MONDAY, 27 JUNE 2016
SUBJECTS: Labor’s positive plans for the Budget.
PHILIP CLARK, PRESENTER: Andrew Leigh, Member for Fraser, Shadow Assistant Treasurer, is in the studio here with me this morning. Andrew, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Philip. Great to be with you.
CLARK: Last week of the campaign, it will all be over soon. Forecast, or deficit forecasts, or forecast of what the budget is likely to be in ten years or so have to be met with a great deal of scepticism and the Government is getting into Labor for saying that, well, your forecasting a bigger deficit in the near years – you're both saying that by 2020-21 the budget will be back in some sort of surplus. So you're both predicting that that'll arrive at around the same time, but it's just the path to get there is different. But how much stock could we put in these things anyway?
LEIGH: Philip, there are clear differences in the way in which the parties have couched a number of big decisions. In the case of our changes to negative gearing and the capital gains tax discount, existing properties are grandfathered. So these are savings that build over time, like money put in a term deposit. The Coalition's biggest promise – indeed, the biggest promise of the election – is a $50 billion tax cut to the largest companies in Australia. That too, builds over time in its cost to the budget, like a stick of dynamite with a very long fuse. So that's why the Coalition aren't going to be giving you their ten year numbers, Philip, because they are not at all proud of them. They have got a ten year plan to cut company tax, but they're not going to give you the ten year costings around that. I think Canberra households are making long-term decisions. Sending a child to school is a decision for thirteen or fourteen years. Taking on a mortgage is a decision for twenty or thirty years. So voters don't want a government that can only plan for a couple of years in advance.
CLARK: The question really is, though, is whether anybody really believes anything you say about what will happen in ten years’ time because the truth is you don't. We live in very uncertain economic times. We saw on the weekend cataclysmic economic events can occur, and they'll affect markets and therefore they'll affect the economy here – you simply can't make predictions about these things and based on your previous record, you'd have to say you haven't been much chop on predictions in the past.
LEIGH: Philip, there's two parts to your question there. One part is the precision of long-term economic forecasts, and I don't think that anyone expects they are going to be precise to the last dollar. But the other is whether you are going to be honest with Australians about the long-term impact of your policies. There's no one who argues that Labor's savings don't build over time; there's no one that says the Coalition's big business company tax cut doesn't cost the budget more over time. It's whether you're willing to be honest with the Australian people about the long-term of your impact of your decisions. Labor has chosen to invest in Canberra's schools. Making long-term decisions to ensure that every school gets needs-based funding, so we don't just have a postcode lottery in Australian education, but we actually invest where the needs are greatest. We have been honest with Australians about the ten year cost of that. The Coalition are pushing many things outside the four-year timetable so that they don't have to be clear with the Australian people about what they are doing.
CLARK: Can we talk about the efficiency dividend? That is something that has bedevilled Canberra institutions. I've spoken to you amongst other about it, including Liberal Senator Zed Seselja regarding the board of the National Library. This efficiency dividend has cruelled institutions, they don't have the flexibility to deal with it, and we've seen the devastation it's caused the National Library. Now, I've asked both sides of politics that they'll get rid of it in relation to these national institutions. Will you?
LEIGH: Philip, we said we won't proceed with the increase into the efficiency dividend that was announced in the 2016 Budget. It's a big decision by Labor, we've said that instead we'll look to find targeted savings through changes to what's spent on consultants.
CLARK: What's the problem though? What's the problem with saying “we won't apply this blunt instrument to these institutions?" I mean, you could make the commitment right here – that we won't apply the efficiency dividend in this blunt way to these institutions.
LEIGH: Philip, we exempted small institutions when we were in government. We made sure that agencies made staff savings last. Public service job numbers under Labor grew modestly and in line with population in every year except our last, when they fell only a couple of hundred.
CLARK: That's not a commitment, that's not the commitment I'm asking you for.
LEIGH: I understand you're asking for a more significant commitment than the significant commitment that Labor made yesterday, Philip. But it is important to recognise what we've done here. We've made an important announcement that benefits...
CLARKE: You've just said you won't increase it.
LEIGH: We've said that we won't implement the Coalition's increase.
CLARK: That's right.
LEIGH: So under the two parties, there's now a very clear difference in terms of the efficiency dividend.
CLARK: But the policy is still there, that when these efficiency dividends are announced, they'll apply across the board as a blunt instrument and that causes devastation in institutions. I'm saying, why not make a commitment that you won't do that.
LEIGH: Philip, I understand you would like us to do more. I can respect that position. But you also have to respect what we've brought to the table here. Labor is offering a very different prospect to Canberrans by saying that we won't apply that 2016 increase in the efficiency dividend. Canberrans have seen the cuts that have been imposed to the public service under the Liberals. They said 12,000 – the job losses are coming up towards 20,000 now. One in ten public servants have lost their jobs. Around one in five scientists. Labor wants to take a different approach. We want to take an approach that focuses on consultancy spending – through a targeted review that will report quickly, and look at how we manage to make the same quantum of savings but without people losing their jobs. That's a very different future for Canberra that Labor is putting on the table.
CLARK: Alright. It's 8:40AM. Andrew Leigh is my guest this morning, the Member for Fraser and Shadow Assistant Treasurer. Can I ask you take your politician's hat off for moment and put your economist's hat back on. I don't see it as a party political thing particularly for Australia, but the decision by the people of Britain to exit the European Union – is it likely to, in economic terms, to have much impact for Australia, really? We've got quite good relations with the EU, and we'll to continue to have them, and presumably we'll continue to have good relations with whatever the United Kingdom becomes.
LEIGH: Philip, I guess it's a question as to how this flows through to economic institutions, so to the extent that Britain, which has been a significant player in world affairs, is now distracted not only with its withdrawal from the European Union, but also with the potential breakup of the United Kingdom itself. That will take a major positive player in world affairs back to a more isolationist role. The European Union is already saying they want Britain to press the 'go button' on the two-year process for getting out because they don't want the EU tied up in this. There’s some impact on trade, though Britain is a less significant trading partner than our Asian trading partners...
CLARK: But they will continue to be so, won't they?
LEIGH: They will, but they will need to be negotiating a range of different trade agreements so they...
CLARK: That might present opportunities as well... it's not all necessarily a negative for us, not by any means is it?
LEIGH: It's hard to imagine that the trade agreements that we would then strike with Britain would be better than the ones we currently have with the European Union. It's a distraction for the British Government. They have chosen to go down this path but it looks now as if there's not only David Cameron stepping down, there's some turmoil on the Labour side. Britain I suspect will be hunkering down, looking inward more, at a time in which the world has benefited, for example, from their strong foreign aid programs, from the positive role they play as a permanent member on the UN Security Council, from the way in which they are engaged in a range of global challenges – you look at the positive role Britain plays in economic development in Africa, for example. All of those will have flow-ons to the globe – it's hard to know exactly what impact it will have in Australia but you saw a 3 p er cent fall in our stockmarket on Friday.
CLARK: Stockmarkets always over-react.
LEIGH: It's possible they have over-reacted. Let's certainly hope that's the case.
CLARK: Okay. Good to talk. Thank you.
LEIGH: Likewise, Philip.