Andrew Leigh

On ABC666, I spoke with presenter Ross Solly and Liberal Senator Gary Humphries this morning about how DisabilityCare Australia will help change lives, and the importance of ensuring it has a stable funding base. Here's a podcast.

TRANSCRIPT – ABC666 WITH ROSS SOLLY
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
2nd May 2013

TOPICS:               DisabilityCare Australia, Medicare Levy

Ross Solly:           Andrew Leigh, the Labor Member for Fraser, has joined me in the 666 Breakfast Studio, good morning Andrew.

Andrew Leigh: Good morning Ross.

Ross Solly:           And joining us on the phone this morning is Liberal Senator Gary Humphries, good morning Gary.

Gary Humphries:        Good morning Ross.

Ross Solly:           Can I ask you first Andrew Leigh, is there danger that this whole issue, this important issue, is going to be politicised? And has it already?

Andrew Leigh: Well Ross, I think that’s a question best put to Tony Abbott. If he is willing to back a secure line of funding for the National Disability Insurance Scheme, then we can change forever the support that is provided for people with a disability in Australia. I spoke in Parliament about a local Canberra woman Denise Reid who’d written to me about her son Tim, who has Down Syndrome, and she spoke about the frustration about having to get Tim reassessed continually to prove that his chromosomes haven’t changed. She finds that it’s just a complete waste of her time, and it’s one of the many examples of this patchwork of support, and inadequate set of supports, that we provided for people with disabilities and their carers.

Ross Solly:           You understand though, why the Liberal Party will want to see all the detail and would want some explanation of where the rest of the funding is going to come from before it agrees to sign up to something?

Andrew Leigh: Ross, what we’ve said here is that there is going to be a secure line of funding through an extra .5 per cent Medicare levy, that’ll cover about 60 per cent of the costs of DisabilityCare Australia. This is, as Craig said, quite a similar approach to Medicare, a levy that doesn’t fund everything but acts a bit like an insurance premium, because all of us know that if you fall of the roof of your house while cleaning your gutters and you become a paraplegic, you’re treated very differently than if you become a paraplegic as the result of a car accident, and this patchwork means that we need another pillar in the social insurance system. And the notion of paying 96 cents for that insurance is, I think, a pretty good insurance premium against something that could happen to any of us and any of our children.

Ross Solly:           Gary Humphries, is the Liberal Party likely to support the NDIS as it stands at the moment?

Gary Humphries:        Well I can’t answer that question because I don’t know where we are with these discussions. Obviously, we’ve had another new policy direction from the Labor Government. They’re policy making is a bit like a fly in a bottle at the moment, going every direction. We need to look carefully and what this represents and we need also to know where the rest of the money is coming from. On my calculations, when the NDIS is rolled out, the levy will only represent about 40 per cent of the cost of the whole scheme, so there is a very substantial amount of money yet to be identified as a source of funding for this. And we need to bear in mind that over the last five years, living standards in Australia have stagnated, in large part because government taxes have been rising across the board. This is the 29th or 30^th new tax, or increased tax this government will have introduced, and we need to be clear that while it’s easy for us in the parliament to sort of wave a wand and say yes, we’ll have a new tax to pay for this new scheme , it’s ordinary Australians that have to pay for this and it will impact on living standards as these sorts of taxes keep mounting up.

Ross Solly:           Do you think, Gary Humphries, that most Australians are happy – it certainly seems most Canberrans are happy – to pay a little bit extra for this important cause? Do you not think generally that most Australians do?

Gary Humphries:        Look it may well be the case, I really don’t know what most Australians think about this, I think you know, most Australians will not look forward to the prospect of, on average, paying another 350 dollars or so a year on taxes to pay for another government scheme. Bearing in mind that we’re yet to find the money for the Gonski changes, there’s a dental scheme that the government is talking about, and you know, there’s a collapse in the government’s revenue which is presumably having to be paid from somewhere as well. I don’t know how we’re going to pay for all of this and at the end of the day there’s only one source, and that’s the tax payer. Look having said all that Ross, I absolutely agree that the NDIS is important. I was the chair of the parliamentary committee back in 2007 which called for a comprehensive funding increase for disability services in Australia. If my party chose to have a levy to pay for that, I would be comfortable with that and I would support that. But I acknowledge that to do this comes at a cost to the living standards of ordinary Australians as they put their hands deeper in their pockets to pay for these schemes.

Andrew Leigh: Ross I’m really pleased to hear Gary supporting, at least in a personal sense, that levy there. I do also just want to point out there that the strength of the economy over recent years; our economy is now 13 per cent bigger than it was in 2007. Over a time period where all of Europe has shrunk, Europe has twice our unemployment rate, and the US has grown by nothing like what Australia has grown by, and in that period too, the tax take has actually gone down, so Commonwealth taxes are now 22 per cent of GDP, they were 24 per cent in the mid-2000s under the Howard government. We’ve had inflation that’s actually been running well below the historical average, meaning that the cost of living hasn’t increased as rapidly according to that measure as in the past.

Ross Solly:           Which is all good when you say it, and it looks good on paper, what Gary Humphries is saying that when people actually turn around and have to put their hand in their pocket, and when their 350 dollars worse off because there is a new tax that has been introduced, that is never going to come across all that well.

Andrew Leigh: Ross I would be delighted if regular consolidated revenue was so strong that we didn’t need to look to a levy. I mean that’s why the Prime Minister when asked about this last year said that she didn’t want to fund it using a levy.

Ross Solly:           So what’s changed?

Andrew Leigh: What’s changed is the budget position, and clear statements from a number of states and territories – particularly Campbell Newman – that he wanted to make sure that the Commonwealth had a sustainable funding source before he would sign on to the national disability insurance scheme. So if this is going to be a way of making sure that a Queensland paraplegic doesn’t have to fundraise for their own wheelchair, then that seems to be a pretty powerful reason for me. The budgetary collapse in revenues is pretty substantial, $12bn revenue down since last October, $30b over the last few years –

Ross Solly:           Which prompts the question Andrew Leigh, and I’ll go to you in a minute Gary Humphries, is this the time to be introducing big new spending measures?

Andrew Leigh: DisabilityCare Australia, Ross, is an idea whose time has come. You have listeners now who were up at 3 o’clock in the morning because they were taking care of their adult son go to the bathroom because he’s not able to go there himself. To say that somebody on 70, 000 dollars can’t afford 96 cents a day so that family gets better care to look after their son, so they don’t have to face that agonising question of who will look after my adult child when I’m no longer here… I think that is worth doing.

Ross Solly:           Gary Humphries?

Gary Humphries:        Look, I mean, the cause is fantastic, the idea of what we’re trying to do with this money is great. But let’s be clear, this is part of a pattern of o the government to rapidly and very significantly increase the amount that the government is spending in order to pay for a whole range of schemes, which – worthy though most of them are – does represent an imposition on the living standards of most Australians. The government's revenue since the last year of the Howard government has increased by 70 billion dollars, the government is raising 70 billion dollars a year more from Australians than they did since the last year of the Howard government, the problem is then that the government's spending has risen by 100 billion dollars a year. The result of that is that there is a huge gap that has to be bridged by yet another new tax. I acknowledge that the cause is good, I acknowledge that we have a great moral obligation to not let our citizens with disabilities to be second class citizens, to have a lower prospect of life than what other Australians have, that is an important imperative of public policy. But we’ve got to acknowledge that to do this will be a painful one for the Australian community and we still don’t know where the other 60% or whatever the figure is of this funding is going to come from, or for that matter what the other schemes the government thinks are important, where they are going to be paid from. That’s the important question.

Ross Solly:           Do we need to know that Andrew Leigh? Do we need to be told where the rest of the money is coming from?

Andrew Leigh: I’m very happy to tell you that Ross, it will come from consolidated revenue, from the budget revenue that is raised from company tax, from the mining tax, from income taxes. That’s where the rest of that money will come from.

Ross Solly:           But that money would already be pencilled in for other projects, so what would you cut?

Andrew Leigh: We’ve been making a set of savings, we made available 1 billion dollars for the initial work on DisabilityCare in the last budget. That wasn’t an easy save, it was done by doing things like means testing the private health insurance rebate, means testing the baby bonus, which Joe Hockey then compared to China’s one child policy. These aren’t easy savings that we’ve made, but we’re on track to cut real government expenditure which will be something that never happened under the Howard government. This drop in revenues, from 24 to 22 per cent of GDP means that tax revenue hasn’t kept pace with the economy. Gary’s talking about those nominal figures, but you’ve got to think about what’s the tax take compared to the economy because that tells you the demand for health services for the pensions, that’s the budget challenge we’re facing.

Ross Solly:           Gary Humphries?

Gary Humphries:        We’re still talking about having to find that money from pockets of Australians, and again I emphasise this is more policy on the run from a government which told us only a few months ago that they’d have a surplus budget that would help us pay for these sorts of things. Now the budget’s in deficit again, as have all the previous budgets under this government have been. We just don’t know where we’re heading and that worries me greatly. We’re asking for all Australians to take us on trusts, that we can somehow pay for this and all the other important things without actually knowing how it’s going to happen. It’s not responsible decision making and to answer that earlier question, Ross, there is a lot of politicking going on board with this, and Labor senators in the federal parliament keep talking about Labor’s NDIS, and this is Labor’s achievement, there’s a lot of positioning Julia Gillard in this for some issue that may carry her through the election, rather than necessarily a piece of national building.

Ross Solly:           Alright, we’ll just go to Mike. Hi Mike.

Mike (caller):     Hi, I’d just like to say that this is an opportunity, this is an issue that should be above politics –

Ross Solly:           And you don’t think it is at the moment?

Mike (caller):     It isn’t. And I’d like to compare it to the Apology. The first thing that Kevin Rudd did was reach across the corridor to Brendan Nelson and say this is an apology from all of us. The first thing that Julia Gillard did was to say I want to pick a fight with Tony Abbott on this, and I think it was completely the wrong way to go, and the politics that have started today in your studio, it is really sickening.

Ross Solly:           Alright, well thanks for your thoughts on this Mike. Let’s go to Darren.

Darren (caller):  Hi Ross, my concerns is that you’ve got two members of parliament there, one from the Senate and one from the other place, and it’s very frustrating from my perspective that you’ve asked a specific question about funding. The .5 per cent I think is a great idea but it doesn’t fund the total amount, and your question is where is the money coming from, and for Andrew Leigh to say that it’s coming from consolidated revenue, knowing the Treasury have got it wrong in the last 12 months, and the last two years, and the mining tax has not generated the revenue that’s expected, and I would suspect it’s not necessarily going to do that into the future, how can he say that its actually coming from consolidated revenue?

Ross Solly:           Alright Darren, Andrew Leigh?

Andrew Leigh: Most taxes are not tied directly to particular items of expenditure, a hypothecated tax like the Medicare levy or this new disability care levy is unusual. Like Medicare this is going to be a small levy that doesn’t cover the cost of all of the scheme, but guarantees that half is there, the rest of those income company taxes, through the revenue that is raised by the government, we will build this, because this is something we are passionately committed to.

Ross Solly:           Andrew Leigh, thank you for coming in this morning. Senator Humphries, thank you for joining us on the phone.

Andrew Leigh: Thanks Ross.

Gary Humphries:        Thanks Ross.

On 27 March 2013, I spoke at the Australia Institute's "Politics in the Pub" about strengthening community life, drawing on some of the ideas in my 2010 book Disconnected. In case you missed it, here's a video of the event.

On the Forum last night, I spoke with Richard Glover, Joe Hockey and Hugh MacKay about my favourite Australian food, teaching the ANZAC tradition in our school curriculum and the latest revenue projections coming out of Treasury.

702ABC Sydney The Forum with Richard Glover

Last night I had a chat with Richard Glover, Joe Hockey and Hugh MacKay about my favourite Australian food, teaching the ANZAC legend in our school curriculum and the latest revenue projections coming out of Treasury

On Sky AM Agenda, I spoke with host Kieran Gilbert and Liberal Senator Simon Birmingham about the drop in federal government revenue, and the challenges this poses for policy costings on both sides of politics.

TRANSCRIPT – SKY AM AGENDA
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
30 April 2013

TOPICS:                                New revenue and budget forecasts, Coalition plans for cuts, the challenging fiscal environment.

Kieran Gilbert:                   This is AM Agenda, thanks for your company. With me now are Liberal front bencher, Senator Simon Birmingham and Labor MP, Andrew Leigh. Andrew Leigh thanks for your time. I’ll start with you if I can. On the Budget, Joe Hockey is saying, well, the Disability Insurance Scheme, if the Government is going to pursue a Medicare style levy it’s only going to fund a fraction of the overall cost. You’re going to have find a lot more than just a levy, aren’t you?

Andrew Leigh: Well Kieran, we’ve been very clear that there are significant pressures on the Budget and that’s because of these surprising international circumstances that have seen commodity prices come off but yet the Australian dollar stay high because of the demand for our bonds. So we’re looking at a range of different ways of making the necessary saves, raising the additional revenue required for something like Disability Care Australia, which I know so many of your viewers are passionate about. Australia shouldn’t be the kind of country in which someone with a disability only gets to take one shower a week and we need to find space in the Budget to do that.

Kieran Gilbert:                   A lot of economists believe that a levy is the right way forward. The Productivity Commission recommended it; Sorles Lake from the Bank of America, Meryl Lynch also believes it. If you’ve got an insurance policy, you need a premium… do you see the merits in that case? And I suppose, why did the Treasurer ever rule it out in the first place?

Andrew Leigh:                   Well, I think in an ideal world, consolidated revenue is where you draw on for all of your schemes, but as we’ve seen this substantial hit to revenues, revenues down from 24% of GDP in the mid-2000s down to now 22% of GDP, that’s a substantial reduction. You’ll hear from people on the other side of politics that the dollar amount of revenue coming into the Commonwealth has gone up. But the fact is it hasn’t kept pace with the demand for things like the pension, things like health expenditure, and of course a growing population. So, that’s why we’re in the position we’re in now.

Kieran Gilbert:                   Senator Birmingham, “Every Australian Counts”, that campaign on a Disability Insurance Scheme believed that a levy is the way forward, what do you make of this debate?

Simon Birmingham:         Well Kieran, we want to see the NDIS implemented, and we’re very concerned about the fact though, that this Government has now taken it to a stage of having ruled out a levy, is now considering a levy. And this is of course sadly politicising something that should have been done in a far more sensible way. We have for a long period of time called for a Joint Parliamentary Committee that could work in a bipartisan way, to get the NDIS implemented and deal through these issues. Instead now, at the eleventh hour as the Government is creating its own Budget crisis, and it is a crisis of its own creation because the truth is, though Andrew wants to talk about revenues from a decade ago, the truth is this Government will still have more money this year than they had last year. They still will in fact have around $25 billion dollars or so more in revenue this year than they had last year. So, revenue is significantly up over the year. It is the Government’s spending that is the problem and it’s a tragedy the NDIS has been caught in the middle of this vortex.

Kieran Gilbert:                   That’s the point that was made repeatedly by Joe Hockey this morning and yesterday and Senator Birmingham just now on this revenue increase of 7.6% year on year. So you’re saying that spending has outstripped that. Is it time politicians, policy makers, re-think the way they do budgets?

Andrew Leigh: But Kieran, the point I was making was that demands of our society are outstripping that. The health expenditures have gone up…

Kieran Gilbert:                   So do expectations have to change?

Andrew Leigh: Well, I think we have to make responsible savings measures. Ever since the global financial crisis, every new spending measure Labor has made has been offset by an appropriate savings measure. But it’s just not helpful to talk about the dollar amount of revenue. What you need to focus on is revenue as a share of GDP because that brings into mind the increase  in the demand for health expenditure, the increase in the overall population, and so taken as a share of GDP, our tax revenue is well down on what it was in that boom period of the Howard years.

Kieran Gilbert:                   Senator Birmingham, that specific point there, if you could respond to that specific point? The revenue as a share of GDP as opposed to simply the dollar amount which has been referred to the last day or so.

Simon Birmingham:         Well Kieran, what is a good thing is that the Australian economy has kept growing and that’s why we should be in a surplus position, and when the economy grows, if it grows at a particular rate, ahead of the rate that taxation grows, then the revenue as a share of GDP will shrink. That is actually a good thing if that happens and governments should be able to manage in those circumstances. Revenues are still growing, that is an absolute fact. What is a complete bunkum, utter untruth, is when Andrew says that the Government has banked savings to offset new spending initiatives. That’s just not true. The Government has claimed to have revenue from its mining tax, made all these spending decisions based on it and not had the revenue there. The same thing is unfolding with the carbon tax. We see in other areas where the Government has shuffled around the timing of when it’s going to get its revenue from spectrum sale. So, this Government has played a lot of games on the revenue side, has made a lot of assumptions on the revenue side, and those assumptions have simply been wrong. Their problem is they’ve made all their spending decisions based on assumptions of their own making.

Kieran Gilbert:                   I suppose you get to the Treasury forecasts in that context, why are they so far out?

Andrew Leigh: Well revenues are a difficult thing to forecast, Kieran. I mean, we saw errors in the opposite direction under the Howard years. This isn’t because people are behaving in a mendacious way, it’s simply that revenues are challenging to forecast. But Kieran, we will continue to find those responsible saves. We’ve found $100 billion of them in past budgets. Let me just give you a couple of examples to answer Simon’s comment: means-testing the Private Health Insurance Rebate, means-testing the Family Tax Benefit Part B, means-testing the Baby Bonus. All of those of course, opposed by the Coalition who when we reduced the amount of the Baby Bonus Paid to second and subsequent children, compared it to China’s One Child Policy. So the Coalition also need to recognise that the current fiscal condition is very challenging for them, for example, they need to recognise that if they’re going to fund a parental leave scheme with a levy on company tax, that the huge reduction in company tax revenues is going to have an impact on that budget costing.

Kieran Gilbert:                   Let’s get to Senator Birmingham on that point, that reality that we saw yesterday. It is going to affect the Coalition if in government and on that specific policy.

Simon Birmingham:         Kieran, we don’t pretend that it’s going to be easy to get this budget back into shape. Especially not after the type of spending decisions the Government has taken. We know it will be hard, that’s why we’re being up front about having to make some difficult decisions. We know that it’s not popular to say we’ll axe the SchoolKids Bonus. Those people who are getting that money in the bank don’t like the fact that we’re going to cut that. But we recognise these types of savings decisions must be made and we will make those difficult decisions just as we outlined in our costings at the last election. We’ll outline them again in our costings at the next election. Most importantly, we will get the size of the bureaucracy under control as well. We’ve seen phenomenal growth in the bureaucracy, and I know it’s in Andrew’s own electorate there much of it. But we’ve seen huge growth in the size of our health bureaucracy, our education bureaucracy, despite the fact they don’t run any hospitals or schools. These are areas where Government has to keep a really tight rein on spending.

Kieran Gilbert:                   Senator Birmingham, Andrew Leigh, thank you for your time this morning. We’re out of time. That’s all for AM Agenda.

TRANSCRIPT – 2CC MORNINGS WITH MARK PARTON
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
30 April 2013

TOPICS:     Budget Deficit, falls in revenue, the Budget, Australian economy

Mark Parton:     … So much talk around town over the big announcement from Julia Gillard. We knew it was coming because so much of it had been leaked: that there’s this $12 billion black hole in revenue and obviously all these new things are going to be considered when it comes to the Budget which is delivered in a couple of weeks. Who do you blame for it? You know, it looks as though again that Treasury has overestimated the money that we were going to get as they’ve been doing for quite some time.  I know that there are a number of economists who sort of track it back to’96 and look; the question is how do we deal with it? We’ve got Andrew Leigh on the line. He is of course the Labor member for Fraser. Now, I know that there are those on the Right who are always extremely critical of whatever Andrew says about economics and look, I seriously think they should listen. He’s a very esteemed economist. I’m not, and I think it’s folly to dismiss what Andrew says.  You can have your ideological differences with him, but let’s see what the bloke’s got to say. G’day Andrew,

Andrew Leigh: G’day Mark

Mark Parton:     When Greg Hunt came on the program yesterday he said that basically what Treasury and your Government have done is budgeted for winning lotto and spent as though you’re going to win lotto and then found out that you hadn’t.

Andrew Leigh: Well the challenge, Mark, of predicting revenues is a big one. I mean, you said before that Treasury has traditionally overestimated the amount of revenue that will come in. Actually, the problem under the Howard Government was the reverse. They ended up getting a little more revenue than they expected and what we’ve found now is that the same Treasury forecasters are making the mistake in the opposite direction. Here’s what’s happened to this one: we’ve seen commodity prices come down a bit. Normally that should bring down the Australian dollar and that has benefits for many of our exporters. But the problem is that so many banks around the world are buying Australian government bonds which has kept the dollar high even while commodity prices have come off. It’s a pretty unusual set of circumstances and that’s meant that revenues are down $12 billion just from what we were forecasting in October last year. $30 billion down on what we were forecasting a few years ago.

Mark Parton:     But Andrew, like, I mean, you know much more about this stuff than I do. Why is it that so many others were able to predict that we were going to get this black hole but up until as late as December, your Treasurer and your Prime Minister were still talking about a surplus come hell or high water? Surplus was never going to happen was it?

Andrew Leigh: Well Mark, I think the reason for focusing on the surplus last year when we had better revenue projections was it gave a sense of discipline to spending decisions. In a sense, the global financial crisis, every new revenue measure we’ve made, and every item we’ve spent on we’ve offset by finding another saving. Something like means-testing a payment or something like that. And so we had that simmering through the Budget process until it became pretty clear at the end of last year that the utter collapse in revenues caused by what’s going on around the world meant that that surplus wasn’t going to be achieved and now we’re, I guess, laying out for the Australian public the fiscal challenge that’s ahead of us. That’s there for the Labor governments but it’s also there for the Coalition/opposition. Just to take one example, they’ve got a paid parental leave scheme, which is very expensive, paid for by a company tax levy. When you’re company tax returns are down, that’s going to affect the affordability of that plan. So, being up front about the revenue situation matters for everyone.

Mark Parton:     Medicare Levy. Talk to me.

Andrew Leigh: Well, this is certainly… I’ve seen mooted in the papers as you have but as you know, Mark, the Budget is a tightly kept document and no one wins any prizes for announcing the Budget before Budget night. We’re obviously looking at a range of different ways of addressing the revenue shortfall, but it’s a big shortfall. If you go back to the mid-2000s, we’ve got government revenue that’s 24% of GDP. Now it’s 22% of GDP. So, that 2% gap is pretty substantial…

Mark Parton:     …are there bigger, wider, long term questions to be asked here though, Andrew, in terms of like, the mining boom looks as though it’s over and certainly the Prime Minister is saying those good times will never return. If that’s the case, it’s going to take us a long time to get back into the black, isn’t it?

Andrew Leigh: I think we do have revenue challenges Mark. I’m not quite as pessimistic about the mining boom as you’ve said there. We’re seeing prices come off a smidgeon but we’re also seeing volumes go up a lot, so we’re moving out of a phase of the mining boom where it was driven by this once-in-a-150-years price spike to a phase where we’ve got still  pretty high prices but we’re just digging a whole lot more stuff out of the ground. I mean, some of these extraction projects are extraordinary in their scale and scope and that’ll drive mining profits as well.

Mark Parton:     What a challenge for the Treasurer who’s got to come up with this Budget, which I mean, obviously most of it’s worked out, but there will be some finer details still being sussed out now. A Budget in an election year which has to be desperately tough, but then you’re standing before the Australian people saying, “please vote us back in”.

Andrew Leigh: I think the important thing in politics, Mark, is to be upfront and honest about the challenges that we’re facing.

Mark Parton:     So do you think perhaps the Government hasn’t been as upfront and honest as it should have been in the last year and a half?

Andrew Leigh: No, we’ve been very clear about the revenue situation. What this reflects is that as that projection’s been updated, where the Prime Minister came out yesterday talking about the challenge that it poses. I mean, you’ll hear people saying that the total amount of dollars that they’re getting in in revenue is higher than last year. That’s true, but, it hasn’t kept pace with the increases in the Australian population, the demand for the pension, the health expenditures and so on. So that’s meant we need to look at belt tightening, look also at whether we can find government revenue in other ways. That’s just the political reality that all of us face. Look around the globe though and we’re in a pretty good position. We were the 15^th largest economy in 2007, we’re now the 12^th largest economy and so we’ve moved up the global rankings. And I bet many countries in Europe would rather have our challenges than theirs.

Mark Parton:     Andrew, thanks for your time this morning.

Andrew Leigh: Thank you, Mark. Appreciate it.

2CC Breakfast With Mark Parton-20130430

On ABC24's Capital Hill program, I spoke with host Lyndal Curtis and Liberal MP Sophie Mirabella about the challenging budget circumstances Australia faces, with federal revenues having fallen from 24% to 22% of GDP.

Recently, I spoke with Media Watch's Jonathan Holmes about social media and politics. A podcast and (mostly correct) transcript of the interview are available on the ABC website.

My op-ed in the AFR looks at the Coalition's climate change dilemma - do they meet their pledge to reduce emissions by 5% by 2020, or do they spend the paltry underestimate that they say their climate policy will cost?

Abbott's no-go carbon plan, Australian Financial Review, 22 April 2013

Over the past few weeks we have seen the Coalition dip their toes in the water of policy debate. Amidst running around the nation shouting ‘no’, Tony Abbott has revealed that the Coalition’s plan for superannuation includes taxing 3.6 million of Australia’s lowest-paid workers to the tune of $4 billion. We have seen them outline their tin-can-and-string broadband strategy. We have learned that families and small businesses will be expected to cough up to $5000 to connect to a service Labor will provide for free.

This is the most information we have heard about the Coalition’s vision for the future of Australia, and while it may not be pretty, it is a marked improvement from their three-year tradition of providing no alternative at all.

It seems strange then, in light of their cautious new ventures into actual policy discussions, that Tony Abbott has remained almost silent on the one issue he has pegged the bulk of his negative rhetoric: climate change.

We are no longer hearing the Coalition claim that putting a price on carbon will ‘crush’ the Australian economy; time has proven the emptiness of this fear-mongering and the economy continues to go from strength to strength.  Given the vehemence with which Tony Abbott has promised to rescind the carbon price (despite strong contrary advice from key industry groups such as AIG) you would expect to have heard more about the ‘Direct Action’ plan that he would have as the replacement. But we have not, and this is in no small part due the Coalition’s unwillingness to provide costing information.

When asked by reporters last month what the ‘Direct Action’ plan would cost, Tony Abbott responded that ‘our policy will cost what we commit to it in the policy that we will announce before the election’. Take what you will from this garbled tautology, but you certainly cannot take an answer.

Perhaps aware of the unsatisfactory nature of this response, Tony Abbott further offered that ‘we will spend no more and no less on reducing emissions than we allocate’. Clearly, we need to look further afield for answers on costs. In the Liberal Party’s ‘A Strong Australia’ policy direction statement, they claim their emissions reduction fund would spend $1 billion a year on average. This lines up with the figure provided in 2010, which was an expenditure of $10.5 billion out to 2020. The emissions reduction target that the Liberal Party set then was a 5%  reduction by 2020 – an annual reduction of 155 million tonnes in 2020, which they have reaffirmed in their policy platform.

But therein lies the fundamental problem. If the ‘Direct Action’ plan is implemented, Tony Abbott will either have to break his promise to spend no more than allocated, or fail to meet his own reduction target.

Treasury analysis shows the Liberal projection of $10.5 billion is a woeful underestimation, with the real cost by 2020 totalling at least $48 billion. Treasury analysis attributes this dramatically different figure to two key factors: first, ‘direct domestic action would forgo opportunities for cheaper, internationally sourced abatement’, and second, ‘direct action programs are generally less effective at driving take up of all potential abatement opportunities’.

The Grattan Institute has estimated that reliance upon a grant-tendering scheme in an effort to meet the 5% target would mean at least $100 billion would need to be put towards an abatement purchasing fund. This would be equivalent to nearly one third of the entire Federal Government budget. And because the ‘Direct Action’ plan is funded by taxpayers (compared to the Labor Government’s carbon price, which is funded by the biggest polluters), that means everyday Australians are expected to foot the bill for this ineffective policy. It would cost each household at least $1,300 a year in new taxes.

That the Coalition is finally giving us some insight into their plan for Australia’s future is a good thing. But they are not giving us the full picture – at best they are confused about their costings, and at worst they are being intentionally deceptive. The question Tony Abbott needs to answer now is this: which aspect of the ‘Direct Action’ plan would change if he won government. Would he fail to meet his promised emissions target, or would he let the cost blow out?  In reality, as Malcolm Turnbull has said, Direct Action is a “fig leaf” and Mr Abbott will not unwind Labor’s carbon price.

Andrew Leigh is the federal member for Fraser, and Parliamentary Secretary to the Prime Minister. His website is www.andrewleigh.com.

Note: An abbreviated version of this piece appeared in the AFR print edition.

I launched Stuart Cunningham's new book Hidden Innovation tonight.

Launching Stuart Cunningham, Hidden Innovation: Policy, Industry and the Creative Sector
Paperchain Books, Manuka
9 April 2013

According to one study cited in Stuart Cunningham’s book, there are two opposing groups of people: ‘political junkies’ (PJs) and Big Brother fans (BBs). PJs think that it ‘beggars belief’ that anyone could think Big Brother was useful. BBs say that politicians are unapproachable and out of touch.

So as an MP who used to quite enjoy watching Big Brother, I found myself torn. Am I a BB or a PJ? A PJ in BBs? Or a BB in PJs?

The reference to Big Brother is just one of a myriad of cultural touchstones in this fascinating book. Stuart Cunningham’s book romps through Survivor and Go Back to Where you Came From, Korean bloggers and Fat Cow Motel, Australian iTunes game Fruit Ninja and Nigeria’s ‘Nollywood’.

Stuart Cunningham has also read a plethora of OECD and overseas government reports on creativity and innovation – so you don’t have to. What’s striking about many of the OECD reports is how un-creative and un-innovative their titles are (‘Content as a New Growth Industry’, ‘Innovation and Knowledge-Intensive Services Activities’, ‘Demanding Innovation’, ‘Creativity, Design and Business Performance’). Naturally, the very readable and pithily titled Creative Australia, the Australian Government's 2013 national cultural policy, is an obvious exception to this general rule.

One thing that I enjoy about such reports (and Stuart Cunningham’s book itself) is that they point out the increasing role that creativity is playing in the jobs of the future. Indeed, the pace of change is so rapid that many of today’s school leavers will spend the bulk of their career doing a job that hasn’t yet been invented.

We cannot forecast the future, but as MIT economists David Autor and David Dorn have pointed out about the US job market, we can make some predictions about the impacts of trade and technology:

‘technical change, augmented by offshoring, is eroding demand for middle-skilled ‘routine’ cognitive and manual activities, such as bookkeeping, clerical work, and repetitive production tasks. Because the core job tasks of these occupations follow precise, well-understood procedures, they are increasingly codified in computer software and performed by machines or, alternatively, offshored over computer networks to foreign work sites. This displacement of routine job tasks raises relative demand for non-routine tasks in which workers hold a comparative advantage over current technology, in particular ‘abstract’ tasks requiring problem-solving, creativity, or complex interpersonal interactions (e.g., attorneys, scientists, managers) and ‘manual’ tasks requiring, variously, situational adaptability, visual and language recognition, and in-person interactions (e.g., janitors and cleaners, home health aides, beauticians, construction laborers, security personnel, and motor vehicle operators)’[1]

This hollowing out of the middle of the US wage distribution has important implications for Australian workers. As technology improves, one of the worst places to be is in a job where you’re doing a task that a computer program can substitute for. One of the best places to be is in a job where your skills complement what a computer can do. So I commend Stuart Cunningham for his strong focus on digital design, from computer game designers to creative workers who are using animation to convey health information to remote Indigenous communities.

If there is a single idea at the heart of this engaging book, it is that it’s not just scientists who ‘do’ innovation. As Stuart Cunningham puts it, ‘the concept of innovation has been virtually soldered to science’. He draws on C.P. Snow’s splendid ‘two cultures’ notion to highlight the disconnect in Australian public life between scientists and creative people.

I agree that this is a real divide, but it’s important not to take from it that science is in the inner circle, and the arts are on the outer circle. As part of last year’s Science Meets Parliament campaign, each Australian parliamentarian was given a copy of Mark Henderson’s The Geek Manifesto. It’s a book that frets about the lack of scientific knowledge and engagement by politicians. After citing C.P. Snow, Mark Henderson argues that the real problem is that parliamentarians understand less about thermodynamics than they do about Shakespeare. So if you’re a creative type, don’t assume that you’re any less ‘plugged in’ to the policy process than any other group.[2]

What should parliamentarians be doing to promote creativity? Stuart Cunningham discusses the Convergence Review, and the recognition that media laws may need to change as technology transforms the industry. For media outlets, attempting to hang on to what Jay Rosen referred to as ‘the people formerly known as the audience’ is no easy task.[3]

Another oft-proposed solution is to make intellectual property laws stricter, but as Stuart Cunningham points out, many parts of the creative sector have thrived through open innovation (eg. via creative commons licenses). Indeed, given that sensible critics are now arguing that the US has gone too far in protecting IP, it seems that a much smaller country such as Australia should carefully assess any claims that toughening up IP laws would boost innovation.[4]

And that brings me to a point I greatly appreciate about this book, which is its recognition that the creative industries aren’t just good for GDP.

Interestingly, claims about why particular things are good for GDP aren’t typically made by economists. If you’ve taken an introductory economics course, you know that economics is about the concept of utility, which encompasses happiness, fulfilment and pleasure. Standard economics recognises that a Carl Vine piano concerto or a new novel by Tim Winton has a benefit that goes well beyond the price of the concert tickets or book purchases.

Indeed, it’s no coincidence that one of our great economic reformers, Paul Keating, was also a deep lover of the arts for their own sake.[5] When Keating was asked by the West Australian Symphony Orchestra to introduce Mahler’s 2^nd symphony, he didn’t talk about how the purchase of trombones and timpanis raises economic output. Instead, he quoted Kant: ‘Only artistic genius discloses a new path to us’, and he talked about how the symphony melded biblical themes, folk songs, and Mahler’s experience of seeing a children’s choir sing a resurrection chorale.

Similarly, when Keating spoke at the funeral of Geoffrey Tozer, he didn’t discuss the way in which government investment in Tozer’s training had been more than repaid in CD sales. Instead, he talked about why someone of Tozer’s genius only comes along once a century, and observed that ‘When one has been touched by the stellar power and ethereal playing of a sublime musician, one is lifted, if only briefly, to a place beyond the realm of the temporal.’

Understanding that creative output matters for its own sake is good for a number of reasons. First, it’s a more sensible way of viewing the world, since none of us wake up believing that maximising GDP is the only thing that matters. Second, it’s useful because – as Stuart Cunningham notes – the literature on creativity and economic growth is notoriously fragile. Sure, countries, cities and companies that are more creative also have more output, but it doesn’t follow from this that the relationship is causal.

It might run the opposite direction (when you get rich, you get creative), or it might be that some third factor drives both creativity and growth. As Harvard economist Ed Glaeser pointed out in his critique of Richard Florida’s book: ‘Sure, creativity matters. The people who have emphasized the connection between human capital and growth always argued that this effect reflected the importance of idea transmission in urban areas. But there is no evidence to suggest that there is anything to this diversity or Bohemianism, once you control for human capital.’[6]

Dropping the more fragile reasons for caring about creativity brings us back to the basics. We want a more creative Australia because culture enriches our lives and soothes our souls. As Stuart Cunningham points out, creativity and innovation are closely intertwined, and dynamic developments in both help make Australia a more interesting place in which to live.

Focusing on culture in its own right also helps concentrate the mind on how we should be measuring the success of government programs. The most interesting question to be asked about a government grants scheme isn’t ‘what did it do to GDP?’, but ‘what did it do for creativity?’. We need more rigorous impact assessments (eg. through randomised trials) of the various ways in which government might boost creativity. Is it more effective to reduce venue hire costs (as Marcus Westbury advocates) or provide scholarships to young artists? Shall we focus on regions with the highest levels of creative output or the lowest levels? The better we understand the answers to these questions, the more effective we will be in boosting what Stuart Cunningham calls the ‘hidden’ innovation of the creative sector.

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[1] David Autor and David Dorn, 2009, ‘This Job is ‘Getting Old’: Measuring Changes in Job Opportunities using Occupational Age Structure’, American Economic Review, 99(2), 45-51

[2] The classic discussion of this issue is Robert Reich, 1998, Locked in the Cabinet, Vintage Books, New York. Reich finds that the closer he comes to power in Washington DC, the more there seems to be someone else better connected than him.

[3] Jay Rosen, quoted in Stuart Cunningham’s book.

[4] See eg. Alex Tabarrok, 2011, Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast (TED Books) [Kindle Edition]

[5] Both of these speeches may be found in Paul Keating, 2011, After Words: The Post-Prime Ministerial Speeches, Allen and Unwin, Sydney.

[6] Edward L. Glaeser, 2005, ‘Review of Richard Florida's The Rise of the Creative Class’, Regional Science and Urban Economics, vol. 35(5), pages 593-596.