SKY NEWS, AM AGENDA
MONDAY, 23 JANUARY 2017
SUBJECT/S: Housing affordability; Medicare levy; Visit to refugee camp in Myanmar/Burma
TOM CONNELL: Joining me now is Labor's Shadow Assistant Treasurer, Andrew Leigh. Thanks for your time this morning on the program.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Pleasure, Tom. Happy New Year to you and your viewers.
CONNELL: And you, I hope you enjoyed a nice break before we got back into it all. What a way to start, housing affordability. I know it's something you enjoy talking about. The Government, reportedly the Treasurer is looking at this plan that has been rolled out in the UK, he is sounding out various ideas and it does look like it will be a priority for the Government in 2017. This plan could give billions in loans towards projects or agencies who are trying to build affordable housing, like the CEFC making projects that maybe would not have got finance from banks get the tick, what do you think of this plan?
LEIGH: Tom, housing affordability is a first order issue. The home ownership rate is now the lowest in Australia it has been in 60 years. For young people, the share of them owning their home is way down on where it was just a couple of decades back. You've got to distinguish between a policy which builds a small number of homes at the bottom end of the market and one which could make a difference right across the wide swath of the market. So sure, we should look at innovative financing solutions but let's not pretend that that's going to make it easier for middle Australia to buy a house. Here you need to look at something else the Conservatives have been doing over in the UK. In the 2015 budget the British Conservatives decided to make changes to negative gearing. The British Conservatives, against a scare campaign in which some of the tabloids said it was going to drive down house prices saw through significant changes to negative gearing of the kind that Labor has been proposing in Australia.
CONNELL: Alright, get to that in a moment. But just broadly on this particular lever you talk about the concern in the middle, surely Labor would have concern for the lower end trying to get a house. Is this something you're happy to look at?
LEIGH: With the National Rental Affordability Scheme Labor ensured that through the global financial crisis we didn't just support jobs we also improved the availability of homes in the bottom of the market. We also believe that we need to do more, I'm worried that the Treasurer will come back touting a plan which will really only help a few rather than one that will help many.
CONNELL: OK we'll take that as an open to it at the least in terms of Labor and this particular policy. I know the negative gearing plan that Labor has is out there and the Shadow Treasurer, Chris Bowen, has said it will go unchanged to the next election even though that's quite a way out. What about looking at the other element that happens on this in the US? They own a tax break to own occupiers rather than investors. There still is an element where people can get into the market for their own house, it means you can obviously only have one house where you do that so it's negatively geared on your own house. It's a different way of looking at it, was it looked at all by Labor?
LEIGH: Tom, if you want to think of one American economic policy that almost every sensible economist ought to be repealed it's America's mortgage interest deduction. It's regarded as a policy which locks people into living in particular areas, discourages people moving to find jobs and cost the budget a bomb. The Grattan Institute's estimate for the cost to Australia was $19 billion every year. So if you want a policy that would be guaranteed to take away Australia's triple-A credit rating yet did nothing to significantly improve Australia's economy then this would be it. I was amazed that Michael Sukkar couldn't immediately see that and just rule it out when he was on your program last week.
CONNELL: OK fair enough. And on your own plan finally, do you think it should be something you should be flexible on? I mean if you look at the housing market, it goes through peaks and troughs that in the next year or two before the election if the property market is showing a lot of heat out of it and it needs to be protected somewhat that your plan should be somewhat nimble in that it can be altered in some way?
LEIGH: Tom one of the things I think that Australian politics needs is long-run thinking and clarity from political parties. One of the reasons you're seeing this spate of opinion pieces in Australia's newspapers about Malcolm Turnbull's lack of leadership is that no one really knows what he stands for or where he's going. Labor at the last election put forward a very carefully costed and thought out policy, grandfathered so existing investors weren't affected. I think Chris Bowen and Bill Shorten in signalling that that policy will stay are giving certainty to the market. There's long-term thinking.
CONNELL: There's one person saying certainty and there's another saying that you won't move regardless because the housing market can change so much. We could see huge slump before the next election and you'd still be saying housing affordability is the biggest issue let's clamp down on negative gearing, there has to be some flexibility doesn't there?
LEIGH: Let me give you a macroeconomic policy analogy. Within macroeconomic policy we're thinking about levers that will affect the long-term growth rate and levers that will affect the short-term growth rate. So yes, you want to have your counter-cyclical fiscal policy in order to deal with the ups and downs of the business cycle but then you want to lock in long-term education and infrastructure changes. Tax reform is in that long-term category. You don't want to be judging your tax reform based on what last quarter's growth rate was. You want to be doing it based on carefully calibrated long-term settings. That's the best way for Labor to behave, it's the responsible way for the Coalition to behave if they want to regain any semblance of policy leadership.
CONNELL: Alright, we'll take that as no change. Medicare levy, there is talk this might be increased to pay for health. There's gonna be a bigger gap than there was before, we know it hasn't been paying for Australia's health costs. But with the NDIS it's going to be a much bigger shortfall in future years. What are your thoughts on increasing the levy to help pay for health?
LEIGH: It was increased under Labor in order to help pay for a new component of the healthcare system, the NDIS.
CONNELL: That was never going to pay for all of the NDIS, was it?
LEIGH: No, indeed. That's why the budget papers that year laid out very clearly how the long-term costs of the NDIS would be paid for, through a range of different savings. What people paid was an additional Medicare levy, and what they got was a new pillar of the social security system. What seems to now being floated is the idea that the Coalition will just jack up taxes because they're unable to balance the books, unable to make the hard decisions on making multinationals pay their fair share, unable to rein in the most generous property tax breaks in the world. They can't do tax reform so they're just considering tax increases.
CONNELL: So the health spokesperson yesterday, Catherine King, was saying that “there are better ways to do this." Are you saying simply that Labor won't really countenance increasing the levy?
LEIGH: We don't think it's tax reform. We've spoken a moment ago Tom about changes to the property tax concessions that improve housing affordability. In the multinational tax space we had a plan on the table just 18 months after the 2013 election, in which Labor suggested that we should reign in the concessions that multinationals can get for debt deductions.
CONNELL: Just on the levy then. Is that totally off the table as far as Labor is concerned? Supporting that increase?
LEIGH: We don't think it's sensible reform. We think instead you'd be better to look at changes that actually bring you a productivity gain. Just jacking up taxes doesn't make the economy grow any faster. It's a lazy option frankly, compared to the sort of changes that I’ve talked about, which can actually improve growth at the same time as adding to the budget bottom line.
CONNELL: You've had a trip recently to a Rohingya refugee camp in Myanmar – what was the old Burma – can you tell us briefly about that?
LEIGH: Yes. The Gates Foundation funded a trip organised by 'Save the Children' for a group of six parliamentarians to spend some time in Myanmar meeting with leaders and also visiting some of the aid projects. It's extraordinary Tom, to be at a Rohingya Muslim refugee camp in Burma – just to see the awful conditions in which people are living. Kids with a smile on their face but so little provided in the way of good nutrition, good education – and a government which seems, still, implacably opposed to allowing them to return to the lands from which they were forcibly removed. Burma's dealing with a host of really tough development challenges, and it is valuable to see the impact that overseas aid can make. That old line that "charity begins at home" also has a second part that says "but doesn't end there." These people living on maybe a dollar a day do benefit from getting the help of foreign aid from governments and also from the donations that many of your viewers will themselves make.
CONNELL: Is this a call to Australian citizens? The government? We know the foreign aid budget has been cut several times under Labor and then this government as well. Are you talking about taking in a batch of refugees? What will come out of this thinking?
LEIGH: The foreign aid budget was never cut under Labor. The pace of the increase slowed during the global financial crisis -
CONNELL: The pledge was lessened if you like.
LEIGH: Let's be very clear – if we increase something more slowly, that's not a cut. Under this government the foreign aid budget has been halved. It was headed on a path to go to half a per cent of national income – 50c per $100 – it's now down to less than 20c per $100. So we can do more. We're an affluent country and we ought to be supporting those in the developing world more. But it's also important that Burma steps up to the plate to deal with the plight of the ethnic Rohingya. There's been reports by Human Rights Watch and the International Crisis Group. The risk Tom, is that a community which has largely been peaceful becomes increasingly radicalised through an overreaction by the Burmese government. It's both a security and a humanitarian challenge for them.
CONNELL: So you think it's about them sorting out this problem rather than looking for some sort of resettlement solution?
LEIGH: These are people – in some cases – whose ancestors have been in country for one thousand years, in other cases communities have come in recent generations. There needs to be different settlements for different people. There needs to be an accommodation of the Rohingya into the Burmese polity which there hasn't been in the past. I think that's important for them as a nation, it's important also for Burma's standing in the international community. And we made that point clear during our meetings in Naypyidaw, the national capital.
CONNELL: Very quickly, are you going to be sitting around the Labor policy discussions and say we must increase foreign aid significantly in the lead-up to the next election?
LEIGH: Labor did take an increased foreign aid commitment to the last election under Tanya Plibersek. I know Penny Wong has strong personal commitment to overseas aid, and has indeed visited aid projects since she's taken over the job of shadow foreign minister. The budgetary situation has obviously worsened under the Coalition but Australia needs to play a part in alleviating global poverty.
CONNELL: Andrew Leigh, thanks for your time this morning on the program.
LEIGH: Thank you, Tom.
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