and down the main streets – particularly in regional communities – because what they want is some confidence back. They don’t have it under this government and they are looking for someone, a grown up, to run the economy, run the country properly, so they can get on and do business and get on with their lives in the way that they want to.

Tim Lester:         Ok, you’ve chosen not to nominate a year from where we stand. Andrew Leigh, will you nominate a year? You are an economist, by the way, so  you don’t get the get out of jail card.

Andrew Leigh: Tim we’re filming this eleven hours before Wayne Swan will bring down the budget, let’s let the Treasurer bring down the detailed budget figures in eleven hours’ time. I’d encourage people to tune in, I’m sure Wayne will deliver a strong speech there. And he will level with the Australian people what we’ll do, and how we’ll pay for it. The question then is whether on Thursday night Mr Abbott will do the same thing, whether he will talk about the trade-offs and how he will pay for things as well.

Tim Lester:         Fascinating couple of days ahead, and great to have you both regulars here to chew the fat over it. Andrew Leigh, Fiona Nash, thanks for coming to Breaking Politics.

Listen Here: http://media.smh.com.au/news/national-times/details-please-4270757.html

MEDIA RELEASE – 14 MAY

Federal Budget will mean a stronger, smarter and fairer Canberra

Initiatives outlined in Wayne Swan’s sixth Budget will mean a stronger, smarter and fairer Canberra.

While Canberra is small compared to other Australian states and territories, initiatives outlined in this Budget demonstrate the special role Canberra plays as a city of culture, learning, and a provider of important services to the whole country.

The Budget also captures the relationship forged with the ACT Labor Government on important reforms such as the National Disability Insurance Scheme, now called DisabilityCare Australia.

This Budget delivers a range of initiatives that map a path back to surplus. The initiatives outlined in this Budget are offset by responsible savings ensuring that the cost of nation building programs such as DisabilityCare Australia and the National Plan for School Improvement are shared across the whole community.

Canberra will be able to share in over $690 million in additions and amendments to the Pharmaceutical Benefits Scheme and $29.6 million for support in the dispensing of chemotherapy medicines.

$96.7 million will be made available to increase the number of Commonwealth Support Places in sub-bachelor and post-graduate level studies.

Labor’s historic Paid Parental Leave Scheme will also be improved as a result of this Budget to make it easier for working mothers with children born close together to qualify for Paid Parental Leave for subsequent children.

This Budget prioritises Australian jobs and growth by taking responsible decisions. This directly contrasts with Tony Abbott’s arbitrary measures which will cut Canberra to the bone.

Tony Abbott has promised that should he get elected in September, at least 20,000 Canberra jobs and the local businesses that rely on them stand to be wiped out, to pay for promises like Mr Abbott’s tax cuts for big miners and big polluters.

The reality could be worse still. After the 1996 election, John Howard sacked ten times as many public servants as he had promised before the election.

With a self-confessed $70 billion black hole, Senator Lundy and members Gai Brodtmann and Andrew Leigh call on Tony Abbott to outline what cuts he will make to Canberra in order to fund his promises.

On Sky’s “The Nation” program with David Speers, Andrew Leigh MP joined an “all economist” panel with respected commentator Jessica Irvine, Liberal MP Paul Fletcher and former Liberal leader John Hewson. We discussed the strength of the Australian economy, the hit on budget revenues, Labor’s DisabilityCare reforms and the Coalition’s regressive parental leave scheme & “WorkChoices lite” policy.

Speech to the Australian-American Association Canberra Division Battle of the Coral Commemorative Service

9 May 2013
Canberra

Andrew Leigh
Parliamentary Secretary to the Prime Minister

[Acknowledgements omitted]

The Battle of the Coral Sea was a unique battle in history.

It was the first time aircraft carriers engaged one another, never sighting their enemies.

It remains the largest naval battle in to have taken place off Australia’s coast.

We stand here in front of the Australian-American memorial. It is not the most modest piece of architecture in Canberra.

Neither are aircraft carriers. This was brought home to me when visiting New York recently, where the decommissioned USS Intrepid sits at anchor. There is something awesome about walking on the deck of a ship that can carry 100 aircraft.

The importance of the Battle of the Coral Sea was not lost on Australians in May of 1942. Prime Minister Curtin described the battle in a speech at the time: ‘Events that are taking place today are of crucial importance to the whole conduct of the war in this theatre . . . I should add that at this moment nobody can tell what the result of the engagement may be. If it should go advantageously, we shall have cause for great gratitude and our position will then be somewhat clearer. But if we should not have the advantages from this battle for which we hope, all that confronts us is a sterner ordeal and a greater and grave responsibility.’

Able Seaman Roy Scrivener of HMAS Hobart described his impression of the Australian and American forces massed to meet the Japanese Navy as: ‘The most magnificent sight I had ever seen.  There were two aircraft carriers, there were battle ships, there were cruisers, there were destroyers and trailing astern and a little separated, were the tankers with their destroyer escorts. And what a wonderful feeling I had until I realised, my God, they’re not here to play games. We’re all here for fair dinkum trouble!’

Fair dinkum trouble they found. Thankfully, the Australian and American naval forces were successful, and the Japanese Navy never reached as far south as they did on this occasion.

Today, we honour the successes of the Australian and American forces. But we also recognise the valour of their Japanese foes.

It is also worth noting that throughout the early-1940s, the German naval forces were urging the Japanese to adopt a policy of targeting merchant ships. But the Japanese, under Admiral Suetsugu, resisted, arguing instead that their principal target were naval vessels, not civilian ships.

We honour our Japanese opponents in World War II with the same spirit of those Australians who, after the midget submarine attacks on Sydney Harbour in May 1942, gave the deceased submariners a full military funeral on Sydney heads.

As member for Fraser, I have a direct connection with the Battle of the Coral Sea. The suburb of Crace in my electorate is named after Edward Kendall Crace, whose son Vice Admiral John Crace commanded the Australian fleet in the Battle of the Coral Sea. I am reminded of the battle each time I visit the suburb of Crace.

We are also reminded of it through the ANZUS treaty, a lasting partnership with the United States. The treaty would not be finalised until 1951, but it was forged in the crucible of World War II.

Lest we forget.

Of Cuts and Cons

The Barnett Liberals were elected promising to deliver a $4.8 billion swag of ambitious infrastructure projects: the Metro Area Express Light Rail, the Perth Airport line and the Perth to Darwin highway. But their promises are a sham.

Scrutinise the costing details and you find the most brazen of creative accounting cons: the projects rely on an ‘assumption’ that the Commonwealth would fork out $3 billion.

Where did they get this number? Certainly not from the Commonwealth. They just made it up. You can promise whatever you like when there’s imaginary money to pay for it.

This was just one of the Liberals’ tricks uncovered by WA Treasury, who red-flagged the contribution assumption as a ‘substantial risk’ to the Liberals’ budget integrity.

Let’s be clear. The issue is not the merit of the programs. The issue is Mr Barnett blatantly misleading the community about what he can deliver.

Perhaps Mr Barnett might claim that his costings were premised on swinging a mate’s rates deal if Mr Abbott is elected on 14 September. Not likely. Tony Abbott has admitted that the Liberals ‘have no history of funding urban rail and I think it’s important that we stick to our knitting’. (Conversely, Federal Labor have put more into urban public transport than every previous government since Federation – combined.)

Unlike the Federal Liberals, Labor will not automatically veto rail investment. We will assess the Barnett proposals on their merits, in the established process. The process involves picking up the phone to the Commonwealth and setting out details of the projects so that a formal assessment can take place.

Depending on the outcome of the funding bid – $1.6 billion of which Mr Barnett hadn’t even submitted prior to winning the election – Western Australians could be left with a $3 billion Barnett black hole.

Now that’s a lot, but it’s loose change compared to the $70 billion fiscal crater engulfing Mr Barnett’s Federal Coalition colleagues.

Seventy billion is not a Labor figure. It’s what Joe Hockey admitted to Sunrise on 12 August 2011.

Mr Abbott has racked up this $70 billion blowout by saying ‘yes’ to every vested interest while yelling ‘no’ to Labor’s responsible savings.

What Mr Abbott hasn’t done is outline exactly how he plans to plug his $70 billion black hole. Mr Abbott has only revealed a handful of his cut-back plans – and they’re not pretty.

Speaking on 3AW on 3 February 2010, prior to the last election, Mr Abbott told listeners that he’d go to the election ‘with a list of promises, a list of commitments and we will fund them without new or increased taxes’.

But Mr Abbott’s business tax hike will affect 3,200 successful Australian businesses, which will be passed onto Australian families through higher prices.

And don’t take my word for it. In a recent interview with Mr Abbott on Adelaide’s 5AA radio, the host asked ‘The Fin Review today reports that the nation’s largest companies are unhappy with what it will cost them – they think it might cost about $100 million on average for these big companies. They would in turn, turn that around into a tax on more Australians, wouldn’t they?’

Mr Abbott responded ‘Well, obviously businesses do pass on costs and if there was a levy that was to fund something, yes that would be a cost.’

So he’s gone from saying he won’t increase taxes to proudly admitting that his tax will slug Australian families at the shops or when they fill up the car with petrol

Tony Abbott likes to talk tough on tax, but he in fact wants to bring almost 1 million Australians back into the tax system by abolishing Labor’s increase in the tax free threshold.

He has also pledged to hit 3.6 million Australians with a $4 billion super tax hike.  This will reduce the retirement savings of low income Australians, including more than 350,000 shop assistants and cashiers, 200,000 food and hospitality workers, and 80,000 cleaners.

He’ll also abolish SchoolKids Bonus – a measure intended to helping with education expenses – taking $1,200 a year from the average family’s budget.

Who could forget the Liberals’ 2010 election costing debacle? They claimed their costings had been audited, but the accountants were fined by the Institute of Charted Accountants for breaching professional standards.

Nearly three years later, not much has changed. The Liberals claim their policies are costed – Andrew Robb says the costings sit in his top drawer. But to this day, they remain secret.

Australian families need to ask: if the Coalition’s policies were good for them, would the Opposition really be keeping them secret?

TRANSCRIPT – SHOWDOWN WITH PETER VAN ONSELEN
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
7 May 2013

TOPICS:                                Carbon pricing, revenue write downs, cut in interest rates, Liberal Party conscience vote for equal marriage, the federal Budget

Peter van Onselen:         Welcome back you’re watching Showdown. I’ve been speaking to Peter Reith, joining us out of Melbourne as well as Senator Cory Bernardi, joining us out of South Australia, we’re now also joined by Dr Andrew Leigh the Parliamentary Secretary to the Prime Minister, who joins us out of Canberra. Mr Leigh thanks for your company, or Dr Leigh I should say, don’t want to down grade you before we get the interview started.

Andrew Leigh: Now worries at all, good to see you Peter.

Peter van Onselen:         Can I, I just want to start by going back to you, Senator Cory Bernardi if I can. On your blog today you’ve had a bit of a crack at the style of the government that is being run by David Cameron over there in the in the UK. You’ve called it a soft-left policy agenda led by a man who’s most notable commitment has been to make the once proud Conservative Party more green than Labour, but what intrigued me was the next line; you said a few years ago there were a number in the Liberal Party here who actually thought this was the best path for us to adopt. Who was that?

Cory Bernardi:                   Well Peter you know we had an extensive debate about the emissions trading scheme and supporting Labor’s policy. I was not one of those who subscribed to that I warned about the dangers for the Liberal Party about going down that path, and I think the proof is in the pudding. If you look in the United Kingdom’s experience, David Cameron I think won an election, but he was forced into coalition when he should never have been because the Labour party was so bad over there, and here, because we actually took a principled stand about was in the national interest, Tony Abbott came within a whisker of becoming Prime Minister at the last election, and I think, you know, the rest is history. The caravan that…

Peter van Onselen:         But Senator how does this work? You were at the vanguard of having a problem with Malcolm Turnbull and the Liberal Party more broadly pushing to support the ETS ahead of Copenhagen. You were at the vanguard of opposing that. Yet the people that were all around Malcolm Turnbull are now the same people that are the senior people around Tony Abbott. Now I know the Liberal Party’s a broad church, but is that at least a little bit surprising?

Cory Bernardi:                   Oh I don’t think so. I think you know, Tony Abbott will always choose the team that he wants around him. He’s got an experienced team. You know quite frankly, I think we’ve got a good policy agenda to take into the next election, but one of the points I want to make is that you know, aping the Labor Party is a recipe for disaster. We are, you know, a centre-right party. We should be espousing the principles that have built the Liberal party over many , many decades and that’s about supporting families, about supporting small business, about lower taxation and you know, the maximum level of freedom that we can have in an orderly society. And I think we need to limit the growth and size of government and we certainly need to stop the government from borrowing you know, tens of billions of dollars every single year because they can’t control their spending.

Peter van Onselen:         Andrew Leigh, can I just bring you in and ask you about the levy that was announced by the Prime Minister in relation to paying for the NDIS. Now as an economist, you are someone who as I understand it, when the levy was originally rejected by the Prime Minister, had some strong economic reasoning why that kind of specific allocation of levies to pay for specific government spending was not a good idea. Yet now that is the path that now the Government is going down.

Andrew Leigh: Well Peter the big change in the revenues is just the striking difference between this year and last. So compared to the last budget, revenues for this budget are projected to be coming in seventeen billion dollars smaller. Now for those who don’t carry billions of dollars in your bank account, the way of thinking about that is that’s one full one full per cent of GDP. It’s a massive write down and I’m sure there hasn’t been a bigger write down in the history of the Commonwealth and that’s led the Government to be making a set of announcements, including the levy that you pointed to, in order to make those books balance. Now, it’s got to be clear, this is not a decision of the Government that has caused this revenue write down; with the same set of taxes, we are bringing seventeen billion dollars less revenue, and that’s a challenge for us and of course-

Peter van Onselen:         can I ask you this though, because isn’t one of the issues here that during the Costello years they underestimated revenue, during the Swan years, you have, or the Government has overestimated revenue. Now my understanding is that there is a range that is put by Treasury to the Government for the various estimates and Costello had a penchant for always taking the bottom of that range and hence he was always discovering that there was extra revenue left in the kitty when the good times rolled on. Wayne Swan when he’s presented with that range goes for the higher end on the estimates for the Budget and therefore, unsurprisingly, when we’re not in such good times there’s a massive underestimation there. Isn’t that why it’s bad policy to turn around and spend the money before it’s come into the kitty when you know that firstly, you’re on the higher side of the range that you select, and secondly you know from historical evidence that there has been a constant inaccuracy in these numbers anyway?

Andrew Leigh: Peter I’ve spent time as a secondi in Treasury, spent six months there, I’ve certainly never heard of what you’re talking about either for Peter Costello or for Wayne Swan. I’ve never heard of people suggesting that the forecast on revenue were anything but the best guess from the ‘boffins’. The problem is that when you’re forecasting revenue, you’re taking a growth forecast and then you’re also trying to extrapolate from that what company profits will look like. We’ve got something of the moment of the perfect storm at the moment in the combination of drop off in commodity prices, but the dollar staying high because of the strong appetite for Australian bonds, and then of course this unique situation of real growth outpacing nominal growth. All of that is pretty unusual and that’s led to this big revenue write down.  We’re still an economy which is doing extraordinarily well by international standards, strong growth, half the unemployment rate of Europe…

Peter van Onselen:         There’s obviously worries though, with the Reserve Bank dropping interest rates today though, I mean that might be a good thing for home owners, but at the end of the day, it is a sign of softness isn’t it?

Andrew Leigh: Well it is a far cry from those days where you would hear people say that interest rates would always be lower under a Coalition Government, isn’t it, Peter? Certainly this is welcome news for homeowners and as the Reserve Bank has said in its statement, it’s weighed up a set of factors, it’s looked at some of the domestic strengths but also the international challenges, the pressure that the high Australian dollar’s put on the economy and overall decided that a quarter point cut would be appropriate.

Peter van Onselen:         Peter Reith can I bring you in and ask you, you were a Shadow Treasurer once upon a time yourself. You were also a senior minister, Minister for Workplace Relations, and if I understand correctly a member of the Expenditure Review Committee for the Howard Government for some time as well, how do you see this debate about the idea that well, revenue is just, you know, underperforming expectations so therefore there’s nothing untoward in what’s happened.

Peter Reith:                        I think quite frankly Andrew, I think what you have to say is laughable. Uh, I mean, look sure there are ups and downs in numbers, but I mean there’s just been one blunder after another under Labor, I mean the mining tax, the carbon tax, you’ve fixed it to Europe. You know, the figure there is three dollars, it’s twenty three…

Andrew Leigh: What has that got to do with any of this?

Peter Reith:                        Well it’s all coming mate, it’s all adding to the problems, fiscal policies that you’ve got. Look the wasting…

Andrew Leigh: It’s all part of the vibe. It’s all part of the thing.

Peter Reith:                        It’s not, it’s the wastage. Uh the fact is you haven’t been, you know, you were running the line a minute ago “oh the dollar’s high”, well mate I’ve got news for you; the dollar was high a year ago when the last Budget was done.  I mean if that’s such a big factor why wasn’t that put in? Why are you still using you know, last year’s arguments? Now the fact is that a government that had been a lot more prudent than you have, instead of, you know, giving people this nonsense about how great the economy is, you know, the RBA has cut it back again today, record lows and you can’t even acknowledge the fact that there are big slices of the Australian economy that got real problems and we’ve got a turning down on the mining industry. Now, you know, a bit of realism, you know, inserted into the decision making on the Budget would’ve avoided a fair chunk of the problems that you’ve got. And on top of that, you know, you’re still in a mode where you think you can just go on spending and, of course, those days are gone.

Peter van Onselen:         Andrew Leigh your response?

Andrew Leigh: Well certainly what we’re doing is taking the best advice of Treasury, I reject what Peter has said there entirely…

(Peter Reith:                      You’ve got to stop blaming everybody else Andrew)

Andrew Leigh: …in terms of decisions the Government has made. The decision on pricing carbon for example is in accord with what every sensible economist would advocate. I mean, you’ll have the shonks and shysters telling you that direct action and soil magic can somehow deal with climate change, but this is the economically responsible thing to do, to put a price on carbon pollution. And what you’ve got to realise is that internationally, Australia’s position is strong: ten per cent government debt is extremely low by international standards, but we have…

Peter van Onselen:         Can I, can I ask you about that, sorry to interrupt you. It is low and I don’t disagree with that, but it is also true isn’t it that it has risen at a sharp rate comparable to a lot of countries that started with a lot higher debt and have now obviously ended up with even higher debt. In this country it remains low but it’s only low because we started with no debt. The scale of the increase has been pretty significant.

Andrew Leigh: Well I mean when you put in place stimulus spending you backed quickly. The alternative is to lose hundreds of thousands of jobs. Everyone that tells you we should not have taken on debt in the global financial crisis is saying that they wish unemployment had been driven up to double-digits, as it has been in Europe, because that’s the alternative…

Peter van Onselen:         But couldn’t we have just dumped interest rates? Couldn’t we have used monetary instead of fiscal policy?

Andrew Leigh: Well we did both as you recall Peter, I mean we put in place monetary policy which has an impact on sectors of the economy that are borrowing. But then of course, that’s only a portion of the economy, and as OECD, IMF, were advising at the time, as most countries did, you then want to inject some fiscal policy at the same time, both through house hold payments which have a quick effect and through infrastructure spending which has a larger multiplier. All of what we did in the down turn was text book. The result was to save hundreds of thousands of jobs and to put Australia in a debt position which is low by international standards.

Peter Reith:                        Yeah but you’re just running over the facts here because, look  I don’t disagree with half of what you say, but you know, the other half you don’t get it right. I mean, Malcolm Turnbull, when he was Leader of the Opposition got up in the Parliament and said, “well, we understand why you’ve done what you’ve done so far, but cranking up even more stimulus we think is going too far”. Now, you don’t have an answer to that because there isn’t an answer to it, and Malcolm Turnbull was proved to be absolutely right and this was just another poor judgement call by your Treasurer, you know, thinking that just spending more money, you know, was somehow the answer and unfortunately it’s not. It’s the same with Gonski as well I might say, you know, just spending is the way to fix problems when, a lot of problems aren’t just fixed by spending more money.

Peter van Onselen:         Alright gentlemen, time out, we’re going to take a commercial break. When we comeback we’ll continue the debate including, I’d like to see the thoughts of Senator Cory Bernardi in relation to the issue of whether or not the Liberal Party should have a conscience vote on gay marriage after the next election. Back in a moment.

COMMERCIAL BREAK

Welcome back. You’re watching Showdown where I’m joined out of Melbourne by former Howard Government minister Peter Reith, out of South Australia by Liberal Senator Cory Bernardi and out of Canberra by the Parliamentary Secretary to the Prime Minister Dr Andrew Leigh. We’re going to move on to other subjects, but first if I can Andrew Leigh, can I just ask you Andrew Leigh, we’ve just had the Victorian Budget today; how is it that with revenue write downs they can forecast surpluses going forward over the next three years as well as deliver one in the current financial year, yet with write downs also at a federal level, we’re not in a position where we’ve got that kind of forecasting.

Andrew Leigh: Well we’re relying on more volatile tax bases at the federal level is one straightforward answer, Peter. Company tax revenues are much more volatile than GST revenues, so it makes it easier to project at a state level. But I do think that this is a good reason why Victoria should be signing on to the Gonski Reviews. I think it certainly signals that it’s about time that kids in low income schools in Victoria got a fair deal.

Peter van Onselen:         But isn’t just the case though that there might be volatile tax mixes at the federal level compared to the state level, but isn’t it just a case of fiscal conservatism at the end of the day if they are as volatile as you say. Don’t imprint spending into them before you actually know the return is. Be much more moderate and then be surprised on the upside?

Andrew Leigh: Peter, you sound like what you’re saying is that we should have made savings of $160 billion dollars over our last five Budgets, which is precisely what we’ve done. You sound like you might be saying we ought to put in place a levy to cover most of the cost of the DisabilityCare Australia and putting in place some targeted saves around family tax benefit. All these are things we’ve done and you’ll see more savings measures being announced in the coming days. As you say, that’s the prudent response when you get a revenue write down. But it’s not to sell off the family silver, it is not to trash DisabilityCare Australia, a system depended on by 410,000 people with disabilities and their carers. That I think isn’t the Australian way…

Peter van Onselen:         … but the thing is Andrew, I’ve got to take you to task a little bit on this because yes there are volatile taxes at a federal level but the states are reliant on GST revenue and in the case of Victoria there’s been a $7 billion write down on GST revenue into Victoria. Yet despite that, they’re still projecting surpluses.

Andrew Leigh: Well, Victoria has made some pretty savage cuts, Peter, and I think if you speak to nurses, police officers, fire fighters in Victoria, they might have a different complexion on the …

Peter van Onselen:         …so are you saying that if Labor was delivering the Budget you wouldn’t have made the savage cuts and therefore you’d be in deficit?

Andrew Leigh: Labor is always going to make targeted savings measures. We are going to make sure that we impose whatever cost there is on those who can best bear it. Tony Abbott by contrast is committed to giving tax cuts first to big miners and big polluters and then to handing out $75,000 cheques to some of the most affluent households in Australia through his gold-plated paid parental leave scheme which seems neither of your other two guests can defend…

Peter van Onselen:         …alright we’re not going there. Peter Reith’s had plenty of time on that one. Let me just go to you Senator Cory Bernadi, entirely different subject now…

Cory Bernadi:                     Well, can I just answer some of those things that Andrew raised, I mean, he’s boasting about $160 billion worth of savings. He’s not talking about the massive tax increases that he’s already foisted upon the economy. He’s not talking about the $300 billion worth of debt that they’ve racked up over the last six years. This is an outrageous sleight of hand and a nonsense. They have completely mismanaged their spending. Revenues are up and they just have no idea how to control their spend thrift ways and there’s nothing to show for it. This is the great problem we’ve got: nothing to show for it.

Peter van Onselen:         Alright we’ll take that as a comment as a certain other person in television often says. Let me ask you Cory Bernadi, as I said, on an entirely different subject, the issue of a conscience vote for gay marriage is something that an increasing number of Liberals are coming out and saying they’re in favour of after the next election. Tony Abbott has said that he’ll take that to the Party Room. The Liberal Party does have a proud tradition of providing conscience votes on certain issues. I know where you stand on the issue of gay marriage, but where do you stand on the issue of whether or not it should be a conscience vote for individual Liberal MPs?

Cory Bernadi:                     Well I’ll make the point that we have a tradition of conscience votes where we have no official Party position. Our Party position is that we support the existing definition of marriage as being between a man and a woman. We’ve supported that, you know, since the foundation of the Liberal Party quite frankly. Now, we also, I make the point, have the freedom for every single member of the front bench, or the back bench to vote according to their conscience if they don’t like the Party position. Now, I don’t detect any appetite quite frankly, amongst the general public or amongst the Party room to change our position right now. There might be one or two murmurings, but you know, quite frankly it’s not a mainstream issue. People are more concerned about the cost of living, about, you know, how this government is borrowing money and mortgaging the future of their kids.

Peter van Onselen:         so you don’t think it should be a conscience vote as simple as that? You’re of the view it should stay a Party vote?

Cory Bernadi:                     I absolutely support the existing Party policy.

Peter van Onselen:         And can I ask you on that, because when you were just talking about it, you made the point that, you know, that marriage should be between a man and a woman as something that’s been Liberal Party policy since, you know, the founding of the Liberal Party basically. Does that mean for you personally, if the Party room goes the other way and decides to make it a conscience vote issue, is that something you have a major problem with? Or would you just accept that that’s the Party Room position and it’s a change of policy for the Liberal Party, albeit one which is a complete change from the historical direction of the Party until now?

Cory Bernadi:                     Well the Party Room decision would be the binding decision. Ultimately I would still vote according to my own conscience on that particular matter. But I think there would be widespread electoral issues attached to the Liberal Party taking that position. Now, I have no evidence for that, I’m just supposing it. But look, let me say this Peter, it is not a mainstream issue. No one out there is talking about this in any significant sense. They’re worried about the cost of living and the mortgaging of their children’s future by this spend thrift government. That is what people are worried about. They want to see a change in government. They want to see a radical change in approach and some more responsibility attached to what their government does.

Peter van Onselen:         Peter Reith I think they will see a change of government and I know you agree with me on that. What’s your view on whether the Liberal Party should make the gay marriage issue a conscience vote irrespective of what your view is on the actual matter of gay marriage itself?

Peter Reith:                        I think Tony’s on the right track on this one. What he said is that after the election he’ll raise the issue in the shadow cabinet and then take the shadow cabinet view to the Party room and I think that’s the right process. And if he sticks to that and if he consults with the organisation as well I don’t think he’ll get into too much trouble.

Peter van Onselen:         But what’s your personal view? Do you think that, do you agree with Senator Cory Bernadi that it’s a Party position and it’s not something that is necessarily of the style of issue that should be a conscience vote or do you disagree with that?

Peter Reith:                        I must say I’m pretty relaxed about this issue and if they have a conscience vote I’d be quite happy with that myself. But I think, the main thing from the politics is that, you know, it’s got to handled sensitively by Tony and you know, give everybody a fair shake of what they’ve got to say about it so I think that’s the key thing. I think it probably will go through in the next term, but you know, time will tell.

Peter van Onselen:         Alright, we’re almost out of time, but Andrew Leigh before we go, I haven’t asked you about the cuts, or the cuts to increases if you want to put it that way, in terms of family payments that have been talked about by the Labor Party today. It strikes me that for a Party that is unashamedly a party of you know, people in lower socio-economic circumstances that they are the people impacted heavily by these removed increases. Why go down that path rather than finding other cuts, for example even to the SchoolKids Bonus which isn’t so targeted to low income earners only.

Andrew Leigh: Well Peter, the SchoolKids Bonus goes to people receiving Family Tax Benefit Part A so you’re talking about the same group of people. Look, I would ideally like to have seen these increases to the Family Tax Benefit Part A go ahead but in the current budgetary circumstances that’s simply not feasible. But we are putting in place a range of measures to assist that group, for example, the increase in superannuation contributions which Tony Abbott will rip away. Two thirds of those three million low income earners are women. Tony Abbott by contrast has said today that he thinks his gold-plated paid parental leave is good because it pays women of calibre more to have babies. Presumably what he means by that is that nurses, that child care workers, that cleaners are not women of calibre. I think that’s pretty troubling.

Peter van Onselen:         And I’ll have to interrupt you because we are way out of time but I know that Paul Murray live will be discussing exactly that issue after the commercial break. Peter Reith, Senator Cory Bernadi and Dr Andrew Leigh, thank you one and all for your company on this edition of Showdown. Thank you for your company in watching and I will see you again for Contrarians on Friday.

http://media.theage.com.au/news/national-times/a-plague-on-both-parties-4251555.html

TRANSCRIPT – BREAKING POLITICS WITH TIM LESTER
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
7 May 2013

TOPICS:                                The budget, government revenue, paid parental leave, sports betting.

Tim Lester:          So to our Tuesday regulars on Breaking Politics. Senator Fiona Nash is with the National Party, she’s in her Young electorate office this morning, and Andrew Leigh, Labor MP here in Canberra has come in the Parliament House studio. Welcome to you both on Breaking Politics this morning.

Let’s begin our discussion with the announcement from Penny Wong this morning, the confirmation of a $17 billion hole in the budget this year because of revenue write downs and changes to Family Tax Benefit A, the scrapping of a planned handout under Family Tax Benefit A. What do you read from that, Fiona Nash?

Fiona Nash:        Well I think it just really shows, Tim, the shambles economically that this government is. We had the Treasures, Wayne Swan, telling us hundreds of times that the budget was going to be in surplus by the middle of this year and now we see this huge, huge black hole potentially in front of the government. People out there on the ground realise that their government simply cannot manage the economy, that they have just made a huge mess of it. So while people out there in the communities are trying to do the right thing, trying to manage and balance their household budgets, we’ve just seen the enormous waste and mismanagement from this Labor government and people are feeling incredibly disappointed about that and even stronger Tim, they’re just furious that the Labor government has made such a mess of the country economically.

Tim Lester:          Andrew Leigh, you’d obviously have some counter comments to that, but give us also a sense of the scale of $17 billion write down this financial year. How big a budget hole is that?

Andrew Leigh: Well Tim, Fiona is certainly right to talk about this being huge. It’s more than 1 per cent of GDP and it’s of the scale that Ken Henry advised the government to go with stimulus when we were hit by the global financial crisis. This is a very significant chuck of tax revenue. But where Fiona’s wrong is where is she’s talking about revenues, but of course this is a tax write down. This is not to do with what the government is spending, it’s to do with the amount of tax revenue that’s coming in. And that’s occurred because while commodity prices have come off, the dollar has stayed high. That’s a challenge to both sides of politics, frankly. It’s a challenge as much to the Coalition that would fund a paid parental leave scheme from company tax revenue, and will find that – if they were to win office – that company tax revenues coming off will make that very difficult for their accounting.

Tim Lester:          And so this morning families eligible for Family Tax Benefit A are looking at losing three, four, five hundred dollars in the coming year. Not money they already had, but money they might have budgeted on, to try and patch that hole. Is that a good cut?

Andrew Leigh: No one’s family tax benefits are going down. These are just changes that have been announced but haven’t been put into place. This is a difficult decision, as are some of the other difficult decisions we’ve made, such as means-testing the private health insurance rebate, means-testing the baby bonus and restricting it to second and subsequent children. None of these are straightforward, but when your tax revenue comes down from 24 per cent GDP to 22 per cent of GDP, you know it might be higher in nominal dollars, but it certainly hasn’t kept pace with the demands and the economy over that period.

Tim Lester:          Fiona Nash, you’re deeply critical of the budget management of the current government. Yet as well while we sit here today, your side of politics, the Coalition, is looking at the rolled gold paid parental leave scheme, vastly more expensive than the Labor government’s option. Do you agree with those inside the Coalition party room who are now saying Tony Abbott’s plan needs reassessing?

Fiona Nash:        Well firstly, just to respond to Andrew there, we see from this government, from the Prime Minister, this continuation of promises that are never delivered. And that’s what really, really, getting people’s goat out in the community. So the fact that last budget, this funding promised under the Family Tax A changes, the increase was heralded as a wonderful thing for families coming down the track. And yet now we see it’s never eventuated. The NDIS promise, we still haven’t seen that. The Gonski reforms, there’s still nothing. And people out there in the community, Tim, they really, really understand that this is a government that promises but never delivers. And on the paid parental leave system, look Tony is really looking at this as a workforce productivity issue. It’s about those women out there in the community that need better assistance than they currently do, because it’s a fair and appropriate thing to do. Now Tony believes, and has right from day one, that this is a very good way of addressing that issue about workforce productivity. And it’s also very good for small business out there in the regions, those small businesses are really going to benefit from this without the cost impost and that’s going to help out in the region. So I’m very supportive of Tony Abbott pushing his policy.

Tim Lester:          Andrew Leigh, is the Coalition right to be looking at paid parental leave on such a large scale when the budget looks like this?

Andrew Leigh: Well this is an extremely expensive measure, Tim, and that’s because it provides up to $75 000: if you’re a woman who’s taking off six months and your salary is up to $150 000, the government will give you $75 000. If you’re a woman on a lower income you’ll get much less. Traditionally the Australian social safety net has been so effective because it’s been targeted. It’s disproportionately provided more to those at the lower end of the income spectrum. But this is the opposite – it’s a policy that gives the most to those that have the most, and that’s why it turns out to be so expensive.  And it’s funded by a company tax increase, and we know that the company tax ultimately falls on workers, so all workers will pay for that company tax increase but it will end up going disproportionately to the most affluent households.

Tim Lester:          I want to move on to a couple of other issues around this morning, if we can before we go. The front of several of Fairfax’s newspapers this morning has the story of the analysis of seventy of our wealthiest in this country earning more than $1 million a year and they’re not paying a cent in tax. Doesn’t that suggest that there is something is awry in a system where people on such large incomes are so capable of avoiding tax liability?

Andrew Leigh: The difference between Australia and the US, Tim, is that they have a thing called the alternative minimum tax which is in some sense a cap on deductions and would mean that in the United States, you wouldn’t be able to see a situation like that. We haven’t developed caps on deductions.

Tim Lester:          We should?

Andrew Leigh: Well, the economic case is simply that you ought to be entitled to the same deductions regardless of where you are on the income scale. So if you earn a million dollars and you give it all to charity, you shouldn’t be paying any tax. The alternative minimum tax is actually if you did that, you would pay tax. I think that’s a difficult conversation to have and you want to understand more than just looking at 70 people, you want to actually look right across the income scale to see if this would be a sensible thing to do in Australia.

Tim Lester:          Fiona Nash, are you concerned that a large number of such big income earners didn’t pay any tax in 2010-2011? Is our system awry do you think, or not?

Fiona Nash:        I think the Australian people expect people to contribute fairly when it comes to the tax system. I think that out there in our communities people expect that there’ll be that contribution fairly from those that are contributing to the tax system. Now in this particular instance, I’m not aware of those individual circumstances. But out there in regional communities, we as the National Party every day are out there seeing people battling, working hard, our farmers facing drought now again in a lot of areas, and facing some real difficulties. When they read stories like that, they’re not surprisingly a bit concerned  and want to makes sure that that fairness and equity is actually there in the tax system.

Tim Lester:          Fiona Nash, to close perhaps, an issue that keeps cropping up now quite regularly, this of sports betting and advertising of sports betting during games. Labor MP Stephen Jones says neither of the major parties are being tough enough on limiting sport betting and he’s bringing in a private members bill that will ban the promotion of odds, pretty much at everything except horse races and greyhound races. Is he right? Is that something we should support, or is that too much a case of kids gloves?

Fiona Nash:        As a mother, Tim, I have real concerns about the prevalence of these types of gambling advertisements and I think that Tony Abbott has got it absolutely right on this when he talks about that industry should try and sort it out, but if not he is absolutely prepared to step in and make sure that those things are done properly. And I think he’s absolutely right that if industry is not going to sort it out, then I believe that government certainly has a role to do that.

Tim Lester:          But Tony Abbott isn’t talking nearly as tough at Stephen Jones at the moment in terms of strict limits here. You think we should adopt Tony Abbott’s wait-and-see approach?

Fiona Nash:        Well I think it’s fair to give the sector, the industry some time to appropriately deal with it. I don’t use Stephen Jones as my litmus test for policy development, unfortunately for him. But certainly I think we do need to come into this and make sure we get it right, and if industry isn’t going to get it right, isn’t going to make sure that we have those constraints there, then government absolutely has a role to step in and make sure that happens.

Tim Lester:          Andrew Leigh, your thoughts? A private members bill that might be worth supporting, or no?

Andrew Leigh: Well Tim, I certainly share Fiona’s concern. As a dad, the only solution that I’ve found to this is to try and move the conversation away from betting and to use those odds as a way to teach my boys about maths.

Time Lester:       But you shouldn’t have to do that while watching a footy match, right?

Andrew Leigh: That’s right, I’m making the best of what I regard as a bad situation. I’m trying in some sense to distract them from money and into learning something. I think the code of conduct that the government has put in place with broadcasters where odds promotion is restricted to breaks in play has been an important step and has seen significant reduction in the promotion of odds. But I do think that this is an issue that concerns many Australians, I’ve certainly had constituents talk to me at my shopping centre stalls and in my electorate office with their concerns about this. So it’s something that I’ll be watching closely and I think, similarly to Fiona, I’m very interested to see how the industry responds and whether we need this big stick approaches, or whether we can actually deal with it through voluntary regulation.

Tim Lester:          Andrew Leigh, Fiona Nash, delighted to have you on board with Breaking Politics. Thanks for coming in, and we’ll talk again next Tuesday.

TRANSCRIPT – ABC702 WITH RICHARD GLOVER
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
6 May 2013

TOPICS                                 Inequality, Australian egalitarianism

Richard Glover:                 How much do you have to earn to be in the top 10% of society? What about the top 1%? What about the top 0.1%? How much do you have to earn to be in that elevated crowd, what do you recon? For instance, the top 1%, how much do you think you’d have to earn each year to be kind of 1 in 100 type bread winner in this country? The numbers have been crunched by Andrew Leigh, he’s now a Labor MP but he was a professor of economics at the Australian National University and these numbers grew out of the research that he did there for a forth coming book Battlers and Billionaires and Andrew Leigh joins us on the line, good afternoon.

Andrew Leigh: Good afternoon Richard

Richard Glover:                 Now, before we get into that matter of you know, how much you do have to earn to be in the top 1% of the top 10%, your interest in this has been to look at inequality and whether it’s grown or not in Australia.

Andrew Leigh: Yes, that’s right Richard. I regard inequality as being sort of an important part in the Australian national story, egalitarianism sort of deep in the Australian legend whether that’s through the work of Paterson or Lawson or whether through the egalitarianism of calling one-another ‘mate’, rather than using the term ‘sir’, so Battlers and Billionaires is about telling that national story. And there’s obviously a bit of number crunching of the kind that you’ve talked about in your intro.

Richard Glover:                 Okay people might have the sense that we’re less equal then we ever have been, that’s not true though, back in the 1950s we were perhaps at our most un-equal.

Andrew Leigh: That’s right, well there’s this spike in the early 1950s in the Korean war wool boom, that’s a sort of one-off ping in inequality, but then if you go right back to the 1910s – 1920s that’s a more unequal time than today, but then we saw a drop in inequality from the 1910s to the late 1970s. Then the last three decades has been the opposite direction; a widening of the gap between rich and poor.

Richard Glover:                 Can we go back to the 1910s for a moment, what’s society look like to make it so un-equal?

Andrew Leigh: Well one of the things about the 1910s is you’ve got pretty unequal land holding, so that comes out of the early land allocation process of the 18^th century, as well as the squatters taking over large tracks of land for grazing. So the big gaps from that period are really between the landed and the rest whereas now the big gaps are between the highly paid and the rest. It’s sort of a labour market gap that’s opened up now.

Richard Glover:                 And In the 1950s, you mentioned the war boom, I mean we all know that the war was fought in a very cold place and that did create a good market for wool for a while in order to clothe all those soldiers, presumably the beneficiaries were mostly farmers.

Andrew Leigh: That’s absolutely right, so if you at those earning over £20,000 in that year, 90% are farmers. It’s an astonishing shock and really it’s driven by the fact that you can’t increase wool supply in a single year; sheep take a couple of years to breed and so this massive demand from the US military just drove the price of wool through the roof and Australia’s farmers are the beneficiaries.

Richard Glover:                 Now if you drive around the Australian country side and have a look at country houses, you can sometimes see, with an eagle eye, the 1950s wing and you can tell that it was built in that period with the money that came from the Korean war.

Andrew Leigh: Yes, astonishing payouts and one of the things they say of that era, was that the purchasing processes of wool meant that certain farmers had a bit of that income spread over the coming decade and so there’s a lot of upgrading of farm machinery in the 1950s as a result of that incredible wool boom.

Richard Glover:                 Now in more recent years how have we travelled, in you know say the last 10 or 20 years?

Andrew Leigh: So if you take the top 1% share, the richest 1/100^th of Australian adults, that’s roughly doubled since 1980. Back in 1980, they had 5% of income, 5 times their proportionate share, and now they’re up to 9% of income – so a significant increase. There was a little blip down in the global financial crisis but the top 1% share has begun increasing again over recent years.

Richard Glover:                                 Okay so 1981 was when we were at our most equal?

Andrew Leigh: That’s right, under the prime ministership of Malcolm Fraser the Australian top 1% share was at its lowest, and it steadily grew right through the Hawke, the Keating, the Howard era.

Richard Glover:                 It’s interesting isn’t it? People associated with a conservative government that would help out the rich but not so.

Andrew Leigh: Well it’s a lot of the changes aren’t policy changes, they’re technology: so the advent of computers for example that’s great if you’re a lawyer, not so good if you’re a typist. Your younger listeners probably don’t even recall that there was once an occupation called typists, but the advent of computers was pretty tough on that sector.

Richard Glover:                                 So information technology has actually led to more inequality?

Andrew Leigh: That’s right. Technology typically benefits those with higher levels of education and so one way of thinking about inequality is a race between education and technology. If we increase education fast then that can have an equalising effect, but if technology gets away from education then it has an unequal effect.

Richard Glover:                 And I guess we’re ling in a time now that, I mean people say that you know it’s very hard, if you’re unskilled it is very hard to get a job, the idea that you can get a good job just using your muscle used to be quite easy in maybe in 1970, not so good anymore.

Andrew Leigh: Absolutely right. So if you were an inarticulate bloke, who didn’t finish high school, then actually in the early `60s, if you were good with your hands there were a lot of options. Now there are not many options around and those options that exist Richard, tend to have fairly flat earnings. So if you take the earnings of for example a cleaner or a security guard, they don’t increase much over the course of a career. A fifty year old in those occupations earns about what a twenty-five year old does, which is pretty painful if you think about a career in those industries.

Richard Glover:                 What about the other end of the scale we hear about the bank executives and so forth who are paid just millions and millions of dollars each year, when people complain about that they say “well it’s a globalised economy, if we don’t pay or commonwealth bank or ANZ don’t pay our executives this sort of money, they will go to Scotland, they will go to England, they will go to Germany or whatever.”

Andrew Leigh: There’s certainly got to be a hint of truth about that, I mean you look back to the early 1980s and there are a number of reports that talk about the low quality of Australian management talent of that era. But what you’ve got now, is you’ve got Australian companies looking to pay an international wage because they do an international search. You ask a company ‘would you pay above median for your CEO?’ and nine out of ten company boards say yes. Of course, nine out of ten can’t actually pay above average and so the effect is a ratcheting up effect.

Richard Glover:                 How do we compare to other countries overseas, we’ve got an idea of ourselves as egalitarian; do the figures show that we are?

Andrew Leigh: If you take sort of the 30 or so rich countries in then we’re about in the top third, so we’re not as unequal as the United States but we’re significantly more unequal then most European countries.

Richard Glover:                                 So the top third in the sense of equality or inequality?

Andrew Leigh: Inequality, sorry so, so, so we-

Richard Glover:                                 We are among the third most unequal?

Andrew Leigh: Exactly. Exactly so we’re, the United States is generally regarded as the rich country that has the biggest gap between rich and poor. Sweden, Finland, Norway are regarded as the most equal rich counties, and we’re closer to the US then we are to the Scandinavians.

Richard Glover:                 Okay so now we come to the figures, and I invite everyone to think about what they earn themselves, and put their figure against the figures that you’re going to supply. How, how much do you need to earn today to consider yourself in the top 1%?

Andrew Leigh: Ah so, last year we have is 2010-11 which is %210,000 to enter that top 1%. That’s an individual income.

Richard Glover:                                 $210,000 as an individual?

Andrew Leigh: Yes -

Richard Glover:                                 And then you’re in the top 1%.

Andrew Leigh: That’s right.

Richard Glover:                                 How do you get in the top 0.1%?

Andrew Leigh: $688,000 as an annual income puts you in the top 0.1%.

Richard Glover:                 Then you’re in the uber-rich, but of course the executives who make headlines often make not $688,000 but 3 million or 5 million. Don’t they?

Andrew Leigh: That’s right and so if you get, if you’ve got a million dollar salary then you’re in the top 0.5 per cent and so on upwards. And you see rising inequality right through. One of the things that Tony Atkinson and I noticed when we crunched this data is; not only is the gap between the top 1% and the rest increasing, but the gap between the top 0.1% and the rest of the top 1% is increasing as well.

Richard Glover:                 Some people argue within equality that actually the bottom end has been, has done quite well and they point to, Mr Howard did actually take a lot of money and give it to, certainly to working families for instance under family benefit, tax benefits and so forth and this helped the bottom end but it’s really the middle class who have suffered in Australia over the last 20 years, do you agree with that?

Andrew Leigh: Well you see income growth right through the scale in Australia which is different from what you see if you look at the United States. You know the bottom 10% in the US are earning basically after inflation are earning what they earned in the early seventies. That’s not true here. The bottom 10% have seen real gains in incomes, but they’ve seen smaller real gains then the top 10% have seen, so we’ve got all boats rising but we’ve got the ocean liners rising faster than the tug boats.

Richard Glover:                 And the dinghies left behind. Andrew Leigh is here. What about if the top ten per cent, what sort of sum of money do you have to earn to be in the top 10%?

Andrew Leigh: $81,000 dollars takes you into the top 10% – probably the figure that I find surprises people the most.

Richard Glover:                 Is that right? Because they think that’s not that much and yet you’re obviously within the

Andrew Leigh: Exactly, there are more families that have incomes over $81,000 but if your individual income is over $81,000 dollars then you’re earning a higher income than 90% of Australian adults.

Richard Glover:                 Which brings us to that whole debate again of what is rich, which we have every time you know somebody, talks about means testing something and people, various people -

Andrew Leigh: Do we have to have this debate Richard?

Richard Glover:                 Yeah, various people including some people on the Labor side say well you can make $120,000 dollars, you’re not rich, but you know, by on your figures within the top 5% or something.

Andrew Leigh: Exactly, and look that’s what I find is the most useful and tractable way of looking at things, because I think there is just, there’s far heat than light around whether or not somebody calls someone else rich. So I can certainly say that I don’t know whether $210,000 is rich or poor but it puts you in the top 1% of individual income earners.

Richard Glover:                                 Okay, if you’re earning $81,000 as an individual you’re in the top 10%?

Andrew Leigh: Correct.

Richard Glover:                 And just, can we come down just one set of figures too, If you’re earning something like $65,000 or something like that, where are you then?

Andrew Leigh: Ah, so our figures are just looking at the top because that allows us to go way back to the beginning of the century. So I’d be,

Richard Glover:                 Guessing.

Andrew Leigh: Yes, guessing at that stage but um, my guess is that it would put you somewhere around the top twenty or thirty per cent.

Richard Glover:                                 So you’re still comparatively well off?

Andrew Leigh: Yes, that’s right, yes.

Richard Glover:                                 Very good. Interesting to talk to you Andrew, thank you so much.

Andrew Leigh: Likewise Richard. Thanks again.

Strong Fibre in Canberra Fabric, The Chronicle, 7 May 2012

One of Canberra’s great features is the strength of our civic fabric. And it’s no more apparent than among young Canberrans who are giving back to our community.

Recently, I held a breakfast roundtable for a group of these ‘social entrepreneurs’, to discuss the opportunities and challenges they’re facing. Let me tell you about some of them.

• The Raising Hope Foundation, led by Ben Duggan, provides opportunities for students in the ACT to develop esteem and self-belief.  Raising Hope works with local schools to make sure that schoolkids at risk of slipping through the cracks get the support they need.
• Created by Sunny Forsyth, Abundant Water raises money to help people in the Southeast Asian nation of Laos get clean drinking water. Effective water filters can be made at a relatively low cost, and Abundant Water works to support communities getting them.
• Focused on Canberra, Brad Carron-Arthur’s work with the Youth Suicide Prevention Network aims to help reduce the scourge of youth suicide. A young man who ran from Canberra to Cape York to raise awareness of mental health, I’m sure he’ll make an impact on improving suicide prevention.
• Most social entrepreneurs focus either on local or international disadvantage. Raize the Roof, chaired by Danielle Dal Cortivo, aims to do both. They support the Starlight Children Foundation in Australia and SOS Children’s Villages in Botswana. And they’re doing it in a unique way: building a house in Bonner with help from local tradespeople, and then selling it off to raise money for charity.

There are many peak bodies and larger organisations in Canberra, and we appreciated the insights of people such as Rikki Blacka of Volunteering ACT and Julie McKay of UN Women.

Navigating the murky waters of charitable foundations and managing to keep your volunteer base upbeat is no easy task, and it was useful to hear different experiences from those at the roundtable. With increasing numbers of government agencies and companies allowing their employees time off to volunteer, Volunteering ACT plays a critical role in ‘matchmaking’ volunteers and charities.

Just as in business, growth in the community sector depends crucially on building new organisations. The activists who joined my latest social entrepreneurship roundtable are living proof that Canberra’s community sector is faring well.

From suicide prevention to better water in Laos, they’re focused on issues that go well beyond themselves. Each of these social entrepreneurs faces challenges in making their group successful. But with the support of others I’m confident they will continue to grow.

Andrew Leigh is the federal member for Fraser, and his website is www.andrewleigh.com. If you’d like to assist any of these organisations, please email Andrew.Leigh.MP@aph.gov.au or phone 6247 4396.

TRANSCRIPT – 2CC with Mark Parton
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
6 May 2013

TOPICS:                                Inequality, Australian egalitarianism, Liberal Party advertising

MARK PARTON:                What is the definition of rich in 2013? To some extent the definition of rich I don’t think ever changes. Anyone who earns about three times as much as you do is rich, that perception applies to pretty much every one. Andrew Leigh’s got some more specific figures for us though, in 2013 in Australia, to be ultra-rich you need $210,000 a year; that sounds pretty fair. Now there’s even a filthy rich figure, Mark Sullivan are you listening? The uber-rich figure is $688,700. Can you imagine the changes that it would make in your life, not even if you were on that salary all the time, but just if you had it for a year, just if you get three quarters of a million dollars in salary for a year. Now Andrew Leigh’s calculated the new cut off points as part of his research for his coming book on inequality in Australia which is titled Battlers and Billionaires, this is research that he started years and years ago when he was a professor of economics at the Australian National University, he’s updated the calculations using tax office data from 2010-11 from the financial year and these are figures released last week and I’ll get him to explain. Andrew good morning,

ANDREW LEIGH: G’day Mark how are you?

MARK PARTON:                Not bad, how do you determine who’s ultra-rich and I’ve used the term filthy rich, I don’t think you have.

ANDREW LEIGH: I haven’t used any of these terms at all Mark, I think they’re… they all seem to be political dynamite. So my study with Tony Atkinson simply looked at what it takes to be in the top 1% of the top 0.1%, so as you said, $210,000 takes you into the top 1%, that’s the individual income and over $690,000 takes you into the top 0.1%; the richest 1/1000th of income earners.

MARK PARTON:                Okay, what this data has shown is that there is a growing gap between the rich and poor.

ANDREW LEIGH: That’s right, so if we go… if we take say the top 1% share; that’s doubled over the last generation, that’s about 1980 or so. Take the top 0.1%, they’ve tripled their share of national income over that period, and it’s a pattern which you see in other English-speaking countries as well; US, UK, New Zealand, Canada.

MARK PARTON:                It’s a fascinating thing that when you start having a conversation about it, and you find out what peoples definition of rich is, aside from the actual dollar value, because to me the definition of rich is being able to pay all of your bills-without stress, eating good food, and having a holiday every now and then. As far as I’m concerned, you got that, you’re rich.

ANDREW LEIGH: But of course Mark you could always have bills that exceed your income, any of us, regardless of our income, you know, you take that three-quarters of a million, I’m sure you could rack up enough bills that that salary wouldn’t cover it.

MARK PARTON:                And that goes back to that original definition that I said right at the start of the interview and I think it pretty much always applies; the definition of rich for most people is anyone who earns about three times as much as you do.

ANDREW LEIGH: Exactly, exactly, so it’s very much from the perspective you’re looking from and you know; I think in some sense, the bill thing comes back to that old Dickens’ quote that if your income is 19 shillings and your expenditure is 20 shillings, you’ll be miserable, if your income is 19 shillings and your spend is 18 shillings then you’ll be happy.

MARK PARTON:                Okay, what evil policy directions do you think you could come up with out of these figures, Andrew?

ANDREW LEIGH: Well, this is really just describing the world. Tony Atkinson and I did the original study a decade ago and each year as the tax data comes out I update it. I’m really keen as to see if we can have more of a discussion around inequality,

MARK PARTON:                Yep

ANDREW LEIGH: I think talking about how much the gap between rich and poor we want is pretty fundamental to the kind of nation we want to live in.

MARK PARTON:                Is it a bit silly though talking about equality, I mean, no-one’s ever going to have the same, there’s always going to be people who have more than others, there are going to be people who are luckier than others, or have worked harder than others, you know, what’s the point in talking about equality?

ANDREW LEIGH: Well of course we’re never going to have perfect equality Mark,

MARK PARTON:                That would be a complete communist structure wouldn’t it?

ANDREW LEIGH: Exactly, and we have good evidence as to what a disaster that would be, but just because we don’t want everyone to have exactly the same incomes doesn’t mean we can’t have a conversation about how the gap between rich and poor has grown over recent  years. We’re still a much more equal country than say the United States, but inequality has risen a lot over the course of my life time and I think having a national conversation about that is a productive use of time.

MARK PARTON:                You seen the headless chook ad, Andrew?

ANDREW LEIGH: I haven’t Mark, no.

MARK PARTON:                Look irrespective of the political message, and I know you won’t agree with me on this; it’s as funny as hell.

ANDREW LEIGH: Well humour is sadly lacking in politics Mark so maybe that’s the only reason to like it. But I tend to think there’s enough nastiness around in modern-day politics.

TRANSCRIPT – SKY AM AGENDA

Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
30 April 2013

TOPICS:                                Paid Parental Leave, government revenue and spending, inequality.

Kieran Gilbert:                   This is AM Agenda, thanks for your company this Monday morning. With me now, Liberal frontbencher Senator Mitch Fifield joining me from Melbourne and here in the Canberra studio Labor MP Andrew Leigh. You’ve heard the discussion with Christopher Pyne this morning Andrew Leigh. It’s healthy for parties to have internal debates about the merits or otherwise of policies, but from the front bench, it’s a very clear message isn’t it?

Andrew Leigh: Well Kieran, I’m very different ideologically from Alex Hawke, but I do appreciate that fact that he enjoys a good intellectual argument. And what he’s been saying here over paid parental leave, this is isn’t just an inequitable scheme, as Labor has been arguing – someone on $200 000 gets $100 000 of government support – but it’s also an illiberal scheme. And Alex is concerned that it represents a slide into illiberalism from the Coalition. It’s a Coles and Woolies tax funding a scheme which is much more European-style. I think even Christopher Pyne –

Kieran Gilbert:                   Most of the OECD does have more generous paid parental schemes. As an economist, don’t you think that it is a productivity measure to get women back in, to provide the encouragement to get women back in the workforce?

Andrew Leigh: I think you should always look internationally, Kieran, but the thing that marks out the Australian social safety net is that traditionally it has been much more targeted to those most in need. This is the opposite. This is a scheme that is most generous to someone on a six or seven figure income.

Kieran Gilbert:                   But doesn’t it make sense as a productivity measure to encourage those women back into the workforce? You don’t see the merits of that?

Andrew Leigh: I don’t think there’s going to be any tangible productivity lift compared to Labor’s paid parental leave, which is a much more equitable scheme, and I think a much more economically liberal scheme. I mean, if Tony Abbott is concerned about gender equity, he might think about the fact that his raising of superannuation taxes on low income earners will disproportionately impact low income women. He might think about the fact that his IR policy will take away penalty rates disproportionately from women. These are the kinds of gender issues that matter.

Kieran Gilbert:                   To be honest we don’t know what the workplace policy is, so that’s a bit presumptuous. Let me go to Senator Fifield and ask you about this, because Alex Hawke, I get the sense hasn’t done this – well he’s written this piece on his own, but it reflects a broader sentiment within the Coalition.

Mitch Fifield:                      Kieran, Alex is a good guy, he’s a friend of mine and he’s a thoughtful contributor to public policy debate. He’s put forward the view that the PPL should be reviewed. That’s not a view that I share. We have a good paid parental leave scheme policy, we will take it to the next election, and should we be fortunate to form government we will legislate it in the parliament and if I’m manager of government business it will be my job to see that that gets through. And that will be a good thing for women in Australia. It’s 26 weeks at your own salary up to a maximum of $150 000 and as anyone who has had kids knows, it is when you have kids that you can least afford to lose that money so this will be important for Australian families, and I’m a strong supporter of Tony Abbott’s policy.

Kieran Gilbert:                   But is this a battle over where the Liberal Party is headed, the presumption that you will win in September, and the economic dries are trying to pre-empt or preclude a big tax and spend policy like this?

Mitch Fifield:                      I don’t think so Kieran. I think it reflects the fact that we, unlike the Labor Party, have a vigorous party room that is used to having debates, that is used to having discussions. We don’t shy away from individual members in our party room having views and expressing them. Alex doesn’t have shadow executive responsibilities so he is perfectly at liberty to put his views. There’re not ones that I share, I think that we have policy that we should take to the next election which will make a real difference to many families when they have kids.

Kieran Gilbert:                   Just finally Senator Fifield, you heard what Christopher Pyne had to say: reminding colleagues that there are only 131 days left until the election. I suppose it was a pretty clear warning to them to pull their heads in. He didn’t say it in those words, but discipline has been strong to this point, do your colleagues need to avoid complacency or hubris?

Mitch Fifield:                      The Australian Labor Party can win this election. Australian federal elections are always competitive and every member of the party room is very much aware of that. But that’s not at odds with colleagues having views and expressing them, but it’s incumbent upon all of us to recognise that this election could go either way, Kieran.

Kieran Gilbert:                   Ok, let’s move on. The Financial Review reporting today, Andrew Leigh, that Treasury is now working on the basis that economic growth this financial year and next is at 2.75 per cent, that’s down a quarter of a per cent on the mid-year budget update. Does that make sense to you, given where the broader parameters are at?

Andrew Leigh: It struck me as an odd story actually, to be honest Kieran. I find that, as we know, economic growth is one of those parameters that you want to estimate based on everything, all the available data. We’ve got a number of data releases coming out this week, we’ve got an RBA decision. I’d actually be pretty surprised if that forecast has been locked down at this stage. But you know, the fact that Australia is talking about growth somewhere around 3 per cent would to many countries in the world be an extraordinary luxury. We’ve grown 13 per cent since 2007. Europe has shrunk, the US has enjoyed only a couple of percentage points of growth.

Kieran Gilbert:                   But things are looking a bit more sluggish now and there is a sense that the outlook is not as good as it has been. Do you think that the RBA is being too cautious? Because many economists do: Ross Garnaut, Bob Gregory, John Hewson.

Andrew Leigh: The RBA makes its own decisions and I don’t think there’s an advantage in me putting my oar in in that, but we’ve got a cash rate now sitting at 3 per cent, and that’s –

Kieran Gilbert:                   But there’s room to move, isn’t there? A lot of room to move.

Andrew Leigh: Well there’s certainly, and again compared to other countries who’ve hit that lower bound and then need to engage in more unconventional practices like quantitative easing, that’s an advantage. Yes, the high dollar has posed challenges for some sectors of the economy. The Prime Minister talked about that from the revenue standpoint last week. But let’s look around the world and let’s realise that most economic policy makers would love to have the set of numbers that Australia has today.

Kieran Gilbert:                   So despite the criticism that the Coalition has had on government spending, of course it’s a very contestable space whether the government has spent too much or enough to keep jobs and growth going. What’s your view then though when you look at the broader picture as Andrew Leigh put it there. Global growth has been sluggish, we’re doing very well compared to other nations, aren’t we?

Mitch Fifield:                      Look Kieran, this government presents themselves as hapless victims of circumstances beyond their control. The budget is just something that happens to them in complete isolation, apparently. The problem here is that every budget that this government has delivered has been predicated on everything going right, predicated on the most optimistic revenue forecasts, predicated on the most optimistic growth forecasts, and predicated on the most unrealistic assumption of all, and that is that the Australian Labor Party could exercise some self-discipline and restraint when it comes to spending. So Kieran, Labor will point to, they will grab on to reduced growth forecasts like a lifeline as another excuse as to why their budget is in such an appalling situation. But we’ve got to keep coming back to the fact that government has about $70 billion more in revenue than in the last year of the Howard government. Revenue, even this financial year, will be $25 billion up on the previous financial year, but the big problem is that despite the fact there are growth in revenues, spending is growing by even more. Spending $100 billion a year more than in the last year of the Howard government. That’s the problem. We don’t have a growth problem, we don’t have a spending problem – sorry, we don’t have a revenue problem, it’s a spending problem.

Kieran Gilbert:                   We will have this debate, no doubt, many times over the next couple of weeks in the lead up to May the 14^th and after Wayne Swan’s sixth budget. I do want to look now to some analysis you’ve done, Andrew Leigh. You’ve got an upcoming book called Battlers and Billionaires, as a follow up from your research at university as a professor of economics. Looking at wage levels – who’s in the top 1 per cent, the top .1 per cent – and looking at inequity in the wake of the global financial crisis, what have you found?

Andrew Leigh: Well Kieran, the big story of the last generation is rising incomes at the very top, and incomes at the top outpacing the middle. The top 1 per cent share has doubled over the last generation. The top .1 per cent share has tripled. In order to get into those groups, $210 000 takes you into the top 1 per cent, nearly $700 000 in the top .1 per cent. And so it’s important, I think, to engage in a national discussion around how much inequality Australia wants and whether too much inequality is threatening to strain our social fabric.

Kieran Gilbert:                   Do you think that this is a short term phenomenon after the global financial crisis, which has exacerbated this, or do you see any sign that things were becoming more equitable?

Andrew Leigh: We actually saw a small drop in the top incomes as a result of the financial crisis, Kieran, and now we’re seeing a rise again in the post-GFC years, getting nearly up to the point where top incomes were. But it’s a picture you see around the world. It’s a challenge -

Kieran Gilbert:                   You go to a Scandinavian sort of system where people cap, where companies cap executives?

Andrew Leigh: I don’t think that would make a lot of sense in an Australian context, then you have the loss of talent as well. Really what Battlers and Billionaires is seeking to do is to spark a debate, much more in the spirit of my old job as a professor than my new job as a policy maker. I do think a national conversation about the gap between rich and poor is important. I know Mitch will have views on that and they’ll be different from mine, but what I’m keen to do is just to have more of a conversation about these matters.

Kieran Gilbert:                   You’ve heard what Andrew Leigh has had to say, Senator Fifield, any thoughts on that this morning?

Mitch Fifield:                      Well it’s good to be part of the Andrew Leigh book club this morning. Andrew makes observations about the gap between rich and poor. As important – if not more important – is the absolute level of income that people have rather than the relative gaps between the incomes that individual people have. We want to see the economy grow, we want to see incomes grow for everyone. We don’t want to be in a situation where you’re looking at someone a bit above you earns, that’s always the definition of a wealthy man, someone who earns more than you do. What we want to do is make sure that everyone is earning more.

Andrew Leigh: I certainly agree with that point, Kieran. I guess the ideal though is growth with equity, rather than having to choose between growth and equality. And in certainly in Australia we’re fortunate that incomes have grown at the bottom as well as at the top. That’s not something they see, for example, in the United States, where once you adjust for inflation where incomes in the bottom 10 per cent have barely budged in four decades. So we’ve done well in Australia. I guess what I’m flagging up is a concern that the great Australian tradition of egalitarianism might be under threat.

Kieran Gilbert:                   Senator Fifield, thanks for being with us on AM Agenda and the Andrew Leigh book club, I appreciate it. And Andrew thank you for your time as well.

Andrew Leigh: Thanks Kieran.

I’ve also done a couple of interviews today about it:

• ABC702 with Richard Glover (coming shortly)
• 2CC Canberra with Mark Parton
• ABC774 Melbourne with Red Symons

Speech launching Economic Theory of Greed, Love, Groups and Networks by Paul Frijters (with Gigi Foster)

Andrew Leigh
Federal Member for Fraser

Australian National University
2 May 2013

If you want a quick way to assess a piece of academic writing, try starting at the end. A skim through the reference list can tell you a great deal:

• Is it long, or so short you get the impression the author thinks they’re the only one to have considered the problem?
• Does the author’s own name dominate the reference list, or is there a sense that other people have sensible things to say too?
• Are the references all by people from the author’s country, or are they international?
• Are the references all in the same discipline, or are other disciplines cited too?
• How old are the references? (Frighteningly, the typical reference in an economics article is just five years old)

So, what does starting at the back tell you about Paul and Gigi’s book? They’re extensive, global and interdisciplinary – like the authors themselves. You’ll see references to Fox’s Behaviour of Wolves, Dogs and Related Canids; to a Sherlock Holmes novel; to Bourquin’s ‘The Zulu Military Organisation and the Challenge of 1879’; to Dr Seuss; and to Besse’s 1910 classic Hermits.

Indeed, the book betrays little sense of the authors’ national origins, and only a few pointers that they both work at Australian universities. The book contains more references to China than Australia, and only hints like the reference to the ‘Solow-Swan growth model’ give it away. Indeed, the only clue that the lead author is Dutch is that it contains over a dozen references to sex.

Speaking of Paul, I see that there is some uncertainty in the book as to how he has been treated by the profession. Is this the man who has been ‘labouring for 20 years mostly without acknowledgement’ (p.xii), or the man whose work ‘features regularly in the global media’, and was the second-ever winner of the Economics Society of Australia’s medal for the best Australian economist under 40 (back cover)?

Something of the same tension relates to the book itself. Is this the book that ‘heralds a new dawn in social science’ (p.xiii) or is it the case that ‘with one exception, none of the specific observations or individual theoretical arguments in this book is new’ (p6)? Is this groundbreaking, or a gentle seasonal tilling the soil?

I’m going with groundbreaking, perhaps because I learned some fascinating things from this book. Let me share a few of my favourites:

• In experiments in the mid-1940s, René Spitz followed infants who were raised in a foundling home, where seven infants were allocated to each nurse, and sheets prevented them from seeing out of their cribs. By age two, only one in ten of them could walk and talk. (p98)
• The output collapse in Eastern Europe in the 1990s can be partly explained by a collapse in people’s social ties (p257), exacerbated by a refusal to hand over control to local party bosses and bureaucrats (p264).
• If a life events – like being fired or promoted – happens to your spouse, then it has about 1/10^th the impact on your mental health than if it happened to you (p105)
• The ‘golden rule’ of ‘do unto others’ can be found in surprisingly similar form in the teachings of Buddhism, Christianity, Confucianism, Hinduism, Islam and Judaism.
• In a 1968 experiment conducted the day after Martin Luther King’s assassination, third grade teacher Jane Elliott divided her class of white children into brown eyed and blue eyed. She watched as they formed strong bonds, and eagerly discriminated against one another. (p171)
• On average, workers spend at least one-seventh of their time on ‘information seeking’ activities (p237)
• 12 percent of Chinese men – but only 2 percent of women – are Chinese Communist Party members (p288)
• If social norms are the main driver of littering behaviour, then Clean Up Australia Day is likely to be more effective in discouraging littering than higher spot fines (p323)

I also read some outrageous sentences, which reminded me of the differences between my former profession (where scandalous statements are encouraged) and my current one (where it is not so rewarded). Indeed at some points you feel as thought Paul and Gigi doing their best to provoke the reader. Try some of these for example:

• ‘From a simple cost-benefit point of view, then, self-interested individuals in advanced economies should be paying much less in taxes than they are.’ (p20)
• ‘Women are attracted to power’ (p126)
• ‘I would expect the poor to be loath to band together as a group of “losers” and instead to become more fervent members of religious groups, patriotic groups, and other large reciprocal groups.’ (p212)
• ‘Australia has no comparative advantage in banana production, and … from an efficiency perspective it should not therefore have a banana industry in the first place’ (p318)
• ‘A politician who says he loves his country is merely wasting time on irrelevant and even nonsensical statements.’ (p325)

Not to mention the fact that Paul describes his colleagues with the well-known Marxist appellation ‘fellow travellers’.

Paul and Gigi draw on a wealth of prior research, but they are essentially economists. Both are very comfortable with mathematical models. Yet this doesn’t stop them making fun of their own discipline, saying at one point ‘Much like an army sergeant successfully makes a platoon sergeant out of a selfish recruit by physical exhaustion, so too does the complexity of economic theory force clever yet ambitious young students to accept the group beliefs inherent in it.’ (p431)

This book is heavily informed by the advances in behavioural economics over recent decades. As they point out, the key challenge for behavioural economics now is not to keep identifying quirks (that way lies psychology). Instead, it is to attempt to build a coherent model that incorporates the new behavioural insights.

These insights are rich indeed (ten years ago, Thomas Schelling once told me that he thought behavioural economics had already contributed more to our discipline than game theory). But Paul and Gigi cite Drew Fudenberg, who argues that behavioural economics must ‘devote more attention to the foundations of its models, and develop unified explanations for a wider range of phenomena’ (p222).

* * *

At the core of this book is love. As those of you familiar with the economics of the family will know, we often put love in the error term. Indeed, I myself have written down models in which love is implicitly an independent and identically distributed random variable.

But Paul and Gigi want to know about love itself. They define love as ‘caring about [a] thing or person regardless of any observable reward’ (p74). [i] Their notion of love overlaps with what we might also call loyalty, and so covers parents and soldiers, sports fans and honest judges. They argue that love is a form of submission, and contrast it with greed, which they describe as a form of dominance.

Going further still, they contend that the ‘main game’ of life is a struggle between love and greed (p307). In the Frijters-Foster scoreboard, love wins in the short-term, greed wins in the medium term, but that the ‘thrust of history’ is towards love winning in the long term.

This is heady stuff.

The book is also incisive on the value of groups. As the authors point out, ‘No individual alone can produce procreation, defence, knowledge or insurance in meaningful amounts.’ (p198-9). Perhaps more persuasively to an Australian audience, they also say ‘No individual worker, machine, customer or supplier on his own would have produced or consumed beer.’ (p274)

We can drink to that.

* * *

This is a big, bold, ambitious book. As social science has grown increasingly complex, people have naturally come to focus on narrower fields. Most of us don’t have brains big enough to add to the literature on optimal income taxation, let alone to link it to psychology.

In the breadth of its subject matter and the sweeping nature of its claims, it has more in common with Adam Smith’s Theory of Moral Sentiments than the typical article written by an academic economist these days. This also means that it has the feel of a very good dinner party conversation with Paul and Gigi. And that’s no bad thing.

I notice also that the book refers to another work – cited as ‘Frijters and Foster 2013’, but tantalisingly omitted from the reference list. I eagerly await its arrival.

So, a final question: is this a book about greed or love?

In the former camp, we have the fact that entry tonight was contingent on purchasing a copy of the book. (Is that greed, or merely a convenient pricing model? I’ll leave you to decide.) But like most Australian authors, I expect that their hourly wage for working on this book is likely to be measured in cents rather than dollars.

Moreover, this project perfectly fits their definition of love. The production of this book demonstrates a care for us – the readers – regardless of any observable reward.

I thank them for it, and am pleased to launch, Paul Frijters and Gigi Foster’s Economic Theory of Greed, Love, Groups and Networks.

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[i] The authors relate their formal model to the identity model of Akerlof and Kranton. But I regard their model of greed and love (set out in the book’s technical appendix) as better cast than Akerlof and Kranton’s, since it does not simply add a term into the utility function.