2GB MONEY NEWS
TUESDAY, 7 MAY 2019
Subjects: Reserve Bank decision, Labor’s plan to crack down on multinational tax avoidance, climate change.
ROSS GREENWOOD: I thought I'd just bring here somebody who's really good with his time here on the program. That is the Shadow Assistant Treasurer Andrew Leigh, who's on the line right now. Andrew, many thanks for your time.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Pleasure, Ross. Great to be with you.
GREENWOOD: All right. I want to start there with the Reserve Bank and this decision to keep rates on hold and where it might go. Wages has been a big issue in this election campaign and clearly many Australians right now are feeling the pressure of not having had a wages increase yet their costs, their household bills, even now their supermarket prices are starting to rise. So your side of politics has said you want a living wage. The question is whether Australia can afford that living wage, as you've described it in the election campaign.
LEIGH: Ross, I think the question is whether we can afford to have wages growth still stuck in the doldrums. Wages growth under this Government has been lower every quarter than in any quarter under its predecessor. We've seen wage growth at 1.9 per cent since the 2013 election. Even in the global financial crisis wage growth didn't drop below 2.9 per cent. That matters because, as the adage goes, my spending is your income and your spending is my income. What doesn't go into workers’ wallets doesn't go back into the economy. One of the reasons we've seen this flat-lining of retail sales, the fall off in new car sales, has been that wages have been been stuck in the slow lane.
GREENWOOD: Isn’t the real reason why that hasn't happened, the spending on cars, the spending in a range of different retail areas - isn’t that because house prices have fallen on the east coast of Australia and people don't feel so confident to borrow to buy a car or to borrow to renovate their house if their house prices coming down in value? It’s partly wages, I do get that. But you know, the problem is if you suddenly say ‘right, we want higher wages’, somebody's got to pay it. It's not the government that pays it. It's the employer and the employer themselves has got to have the money to be able to pay those wage increases.
LEIGH: Well it’s a question as to whether you want a virtuous circle or a vicious cycle. In a race to the bottom, we keep on cutting wages and then that cuts spending and then we spiral downwards. In a virtuous cycle, people get pay rises. They put that back into the economy and that's good for everyone. You look at experts like Callam Pickering, who says that the retail sector continues to come under intense pressure from persistently low wage growth. We've heard this from National Australia Bank, from Deloitte, from the Commonwealth Bank, from the Reserve Bank itself being concerned about the flatlining of wages. We think it's appropriate to boost penalty rates because the cut to penalty rates was a cut out of the retail sales sector, as well as being a cut out of some of the budgets of the most vulnerable Australians. Labor wants to make sure labour hire is used back in its traditional approach of filling temporary vacancies rather than pushing down wages and conditions. We want to make sure that it's possible for people who've been casuals for many years to have the ability to apply for permanency from their employers. All of those things will make a difference to getting wage growth going back up again.
GREENWOOD: Okay. I get all of that, but we've got to have a bigger pie for people to have bigger wages. And what worries me is maybe the pie is not growing so fast and this is not about consumer spending, this is about confidence. This is about the confidence of business to invest, of property investors to invest. I mean it really comes down to a situation, you can't keep leaning on government and relying on government for the handouts, for pay increases or for subsidies. Whatever it might be, you’ve actually got to have business and entrepreneurs taking the punt, taking the risks that create the employment and ultimately the taxes for the government.
LEIGH: You've hit the nail on the head, Ross. You've got to make sure you've got an economy that doesn't just work for big monopoly firms, but also for startups. A new study published recently found that the start up rate in Australia had fallen from 15 per cent a decade ago to now 9 per cent. That means we need to do more for small businesses. Businesses large and small will face the same corporate tax rates whoever wins the election, but if Labor wins they'll get the Australian Investment Guarantee, which will allow more rapid write-off of new business investments. We'll ensure that multinationals pay their fair share, which doesn't just put more money back into the government coffers, but also puts Aussie businesses on a level playing field with tax dodging multinationals.
GREENWOOD: I'll tell you what, I'll come back to that very shortly. But I wanted to pick you up on one thing - you talked earlier about the about the monopolistic large companies as compared with the start ups. The problem is, isn't it, that it's those large companies really - I know small business employs overall more people, but you really want to make certain that the big companies don't suddenly start shedding workers. You know, you're already seeing it with the banks. It's happening right now by the thousands of workers. Your big supermarkets there employ sort of tens of thousands of people, each of them. I mean, you really do want to make certain that those big companies are also competitive simply so that they're not gobbled up by international competitors.
LEIGH: I don't think there's anything anti-business about saying that bigger firms should face competition. We need an ecosystem that encourages scrappy startups to grow and to take on the big end of town. So we'll be boosting growth right across the economy. Part of the way will do that too, Ross, is by providing stable leadership. I speak to a lot of businesses large and small and they say that the endless chopping and changing of leaders from Abbott to Turnbull to Morrison has sapped confidence in their business. As Shadow Assistant Treasurer, I've held that job right throughout our time in opposition. But I’ve faced off against almost half a dozen coalition counterparts during that time. That's not good for the stability of economic policy making in Australia. The stability that Bill Shorten‘s leadership brings to the Labor team means that we seek government with the most ambitious policy agenda that any opposition has brought to an election in living memory .
GREENWOOD: A couple of things. You and I last time we spoke, I said ‘when will you actually be putting out your negative gearing policy and costings’. You said that would happen before we go to the polls. Problem is the polls have opened, 900,000 people have already voted and yet they haven't got full details and full costings of the Labor policies. Is that a problem, given the fact that more people are pre polling today?
LEIGH: Well, we'll have our costings out well in advance of when the Coalition had theirs out in 2013, which as I recall was the Thursday before polling day-
GREENWOOD: Okay, I get that. But you know what I'm saying is the polls, the booths are open effectively and you've got record numbers of people today pre polling and you'd have to imagine if they don't have all the information from both sides that they're sort of, you know, they're sort of voting in the dark.
LEIGH: We’re also constrained, Ross, by the process we go through the Parliamentary Budget Office. They take as a benchmark the Pre-election Economic and Fiscal Outlook, then they go back and work through and recost and cost policies to ensure that they come to a final bottom line figure. But people will see those those figures well in advance of where the Australian electorate saw them in 2013. And of course in terms of the policy detail, many of our policies have been out for more than a full parliamentary term. The negative gearing, capital gains tax policies were announced before the 2016 election. Our multinational tax measure to crack down on thin capitalisation was announced in 2015. And that's because we've used the six years in opposition not to throw bombs, but to develop policies, to think about what kind of a government we would want to be and if we're fortunate enough to be elected in the 18th of May the ability to hit the ground running, knowing the stakeholders, understanding the issues and with a plan that is as ambitious as the nation deserves.
GREENWOOD: Okay. Let's go to the crackdown on the multinationals. I think this is an important issue that many Australians will be highly sympathetic towards and that is that too many companies invest in this country based out of tax havens and it doesn't matter whether it's Liechtenstein or whether it's Monaco, whether it's the Seychelles or the British Virgin Islands - people sort of know those and understand and recognise that they are tax havens. The point is also that we see right now big multinational organisations are making hundreds of millions or even billions of dollars worth of turnover in Australia, but reporting only miniscule fractions of that amount in tax. It’s not good enough. Australians understand this. Is what you're considering capable of collecting that tax and cracking down on those companies?
LEIGH: We think it is, Ross. We certainly recognise the scourge of tax havens on the global tax system. We've now got two out of five dollars of multinational profits going through tax havens and we know these are places which are used by terrorists and drug runners and extortionists, used by al Qaeda and Mexican drug kingpins. So if you're operating out of a tax haven like the Cayman Islands, you're rubbing shoulders with some pretty unsavoury types - arms dealers and the like. Labor will make sure that we've got more transparency around tax haven dealings. You'll have to disclose those to the sharemarket if you're a large listed firm and to the Australian public if you want to go for a government tender. But we’ll also crack down on specific rorts that are being used. I mentioned that 2015 measure that cracked down on debt shifting. Bill Shorten announced on Sunday another measure which tackles the use of royalty payments, a trick that's been used excessively in our view by billion dollar firms in order to reduce their tax bill in Australia.
GREENWOOD: I think a lot of people would be sympathetic about that. One final one for you and that is climate change and energy policy. This still has not been costed. You've had ministers on your side of politics simply say look it's too hard. I think even Bill Shorten today was saying you know it is actually difficult to try to understand how much this will cost our economy. It's pretty hard you'd imagine because this as you know has been a highly contentious area of politics in Australia for a long time. If we don't know how much something is going to cost and how much it might hurt the economy - notwithstanding it might be a feel good exercise for everybody, its might be vitally important - but the fact is if it can't be costed, we don't know what impact it will have on all of us as an economy. Is it not fair to ask that question and keep asking the question all the way to the election?
LEIGH: Ross, before I entered Parliament, I was an economics professor at the Australian National University and my boss there was Warwick McKibbin, a respected climate economist. He was commissioned sometime back to cost for the Coalition the two different plans of 26 per cent reduction in emissions by 2030 under the Coalition or a 45 per cent reduction under Labor. And in his view there was very little impact on economic growth of either approach. There's big economic gains to tackling climate change. We know that the impact on the insurance industry is massive from these extreme weather events we've been seeing all too often. Just the Townsville floods cost the economy a billion dollars alone and these extreme weather events are costing us $18 billion a year. If we don't act on climate change then the impact on natural resources like the Great Barrier Reef will be massive. We'll end up paying more for our electricity through unstable ageing coal-fired power stations than we would through the kind of clean green technology that many of us have put on our roof.
GREENWOOD: Are you making the parallel here between extreme weather and climate change or is it simply that more people in a more populous world that we live in means that more people are exposed, more infrastructure is exposed when there are extreme weather events?
LEIGH: It's certainly true that having more people living by the coasts drives up the risk. But we have pretty good science evidence suggesting that unchecked climate change increases the frequency and severity of extreme weather events - bushfires, floods, hurricanes and the like. So we need to tackle climate change because of our exposure as Australians. We also need to do it because if we leave off acting then the rest of the world is going to demand that we act and the implications of being the last mover are that you're going to pay way more than if you make a smooth steady transition to decarbonise the economy while seeing strong economic growth.
GREENWOOD: Andrew Leigh is the Shadow Assistant Treasurer and Andrew, I trust we might have another chat before the election date and if we do I’m looking forward to it.
LEIGH: I’d love that.
GREENWOOD: Thanks for your time.
LEIGH: Thank you, Ross.
Authorised by Noah Carroll ALP Canberra.