2GB MONEY WITH ROSS GREENWOOD
TUESDAY, 4 SEPTEMBER 2018
SUBJECTS: Housing, the Liberals’ civil war over energy, ACCC, Labor’s plans to level the playing field between multinational manufacturers and Australian car retailers.
ROSS GREENWOOD, HOST: Right now, a man is always great with his time - the Shadow Assistant Treasurer Dr Andrew Leigh is on the line right now. Thanks for your time Andrew.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Pleasure, Ross. Great to be with you.
GREENWOOD: Let's go first to that issue of property markets because it could be argued that intervention by regulators and also the actual market conditions themselves has caused the housing market to come off the boil more rapidly than many expected. The question is if you implemented your changes to capital gains tax and or negative gearing over the top of what's already happened, it could really have a more significant impact on the falling property prices which in turn could start to hurt the Australian economy.
LEIGH: You're absolutely right that we don't want to set policies based on where a particular market is a particular time. You've got to think about the long term interests for Australia when you're setting policy and that's absolutely what we did with our capital gains tax and negative gearing policy. We made the judgment that these the tax concessions weren't affordable at a time when debt has doubled. We needed to make sure we're rebalancing the market away from investors and towards first home buyers given that the home ownership rate now is the lowest it's been in six decades. We don't think it's going to have a massive impact on prices and that's because the policy is grandfathered. So if you’re negatively gearing right now an existing property, you'll continue to do that. You've got a particular asset, then you'll pay the current capital gains tax rate tax rate. These policies are prospective. Gradually they'll help rebalance the housing market so first home owners aren't finding themselves beaten out by investors Saturday after Saturday.
GREENWOOD: The interesting part about it is it appears anecdotally to be happening right now. We can see that with mortgage applications that are coming through that there is a greater proportion of first time buyers coming through. What I'm trying to get to is that yes you've got a policy that might have been designed to get more first time buyers into the market, but whether that policy was needed, whether it might have been right for the times two years ago, 18 months ago when you announced it, but whether it's actually right for the times right now. Because some policies as you would be aware could be detrimental to the economy, detrimental to potentially the property markets, which might actually need a boost as distinct from being pulled back even further.
LEIGH: This is about rebalancing the market, Ross. You’re right to say that we've seen a small fall in the investor share in the market, but it's still the case that first home buyers are really struggling to get in. You don't want to have a different policy for Perth than you have Canberra, despite the fact that you've got very different conditions in those markets - pretty big falls and the Perth property market over recent years have been driven in large part by the tailing off of the construction phase of the mining boom. What we want to do with these policies is make sure that the great Aussie dream of home ownership is within the grasp for a family of modest incomes. I think about the teacher and police officer came up to me at a street stall and said ‘Andrew, we’d love to be able to buy a house but we're not sure how we can afford to make the mortgage payments if we want one of us to take a bit of time off when we have kids’. Families are having to choose between buying a house and having kids! That’s not the Australian way.
GREENWOOD: Alright, so that's an interesting observation of that and of course it's different in different cities where prices are different and of course many public servants are paid very similar amounts around the country. I'll take you to a couple of issues. One is Scott Morrison and energy policy. He said yesterday for the first time that he would consider a Royal Commission into energy companies. He's also admitted he was wrong initially to oppose a Royal Commission into banks and basically said he underestimated the need for people to be able to tell their stories about the impact of the behaviour of banks on their businesses and on individuals. Now the question as to whether the Labor Party, which had supported a Royal Commission into banks, would also consider supporting a Royal Commission into the energy sector.
LEIGH: We're certainly open to it, Ross. But the big challenge at the moment is the government doesn't have an energy policy. They've ripped themselves apart over this issue of climate and energy, just as they did in 2009. It’s sad to see the second-largest political party in Australia unable to deal with the biggest environmental challenge of our age and the biggest cost pressure facing households.
GREENWOOD: It is also fair to say, just to jump in there, that Kevin Rudd did of course tear up some of the climate policy of Julia Gillard previously in the lead up to the 2007 federal election. I mean that was a pretty key one as well.
LEIGH: Well, I'm not sure what you have in mind there. We were pretty consistent over our support for market based mechanisms, as indeed conservatives have been in Britain and New Zealand where they’ve managed to get this right. It’s just in America and Australia where the right wing party has really decided that it wants to run full on scare campaigns, taking a Tea Party style approach, rather than getting sensible decisions in place, allowing investors to make decisions for the long term, getting that investment in renewables which is going to drive down power prices. We need more wind, more solar - we don't need this investment strike. There are jobs there and there is great benefit to households if we get that investment in renewables.
GREENWOOD: So okay, so we go to that level, but you do want a royal commission or some sort of inquiry into the big four accounting firms in Australia – Deloitte, Ernst and Young, KPMG and GWC. Just explain why you think there needs to be some form of inquiry and you're suggesting here the ACCC does this. Why do you want to look at the structure of those big four accounting firms?
LEIGH: Well, we're certainly not going as far as a royal commission. We’ve simply written to the ACCC, just asking them to investigate some of the issues that have been raised by the parliamentary committee about meetings that have taken place between the big four accounting firms. We know this is a fairly concentrated market, we know elsewhere there’s been conversations over the role of audit and accounting - that’s a conversation that’s playing out in Britain and the United States. We just want to make sure that the regulator is on top of it. So we're not jumping the gun here, we're just making sure that the regulator is carefully looking at the competitive issues as indeed the ACCC does in a whole host of markets across Australia.
GREENWOOD: Put your finger on this for me, Andrew - what is the issue here? I mean, there are four accounting firms you know - are you questioning whether they cooperate between each other? Are you questioning whether they do their jobs properly? Are there any signs or evidence that there is any collusion or any malpractice from any of these organisations?
LEIGH: Well, Ross, there is evidence given to Julian Hill's committee about meetings taking place between officials of the big four accounting firms. We just want to make sure that that's all above board. We're not pointing any fingers here. We’re just making sure that the regulator is looking into these issues that were raised in a parliamentary committee
GREENWOOD: Okay, one area which has been the subject of significant investigation the last little, while in particular by the Australian Securities and Investments Commission and also the ACCC, has been the area of automotive dealers, car dealers. So in this particular case, there's been issues about credit contracts, insurance contracts, the way in which they operate and also the way in which they charge for servicing as well. Now what you're suggesting is you want somehow a different playing field as compared with overseas multinationals that make cars and the companies here in Australia that sell the cars. Just explain how that would work.
LEIGH: Here’s the problem. We've got a small number of multinational car manufacturers - all our cars are manufactured offshore - who are able to basically hold dealers over a barrel when it comes to negotiating agreements. Car dealing is a pretty competitive industry - a lot of mum and dad businesses, a lot of small businesses. They're finding themselves pushed around by big multinational manufacturers on things like the length of the agreement term that they have, sudden termination, and the handling of complaints. So consumers will come in with a car problem that clearly needs to go back to the manufacturer and the manufacturers are pushing back on the dealers. The competition watchdog has looked into this, concluded that there are problems. I announced today at the Australian Automotive Dealers Association conference that a Shorten Labor Government would implement an industry specific code, like we have for horticulture and wheat ports. We believe that the case has been made for an industry specific code to make sure dealers get a fair deal and the drivers get a fair deal.
GREENWOOD: So there you go. I’ve got to say, always great to have you on the program and it's a good conversation to continue to have and we will continue to have it into the future as well. The Shadow Assistant Treasurer Dr Andrew Leigh. And I should make an apology there – it wasn't 2007, it was 2013 when Kevin Rudd announced it would terminate the fixed price carbon tax. Andrew, as always, great to have you on the program.
LEIGH: Likewise, Ross. Thank you.
Authorised by Noah Carroll, ALP, Canberra.