Andrew Leigh

HORSE AND SPARROW ECONOMICS

House of Representatives, 17 September 2018

Before they called it trickledown economics, there was a term known as 'horse and sparrow' economics.

The idea of horse and sparrow economics was that, if you want the sparrows to eat better, you just have to feed the horses enough and eventually there'll be enough left on the road for the sparrows.

That is fundamentally the way in which the Abbott-Turnbull-Morrison Government thinks about economic policy. 

Right now Australia needs a pay rise. Real wages have been essentially flat since 2012. Households are struggling to pay the bills. Real net national disposable income per capita, probably our best proxy for living standards in the National Accounts, has barely grown under the Liberals. Last quarter it went backwards.

There's a reason that this motion focuses on the headline GDP number. That is in large part because it's not adjusted for what households get and not adjusted for population growth.

The government crow about the record number of Australians in work. They ought to be honest that the real driver of that is the record number of Australians. Australia has a strong migration program. We've increased the population markedly over recent decades. That's one of the reasons why the aggregate pie has increased. But average compensation for employees grew only 1.6 per cent for the year, meaning incomes aren't keeping up with the cost of living.

We've got company profits growing more than five times as fast as wages in Australia. There's a group of Australians who are enjoying decent pay rises, a group of Australians who saw almost a 10 per cent increase in real incomes in 2017. They are ASX 100 CEOs, who are doing extraordinarily well. If you look at the top 200 wealthiest Australians, their total wealth was up 21 per cent last year. But many Australians are not seeing the benefits of economic growth, and that would continue under the government's own projections. The Parliamentary Budget Office's review of medium-term budget projections points out:

Our distributional analysis highlights that the largest increases in average tax rates occur in the low- to middle-income groups.

Analysis by the Australia Institute found that high-income earners would get 95 per cent of the benefits from stage 3 of the government's income tax plan which disproportionately benefits millionaires and disproportionately benefits men.

The argument that some of those on the other side often run is, 'We have to give outlandish tax cuts to millionaires; otherwise, they'll leave and go elsewhere.' But when the AfrAsia Bank Global Wealth Migration Review looked at the migration of millionaires in the world it found that 10,000 millionaires moved to Australia last year and almost none left. They pointed out that it was the highest net migration of millionaires to any country last year in absolute terms. But if you look at a country like Singapore, with its famous 15 per cent tax rate, it only attracted 1,000 millionaires, one-tenth the number Australia did.

The economic benefit to Australian employment would come from more generous tax cuts to 10 million Australians, and that's Labor's tax plan. Labor are committed to getting wage growth going again. We believe in supporting penalty rates. We believe that unemployment can be lower than it is today. In the event that Australia had the unemployment rate of the United States or Germany, hundreds of thousands more Australians would be in work. We need to make sure the economy is operating in as competitive a manner as possible.

The banking royal commission has uncovered some egregious conduct, yet the now Prime Minister voted against it 26 times. He's presided over the worst wages growth in a generation and a debt blowout. Gross debt now sits at $535 billion, almost double the $280 billion it was when the Liberals came to office. Net debt has almost doubled since the Liberals came to office, and both kinds of debt are growing faster now than they did in the global financial crisis. The previous speaker spoke about the damage done by the early 1990s recession. I share his concern. But why didn't Australia lose 200,000 jobs and 10,000 small businesses in the global financial crisis? It was because of the timely, targeted and temporary fiscal stimulus that Labor put in place.

Under the Liberals, we have the economic numbers that matter going backwards. Inequality is too high and wage growth is too low. We need to make sure that we get away from 'horse and sparrow' and trickle-down economics.

ENDS
 
Authorised by Noah Carroll ALP Canberra.