Where now for Greece? - 666 ABC Canberra




FRIDAY, 17 JULY 2015

SUBJECT/S: Greek economic situation; Chinese stock market; ANZUS treaty; ALP National Conference; climate change; Tony Abbott’s Royal Commission.

CHRIS COLEMAN: Andrew Leigh is the Member for Fraser, and he is also the official party spokesman for the ALP's National Conference next week. He's also an economist so he's a good bloke to speak to about a number of things. Let's start on the economic front, Andrew Leigh – good morning.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning Chris, it's lovely to be with you in your final half hour. I feel a bit like someone who sees a band just before they finish their tour.

COLEMAN: You're far too kind. While I've been here, one of the things we've talked about on numerous occasions, and it's been in just about every news bulletin, is Greece. Where are we at with Greece? And now there's been another attempt at resolution to the problems in Greece, how is that going to affect Australia?

LEIGH: The forecasts are still about a 50 per cent chance of Greece exiting the Eurozone. The challenge is making sure the package that was agreed earlier in the week passes the Greek parliament. It's a tough package indeed for the Greek people to swallow. I've been a little disappointed through the process of this that the IMF and the European Central Bank didn't act earlier. We know that if there's defaults, we're talking about $340 billion Euros of debt and that's going to have significant impacts on the rest of the Eurozone. That confidence contagion could flow through to Australia. So it would have been good to see the IMF and the ECB taking earlier action. Fingers crossed they manage to sort this out because a Grexit would be messy for Greece and potentially cause problems for countries like Italy, Portugal and Spain - not this year but in years to come.

COLEMAN: On China, there's been a lot of news about China recently as well. It seems to me it's a case of China sneezing and the rest of the world catching a cold; or at least coming down with a bad case of the man-flu. Again, is it bad for Australia or is it ok and are we worrying unduly?

LEIGH: Chris, this one worries me more from an Australian perspective than the Greek story. The Chinese have managed the transition to a market economy well, I think, but faltered a little in their handling of the stock market correction. As soon as stocks started to fall, they froze the stock market. There's now 90 per cent of the stocks on the stock market can't be traded. I think that's a mistake. The fall is significant – it has wiped $3 trillion off the value of the stock market, but stocks have only fallen back to where they were in March, which gives you a sense of how rapidly that market had been rising. The problem is that if you freeze the stock market, then when you un-freeze it the reaction can be even bigger. Think of a bit of machinery: if you suddenly spike it and hold it still while the motor keeps running, then when you release it you can get a big effect. I'd like to see the Chinese authorities allow more trading. I understand some people have borrowed money in order to invest in shares and so there will be damage there. But the Chinese stock market as a share of the economy is fairly small. That total debt for borrowing for shares is a couple of per cent of banking debt and so it ought to be possible to have this correction - as we would in Australia if there was a market fall.

COLEMAN: Is China the Clayton's market economy? You know, is it the market economy you have when you're not having a market economy?

LEIGH: It was in certain respects, but increasingly it has come to look far more like a standard capitalist economy around the world. There's still unusual features, but private ownership is becoming more common; you see every year the Chinese Communist Party updating its founding texts and sounding a little more market-liberal year by year. The fact that they have a fairly liquid stock market is good, but the fact that the rise of the stock market was so tightly tied to the quality of the leadership meant that when it started to fall, some of the regulators thought: that might reflect badly on the President, we'd better not let it fall. That's a mistake. Markets need to be allowed to go down as well as up in a well-functioning economy.

COLEMAN: Could this turbulence in the Chinese economy affect the forthcoming China Free Trade Agreement? And for that matter, does the Free Trade Agreement protect Australian workers to a sufficient degree?

LEIGH: Penny Wong has been raising a number of questions with the Government which they have so far failed to answer. Andrew Robb is good at standing in front of the cameras and smiling while he signs documents; he's not so good at coming clean with the Australian people on questions like whether we still have labour market testing for 457 visa holders. Or whether there's going to be mandatory skills assessments in occupations and why those skills assessments appear to have been abolished. Australians welcome migrants; everyone except Indigenous Australians are migrants or children of migrants. But Australians, reasonably enough, have concerns  if the standards of electricians on projects are not up to the standards we'd expect. Labor also has concerns about the Investor State Dispute Clauses. The Howard Government managed to negotiate an agreement with the United States without those provisions, so it's not clear to us why Andrew Robb hasn't been able to get to the same place with the China Free Trade Agreement. And he's just stonewalling on those basic questions.

COLEMAN: The unions have been, of late, campaigning pretty hard on this - including the 50,000 robocalls in the past couple of days. Is there a protectionist element to their argument, or is it fair enough? And what do you make of Andrew Robb's comments that the attacks are 'xenophobic'?

LEIGH: Labor has got an extremely strong track record on free trade. The big moments at which the Australian economy opens up – 1973, 1988, 1991 – they're Labor trade agreements that open up the economy. What we need though is answers from Andrew Robb about how this agreement will affect safety standards. It is not unreasonable for Australians in the union movement or outside it to be concerned when Andrew Robb is unable to answer how the standards for electricians will be affected by this agreement that he has signed on to. What's in the side letter? We need to know these simple answers.

COLEMAN: Ok, what future for the ANZUS Treaty and our relationship with China? Are they two things that can be run concurrently, or do we need to choose one or the other?

LEIGH: Look, it's one of the most interesting debates in Australia. Hugh White's 'China choice' writings have kicked this debate off and I feel like every wonk-fest that I'm at, every academic conference, there's a discussion over the implications for Australia of the rise of China. But I certainly believe we can maintain the strength of ANZUS and also maintain a strong relationship with China. James Brown from the US Studies Centre says that these mooted changes to the Labor party platform bring it more sophistication. So if the US Studies Centre is comfortable with it, I don't see why the rest of Australia shouldn't be as well.

COLEMAN: This is 666 ABC Canberra Breakfast, Chris Coleman filling in for Phil Clark this morning. Andrew Leigh is my guest, the Labor Member for Fraser. Andrew Leigh, let's turn to local events: the trade union Royal Commission in Canberra. Yesterday there were some pretty stark revelations and an arrest following the trade union hearings in Canberra. Have you got any initial comment there?

LEIGH: Look, we should all be careful in commenting on matters that are before the courts or about to come before the courts. So let me just make the very general point that I have absolutely no time for corruption or wrongdoing in any section of the community. That should be dealt with by the full force off the law.

COLEMAN: Should the ALP be having a closer look at its association with the CFMEU?

LEIGH: I don't think so. I think building workers suffer injuries at a higher rate than people in most other occupations. The two industries that are most dangerous for workers are building and mining. It's appropriate for workers to be able to collectively organise to make sure that people aren't injured or killed on building sites. We've seen too much of that in Canberra in recent years, Chris. Your listeners will be able to recollect incidents of young men who've lost their lives on building sites. One of the important things that unions do is make sure that appropriate safety standards are maintained.

COLEMAN: There's talk, though, about dodgy cash coming into a CFMEU official who was also, at the time, an ALP local branch official. There's talk that his successor is going up before the Royal Commission today. I asked this earlier on the program: is it a good look?

LEIGH: This person is no longer a CFMEU member, as I understand it, and his Labor party membership has been suspended. But let's not mistake what are extremely serious allegations about one individual for the fundamental principle that if you're a worker on a building site and you want to get together with your mates to make sure that all of you get to go home to your families at the end of the day, that this is fundamentally in accord with the values Australians share.   

COLEMAN: So more decisions, more discussions to be had once the Royal Commission has had its hearings and played its course?

LEIGH: We're not providing a running commentary on Tony Abbott's Royal Commission.

COLEMAN: Let's talk about your National Conference next week as well. There's plenty of things coming up there and we've touched on some of it already. But climate policy is going to be – pardon the pun – a hot topic at your National Conference. The leaking of that draft Cabinet discussion paper has put people like Bill Shorten and Mark Butler on the back foot, hasn't it?

LEIGH: I don't think so, Chris. This reflects the statement that Bill Shorten made to the Parliament last year, that Labor is committed to a market-based approach to tackling climate change. Why wouldn't you be if you were a serious political party? That's the way in which John Howard said he would deal with climate change in 2007, and every previous Liberal Party leader bar Tony Abbott has recognised that a market-based approach makes sense. China is doing it in provinces that are home to hundreds of millions of people. California and much of Europe have emissions trading schemes. They put a cap on carbon pollution and that price will be floating, so we can be very clear that this is not a carbon tax. But it's a way of dealing with emissions far more cheaply than the Government's approach. Which, let's face it, is a carbon tax. They're raising money by taxing households and paying it to polluters. They get carbon reductions at a cost of $66 a tonne, far more expensive than any market-based mechanism around the world.

COLEMAN: Will the ALP have a clear and unified policy on the climate by the end of the National Conference? I mean, can you ever control this debate now or are you always responding as opposed to being able to be proactive?

LEIGH: I think we're strongly on the front foot on this, Chris. We're in accord with the vast consensus in the economics community and so many nations around the world which are looking at how to reduce emissions at the least cost. The thing about Tony Abbott's slush fund for polluters is that it's expensive right now, but it's just not scaleable to get the reductions we need. Ultimately, Australia is going to have to use a maket-based approach to deal with carbon pollution. If we do it earlier then that's cheaper. If we put it off into the future then that becomes more expensive. So Tony Abbott's approach is a carbon tax on households right now, in order to pay polluters and get small amounts of emissions reductions. Then the result is that future generations will just have to pay more. There's nothing fair, efficient or equitable about Tony Abbott's head-in-the-sand approach to climate change.

COLEMAN: Andrew Leigh, thank you for a wide-ranging discussion this morning; we've touched on a lot of things. Thank you very much for coming in this morning.

LEIGH: Thanks Chris, and enjoy your last 15 minutes.



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