When the year's G20 meetings come to a crescendo this weekend with the Leaders Summit in Brisbane, economic growth is the first item on the agenda. But as I discussed with Linda Mottram on ABC Sydney's 702 mornings show, we need to make sure that the benefits of growth are shared throughout our community. Here's the transcript:
ABC 702 SYDNEY
FRIDAY, 14 NOVEMBER 2014
SUBJECT/S: G20 growth target; inclusive growth; inequality; consumer confidence
LINDA MOTTRAM: Dr Andrew Leigh is a former professor of economics at the Australian National University in Canberra, and he's also the Shadow Assistant Treasurer in the federal Labor Opposition. He joins me this morning, Andrew — good morning. What does the evidence say about the gap between rich and poor in Australia and globally?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Linda. Certainly both in Australia and many developed countries, we've seen a rise in the gap between rich and poor. Over the last generation, incomes have risen three times as fast for the top 10th as they have for the bottom 10th, while the top one per cent have doubled their share of national income. We now have a situation where the wealthiest three Australians have as much wealth as the poorest one million Australians. That matters, of course, because it speaks to who we are as a society, and to the risk of challenging a really great Australian value which is egalitarianism. But it also matters in terms of consumer confidence, because the rich save about a quarter of their income but the poor spend all of their income – and often then some as well if they're taking on credit card debt. So say you take $10 billion and you move it from the poor to the rich, as some of the Government's recent measures have done, that's not only unfair but it actually detracts from retail trade. You're seeing that come out in various consumer sentiment surveys, whether it's the Westpac survey, the NAB survey, the Roy Morgan one. All of them are speaking to this sluggish consumer sentiment and poor retail trade figures.
MOTTRAM: So not surprising to hear Bernie Brooks from Myer reporting what he is reporting, which is that the hit to their profits is coming in the lower socio-economic areas?
LEIGH: That's absolutely right. It speaks to one of the really important insights from economics, which is that how you get a country going is different from how you get a company going. So you'll occasionally hear CEOs say: 'well, the secret to Australian prosperity is to cut wages at the bottom'. That might be quite successful for their own firm, if they were able to implement it. But when we're in an economy, your wages flow into demand for other people's services and so you can end up in a downward spiral if you keep on cutting away at the bottom. I fear that measures such as the $7 GP co-payment and $100,000 degrees, the income support cuts that see a single parent on $60,000 lose one-tenth of their income, all of those measures are chipping away at consumer confidence as well as at the Aussie fair go.
Ahead of the G20 meetings this weekend, the Treasurer has been trumpeting a so-called growth package which will boost Australia's economic performance. But when you get beyond the headlines, there's really nothing to it.
JOE HOCKEY'S FIVE POINT SCAM FOR GROWTH
Joe Hockey needs to front up about how much of his G20 growth package relies on unlegislated and unfair measures which he cannot get through the Parliament.
While Tony Abbott ignores climate change at the G20, Joe Hockey hopes to steal the show by bragging about his new GP Tax, cutting university funding and forcing jobseekers off payments for six months as new ‘growth initiatives’.
Each of the G20 participants have submitted a package of policies which are intended to collectively lift global growth by two per cent over the next five years.
Despite this package being submitted to G20 officials back in September, the Treasurer has refused to release any more details about the specific measures he is relying on to boost economic growth.
The Abbott Government is playing its state government colleagues for fools, forcing them to make the case for tax changes it clearly wants to make.
PREMIER NEWMAN ANOTHER PAWN IN ABBOTT’S GST STEALTH CAMPAIGN
Campbell Newman’s call for more tax revenue to be returned to the states shows Tony Abbott’s $80 billion in cuts must be starting to bite.
In an opinion piece in today’s Australian, Mr Newman has argued that the states and territories will need a greater share of Commonwealth revenue in order to continue providing high quality services like hospitals and schools.
Until the May Budget slashed the Commonwealth’s contribution to the states, they were set to receive substantially more federal funding – over $80 billion more over the next 10 years.
But Treasurer Joe Hockey ripped away this funding in one of the budget’s biggest broken promises, leaving state governments like Mr Newman’s to fend for themselves.
Richard Fidler was kind enough to have me on his 'Conversations' program for a good chat about the role of ideas in politics and how economic thinking can benefit public policy-making. You can listen in to the whole interview at the Radio National website (while you're there, subscribe to the podcast for lots more interesting interviews and ideas!)
The Canberra Times is reporting that up to 250 jobs from the Australian Bureau of Statistics will be moved out of Canberra and sent to Geelong as part of a Victorian Coalition election promise. I joined 666 ABC Canberra to explain why pork-barrelling with public servants is bad news for effective national policymaking. Here's the transcript:
666 ABC CANBERRA
TUESDAY, 11 NOVEMBER 2014
SUBJECT/S: Tony Abbott’s pork-barrelling with public service jobs
PHILIP CLARK: The Government has announced plans that up to 250 public service jobs, this time from the Australian Bureau of Statistics, are to be shifted from Canberra to Geelong. The jobs are going from the Australian Bureau of Statistics which has most of its workforce based in the ACT, and a number of staff there have already been made redundant. There's a new so-called ABS Centre of Excellence for survey functions to be established in Geelong and opened in 2016, and 250 jobs are going to be moved out of Canberra to there to staff it. Andrew Leigh is the Federal Labor Member for Fraser and Shadow Assistant Treasurer, and he's on the line this morning. Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning Philip.
CLARK: Isn't Canberra supposed to be the centre for national bureaucracy?
LEIGH: Well absolutely. The thing that I find really shocking about this decision, Philip, is that it's just so nakedly political. It seems that Tony Abbott has looked over at Denis Napthine and said: 'you're behind in the polls, so here – let me give you 250 Canberra public service jobs to see if that will help out'. The crass arrogance of using public servants as pork-barrelling pawns is terrible for a great national institution. You go around the world and people are in admiration of the Australian Bureau of Statistics. They have led the world in terms of national income accounting, and on a range of metrics they are an excellent outfit. So then to be gutting the organisation, to be taking 250 jobs and just plonking them down the day before the caretaker period starts in Victoria, I find that shocking.
CLARK: Look, there's been a lot of criticisms of cuts to the bureau anyway; it's a vital national resource. After all, if we can't accurately measure what's going on in the economy, we can't make sensible economic decisions. The Australian Bureau of Statistics is far more than counting heads; it's about making sure we've got the information on which to base critical decisions. But does it matter if it's disaggregated in that sense? I mean, we're all connected these days anyway by network systems, so does it matter if the bureau is disaggregated?
LEIGH: This comes down to one of those great 'death of distance' questions, Philip. One of the things that strikes me when talking to people in, say, the technology industry is that they talk about how even the IT sector and Silicon Valley is becoming more concentrated, rather than less. There's a great virtue in proximity – you rub shoulders with people and that serendipity leads to better ideas and to a better functioning system. So good organisations are housing themselves under a single roof, increasingly. If you were a corporation, you wouldn't be willy-nilly taking 250 people and just plonking them on the other side of the country, and the same holds true with the public service.
We're in the final countdown now to the G20 Leaders Summit in Brisbane, so I joined Breaking Politics to talk about what the Abbott Government needs to deliver from this. Here's the transcript:
FAIRFAX BREAKING POLITICS
MONDAY, 10 NOVEMBER 2014
SUBJECT/S: G20 growth target; Multinational profit shifting; China FTA; Renewable energy
CALLUM DENNESS: Joining us now outside his Electoral Office is Andrew Leigh, the Labor member for Fraser in the ACT. Good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Callum, how are you?
DENNESS: Good thanks. Now the G20 is due to kick off this weekend. The Government is promoting this growth target of 2 per cent over the next five years that it hopes the G20 will adopt. Is this an ambitious target? Is it a useful target?
LEIGH: Well I'm certainly all for improving the rate of economic growth in Australia, I wish the Government all the best in that target which is 2 per cent over 5 years, or 0.4 per cent a year. Where I'm troubled though is the sense that the government is missing some of the key issues and running in the wrong direction on others. We know that one of the ways of ensuring that we have sustained economic growth is to tackle climate change with an effective strategy, not to push it off to an expensive strategy like Direct Action. We also know that you can't cut your way to growth and that investing in health and education is absolutely vital for laying the foundations for prosperity. For the Government to suggest that somehow $80 billion worth of cuts to health and education will improve growth has it exactly backwards.
DENNESS: Another of their suggestions for boosting growth is cutting access to the dole. Does this have any economic merit?
LEIGH: So these guys are from the old 'trickle down' school of economics, the idea that the only way of making the poor richer is to first make the rich richer. There's no economic logic in that. We know that people who are on benefits tend to spend all of their incomes while those at the top of the distribution can save about a quarter of their incomes. The latest budget transfers so many billions of dollars from the most vulnerable to the most affluent. In the process it is taking away from consumer spending, which is why consumer confidence is in the doldrums. And ultimately, it's going to have a detrimental impact on growth. We need to get people into jobs, we need to tackle youth unemployment. We need smart, evidence-based approaches for doing that, not old fashioned ideology.
The interim report of the Harper Competition Review had many interesting things to say about what Australia's future competition policy should look like. But one recommendation that isn't on the right track is the suggestion that the Health Minister should give away the power to oversee private health insurance premium prices. Shadow Minister for Health Catherine King and I explain why in this op-ed which was originally published on the Croakey health blog.
Minister should retain veto power over health insurance premiums, Croakey, 7 November
One of the hardest things to do in politics is to stand up for the many against the few. Where the gain is diffuse, but the cost is concentrated, policymakers have to be strong to get the right outcome.
That, in a nutshell, is why it took decades before governments grasped the nettle on tariff cuts and competition policy. In both cases, it took Labor Governments to recognise that consumer interest needs to be put first.
Which brings us to the case of private health insurance. Today, 55 percent of Australians have health insurance. To contain costs and ensure fairness, Labor means-tested the private health insurance rebate, leading Tony Abbott to predict in 2011 that ‘1.6 million people will drop out of private health insurance’. He was wrong. More Australians now have health insurance than ever before.
But we need to keep downward pressure on health insurance costs. With just five health insurers holding 83 per cent of the market, private health is a relatively concentrated market. While some people change insurers each year, inertia and a fear of waiting periods tend to keep people with the same private health provider. For a single person with the most basic level of cover, the average premium is around $1746 a year – a considerable amount for middle-income households.
The Australian Financial Review has just published some pretty explosive evidence of multinational profit shifting by major Australian and international firms. I joined Waleed Aly on Radio National's Drive program to talk about what the government should be doing to tackle this.
RADIO NATIONAL DRIVE
THURSDAY, 6 NOVEMBER 2014
SUBJECT/S: multinational profit shifting
WALEED ALY: Andrew Leigh joins me now, the Shadow Assistant Treasurer. He's been arguing that we've got some problems here and that the government is going the wrong way about trying to deal with them. Thank you very much for joining us, Andrew.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Pleasure, Waleed.
ALY: Let's talk about this scenario, and let me be radical about this and ask a threshold question: is this actually a problem? Because we can try to close tax loopholes but won't that just ultimately drive people or companies to other countries where they can use those loopholes, and then we don't even get the benefit of their employment?
LEIGH: Waleed, I think it's a constant race between lawyers for multinational firms looking to find loopholes and countries looking to close those loopholes. We need to be vigilant as a country to make sure that we're closing those loopholes. I don't think that making sure that people pay their fair share of tax means that they'll ship all their jobs overseas. In fact, that ought to be a free market notion: that everyone pays the same rate of tax. Every time one firm pays less tax, effectively other firms and individuals have to make up the difference in order to support the social services we value.
ALY: The problem we have here is the cracks which exist in laws between states, ultimately. If we had one global tax regime this would be impossible, you simply couldn't do this.
LEIGH: That's right. As a result, what you have is firms wanting to book revenue in low-tax jurisdictions and deductions in high-tax jurisdictions. The tax authorities are seeking to stop them doing that.
ALY: Right. But that needs international cooperation. The G20, I suppose, will take a look at this next week, it's certainly on the agenda. But is there anything Australia can actually do? Because unless everyone is one the same page – it's a bit like the climate change problem – unless everyone cooperates, anything you do ends up being futile.
LEIGH: No, that's not right. We can certainly move to close loopholes in our own tax laws, and that's one of the big things that Wayne Swan and David Bradbury did last year when they put together the biggest ever package of multinational profit shifting reforms. It was so recognised around the world that it won David Bradbury an award for being one of the 50 best tax reformers in 2013. When the Coalition came to office, I'd expected that they'd take that package and build on it. But instead, they took that package and chipped away at it. They gave $1.1 billion of tax breaks back to multinationals by deciding not to proceed with measures, for example, to curtail the use of offshore banking units or to stop multinationals engaging in debt shifting.
The evidence continues to mount up that Australia's Charities and Not-for-profits Commission is doing great work. Surely it's time for the Abbott Government and Kevin Andrews to start paying attention?
USA WANTS A CHARITIES COMMISSION. WHY DOESN'T MR ABBOTT?
The Australian Charities and Not-for-profits Commission has proven to be so successful that charity regulators from across the USA are now looking to replicate it. This is further proof that the Abbott Government has got in wrong in moving to scrap the commission.
One of the commission’s senior executives was recently invited to the United States to tell the National Association of State Charity Officials more about how the regulator’s work is increasing transparency and cutting red tape for not-for-profits.
In particular, the US group is looking at replicating Australia’s national Charities Register to increase accountability and protect donors against scams.
It is also considering the Charity Passport initiative, which allows not-for-profits to report once to the charities commission and then have this information shared with other government agencies.
With new data out showing ACT property prices have started to tumble, it's feeling a bit like 1996 all over again for many Canberra homeowners.
ABBOTT'S CUTS ALREADY HURTING CANBERRA HOMEOWNERS
New property data shows Tony Abbott’s cuts to Canberra are starting to bite, with house prices falling 2.3 per cent in October.
While property prices rose in other capitals, an RP Data report shows the price of Canberra homes fell below the national median.
Joe Hockey joked about driving property prices down before the 2013 election, saying:
“There is a golden rule for real estate in Canberra – you buy Liberal and you sell Labor.”
– Press conference, 31 May 2013
While we all support affordable housing, this is best achieved through smart policies that manage supply, not through massive job losses and collapsing consumer confidence.