RADIO NATIONAL BREAKFAST
WEDNESDAY, 16 DECEMBER 201
SUBJECT/S: Government fails its own economic test with MYEFO.
ALISON CARABINE: Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning Alison, how are you?
CARABINE: Very well, thank you. Scott Morrison is trying to be positive; you are an economist so with the deficit increasing to $37 billion and the return to surplus pushed out by yet another year, how much trouble are we actually in here?
LEIGH: Alison, economists wouldn't argue that debt and deficit is the number one test of economic management. Most economists would talk about things like growth or inequality or jobs. But the Coalition did say that this was their signal test of economic management from opposition. They said they'd have the budget in surplus in their first year and every year after that. On that call, they've spectacularly failed. We can see that peak debt was forecast, when the Government came to office, to peak at 13 per cent of national income but now it is forecast to peak at nearly 19 per cent of national income. When the Government came to office, the budget was forecast to be back in surplus in the next fiscal year; now it is deficits as far as the eye can see.
CARIBINE: But Andrew Leigh, the Government can't fast-track a surplus because the economic recovery is too fragile. If the Government rushed back to surplus, wouldn't that endanger growth and jobs? You can't have it both ways here.
LEIGH: Well Alison, the really critical thing is how you make the savings. If you look at Labor's proposals on things like multinational taxation, high-end superannuation concessions and cigarette excise, these are carefully calibrated not to hit growth or increase inequality. By contrast, there's cuts in this budget update which even Tony Abbott and Joe Hockey wouldn't have considered. The cutting of job-seeker services, mature aged employment programs, the cutting of childcare programs, cuts to the federal police's international deployments, cuts to the Australian Early Development Census, cuts to Medicare, cuts to family day care, and increasing compliance on welfare recipients. All of these are harsher cuts than Tony Abbott and Joe Hockey considered and they will have an adverse impact on growth.
CARIBINE: Well considering the adverse impact on growth and your concerns about how they will impact people, Labor has been criticising these cuts – in particular the winding back of bulk-billing for pathology and diagnostic imaging, the cuts to aged care and so forth. Does that mean you will block them all in the Senate?
LEIGH: The Budget update has just come down yesterday, Alison, so we'll –
CARIBINE: But you're already criticising those savings so will you block them in the Senate? Will you walk the walk as well as talk the talk?
LEIGH: We've got our proper processes and we'll be working through them in the course of the coming days. But one measure that really made me raise an eyebrow was the Government's suggestion, having said at the last Budget that they could raise $1.7 billion in getting job-seekers to better report their income, now saying they can raise another $2 billion. As my colleague Jenny Macklin pointed out yesterday, a claim that they can raise that much money ought to have been tested by the facts already. We ought to already have evidence that the Government's program is working and if not, then really this is just hot air. It's an extraordinary amount of money to be claiming that you can save as a result of better compliance with reporting to Centrelink.
CARIBINE: So this is the welfare crackdown that you're referring to, which is the biggest single savings measure in MYEFO? You're saying that the Government has already announced this measure and therefore the $2 billion or so it expects to raise is simply not there – is that your point?
LEIGH: They're claiming to raise an extraordinary amount of money. Everyone believes that people ought not be claiming money to which they're not entitled. Anyone who rorts the system should have to repay the money. But the integrity measures are effectively relying on saying we can add $3.7 billion to the budget bottom line based on getting welfare recipients to better report their income or punishing them if they haven't. We ought to have evidence already that the $1.7 billion crackdown announced at the last budget is already adding millions of dollars to the budget bottom line over recent months.
[SOUND OF CHILD SHOUTING]
CARIBINE: Is that one of your boys in the background being punished, Andrew Leigh?
LEIGH: It is a household with three boys, Alison, so it's a full and busy time here in the mornings!
CARIBINE: That's obvious to all our listeners, but we'll press on.
LEIGH: Sorry about that.
CARIBINE: That's not a problem at all. Now, it's obvious the budget needs structural reform – that could mean major spending cuts or, more likely, serious tax reform. I know Labor has policies in the mix, you've already referenced them, such as reining in superannuation tax concessions, but that won't be enough alone to repair the budget. Wouldn't it be in the national interest for Labor to do what some Labor state premiers are doing and adopt the appetite for reform that characterised some previous Labor governments, rather than just blocking and sniping from the sidelines?
LEIGH: Alison, we are a reform-hungry opposition. Bill Shorten and our team have announced over 50 policies over the course of this year, and the tax policies we've announced came out both earlier than you would expect an opposition to release them, and were more substantial. I can't for the life of me figure out why the Government doesn't want to follow Labor's proposals on multinational debt shifting. We're suggesting closing loopholes, which makes economic sense and it makes budgetary sense. Really critically, it doesn't have that hit on growth you're going to get if you take money away from people using childcare, from people using healthcare, from so many of these other measures. The cuts to the public service that have been announced will again have an adverse impact on growth. So budget repair always has to be done with an eye to the macro economy because that's the big picture.
CARIBINE: Ok, we'll have to leave it there. Andrew Leigh, thank you for your time.
LEIGH: Thanks Alison.
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