Andrew Leigh

E&OE TRANSCRIPT

RADIO INTERVIEW

2GB 

TUESDAY, 23 JANUARY 2018

SUBJECTS: Malcolm Turnbull’s giveaway to the big end of town, Scott Morrison’s plans to tax middle Australia, US tax cuts, company tax cuts.

ROSS GREENWOOD: Let’s go now to Dr Andrew Leigh, Shadow Assistant Treasurer. Thanks for your time, Andrew.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Absolute pleasure, Ross.

GREENWOOD: It’s a great debating point and, as I say, the difference of opinion is one that Australians have got to make their mind up to as they head towards the next election. In regards to those jobs created last year – 400,000 jobs created in Australia, most of those full time jobs, overwhelmingly full time jobs – that surely, no matter which political party you’re in, has got to be good news for Australian families.

LEIGH: Ross, I’d always welcome improvement in the employment numbers. But the key question here is should we give tax cuts to some of the biggest companies in Australia? What would that do for growth? So let’s unpack the Treasurer’s “big pie” policy. His own analysis, brought down on the eve of the budget where they announced this corporate tax cut, said that if you funded it by raising income tax on middle Australia – which is what he plans to do – it would grow the economy by 0.1 per cent. So imagine that I told you I have a great plan for growing a pie. I’m going to grow the pie by one one-thousandth. You’d say ‘I’m not sure I can actually see that, Andrew. When I stare at the edge of the crusts, they don’t seem to have gotten very much bigger.’ But that’s what Scott Morrison’s own analysis says is the impact of his $65 billion give away to the top end of town. Labor instead believes that we ought to be giving a better deal to middle Australia. We won’t support Scott Morrison’s attempt to raise taxes on everyone earning from $21,000 to $87,000. We don’t think that at a time when wage growth has been stagnant and corporate Australia is setting profit records that the right thing to be doing is raising taxes on middle income households and lowering the impact on big corporations.

GREENWOOD: Right, I’m not going to argue for him – he can do that for himself – but the truth is it would appear as though both Scott Morrison and the Prime Minister are very much prepared to deliver not only company tax cuts, which as we point out big companies would over the next nine years and as you point out that’s $65 billion again is over the next ten years time, but the fact is they seem also determined to deliver tax cuts to middle income Australians. Because otherwise bracket creep, which is something that we’re critical of on this program, would ultimately gobble up those peoples’ income as they get into higher tax brackets and therefore that’s one of the reasons why you ultimately get the budget back into surplus. Both sides of politics have got to somehow find a way to balance the budget.

LEIGH: Well Ross, I’m not sure how you can say they’re committed to lowering taxes on middle income Australians. The one thing that they have in legislation before the parliament is an increase in taxes on middle Australia. I mean, it’s a bit like the guy standing at the counter, saying ‘I’m really committed to losing weight’ and you say ‘you just ordered the double cheese burger’ and he says ‘yeah yeah yeah but I’m really committed to losing weight in the long term’. The fact is-

GREENWOOD: So how is it, you say though – just one thing, to pick you up on that – how do you say though that they’re committed to raising taxes on middle income Australians? I’m trying to work out where that comes from. I can’t see where that happens?

LEIGH: They’ve committed to increasing the Medicare levy by 0.5 per cent on people earning from $21,000 to $87,000. That was in the last budget. Bill Shorten very clearly said Labor won’t support that. We are willing to see that levy increase for the top end, but we don’t believe it should increase for low and middle income Australians. Meanwhile, we don’t believe that we ought to have the expiry of the temporary deficit levy on those earning more than $180,000. We believe that the top rate that prevailed under the first couple of years of the Abbott Government is appropriate to continue at a time when we’re seeing debt hit record levels. Australia, like the United States, has a big challenge with debt. We don’t believe it’s an appropriate or fair fiscal thing to say that we ought to be cutting taxes on the top end of town while increasing taxes on middle income Australians.

GREENWOOD: But then we go to another aspect of this, which is really if we look at it, the company taxes raised in Australia $81 billion – these are numbers I put to the Treasurer last night, so I can put them to you as well. As for individuals and others and withholding taxes, $188 billion. So the total taxes collected is around $300 billion a year and you can see the overwhelming, the largest proportion of that is from individual tax payers. So that again goes back to the argument that individuals need the tax break, but really what the individuals need is a job because surely the job is more important than the tax cut.

LEIGH: Look, absolutely. I think it’s important to make sure that we have ongoing employment growth. Indeed, if Scott Morrison was being honest, he would also admit that the employment numbers he’s crowing about occurred in an environment in which large companies in Australia face a 30 per cent corporate rate. Companies also choose to invest and create jobs based on the quality of the infrastructure. That’s why we need superfast broadband, why we need a great education system with needs based funding and why need to make sure that every kid that has the smarts to get to university is able to go there. In a world of driverless cars, in which Amazon is threatening retail jobs and artificial intelligence is growing in the service sector, we’ve got to have a redoubled effort in the education system. In an Australia in which we’ve got significant challenges of traffic congestion, we’ve got to be doing better in the infrastructure space. These are things that will increase productivity and, in the clichéd language of the Treasurer, will grow the pie.

GREENWOOD: But it is also true and I'm sure that you'd agree with this that it is not Government that can create or should create the employment to get a large number of people into jobs. It's actually the private sector that needs to be employing. So the question is, where is the incentive for the private sector to go and employ, put more people on to try and earn more profit because if there's not the profit incentive out there you don't get the jobs to follow and you don't necessarily get the wages growth as well.

LEIGH: As I said before, we've had a good year of investment and creating some of those jobs and that has occurred under a 30 per cent corporate rate for large companies. But we need to make sure that we've got that environment that leads to sustained growth. We are a country which is towards the lower end of our tax burden across the advanced countries but we also have a rising debt burden. The increase in the debt burden means that you have to look very carefully at everyone who is saying we ought to give $65 billion to some of the largest companies in Australia. Labor's view is that if we are giving tax relief to anyone it should be low and middle income households. Scott Morrison's view is they should pay more tax so big corporate Australia can pay less.

GREENWOOD: Okay so then if those lower and middle income Australians actually get the tax breaks that you're talking about, the question is, does that make Australia a more productive country? Does that make the pie grow faster? Does it make it grow bigger?

LEIGH: Look absolutely. The lower the tax burden is, the more incentive there is to go to work - that's economics 101. We need to make sure that we're not increasing taxes on average workers and cutting them on the top end of town.

GREENWOOD: But you don't give some incentive to companies, Andrew, surely then where is the incentive to employ? The workers might have the lower taxes and they're looking for the jobs and they have the incentive to work and you're quite right about that I couldn't agree more about that. But then you've got to have the incentive on the other side for businesses to employ, surely?

LEIGH: Ross, you have to look at the size of these effects. I'm not making up this modelling about 0.1 per cent, that's there on the Treasury website for any of your listeners to go and check. The Government's own expectation is that if you cut the corporate rate from 30 per cent to 25 per cent for big firms, then in the 2030s you will have a growth dividend of 0.1 per cent. Now 0.1 per cent as you know, isn't zero but it's as close as you can get to it. So the Government's own numbers suggest that the growth dividend just isn't there in any tangible sense. I'm not sure how they can justify busting the budget, following Donald Trump over the fiscal cliff like lemmings at a time when Australia's debt is as large as it has been in decades.

GREENWOOD: Final one for you, we do know that wages have been very stagnant in Australia. This is one of the reasons why it is really a tough time in many households right now even though grocery prices have been flat or have fallen, we do know that wages have been flat, you've had electricity prices, you've had health insurance premiums all through the roof. Now, the forecast from Treasury that has gone through the mid-year budget update in December last year showed an expectation of wages to grow by three and three quarter per cent, the following year four and three quarter per cent, the following year by five and a quarter per cent. Now these are big numbers for wages that are rising. These are numbers that have come out of the Treasury, do you believe that those numbers are sustainable, that they are forecast because they would also be a part of the reason why the Government would be forecasting a surplus in that year 2021?

LEIGH: You've got to say they are optimistic forecasts don't you, Ross? You look at these numbers, you look at the way in which say wages in the US have been tracking, wages in Europe, wages in Australia. We haven't seen that flowing through to worker pay packets. It's particularly an issue for young Australians who are facing that double whammy of having higher education costs if they're paying for TAFE training or university and then also the rising mortgage bill. House prices in big cities are going through the roof and many young Australians are feeling that that dream of buying a home of their own is slipping out of reach.

GREENWOOD: Just one final one before I let you go, and that is this, if say for example a company were to choose to make an investment say not in Australia but the United States or parts of Europe because energy prices were lower because maybe the corporate tax rate was lower. The questions is that we would not even recognise that they were jobs lost, they were simply an investment opportunity lost to Australia. Is that something as you as the Shadow Assistant Treasurer are cognisant of, to make Australia an attractive place for not only Australian companies to invest but also for multinationals to come here and put their money and to create jobs?

LEIGH: Look, absolutely. I recently wrote a Lowy Institute/Penguin book called 'Choosing Openness' which is making the case for foreign investment, trade and migration. So I'm acutely aware that a lot of the investment in Australia comes from overseas and that has underpinned our prosperity. But the attraction for Australia isn't simply on the tax front. This new IMF report warns of a “race to the bottom” in taxes. Investment is also driven by the quality of our infrastructure, the quality of our institutions, it's having a bit of stability in the political system. You can say what you like about Labor but we have been consistent in our values, stable in our polices, clear in what we intend to do. Bill Shorten’s opposition has got more policy out there than any opposition for decades. We've done that for the simple reason that not only voters but investors have a right to know exactly what the alternative government of Australia would do.

GREENWOOD: And that's the reason why we've had this debate here on the program over the last couple of nights, we'll put it across to our listeners now. Shadow Assistant Treasurer, Andrew Leigh always great to have you on the program, Andrew, and we appreciate your time this evening.

LEIGH: Likewise, thanks Ross.

ENDS