2CC CANBERRA DRIVE
THURSDAY, 23 JULY 2020
SUBJECTS: Budget deficit; deferred Parliamentary sitting.
LEON DELANEY, HOST: Joining me now the Shadow Assistant Minister for the Treasury, Andrew Leigh. Good afternoon.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: Good afternoon, Leon.
DELANEY: Thanks for joining me once again. We're making a habit of this, but of course this is the biggest story of the day, isn't it? So we really do need to look at this in some detail. As I said, it could have been worse, couldn’t it?
LEIGH: It certainly could have been more comprehensive, and what we've got from the Government is barely a plan. It's just really a press release. We don't have the usual forecasts that you would expect to be getting, this year and the three following years. We've just got next year's figures being reported by the Government. And I don't get a sense from reading through this document as to what the Government plans to do to bring unemployment down, which has got to be the top policy priority in Australia right now. There's a lot of talk about where the figures are, both in economic terms and in fiscal terms, but there's very little in the way of a road map to get us out.
DELANEY: It was never meant to be a budget or even a mini budget, it is just an economic statement. Isn't it basically just an accounting of where we are and where we're expecting to be in the next few months?
LEIGH: Don't forget that we ought to be having this statement much earlier than we've actually gotten it - it's been delayed twice. The Government ought to have brought down something that was far more comprehensive. You look at the white paper on full employment brought down at the end of World War Two, where the government at that stage makes the decision that while Australia was in a crisis, it's important to build back better - to focus on in that case expanding housing as we came out of the recovery and moving to full employment. I don't get that sense of ambition out of today's statement. They seem all caught in the weeds, but they're not even giving us a full accounting of the numbers. And they're certainly not pointing a path to a stronger Australia in which we've got full employment, and in which we've succeeded in growing our way out of the crisis.
DELANEY: Sure, but it was my understanding that today's announcement was all about the numbers, not necessarily about a more detailed plan. Obviously, a more detailed plan would be good, but the sands are constantly shifting, aren’t they? It's hard to make a detailed plan.
LEIGH: We've got neither. We don't have the numbers we would normally get, the four year numbers, and we don't have the detailed plan. I think you do need to have a plan in this situation, Leon, albeit it needs to be one that's flexible. But you need to have a very clear goal and there needs to be informed by the details of this downturn. So previous downturns, you've got mostly loss of male jobs - men lost two-thirds of the jobs in the 1980s and 1990s recessions. But this time round, it's women who've borne the brunt of the job losses. So you need a plan to think about how you'd invest in those caring jobs in order to bring down unemployment. We would also need to be thinking about how we extend sick leave across the economy. I'm just not sure we want to go back to a situation in which most of Australia's cafes and restaurants are being staffed by casuals who have a financial interest in coming to work if they're unwell. That's a model that I think really needs to be carefully looked at.
DELANEY: Josh Frydenberg did certainly talk about jobs, and of course identified the number of jobs that have been lost and the number of workers who have seen their hours cut. But he's claiming that without the Government’s support measures, the figures would have been a lot worse. Those measures have been helpful, haven’t they?
LEIGH: They've been critical. When the Government first came into the crisis, Scott Morrison said that he didn't believe in ‘extreme fiscal responses’ and he rejected the idea of a wage subsidy scheme. Labor pushed him very strongly to introduce one, pointing out that many other countries around the world had put in place wide subsidy schemes in order to maintain that connection between firms and employees. The Government eventually implemented JobKeeper, and that is the main programme that's sustaining employment at the moment. But it's needs to be better targeted. Even after September, the Government has a fairly crude targeting approach, which will just see it go to two levels of payments. Other countries are directly subsidising people's wages, and the Government here is saying “our data systems are bad, we don't know what people earn”, so we have to have to have this this crude approach that they're going with through JobKeeper. That means it's more expensive, which means we end up with more debt. Net debt was a tenth of national income when the Government came to office, they took it to a fifth. Now it's going to above a third. So they're steadily increasing the net debt as a share of national income.
DELANEY: Yeah, but when we look at net debt as a share of gross domestic product, it's still incredibly low compared to a lot of other countries, isn’t it?
LEIGH: We’re lower than other countries, but we're a lot higher than the Coalition said we'd be. I mean, don't forget, they promised before they came to office, the budget would be in surplus in their first year and every year after that-
DELANEY: But everybody knows that the circumstances have changed, and nobody reasonably is going to say “oh, look, you said you were going to be in surplus and you haven't achieved it”. Nobody’s reasonably going to make that accusation under the current circumstances.
LEIGH: What circumstances changed in 2013? We are talking about a succession of deficits delivered by a party that said that they would have only surplus budgets. So we're talking about the 2014, 2015, 2016, 2017, 2018, 2019 budgets all being deficit budgets. And now we've got a huge rise in the deficit, but let's not pretend that it doesn't come off the back of a significant fiscal deterioration under the Liberals.
DELANEY: All right. Well, obviously the pandemic at the moment I think has some responsibility for current fiscal position. And I know, I take your point that things were going in the wrong direction before. I understand that. But of course, the Coalition Government was charting a course back to surplus over a period of time, and without the interruption of the pandemic they were very close to getting there. Surely you acknowledge that?
LEIGH: Well, this is like somebody's going to Maccas, having as many Big Macs as they can, and then at a certain stage saying “well, I'm going to stop eating now”, having promised that they'd never touch Maccas.
LEIGH: The fact is that they didn’t pursue the fiscal policies they promised up until now, and that's put us in a worse fiscal position than we would otherwise be. We certainly support JobKeeper. As I said before, Labor called for it, but it needs to be more carefully targeted because that way we can make the money go further and we can correct some of the omissions - the fact that it doesn't apply, for example, to short term casuals.
DELANEY: Yes, and these are issues that will remain issues for a lot of people for some time to come, and certainly they’re very worthy of attention. But just back to today's statement again and the projections that have been put forward about the anticipated budget deficit for the current financial year, about the anticipated level of debt as at June 30 next year, which is projected to be $851.9 billion apparently. The bottom line here is that all of these figures are based on what Josh Frydenberg called “what we know at the time”. And of course, that means it's including assumptions that current lock downs and restrictions will gradually be eased and lifted. We've got no guarantee of that, have we?
LEIGH: Forecasts are always going to be uncertain. That's the very nature of economic forecasting. But it's very unusual to bring down an update of this kind and simply look one year out. Businesses need certainty, individuals need certainty. People need to be able to plan, and Josh Frydenberg owes it to the Australian people to provide the same level of fiscal projections that would normally be provided in this kind of statement. He’s provided less than half of the usual projections that you would get, and that means that people are less able to plan for the future than they’d be able to otherwise.
DELANEY: There was also advice from Treasury apparently ahead of that JobKeeper announcement that going to a two tiered payment system would be both complicated and potentially unfair. And yet that's the path the Government has chosen to pursue anyway. Do you think it's unfair the way it has been structured?
LEIGH: I think it's important to target the payments to subsidise people's wages. I think if you're in a situation in which somebody is working one day a week, they’ve been used to getting $100 a week. and then suddenly having their wage go to $750 a week is not necessary at a time when others, somebody who's full time casual but only been with their employer for 11 months has been told they get nothing at all. You can target this much more carefully. You can taper it down much more fairly, and we know that this is not going to be the V shaped recovery that the Government's been talking about. At worst, we're looking like an L. At best, we're looking like a Nike-shaped swoosh. But we're certainly not coming back as fast as we went down into a crisis.
DELANEY: There's also concern that's been expressed by Chartered Accountants Australia and New Zealand, who said that the new eligibility rules for JobKeeper mean that if businesses are yoyoing back and forth between viability, they'll drop out of being eligible because the new test requires consecutive quarters of having reduced income.
LEIGH: Yes, that's right, and certainly there'll be firms that are missing out. And also, I don’t get a sense from the current update that the Government is looking systematically across the economy and thinking about how coronavirus is going to reshape the economy in the long term. It's very clear this notion of ‘snap back’ simply isn't going to apply. We're going to have quite a different economy - probably less international tourism, probably less close face-to-face interaction. So thinking systematically about what the economy needs is really important right now, and that’s some of the sort of thinking that's occurring within think tanks around Australia, but that I would have hoped we would have seen from the Government today.
DELANEY: Now, of course, there's been a lot of discussion about the Government's decision to abandon the scheduled parliamentary sitting days and only return to Parliament later towards the end of August. What do you think of Rex Patrick's suggestion that parliamentarians are perfectly capable of attending parliament and therefore should be docked $1,000 a day that they don't turn up?
LEIGH: Rex certainly gets the extra pay when he comes down here. Us Canberra MPs just do our job regularly, and we're here the entire time. Parliament ought to be sitting. We need that additional scrutiny, and I think it wouldn't have been beyond the wit of the Parliament to find a way of ensuring that we've got the proper scrutiny on behalf of Australians that the Government needs right now. Now we can socially distance more, we can have fewer people in the chamber, but that engagement is really critical. Labor wrote to the Speaker of the House and the President of the Senate, saying that we needed to make sure that we had alternatives there and I'm pleased to say that they've taken up that suggestion, that they're looking into ways of ensuring that we've got the proper scrutiny that we really need at a time in which we've got unprecedented levels of debt.
DELANEY: Indeed. Thanks very much for your time today.
LEIGH: Thank you, Leon.
Authorised by Paul Erickson, ALP, Canberra.