FRIDAY, 18 OCTOBER 2019
Subjects: The IMF downgrading Australia’s growth forecast; the Liberals mismanaging the economy; unemployment; ACT infrastructure plan; Labor declaring a climate emergency; the Liberals failing to act on climate change.
LEON DELANEY, HOST: Joining me in the studio now a very special guest - Andrew Leigh, Member for Fenner and Shadow Assistant Minister for Treasury and Charities. Good afternoon.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: Good afternoon Leon. Great to be here in your brand-new studio.
DELANEY: Well, I was just asking you before why you wanted to come and visit today, and you said straight up ‘I just wanted to see the new place of business’. And I thought ‘well, you know you could have come on the grand opening on Monday’ but you weren't allowed to leave the Parliament, unfortunately.
LEIGH: We get locked up in the big house, I'm afraid. But it still has that new studio smell, which is your listeners are missing out on right now.
LEIGH: And a beautiful view of another fabulous Canberra afternoon.
DELANEY: It is indeed. You missed out on the tea and biccies on Monday of course, but nevertheless we've got a very fine glass of water for you.
DELANEY: I hope that's okay. The International Monetary Fund has this week downgraded Australia's economic growth forecasts and there has been some concern about the state of the economy for quite some time. There are a lot of alarm bells ringing, even though we're still just slightly ahead of the curve. We're still managing to hang onto that unbroken run of economic growth, but only by a slender thread. So, are we about to encounter serious economic difficulties?
LEIGH: The boffins of the fund are saying to the Government that they don't believe the forecasts that were brought down in budget earlier this year. They share the view of Deloitte, which has recently said that it doesn't believe the Government will hit its growth forecasts, and the Reserve Bank's concerns which have it now lowering rates to the lowest level we've ever seen. When interest rates are at three quarters of a per cent, that's some pretty bright lights flashing. And yet the Government's not doing this sort of fiscal policy that you would expect in those circumstances. When you've only got monetary policy supporting growth, it's like someone's swimming with one arm, Leon. Every serious economist right now is calling on the Government to bring forward infrastructure projects, to bring forward the budget update. When the Government brought through their tax cuts, we said ‘let's do the stage two tax cuts sooner to support demand’. Right now, you've got consumer spending per person basically flat lining. Nick Scali’s reported some downgraded results, a whole bunch of retailers are worried that they're going to go to the wall at the moment. So, we do need to do more to support the economy.
DELANEY: This week's unemployment figures showed a slight, very slight improvement. So, are we still in trouble with jobs, or is this ship more or less steady in that respect?
LEIGH: Our unemployment figures sat above five per cent through the period this Government's been in office. That contrasts with the 4 per cent that you have in New Zealand, in Britain, the United States and Germany. Four per cent unemployment wouldn't just mean that hundreds of thousands more Aussie should have jobs. It would also mean we'd start to get some upward pressure on wages, which is so sorely needed at a time when wage growth has been the slowest on record. We need to make sure that we're more ambitious about unemployment, and I worry that the Government is saying to itself ‘well, 5 per cent is it all right for Australia’. We can do a whole lot better than that, and that would mean particularly more jobs for people with less education, for Indigenous Australians, for people with disabilities. They're often the last to get hired. So, you get the unemployment rate down to 4 per cent and you not only boost productivity, but you also have an egalitarian benefit.
DELANEY: Yeah well, generally speaking, 5 per cent unemployment was considered to be more or less you know full employment, because there's always some turnover with people transitioning. But that's not really the consensus anymore, is it? We're looking now at a lower rate being more desirable.
LEIGH: You've hit the nail on the head. The Reserve Bank reckons that when you get unemployment rate down to 4 per cent, you'll start to get wages growth and inflation coming back into the target band. And while your comment reflects recent experience Leon, if you go back to 1960s we had unemployment sitting comfortably around 2 per cent. So, there's no reason why we can't be a whole lot more ambitious than the 5 per cent unemployment the Government seems to reckon is good enough.
DELANEY: There was a report this week showing that for people that are looking for low skilled or entry level positions there are fewer and fewer of those positions as work becomes more and more complex in the high tech age. That's increasingly a problem, isn’t it?
LEIGH: A fascinating little study. They went through and they looked at job ads and found that in 2006, 22 per cent of jobs were available for people with no qualifications and no experience. Now it's only 10 per cent of jobs that are available to someone who's just starting out without post school qualifications. So, the labour market is moving against people with less skills. I think that also illustrates the importance of making sure that Newstart is a liveable amount. Many people are on Newstart for years, not months, and Labor's been urging the Government to consider raising Newstart, which would not only be good for equity but would also pump that money straight back into the economy. People on Newstart Leon, as you well know, are spending the lot. So, it's going into stores a time when retail sales are languishing. A boost to Newstart would be a boost to the economy.
DELANEY: It certainly would. But the Government is reluctant to do that for a couple of reasons. Some say it's ideological. One of the reasons they put forward though is they say they want to preserve what is currently only a very small projected budget surplus but soon to be, if the projections remain on track, soon to be an actual budget surplus. They want to preserve that surplus in the event that there is a significant economic downturn in the near future. And looking at the IMF report and looking at all other reports, that's a real possibility, isn't it?
LEIGH: There's no point keeping your powder dry when the guns are blazing. You need to actually be using that fiscal firepower to support the economy. The longer the Government's sits out, the more the risk is to the economy. And the reason we got through the global financial crisis without a recession, one of the very few countries to do so, was that we acted speedily. We actually acted ahead of the shock to the Australian economy, because we saw what was coming. Our Labor Government, the Rudd Government, stepped in at that time to do what was necessary. But if you leave it too late, then a whole lot of people lose their jobs.
DELANEY: So, I don't think there's any argument that that stimulus really did do the job it was intended to do. It was effective, it helped the economy remain in growth and not go into recession. But obviously there were big problems with that stimulus package too in the execution, where you know the insulation program had so many serious problems, including young people dying in installing insulation. You've got to be very careful about what the Government actually does, haven't you? About the fields in which it launches these endeavours, whether or not it's got the expertise to manage the things that it seeks to do.
LEIGH: We can always learn from those past mistakes Leon, but Nobel Laureate Joe Stiglitz said it was the best designed stimulus package in the advanced world. We acted early because we realised that there's a delay in infrastructure rolling out. So, if you want a boost in December, you can't write the cheque in December. You have to write the cheque months in advance in order to get the economy going. Just to take some concrete examples here in the ACT, the Barr Government has called on the federal Government to support cycle path projects, to support Stage 2 of light rail, to bring forward their funding for the Monaro Highway work, for the work on the unfortunately-named William Slim Drive, where the Government is putting its funding off past the four-year point. Bring forward that that funding and you can get that immediate stimulus to the economy, and also get the ACT its fair share of infrastructure funding. And we've gotten much less than our population share from this Federal Government.
DELANEY: Coincidentally an insurance company this week named the Monaro Highway as the most dangerous road in Canberra.
LEIGH: The work needs to be done and needs to be done soon. We need to get that that rolling. The more that we can get these long running infrastructure projects in place, the better it is for busting traffic congestion. You mentioned before the ACT Government's infrastructure plan. What I worry is that the Federal Government's planning for infrastructure for the ACT languishes so far behind what the ACT is willing to do. The federal Government is much more concerned about political pork barrelling than about properly funded projects for the ACT. The last big federally funded project for the ACT was the Gillard Government spending money on the Majura Parkway. We haven't seen a project of that scale for the ACT since the Coalition's been in office.
DELANEY: Well on the topic of the ACT infrastructure plan, announced yesterday by Chief Minister Andrew Barr, have you had a good look at it? Do you think it's a good plan?
LEIGH: Absolutely. I think it's the sort of long range planning you want to be looking at. The stage 3 of light rail connecting Belconnen to the city and then extending to Canberra airport through the Russell defence precinct - that sort of master plan gives Canberrans a sense as to what's in store for light rail over the long term. We know there’s sections of cycle paths which don't perfectly connect up and thinking about how to get a full network of cycle paths is really important. An upgrade to a new Canberra Theatre I'm sure would be used by many Canberrans, beloved by school groups who are often filling the existing theatre right to the gills. And a Canberra hospital expansion would be welcome for many of us who've made use of the current facilities.
DELANEY: You know that Alistair Coe has described the plan as being more like a discussion paper than a plan. He said it's just a description of some of the options that are before the territory. It doesn't actually say what the genuine priorities are and what decisions are going to be taken in order to get the infrastructure that Canberra really needs. Obviously, there's a lot of I guess vague suggestions in the infrastructure plan, options rather than firm plans. Do you think Alastair Coe's criticism has any validity at all?
LEIGH: I find it a bit bizarre. If Alistair Coe wants to know the priorities and the order in which light rail will roll out, he might look at the order of stages. So, stage one comes first, second stage comes second-
LEIGH: Stage three comes third, stage four comes fourth. It's not very difficult. That's what the ACT Government has set out, and it's planning for the future. The Canberra Liberals opposed light rail, they opposed the arboretum. They don't want the ACT Government to be out there building things, they don't have the policies to take to the next election. They're just planning on running the same sort of narrow scare campaign that Scott Morrison ran in the last election. Politically maybe that's a clever strategy for them, but in terms of what the ACT needs, that sort of myopic focus on just attacking the Government rather than talking about what you do is deeply destructive.
DELANEY: Where should the new sports stadium be?
LEIGH: I think there's a lot of wisdom around locating sports stadiums in the city. Obviously, there's challenges around the location of the pool at the moment, but to the extent that you can have people using public transport to get to sporting games, that's a whole lot better than kicking up a dust bowl of traffic after the match. I love the Bruce Stadium, but there's limits to what it's able to achieve there.
DELANEY: But the Exhibition Park suggestion?
LEIGH: Look, I think the challenge is that Exhibition Park is a pretty good facility for a whole lot of other activities year-round. Perhaps it can be done. I'm more drawn towards the city plan, but all these options should be worked through.
DELANEY: Now ever since Jacqui Lambie started on her campaign to get the housing debt for Tasmania forgiven by the Commonwealth Government, Andrew Barr has said ‘hang on a minute - we've got a housing debt too, can the Commonwealth Government please forgive our housing debt as well and let us move on and put more money into services where they're needed’. So obviously you're not actually in Government, but if you were would you consider that?
LEIGH: Andrew Barr’s absolutely right to make the point that the Tasmanian housing debt is the same sort of debt that the ACT debt is. There's no economic reason why the federal Government should be forgiving one and not the other. He's also pointed out that the way in which the federal Government responded to the Mr Fluffy scandal was to provide a low interest loan, but now with rates having dropped, that low interest loan is-
DELANEY: Now a high interest loan.
LEIGH: It’s higher interest loan than you’d be able to get on the markets. So, renegotiating that and offering the ACT a better deal-
DELANEY: And ultimately it was the Commonwealth, it was responsible for that in the first place. So why didn't they just cough up the money and not make it a loan?
LEIGH: Well, it was done under the period before self-government-
LEIGH: The approach that the federal Liberal Government took was ‘well, when you got self-government you took over all of the liabilities’. I thought that was a real washing of the hands-
DELANEY: Very much so.
LEIGH: And pretending there was no federal obligation here. The least they could do would be look at the interest rate on that loan.
DELANEY: Now at around about this time, I'm informed there’s supposed to be a big protest taking place right smack bang in the middle of town. Extinction Rebellion. They're causing a lot of controversy; some people support their message but not the method of delivering that message. Others think the protests are fine. Where do you fall on that spectrum?
LEIGH: We've seen a lot of activism from young Canberrans over climate change, frustrated by the fact that Australia's emissions are going up at the same time as the planet is warming. It's not good enough for the federal Government to have emissions rising at a time when the rest of the world is cutting their emissions. So, the climate strike is a response to that. Labor voting in the House of Representatives this week to declare a climate emergency, as the ACT Government has done, is a reflection of that and the Extinction Rebellion marches are a response to it. I think it's important with any of these protests that they aim to build the base of popular support, that they aim to engage more people with the cause and obviously Extinction Rebellion is walking that fine line between engaging people and turning them off the cause. But there's no question whatsoever that this is an absolute emergency and we need a federal Government that’s going to act.
DELANEY: I think you might have almost dodged the question. Should they be protesting in this way?
LEIGH: Everyone has a right to protest. Everyone has an obligation to obey the laws of the land.
DELANEY: Still walking both sides of the street Andrew.
LEIGH: Well Leon, my frustration is not with protesters. My frustration is with one of the very few governments in the world that’s allowing emissions to go up. It's just not that hard to decouple our carbon emissions from economic growth, to have good shared economic growth but to see Australia playing its part to deal with dangerous climate change. Europe is now talking about carbon tariffs, imposing carbon taxes on imports from countries that aren't acting to deal with climate change. And that could hit us if we continue being an absolute recalcitrant when it comes to climate action.
DELANEY: Well, I think we've covered plenty of territory today and we've run well and truly out of time, but thanks very much for dropping in to visit. You have to come back another time.
LEIGH: I'd love that.
DELANEY: Thank you very much. Andrew Leigh, the Federal Member for Fenner and Shadow Assistant Minister for Treasury and Charities on 2CC.