Talking politics and the economy on Capital Hill

This afternoon I spoke with Capital Hill host, Lyndal Curtis, about the unfairness of the Federal Budget and the prospect of more punitive welfare measures under the Coalition. Here's the transcript: 



SUBJECT / S: Joe Hockey’s remarks on leaners; Federal budget and inequality; Welfare and means-testing; Tax reform.

LYNDAL CURTIS: The welfare reform report is not out yet but already the shape of what the government is looking at is becoming clearer. A medium to long-term plan to drastically wind back the number of payments and use what is happening in New Zealand to deliver better targeted help. It comes at a time that the Treasurer has been warning that the system delivers too much, to too many people. Part of the broader conversation he started when he declared the age of entitlement over and started speaking about people who can afford to do so, standing on their own two feet, without the need for government support. Labor has already condemned the action that the government has already taken on payments in the Budget. The Assistance Shadow Treasurer Andrew Leigh joins me now. Andrew Leigh welcome to Capital Hill.


CURTIS: Do you believe that the current welfare system as Joe Hockey says makes payments too broadly available to too many people?

LEIGH: Absolutely not. And it’s not just me saying that. It’s what you see when you look at the international evidence. When you compare Australia to other countries, we're a relatively low-taxing, low-spending nation. Down the end of the spectrum where we would see the US and Mexico, not up the Scandinavian end of the spectrum.

CURTIS: But even economists have criticised the way John Howard broadened the welfare system, increasing family tax benefits to people who might not necessarily, absolutely need that money. 

LEIGH: Well look I have been critical of thing like the Baby Bonus. But I don't see how introducing a wage-replacement parental leave scheme, that gives $50,000 to the most affluent, in any way does this. It seems utterly at odds with what Mr Hockey is arguing. Overall though, ours is the most tightly targeted social spending system in the OECD. Government is about one-third of the Australian economy compared to 40% and 50% in many parts of Europe. 

CURTIS: But when Labor were in government, when your side was in government, you were winding back the scale of the welfare system. You were means testing more, you were looking at putting limits on it. Is it the time really to look at whether people who can afford to stand on their own two feet should do so?

LEIGH: Means testing is absolutely vital to maintaining a strong social safety net in a low-tax, low-spend nation. But when Mr Hockey speaks about half of Australians getting a government payment and says we want to discourage ‘leaners’, I get the sense that he thinks that half of Australians are ‘leaners’. That he has this idea that people like the woman in my electorate who in a wheelchair who relies on public housing, is a leaner. Like my grandfather who left school when he was 14 and worked as a boilermaker, now is a retiree is a leaner. Like the single parent who left abusive relationship with her child, is a leaner. Now that is an outrageous notion Lyndal and its fundamentally at odds with the egalitarianism Australia that I love.

CURTIS: On the question of what the government might do on welfare reform. Kevin Andrews spoke this morning about scaling back the number of payments to possibly four or five or six. Now Ken Henry for the tax reform paper he did for Labor looked at the intersection between the tax and transfer system, and recommended that it be simpler. Is a simpler system going to be a better one?

LEIGH: I'm all for simplification Lyndal. We took a million people out of the tax filing system and that was a terrific reform to do. But I think that most Australians when they hear Kevin Andrews talking about simplification realise that it is probably code for cuts. Cuts like the cuts to the pension that we saw in the budget.

CURTIS: But could you make the system simpler and it may not necessarily mean cuts. Does that actually complexity in the system need to be addressed?

LEIGH: Labor has always open to good ideas where ever they come from. But I think we have to judge this government on its track record. The latest Budget took one dollar in ten out of the wallets of the poorest single parents while putting in place an entitlement parental leave scheme and giving a billion dollars back to multinationals through profit shifting.

CURTIS: But we are also looking to the future on what the government might do on welfare reform.

LEIGH:  Absolutely and I hope that they reject some of the horror measures in this budget. Measures that in an Australia where inequality has grown for a generation, where the top one percent share has doubled and earning are going up much faster for CEO's than cleaners. The idea that then what we need is a government that is going to redistribute from the worst off to the best off is to me pretty shocking. We're a better nation than that Lyndal. We are affluent enough to be decent to single parents, to the unemployed, to people with disabilities, to older Australians. 

CURTIS: We will look at the upper end of the income scale. Bill Shorten your leader raised the prospect of looking at superannuation and there have been calls for the tax regime for super for upper income earners to be looked at. Should Labor also look at negative gearing, which one of your senators raised in the Senate a few weeks ago, and Capital Gains Tax? Things that have been sacred cows in Australian politics for a while.

LEIGH: We'll have a set of policies to take to the next election, but if you want to judge Labor on what we would do to raise revenue, for a start there is the carbon price. Mr Hockey looks like only getting one major measure through the Senate guaranteed, that is the repeal of the carbon price, which will make the Budget around $20 billion worse off. That's an amount of money which is equal to all of the other measures which he says are being blocked at the moment.

CURTIS: But that was money the carbon price raised money but Labor immediately spent that on compensation?

LEIGH: Well we made a tax switch. We increased taxes on pollution and we decreased taxes on work, so you got a double dividend out of that. You got more work and less pollution. The Coalition is going down the opposite road, they've raised income taxes and they are going to cut taxes on pollution, and that is why Australia is one of only two nations in the world backsliding on climate change. The other being Japan which is doing so because of the Fukushima disaster. They have an excuse. We don't.

CURTIS: Is Australian politics ready to have the hard conversations about things like negative gearing?

LEIGH: We have had plenty of hard conversations on tax reform Lyndal. The carbon price was a fundamental tax reform, putting in place the significant changes we did to take people out of the tax-filing system was important. In terms of equity, we also took on superannuation tax concessions. For example we thought that people with more than $2 million in their super balance could afford to pay a little more – because the government assistance that they were getting was bigger than the full rate pension. So we have made those hard calls in government and we will make them again in the policies that we take to the next election.

CURTIS: We will have to leave it there. Andrew Leigh thank you very much for your time.

LEIGH:  Thanks Lyndal.

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