Budgets and politics with Michelle Grattan - Transcript

It was great to sit down during budget week with Michelle Grattan and outline a Labor vision for Australia. You can find the transcript below, or listen on listen online at The Conversation


GRATTAN: Hello I'm Michelle Grattan and this is our budget podcast. Shadow Assistant Treasurer Andrew Leigh is with us today to talk about Labor's response to the Budget and its alternative. Andrew Leigh just starting with the big picture. In the very broadest terms, what kind of budget would a Labor government have delivered this week?

LEIGH: Michelle we would deliver a budget which face down Australia's big economic challenges. They include declining living standards: income per capita in real net terms has declined 4% since the government came into office. Flagging innovation which has seen too few Australian firms develop new to the world innovations. And rising inequality, where the gap between rich and poor now is the highest it’s been in three-quarters of the century. To answer those challenges requires a budget which doesn't give more to the rich than it does to the poor, and a budget which invests in the productive capacity of the nation rather than taking money out of the infrastructure, schools and hospitals.

GRATTAN: Could you just give us an audit on where Labor stands on the big items in this budget so far, on the tax side, what would you support, what would you oppose?

LEIGH: We clearly support the measures that were copied from Labor. The government's decision to bring back the low incomes super contribution and give it a new name, having eliminated it in the previous budget, is one that we welcome. We support the change to the tobacco excise, a measure which we believe would lead to improving budget bottom line, and discourage young Australians from taking up smoking. We are, in a broad sense, supportive of the change in superannuation, although we have some reservations around the retrospective nature of some of those changes. On the other side, we're concerned about the company tax cuts - an unfunded company tax cut - talked about as a 10 year plan but with no bill attached to that plan. Chris Richardson writing in the Financial Review estimates that it's a 55 billion dollar cost, which means it'll significantly blow out the budget. We're concerned about the government's decision to give a very large income tax cut to those at the top of the distribution. For example, the government wants to give a $17,000 tax cut for someone on a million dollar income. We don't think that's fair or would boost growth.

GRATTAN: Now you support the action on bracket creep, taking up the rate from 80,000 to 87,000 right? But you would keep the deficit levy that's due to come off. 

LEIGH: That's right. We’ve pointed out as many others have, that the impact of the increase of threshold from $80,000 to $87,000 is only worth 6 dollars a week. It's not a sandwich and a milkshake tax cut, it's a sandwich or a milkshake tax cut. And when you cut it in at $80,000, that means that three quarters of the Australian workers don't get anything. 

GRATTAN: A year ago in his budget reply, Bill Shorten called for a bipartisan aspiration to get company tax for small businesses down to 25%. Now the government has that aspiration, of course it also proposes to get company tax for large businesses down to that amount. But I just wonder where that aspiration of last year goes now if you're worried about these tax cuts. 

LEIGH: Michelle, last year Bill called for the Government to work with Labor on the plan. They haven't worked with us, they haven't engaged with us on the plan that Bill proposed, instead they’ve put a plan of their own on the table. That sees most of the company tax cuts go to the biggest companies in Australia. Consistent with what Bill said last year, Labor will be supporting the reduction of company tax rates for small firms. We don't think a billion dollar firm is a small business. We're raising an eyebrow or two on the notion way the Liberals are giving a tax cut to big businesses by redefining what a small firm is. As my colleague Ed Husic said the other day, this is a little bit like suggesting that Donald Trump is just a local builder. 

GRATTAN: The budget has been described as one that doesn't frighten horses, that is the voters. Doesn't this mean that Labor doesn't have a lot to work with in this budget?

LEIGH: Well certainly you wouldn't say that people are unfrightened if you were thinking about single parents who was on, say, 80,000 dollars with a couple of children. That family would be losing thousands of dollars a year under the family payments cuts that are entrenched under this budget. So for many Australians the cuts they've seen to schools, to hospitals, to family payments, the impact of the government's failure to invest in a social safety net generally, is a scary prospect indeed. And yet what the budget is doing is essentially locking in big giveaways to the top end of the town, in a time inequality is as high as it's been in my lifetime. 

GRATTAN: Neither side these days seems to be particularly preoccupied with the challenge of getting back to surplus. It's just gone down in priorities. And yet the rating agencies seems to be much more concerned with this, with the need for Australia to engage in budget repairs. Do you think that Australia's AAA rating is in any danger?

LEIGH: For me it certainly does raise concerns. The statements they made recently were particularly pointed. They were a critique of Treasurer Morrison's unwillingness to look at tax measures as well as making cuts to payments. Moody was clear that the AAA credit rating was at risk, and you can see why they'll be worried. In the pre-election economic and fiscal outlook, the budget deficit for 2013/14 was projected at 30 billion dollars. The budget deficit now, for the coming year of 2016/17 projected at 37 billion dollars. So the gap between what government raises and spends has grown during the Coalition's time in office. That's increased total debt by $123 billion, or $5000 for every Australian.

GRATTAN: Survey show that Labor have started pretty high in the debate of economic credentials, how do you strengthen your position in the next two months on that front?

LEIGH: It's very important for us to have clear plans laid out. And it's part of the reason why Bill Shorten and the teams put out more policies than any other Oppositions since 1993. We've done that in the areas such as negative gearing, cigarette taxation, in the areas like sharing economy, competition policy, family violence. We've been willing to put a great deal of policy on the table, for precisely this reason. We want to engage the policy debate, and make sure that Australians have a real choice in economic leadership when it comes to the July 2nd poll. 

GRATTAN: You have put lot of policies out, and some of it have been quite bold like the negative gearing policy. How do you firewall yourself against scare campaigns because in elections people just hear the generalities. There's such a barrage of materials, they don't pour over the fine print. They get an impression, and it can be a scary one.

LEIGH: The challenge, as always, is to fight fear campaigns with facts, and to be absolutely clear about what the facts are on the ground. Malcolm Turnbull is running a ferocious fear campaign, for example on Labor's changes on negative gearing and capital gains tax, changes that are aimed to tilt the playing field in favour of new home owners and away from property speculators. But his scare campaign fails on the facts. When more radical changes than those Labor is proposing were implemented in mid 1980s, they didn't cause nationwide rent to rise. You saw changes in particular markets due to particular circumstances of those markets, but the policy didn't have the effect the PM was suggesting. 

GRATTAN: The Government accuses Labor of class war politics, and isn't there indeed an element of this, because you taunt Malcolm Turnbull from time to time about his richness?

LEIGH: Whenever I hear Scott Morrison and Malcolm Turnbull talking about class warfare I'm remind by - I think it's Warren Buffett - 'There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning'. And it's not hard to imagine middle income Australians would feel that they're under fire, when they've seen their earning either stagnate, or rise much more slowly than those at the top. The inequality gap in Australia is a real concern for any Australians. In the past generation, the top 1 percent share has doubled. We've seen twice as many private planes, three times as many private helicopters, Porsche sales going through the roof. Yet 1 in 5 Australians can't afford a holiday away from home once a year. It feels to many as though the traditional egalitarian Australia is slipping out of reach. And yes, we need to do something about that.  

GRATTAN: So we do have a class society?

LEIGH: Economic gaps are widening and middle and lower income Australians has gotten a raw deal under this government. They got a raw deal under this budget. They have a right to say to those at the top of the distribution – let’s face it, any politician in Australia is close or in the top 1% - that you need to make sure you are governing for all Australians. 

GRATTAN: Now Andrew Leigh you are an inveterate book writer. Do you feel a book coming on this campaign?

LEIGH: I don't write campaign books Michelle. Policy is my thing...

GRATTAN: Well it's a policy rich campaign?

LEIGH: Look, I'm interested in a range of policy issues, from inequality, to social capital, to randomised policy trials, to international affairs. But campaigns are a time to be out there on the hustings; working in my own seat and in marginal seats across the country. So I suspect I'll be a little too busy to put a pen to paper between now and July 2nd. 

GRATTAN: Thank you very much for talking with us today, and that's all for the Conversations budget forecast. 


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