Tax summit must break the impasse - Sky Lunchtime Agenda





SUBJECT/S: Shelved plans for fee deregulation; China-Australia Free Trade Agreement; Reform summit; Superannuation

LAURA JAYES: Dr Andrew Leigh, welcome to the program. Before we get to the Government's reform summit today, can I just ask you about this breaking news this morning where the new Minister for Education, Simon Birmingham, has decided to shelve reform plans on university deregulation. He's not dumping them altogether but at least putting this off to 2017. You'd welcome that kind of stability going forward for universities, wouldn't you?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Laura, I welcome these reforms going on the shelf, but I'd welcome them more going in the bin. What we've got now is the situation where the Government is still committed to the reforms but it just doesn't think it can get them through the Senate. That's a mistake because at a time when technology is racing ahead, we've got to have more and more opportunities for all kids to go to university, whatever backgrounds they come from. A policy that cuts the student contribution from government by one-fifth is the wrong policy to encourage more kids to attend, and to stay at, university.

JAYES: Can I ask you though, there have been some sections of the crossbench – David Leyonhjelm for one – who wanted to go even further than the Government planned to go on this. There are varying degrees of support for these reforms; I know Labor doesn't support them, you've made that abundantly clear. But are you saying from here on in there will be no negotiation on any kind of fee deregulation and university reform is not necessary? Will you go back to the negotiating table with the Government?

LEIGH: Laura, we made an important announcement on higher education a couple of weeks ago. Kim Carr, Amanda Rishworth and Bill Shorten laid out how Labor will focus not just on improving the per-student contribution, but also on reducing the drop-out rate. One in four kids don't finish university and that number is even higher for disadvantaged groups such as kids from low income backgrounds or Indigenous students. Labor's plan is to try and improve the opportunities for university attendance because we know that this is fundamental to dealing with a technology-rich environment. If technology advances and education stagnates, then inequality will get even worse than it is now.

JAYES: I understand the point you make when it comes to the quality of education and people having access to university. But almost across the board, almost every single university Chancellor bar a handful in this country does want some kind of fee deregulation. So why is Labor ignoring that section of the debate?

LEIGH: Laura, I don't think there's any strong consensus within the higher education community over particular reforms right now. You've got many in the sector who welcomed Labor's announcement of providing sustainability of funding into the future. We think that's the right thing to do for Australia and our education policies are of a piece with the innovation policies that Labor has also been rolling out. We've been talking about the importance of an entrepreneur’s year – providing 2,000 students the opportunity to try starting their own businesses after they finish university; entrepreneurial visa classes; coding in schools.  These are just some of the ideas that Labor has been putting on the table to try and make sure that our education, skills and innovation system is ready for a changing economy.

JAYES: Ok, can I ask you about the China-Australia Free Trade Agreement as well. Of course, this has been talked about as crucial for the economy going forward, and in moving from a mining-based, commodity economy to more of a services-based economy. As I read it in the Financial Review this morning, Labor is looking at perhaps moving an amendment to the Migration Act. This is an option that was there all along – can you confirm that this will be the case and Labor will look at amending the Migration Act without any specific reference to the China Free Trade Agreement?

LEIGH: Laura, let's not get ahead of ourselves. The Government is yet to bring its own enabling legislation for the China Free Trade Agreement to the Parliament and –

JAYES: Sorry to interrupt but this legislation isn't actually within the China Free Trade Agreement. This is not the enabling legislation. This is something different altogether.

LEIGH: We've been debating one aspect of the China Free Trade Agreement. Broadly Laura, Labor is strongly supportive of open markets. As you know, I'm an economist and it's almost a condition of entry to the profession that you support free trade. It was Labor that brought down our trade barriers in the past under the Whitlam, Hawke and Keating Governments. Our concern is not with the open markets aspect of this agreement, it's with removing labour market testing from occupations where that previously existed. That oughtn’t to be a major issue of contention between the parties. I was a little surprised when Tony Abbott made it a big issue in the Parliament, and disappointed that Malcolm Turnbull continued wanting to play political games rather than simply saying: there is a problem, Chapter 10 of the agreement does seem to prevent labour market testing and the side letter does seem to open up risks for skills assessments in certain occupations, but they are minor issues in the scheme of things so let's just work constructively with Labor and fix it.

JAYES: Labor could move this amendment to the Migration Act to solve some of these problems – is that a live option?

LEIGH: Certainly we're engaged with the Government. I understand from reports today that Andrew Robb and Penny Wong are speaking. We're very keen, Laura, to ensure that this agreement becomes a reality. Malcolm Turnbull makes a mistake when he chooses to play politics with the China Free Trade Agreement. It was Labor that opened up relations with China under Gough Whitlam; you look at Julia Gillard's time and those many visits to China; the Australia in the Asian Century White Paper; and important work on negotiating this free trade agreement. Let's tackle the issue of labour market testing, get it done and get on with finalising the agreement.

JAYES: Ok, can I now turn to the reform summit. Malcolm Turnbull is behind closed doors right now with a number of key stakeholders. It seems that these stakeholders do have some kind of agreement, going forward, that the tax mix needs to change and the tax system needs to change to embrace a changing economy. There's no clear way forward but it seems from this that superannuation needs to be looked at and so does the GST. Now, Labor has been quite strong in looking at those tax breaks at the higher levels of superannuation and if the government reconsidered that, will you then turn around as a bit of quid pro quo and be open to any changes to the GST with compensation?

LEIGH: Laura, we need a conversation about how to get the tax system right. We've had a deep freeze for the last couple of years on any serious discussion of tax reform. During that period Labor has put ideas on the table around multinational taxation and high-end superannuation, as you've mentioned. I hope the Government will engage in that conversation and Scott Morrison won't continue to be the iceman, but I've been a little worried so far at their unwillingness to engage across the spectrum. On the GST, our view is that this is not what you'd call tax reform – just whacking up the GST by 50 per cent. Also, on the Government's own numbers the GST is not a more efficient tax than income tax, but it's certainly less equitable. So Labor's view is that we wouldn't support raising the GST. When you're worried about sluggish growth, you've got to look to the example of Japan which raised its equivalent of the GST and then saw the economy go into recession.

JAYES: But the Japanese economy was coming off a much lower base than Australia's, you'd have to agree. I just want to quickly ask again on superannuation, the advice to the Coalition about superannuation – as I understand it – was that your plan was largely un-implementable. Now I understand that Labor has gone back and had another look at that but are you going to discuss this further with the Government? Have you had any discussions about superannuation at that higher level, and are you willing to also give some ground when it comes to pensions?

LEIGH: Laura, if there are sensible proposals coming forward from the Government, we'll consider those. But let's be clear: Australian superannuation tax concessions are growing extremely rapidly. They will shortly exceed the value of the aged pension and thereafter, roar ahead. Whereas our pension, according to Allianz Life Insurance, is the most sustainable in the world and will represent about the same share of national income in 2050 as it does now. So if you want to look at where the rapid growth in the budget is, it is in super tax concessions. Labor's plan is certainly implementable but if the Coalition has sensible ideas on high-end superannuation, then let's have a conversation about it. The 1983 Economic Summit that Bob Hawke convened was marked by Hawke's willingness to bring together conservative leaders, business leaders, union officials and come up with common agreement. It was signed on to by everybody, as I recall, except Joh Bjelke-Petersen. But you don't do that by bad-mouthing unions and the Labor party, as Malcolm Turnbull was doing on radio this morning. That's just back to the old frozen, reform-free days of the last two years.

JAYES: Alright, Andrew Leigh, thank you so much for your time.



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