ABC NEWS RADIO
WEDNESDAY, 16 OCTOBER 2019
SUBJECTS: IMF slashing Australia’s economic growth outlook, Deloitte highlighting homegrown concerns for the economy.
ALI CREW: Labor has pounced on the IMF report saying it shows that the Morrison government's policy settings are not right for the economy. Labor MP Andrew Leigh joins us now. Good morning.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: Good morning, Ali. How are you?
CREW: I'm well, thank you. Now is it really fair to blame the government for these forecasts from the IMF? After all, the body makes clear that it's part of a broader slowdown that we're seeing across the globe.
LEIGH: Deloitte made clear in its report on Monday that a lot of the problems in the Australian economy are homegrown. We have a higher unemployment rate now than the United States or Britain or Germany or New Zealand. They have unemployment rates around 4 per cent, ours is sitting above 5 per cent. We don't have the sort of investment in the economy that is so sorely needed at the moment. When I hear Paul Fletcher saying ‘we've got a plan, we're sticking to the plan’ it sounds a whole lot like pig headedness to me, an unwillingness to adapt to the global economic circumstances and to the problems in the domestic economy.
CREW: But the government says it's delivered tax cuts and record infrastructure spending. So aren't they doing everything they can in the current climate to boost the economy?
LEIGH: We called on the government to bring forward stage two of the tax cuts. We thought that would have stimulatory impact on the economy. We've called on them to bring forward infrastructure projects. We believe that there are opportunities now to bring forward the budget update. If the government holds back its budget update until mid-December, it'll be the longest gap between a budget and a budget update that we've seen. But all in all Ali, you've got a government which is just utterly complacent in the face of really troubling economic circumstances. We've got retail spending in the doldrums. We've got wages flatlining. We've got investment intentions down, uncertainty up. When the gold price is high and bond yields are low, you know there's concerns in the global economy and you know that's a time when you need fiscal policy to be going with monetary policy. Otherwise it's like swimming with one arm, leaving monetary policy to do all of the hard work and having fiscal policy do absolutely nothing.
CREW: The prime minister says that more people in Australia are employed as a share of Australia's total population than at any other time in the nation's history. So how can this be the case, given the bleak state of affairs that you're forecasting?
LEIGH: What we need if you want pressure on wages is to get that unemployment rate down. When the unemployment rate comes down to 4 per cent, as the Reserve Bank believes it can, then you start to get the upward pressure on wages which households most sorely need. Right now, our unemployment rate is too high. We don't have a retail sector that said that's humming. Retailer Nick Scali has just said that customer traffic has been down 10 to 15 per cent in the September quarter, and you've got a whole lot of retailers who are really pointing to the problems in the economy. On a per person basis, consumption hasn't grown at all over the last year. And so when the government crows about what's happening to the Australian economy, they're talking about an aggregate figure Ali, which has driven to a large extent by population growth. Break it down on a per person basis, ask what's happened to living standards, and the fact is they're not moving. Under this government, you've got living standards flatlining. The reality for many Australian households is they're doing it tough, that they're finding it hard to make ends meet, they're seeing their energy prices go up due to the lack of an energy policy from this government, and they're not getting the leadership either on the national stage or the international stage that Australians deserve for their government.
CREW: The IMF has backed in the Reserve Bank's move to cut interest rates to record levels. Do you think the central bank has the right to slash the cash rate so low?
LEIGH: Of course it does. The IMF also said ‘monetary policy cannot be the only game in town, and should be coupled with fiscal support’. They've directly pointed out that you need fiscal support at a time like this. As the interest rate goes down towards zero, yes you can do unconventional monetary policy, but it becomes harder and harder for the Reserve Bank to support the economy. That's why they need the government to put in place fiscal policy. We also need a government that's going to engage with some of the big challenges going on the global economy. So when Scott Morrison shakes a fist at globalisation, as he did at his Lowy Institute talk, he's missing an opportunity for Australia to shape global organisations in our interests - to go in and fix the problems of the World Trade Organisation dispute system, to ensure that we have more of a say in these key international institutions at a time when there's a real vacuum in leadership.
CREW: Well Andrew Leigh, we'll have to leave it there, but thanks for your time this morning.
LEIGH: Always a pleasure, Ali.
Authorised by Paul Erickson, ALP, Canberra.