Between the Abbott Government ditching Labor's scheduled increase to the super contributions of millions of Australians, the scrapping of the mining tax and the introduction of legislation to deregulate universities, it's been a big week in federal politics. I joined Waleed Aly on Radio National's Drive program to talk about the highs and lows:
RADIO NATIONAL DRIVE
WEDNESDAY, 3 SEPTEMBER, 2014
SUBJECT/S: Tony Abbott’s broken promise on superannuation; MRRT; industrial relations changes.
WALEED ALY: Turning now to federal politics and a new battle line has been drawn in federal politics over the frighteningly exciting topic of compulsory superannuation. It is, however, very important and we've been discussing it this week on the program. Part of the federal government's deal to scrap the mining tax is that a planned increase in the employer contribution to your superannuation – from 9 per cent over time to 12 per cent – has been put on hold until 2021. How many years is that? It's a lot of years – seven or so. Labor says Australian workers will be worse off; the government says workers will be better off. So we've got a representative from each side in our regular RN smackdown: Josh Frydenberg, Parliamentary Secretary to the Prime Minister, and Andrew Leigh, Shadow Assistant Treasurer. Gents – welcome.
JOSH FRYDENBERG, PARLIAMENTARY SECRETARY TO THE PRIME MINISTER: Good to be with you, Waleed. Good to be with you, Andrew.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Likewise Josh, and thanks for having us Waleed.
ALY: Josh, I've got to ask you, in the context of a 'budget emergency', this deal that was struck with the Palmer United Party yesterday: how much is that going to cost the budget? Something like $6.5 billion, was it?
FRYDENBERG: It's actually different to that. It's going to save $50 billion over the next 10 years because the mining tax is going to be repealed, and the mining tax had $17 billion of spending attached to it, Waleed. So this is, in fact, a very prudent budgetary measure and its consistent with our election commitments. We're very pleased that we were able to negotiate with the Palmer United Party, as well as the other independents, to repeal it.
ALY: You're talking over 10 years, I'm talking about the budget emergency that means we have to do this over the short term. We're keeping now the Schoolkids Bonus for a number of years – in fact beyond the next election; you've got the Low Income Support Bonus, the Low Income Superannuation Contribution, this is all staying now. By all the calculations I've seen in the press, over the short term this is going to cost $6.5 billion.
FRYDENBERG: We're actually saving $10 billion over the forward estimates, over just the next few years. We are changing the means testing arrangements for the Schoolkids Bonus. But we have to deal with the Senate as it is, not as we wish it would be. We don't believe that the mining tax was a good tax – it was promised to provide $49.5 billion worth of revenue when it was first conceived. It ended up producing just $340 million, so a long way short of the Labor party's projections. As a result, we couldn't continue with the accompanying spending commitments that Labor left us. So we think this is a good outcome, but unfortunately Labor is crying foul because we've done a deal with Clive Palmer.
ALY: Alright, Andrew Leigh I'll come to the substance of the super changes – or non-changes, as the case may be – in a moment. But your assessment of the budgetary impact?
LEIGH: Again blowing out inequality, Waleed. You and I seem to talk about inequality every time we get together for one of these conversations, and the context that we're having that conversation in is that we've seen a big rise in inequality in Australia over the past generation. Billionaires have made out a whole lot better than battlers over the last 30 years. And now we've got a deal which disproportionately benefits a few billionaires at the expense of nine million battlers. Australians have a right to expect that they can retire in dignity, and they've got a right to expect that the Prime Minister will stay true to his pre-election promises not to change superannuation. This is a big adverse change and it seems as though the reflexive instinct of this government at every turn is to back the filthy rich at the expense of the most vulnerable. So when it comes to superannuation, they've scrapped our modest savings which asked people with more than $2 million in their super accounts to pay a little bit more tax, but at the same time they're slugging people earning less than $37,000 a year – two-thirds of whom are women – with higher superannuation taxes. It's a government which is constantly hurting the most vulnerable; a group of ministers who make the Addams Family look like the Brady Bunch.
FRYDENBERG: Come on Waleed, you can't let that one go through to the keeper. The difference between what Labor says and what Labor does needs to be the focus. They keep talking about taking money away from poor people, or taking money away from other Australians. The fact is that if we don't deal with the debt situation then our interest bill will continue to rise. We are already saddling every Australian man, woman and child with $25,000 in debt. Unless we tackle that debt problem, that's going to be the legacy left for the next generations. Part of the motivation for removing this mining tax is about the real savings that will occur for the budget.
ALY: Alright. As a result of these delays which push it out to 2021 – and there's no guarantee that it will even happen then, because there's a long time between now and then - but as a result of that people who were earning even reasonable incomes, say between $100,000 and $150,000 at the moment, will have quite a significant reduction in their retirement income. They'll probably end up in the vicinity of having half the income in retirement that they've had before they retired. The shortfall of that, surely, ends up being made up for in the pension, doesn't it? So I wonder: how much more money are you prepared to put into the pension to make up for this?
FRYDENBERG: Well that doesn't necessarily follow, Waleed. As Bill Shorten himself has said, and I can quote: 'Analysis suggests that over time, superannuation guarantee increases have come out of wages rather than profits.' So what Shorten has said there is that the money has been taken out of the pockets of workers and put into their superannuation.
ALY: Well, it's a delayed pocket but it is still their pocket.
FRYDENBERG: Our view is that they should be allowed the flexibility to decide if they want to put extra money into their superannuation. Which they can do, or they can spend it as a form of disposable income. This is a good outcome, not just for the economy because of the savings that will accrue to the budget over time, but also because we're getting rid of a tax which nobody ever wanted and nobody ever needed.
ALY: Ok, but let's stick to the argument about the workers here and what's in their pockets versus what isn't. If what you say is true, that workers are better off because they will have access to their money straight away, why don't you commit to that principle wholeheartedly and abolish superannuation altogether?
FRYDENBERG: Because you need to get the balance right. Of course we support compulsory super and believe that with the demographic challenge that Australia is facing, it's important to have appropriate retirement savings. But also in this case, what we are encouraging is a policy which is going to put a bit more money into the pockets of the workers and to give them the flexibility, Waleed, if they want to put that money into super on top of the money that automatically goes into compulsory super.
ALY: Which is great if you can afford it. But if you're at the lower end of the income scale, you're not going to be in a position to afford it as easily, and you're going to be taxed higher on that income than you are on what goes into superannuation.
FRYDENBERG: But Waleed, what you're saying is that people can't be allowed to make that decision themselves.
ALY: No, I'm saying you're going to tax them more if they're not in a position to make that decision because they can't necessarily afford it.
FRYDENBERG: Look, we're still committed to compulsory super – absolutely. We believe that we've got the balance right here. I'm sure Labor does too, they just don't like the fact that we've had a political win in keeping our election commitment and doing a deal with Clive.
LEIGH: Waleed, Josh is a lovely bloke. But if you really think he's going to be out there campaigning for the wages of low-paid workers, I've got a bridge you might like to buy. Frankly, the Liberal party has been against universal superannuation at every turn. When we introduced it at 3 per cent – they were against it. When we went to raise that to 9 per cent – they were against it. John Howard came to office promising to increase superannuation from 9 to 12 per cent, and then went back on his word and stopped it. Tony Abbott came to office promising not to stop the increase from 9 to 12 per cent, but then went back on his word. For a 25 year old, this is going to cost them $100,000 in retirement savings. As you've correctly pointed out, this is really just hurting us as a society because someone who doesn't have adequate superannuation savings throughout their life just ends up falling back on the public pursue in the form of the aged pension. The only time the Coalition backs superannuation seems to be when it benefits multi-millionaires. Like the example I mentioned before, where they're looking after people with more than $2 million in their super account. If you're an ordinary Australian, earning less than $37,000, or you're one of nine million people relying on that compulsory contribution of 9 per cent rising to 12 per cent, the Coalition isn't in your corner.
ALY: Andrew Leigh – is the problem here with the delay as a whole concept, or do you accept that it might have been possible to come up with some compromise that would make this affordable, given the disaster that the mining tax was in terms of raising revenue against spending?
LEIGH: Well if you've got a budget emergency, getting rid of a tax seems like a very strange way of dealing with it.
ALY: Not if the tax doesn't raise anything and is committed against the spending that outstrips it, surely?
LEIGH: Well if you're concerned that the mining tax doesn't raise enough revenue, it seems like a strange way to deal with that, to cut the revenue down to zero.
ALY: But getting rid of associated spending is the point, So it was a net negative on the balance sheet and now you've got rid of that negative.
LEIGH: What we did in government was to announce very clearly that we thought Australians needed more retirement savings. All of the independent analysis that has been done suggests that people tend to under-save, and that 9 per cent isn't enough. Josh and I are in the fortunate position of having 15 per cent of our salaries put aside; I don't see any Coalition members of parliament saying that's not right for them. Yet they do seem to think that 9.5 per cent is OK for low paid workers. It's that double standard that really irks me.
ALY: I understand you're being irked, but I'm asking a budgetary question here.
LEIGH: Well budgets are about priorities, Waleed. This is a government which has said 'no' to billions of dollars from carbon pricing, which has said 'no' to $1 billion from taxing multinationals. It is a government that doesn't want to reduce the tax expenditures that go disproportionately to the most affluent on superannuation. It only wants to make savings from the most vulnerable Australians, at a time when we've had a generation in which billionaires have made out a whole lot better than battlers. This is a reflection of every decision this government has made.
FRYDENBERG: We're trying to pay back your debt, Andrew. If you want make crazy analogies, you're prepared to have your staff members have a fair dinkum paid parental leave scheme that you don't want the rest of Australia to have. So don't start extrapolating from the circumstances in your office or my super to the broader public. Because what we're dealing with here is a situation of a huge amount of debt that you left us, a $12 billion annual interest bill just to service that debt, let alone pay back the capital. We have to find ways to do it. To get rid of the mining tax and the associated expenditure is just one way.
LEIGH: Josh, as you know, Australia's debt is amongst the lowest in the developed world. We've got debt that is about one-tenth of our national income. Even if parliament simply rubber stamped the budget, then the budget deficit would be bigger than it was when the government took office, not smaller. That's because they're saying no to so many sources of revenue: the mining tax, the carbon price, leaving open tax loopholes that Labor would have closed.
ALY: Andrew Leigh and Josh Frydenberg are my guests, Waleed Aly with you for Radio National Drive. Andrew Leigh is the Shadow Assistant Treasurer and Josh Frydenberg is Parliamentary Secretary to the Prime Minister. Josh, can I just look at the small business aspect of this? Because I think they're arguing they didn't fare so well in this deal. Three measures that were linked to the mining tax have been dropped. These are the loss carry back provisions for small businesses, as well as accelerated vehicle depreciation and the $6,500 instant asset write-off threshold. Basically, these were advantageous tax treatments that they will now lose. Why is small business losing out of this deal that you've struck with Clive Palmer, in a way that big business doesn't seem to be?
FRYDENBERG: There are two key points here. Firstly, these commitments from Labor were done, again, on the basis of getting revenue out of the mining tax. So if we're going to be fair on things like the Schoolkids Bonus then we've got to be fair in terms of these other savings that were attached to the mining tax which produced no revenue. The second point is that, actually, small business will benefit because there will be more money in the pockets of workers, which can be spent as disposable income. I think that's a very positive story.
ALY: Hang on a second, can I just pick you up on that. Is there any guarantee they'll do that? Can you guarantee to our listeners right now that because they won't be paying as much super, that money that they don't spend is going straight into the pockets of their employees?
FRYDENBERG: We've talked about that. They could have the option of putting that money into super, but they could also have that money available for their spending day-to-day.
ALY: No, the businesses though. The businesses may not give you higher wage increases because they're not paying as much super. They might decide to pocket it and call it profit.
FRYDENBERG: Well I don't think that is the way to look at it. I think the way is to say that people will get that money into their pockets and then they will spend it, which will stimulate jobs and growth in the economy.
ALY: That's only true if that happens though. Can we demonstrate that that's what will happen?
FRYDENBERG: That's how I see it playing out. The fact is Labor saw 400,000 jobs go on their watch out of small business. They recycled the Minister for Small Business – there were half a dozen Ministers for Small Business under Labor. This is a part of our core constituency. By getting rid of the carbon tax, by getting rid of a number of other pieces of regulation, we're actually freeing up small business to do what it does best, which is to employ people and create jobs.
ALY: So let's just finish that point then on small business, and I'm sorry I interrupted you on it, the point about the tax treatments is that small business will be disproportionately affected by these changes. Did you, at any stage, worry that this was one of the consequences of a deal you were striking with someone who runs very, very big businesses?
FRYDENBERG: If you're talking about Clive Palmer, we make our decisions based not on what's good for Clive Palmer, but on what's good for the Australian economy, Waleed. This was a major election commitment for us, and we were always upfront about getting rid of some of the associated expenditure with the mining tax. Because Australia just can't afford to continue to live beyond its means. This is not rhetoric. This is not me, as a Coalition member, being the only one saying it. It's the Parliamentary Budget Office, it's the IMF, it's the OECD, it's the Commission of Audit. These are experts in their field, with no partisan axe to grind, who are saying that somebody needs to take measures to pay back the debt and reduce spending. Labor never will, so we have to do it.
ALY: Alright. Andrew Leigh, it seems to me that the attack Labor is always open to on the mining tax is that it raised nothing because the design of it was really, really poor. Do you accept, now that it is gone and with this attack being one of the best attacks against it, that you got the design wrong at that point? And that if you'd designed it to actually raise some revenue, then it could have been a very different situation?
LEIGH: I don't think it was a perfectly designed tax, Waleed. But I do think that the principle of profits-based mining taxation makes sense. That's not a uniquely Labor perspective – the Minerals Council of Australia put a submission to the Henry Tax Review calling for profits-based taxation; Sarah Palin, when she was governor of Alaska, moved that state on to profits-based minerals taxation. The basic principle is that the world price of commodities is not driven by the ingenuity of our miners. It is, in some sense, their luck to be exporting in a time when the world price is high. So the Australian taxpayer ought to take some share of that good fortune.
ALY: Sure, but so why were there so many loopholes that it ended up raising nothing?
LEIGH: Well, we can certainly debate how the mining tax could have been improved. But that's not what this Coalition government is doing. They're getting rid of the mining tax, and instead we're left with a royalties regime which we know to be inefficient. The problem with royalties is that you're taking a flat dollar amount on every tonne that is exported. We've seen states ramping up those royalty amounts but there are now concerns from the mining companies that if the world price falls, then the royalties they are charged are going to be too high. The benefit of a profits-based tax is that it encourages mining exploration and gets the taxpayer a fair return for the minerals that belong to all of us. So that principle, I think, is a really important economic principle and I've been surprised to see the government walking away from it. The Petroleum Resource Rent Tax was very controversial at the time that Labor introduced it in the 1980s, but now enjoys strong bipartisan support. I think this illustrates the benefits of a profits-based tax over time. And as we move from the construction phase of the mining boom into the production phase and the mining companies' deductions fall, I think you would have seen significantly more revenues flowing through from the mining tax.
FRYDENBERG: I think I've heard it all now, Waleed. We've had Andrew quote Sarah Palin as his inspiration, I've heard it all! But the key point about the happenings of the last two days, Waleed, is that Labor is playing itself into irrelevancy. We have been able to get rid of the carbon tax, we've been able to get through the changes to FoFA, we've been able to implement the Green Army, and now we are repealing the mining tax. All with the support of the independents – not just Clive Palmer, dare I say it, but Bob Day and David Leyonhjelm and John Madigan. These are independents who have supported us in the Senate, and Labor doesn't like the fact that they are sitting on the sidelines and are irrelevant to what is happening now.
ALY: Alright, one more point I want to raise. It's a really interesting development and that is changes to industrial relations law which have now gone through towards the Senate, are now being introduced to the Senate. The idea behind this is to allow for greater flexibility in workplace arrangements: you can strike an individual agreement and the no disadvantage test that applies to that agreement will be met as long as the worker says that they agree, and they are not being disadvantaged by this. My question for you, Josh, is: how does this get around the problem of workers having less power, as individuals, than their employers? Can't they be pressured into saying they're not disadvantaged just as easily as they can be pressured into signing something that disadvantages them?
FRYDENBERG: Waleed, there are already individual flexibility agreements and arrangements within the existing Fair Work industrial relations system. This is something that Labor introduced, and I don't think ensuring a bit more flexibility there in any way makes it more difficult for the worker. It actually benefits the worker because a lot of people just don't want the rigidity of working a nine to five day. They want to take some of their days off on times that suit them, they want to be able to leave early so that they can go and pick their kids up from school. If that works for both the employer and the employee, then that is a good outcome.
ALY: Sure, but the problem is with the way that 'no disadvantage' is assessed. There is one way of doing it, against objective criteria, and there is another way of doing it, where all the employee has to do is say 'I'm not disadvantaged by that'. Surely that can be subject to pressure?
FRYDENBERG: Isn't this a very important philosophical point? Here we are, sitting in Canberra, and you're asking us to regulate every aspect of labour laws, and to dictate the relationship between employer and employee. We have to have some faith in that relationship, and the ability of businesses to work constructively and productively in the best interests of both their employees as well as their customers. That's what this is about. That's why for us, industrial relations is a freedom issue. We don't believe bigger government is better government, and we don't believe we should be inside the workplace of every Australian worker. Rather, we should be allowing employees and employers to get the flexibility that they need.
ALY: Alright, one final thing because I'm late for the news desk, but did you see the front page of the Sydney Morning Herald today, and their use of Comic Sans on the front page?
FRYDENBERG: I missed that one.
ALY: You've got to check that out! Anyway, it has caused a storm, the Sydney Morning Herald has been ridiculed for the decision to put Comic Sans in speech bubbles, and I was just wondering: would either of you, government or opposition, lend support to a bit more Comic Sans? Maybe in government reviews, government reporting – do you think it's an under-used font?
LEIGH: I've always been a bit of a Garamond guy, I'm afraid, Waleed.
FRYDENBERG: I'll defer to the experts on that one, Waleed.
ALY: Who is on your font committee, by the way, Josh?
LEIGH: I've spent far more time than any sensible person should trying to engage with publishers of my books about which font the books should be published in. It turns out they know more about fonts and have stronger views than me.
ALY: Josh – you must know what font Andrew's books are in, you keep quoting him!
FRYDENBERG: I'm waiting for my signed copy.
LEIGH: Waleed, can I just have a brief moment to respond to Josh on industrial relations, because this is a fundamental issue of fairness. It's not just about 'freedom from' but also 'freedom to'. I want an Australia in which workers are free to spend time with their families, knowing that they're not going to be at the beck and call of their employer on an unpredictable shift schedule. I worry, six or seven years on from Workchoices, about a government that seems to be taking us back towards that, and which doesn't seem to have a good sense of how normal people live. When you've got ministers defending the rights of bigots, talking about a link between abortion and breast cancer, having a go at same sex couples, you worry about how much of an understanding they have about how normal people live. And that's my worry in industrial relations.
ALY: Alright, we'll look at the industrial relations changes that are in the offing in the next hour, but gentlemen thank you very much for joining us tonight and I look forward to our next little stoush.
FRYDENBERG: Thanks Waleed.
LEIGH: Thank you gentlemen.
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