TICKY WITH FULLERTON – SKY NEWS
THURSDAY, 28 SEPTEMBER 2017
SUBJECTS: New book Choosing Openness, trade and foreign investment, energy policy, Malcolm Turnbull’s tax cuts for millionaires and multinationals, Labor’s fairer tax plan, migration, inequality.
TICKY FULLERTON, PRESENTER: Well it's all very interesting timing for our first chat with Shadow Assistant Treasurer Andrew Leigh, who is launching a new book for the Lowy Institute called Choosing Openness, why global engagement is best for Australia. In a former life Andrew Leigh was also a professor of economics at the Australian National University, so what does he make of the state that Australia and the world is in? I spoke with him earlier.
Andrew Leigh it's great to get you there. Now this is not the first book you've written, you're making the case for openness in trade, migration, investment in this populist world.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Well it is a world in which people are encouraging a hunkering down, in which we're seeing a rise of right-wing populism not just in the United States, Austria, Germany, Denmark, the Netherlands but indeed in our own country. And part of that harks back to the notion that for most of human history, we did live in very small groups of about 150 or so, where being distrustful of outsiders was a good survival strategy. The trouble is that now engaging with outsiders is actually the best path to prosperity and i'm making the case in Choosing Openness that if we have the right social programs to support engagement with the world, then Australia can benefit through trade, migration and investment.
FULLERTON: So what does the new globalisation agenda look like? It's been the incentivisation through free trade and through investment of the big end of town and business, which actually do get the returns to go out and create this growth, which might shoot yourself in the foot.
LEIGH: Well that's absolutely right. Policies certainly have to adapt to changes in each of these flows. Take migration, for example. We've moved from a world in which most migration was permanent, to one in which temporary migration is far more common. We operate a try-before-you-buy policy with a surprisingly large share of our new migrants. In investment, increasingly we're seeing investment from large multi-national firms with there's questions about them paying their fair share of tax, and so the tax system ties right in to openness. With trade, we've got a world now that's gone nearly a generation without a proper multilateral trade deal, and in which increasingly these preferential deals are focusing on non-trade issues such as intellectual property. I argue in Choosing Openness for a sort of back to the knitting approach in which we really think about how to bring down the barriers to trade.
FULLERTON: OK well let's focus on trade there for a minute. I'll put to you one sector - energy - which we're struggling with here in Australia. Now, one of the things that underpinned jobs in America and did make America greater than it would have been otherwise was Barack Obama's America First policy over all the shale gas revolution. That was quite protectionist.
LEIGH: The United States, with its huge manufacturing sector, saw much less ofa clamour for its gas exports, and I think that's why when we saw our gas companies set up, they immediately looked to an export market with a higher manufacturing share than our own.
FULLERTON: Except that there was Manufacturing Australia - they were jumping up and down saying don't do this, there was James Fazzino who I spoken to earlier this week, Incitec Pivot who were putting $1 billion into Louisiana instead - the protectionist thing on the shale side seemed to work for America, and now indeed, we are dealing with the consequences there and Western Australia domestic reserve looks pretty good with hindsight.
LEIGH: It does indeed. I've got a long enough memory to remember a year ago when Labor was proposing a national interest test for new gas developments. We were accused of protectionism by the Coalition. Things have turned around then particularly given we have this bizarre situation where Australian gas is being sold more cheaply to places like Japan than it is into our domestic markets.
FULLERTON: But how does this fit with your openness philosophy is what I'm asking.
LEIGH: There's nothing in openness Ticky that says you ought to have a situation in which due to companies wanting to set up long-term relationship, their exporting cheaper than they are selling into the domestic market. It is perfectly appropriate for us to have this national interest test. That is consistent with a policy that wants Australia that wants to support openness. If you have a sort-of scorched earth approach to these things, then people rightly ask 'what am I getting out of globalisation?'. Just as on the investment side, we need appropriate check around national security, over the fairness of tax paying that I mentioned before, over making sure that people aren't buying Australian apartments in sought-after areas and then leaving them empty. All of these things are put forward in book Choosing Openness to support globalisation.
FULLERTON: You make the point about foreign investment in Australia, that Australians are less open to foreign investment that other parts of the world. But I'd also put to you that there's now a change in many Western world countries, particularly about some of the biggest state-owned companies from places like China, against particularly the control of supply chains in terms of foreign investment, And is this another case of us having to be a little savvy looking forward?
LEIGH: We absolutely ought to be savvy, but I'm simply reporting in Choosing Openness that when the OECD looks at regulations around foreign investment, of the 35 countries it ranks, we're ranked the fifth most restrictive. And yet, we're one of the most dependent on foreign capital inflows. We have the fourth largest current account deficit in absolute terms in the world - we're not the fourth biggest economy in the world, as you well know. Foreign investment finances about one-ninth of our investment, so if we were to say 'no more foreign investment for Australia', the average household would either have to spend $4,500 less, or else we'd have to take one-ninth fewer roads, one-ninth fewer solar farms, one-ninth fewer buildings.
LEIGH: We'd miss out on many of the many benefits that foreign investment brings.
FULLERTON: You argue that the key to openness is being more sharing throughout the whole of the economy. Now, in a way, this is what Donald Trump is trying to do. This is what he's been doing by trying to return jobs to the rust belt belt because globalisation has bizarrely created sections where, for instance, you know, the white working male in the rust belt, they can't move as easily even their father could have done. And indeed the white male in America is dying earlier than his father, so these are things Donald Trump, through his protectionist policies, is aiming to address. How do you come back on that one?
LEIGH: You talked about some really worrying trends - the rise in inequality in the United States is certainly one of the factors that fuelled right-wing populism, but you need policies which don't take away health care away from millions of people, don't give away tax cuts to the top end, and don't cut away social supports from those who need them most. Because I'm a progressive, I support openness as a way of raising living standards, but because I support openness then I believe you need that that progressive social safety net to help those who are hurt by globalisation, who are working in industries that compete with traded sectors, in industries where there might be a greater than average share migrants coming in. We need to make sure we share those benefits.
FULLERTON: What about tax reform? We have just heard from Donald Trump overnight, now he's looking at giving tax cuts not to the top, but to middle America. He's also looking at reducing company taxes which has been very much supported by the Business Council over here, and you know, it's been put to you guys a lot of times, but Chris Bowen, Shadow Treasurer, also agreed that lowering company taxes does actually flow through to workers.
LEIGH: It's early days. That Trump tax plan has only just come out but the independent analysis I've seen suggests that it would benefit the top end far more than it would it would benefit the middle. We've opposed a cut in the company tax rate for big business as an Australian Labor Party because we believe at a time when we've seen an unprecedented blowout in debt, half a trillion dollars worth of debt now for Australia, increased by thousands of dollars for the typical household, we just can't afford to be giving a tax cut to the top end of town. On the personal income side, you've got both major parties saying we need to raise tax to reign in the deficit. Labor is saying it is appropriate to do that for the richest two per cent. The Coalition is saying 'no, let's raise taxes on everyone more than $20,000'. And they are two very different visions. Our side think better grounded on the story of rising inequality over recent years, and the gains that the economy is delivered disproportionately towards the top.
FULLERTON: Andrew, what do you make of Jeremy Corbyn's speech overnight which was, you know, a series of massive changes to the British economy. What do you think about how he is now representing the mainstream - what do you think five years of a Corbyn government would deliver for Britain?
LEIGH: I think Jeremy Corbyn is focused on inequality, but I think he you'd do better on the openness front. He had traditionally been a sceptic of Britain engaging with the world, whereas when I look at the success story of Britain it seems to come to a large extent from its willingness to make globalisation work for the British people. Bu again, you've got to make sure that you have got a better education system the more engaged you are with the world. Trade benefits those at the top on average a little more than those at the bottom, particularly workers in the manufacturing sector. If you don't have strong policies to bring everyone along, then in some sense your globalisation plan is going to be a sham. You need to do it not just for fairness reasons, but because you want to make sure that you keep together that political compact, and that was the genius of Whitlam and Hawke and Keating in making sure that the social safety net was strengthened as the tariff walls came down.
FULLERTON: Okay. Briefly, Andrew, just your comments on how the Government is going. Is it having a bit of better week, on the front foot on energy and also with the budget deficit coming down a bit?
LEIGH: We've seen a lot of talk on energy, but we've seen the Government unwilling to pull the trigger, and I'm worried that the decisions that they are unwilling to make on energy really could put Australian households and businesses in worse place. We've got to make sure that we have got a Government that is committed to reducing emissions, creating renewables jobs, and putting downward pressure on power prices.
FULLERTON: And how is the Renewable Energy Target going to help?
LEIGH: We know from the Government's own Chief Scientist that having a Clean Energy Target puts downward pressure on power prices and emissions. But under the Coalition, we've seen both rising. That's not good for Australia, and not good for the world either.
FULLERTON: Alright, Andrew Leigh thank you very much for coming in and talking about the book and other things.