Andrew Leigh

Last Wednesday, I appeared on ABC24 in a segment with Liberal Senator Scott Ryan, moderated by Chris Uhlmann. Transcript below.

ABC News 24
27 October 2010, 4.30pm

CHRIS UHLMANN

Well Andrew Leigh, to you first, during Question Time today the big topic for the Opposition was the cost of living and there's a compelling logic, isn't there, that if you put a carbon tax on top of electricity prices then electricity prices will rise?

ANDREW LEIGH

Well Chris, that's not right at all. What's going on here is that because electricity generators don't have certainty as to what's going on with a carbon price, they're not making the investments to the necessary infrastructure. We need investments in electricity generation in order to make sure that electricity prices don't rise – and the only way we get that is by tackling climate change.

SCOTT RYAN

Well Chris, what Andrew neglects to point out is that the uncertainty is one created by this government. Just before the election, there was no carbon tax. Now, after the election, there is apparently going to be a carbon tax. The Prime Minister has previously alluded to 40% increases in domestic power bills over the last three years. That hasn't seen a reduction in electricity use. There's a legitimate argument here – as a highly inelastic good, electricity use is not that sensitive to price rises. The uncertainty is created by the government breaking its own promise to not have a carbon tax.

CHRIS UHLMANN

Isn't there a number of things involved here too, Andrew Leigh? Underinvestment is one problem that the Prime Minister keeps pointing out, but we're also moving to higher cost sources of power. That's going to make electricity prices rise with things like renewables. The cost of connecting those sources to the grid is going to push up electricity prices as well, and the cost of incentive schemes that we're using to get things like solar power. They're all adding, aren't they, to the rise in price in electricity?

ANDREW LEIGH

But Chris, the key here is that we had a bipartisan consensus around getting a price on carbon and that bipartisan consensus was smashed by Tony Abbott. That was how he won the leadership – he smashed the bipartisan consensus on climate change. Now, what that's meant is that electricity generators aren't willing to invest in the clean energy sources, because they don't know whether there's going to be a price on carbon. And they're not willing to make investments in, say, 'dirtier' energy sources, because again, they don't know whether there's going to be a price on carbon. In that environment, you get massive underinvestment and that drives the prices up. We have to deal with climate change – like many other mature nations have done. In the UK, there was a bipartisan consensus that saw a deal on climate change and that's the sort of deal we need to see here. Level-headed people sitting down and sensibly realising that a price on carbon is the only serious way of dealing with climate change.

CHRIS UHLMANN

Scott Ryan, isn't there a point in all of that? There's essentially a capital strike while people wait to see what the future is going to look like, and the longer that goes, the more there is a risk to the price of electricity and the infrastructure.

SCOTT RYAN

Well I make the point Chris, again, the uncertainty is one caused by this government. To go to what Andrew said earlier, blocking the ETS just ensured that the 12% increase we've seen in electricity prices isn't going to be even greater than that because the ETS was going to force electricity prices up by more than 20% – by 30%-plus for small businesses. So the uncertainty has been one that's been created by this government, because it said, "No carbon tax" and now it's saying, "There will be a carbon tax." Importantly, it talks about a price on carbon as if that's a euphemism. You are not going to reduce the price of electricity by putting a tax on it to make it more expensive.

ANDREW LEIGH

But we need some certainty, Scott. Unless we get certainty in this debate – unless we have an approach which provides certainty going into the future – we don't get these big investments. You don't build a power station unless you know what's going to happen in the future.

SCOTT RYAN

Julia Gillard could provide certainty right now by going back to what she said only days before polling day, which was, "There will not be a carbon tax." That's the certainty that could be provided. Julia Gillard has backflipped – that's where the uncertainty is coming from.

ANDREW LEIGH

Well what Labor has always said is that we ought to use market mechanisms to deal with the challenge of climate change. The thing is, we've now got a Coalition which has walked away from market mechanisms for dealing with climate change, just as it's walking away from market-based mechanisms in a whole range of other areas.

SCOTT RYAN

The Coalition would not put an additional tax on Australian households and small businesses that would only see Australian businesses become less competitive, because Australia alone cannot fix this problem.

ANDREW LEIGH

I think Australians know that it's important to deal with climate change and it's important to do that in the lowest-cost way. If we don't deal with climate change now, the cost only goes up. We have to tackle climate change and a market-based mechanism is the right way of doing it.

CHRIS UHLMANN

Well Andrew, just to pick up on one of the things that you said, too, and it's a theme that the Prime Minister has been hammering for a while – the death of bipartisanship. In the way that she describes it, did bipartisanship like that ever exist? I do vividly recall the Labor Party was opposed to the GST. Now that's a big part of the economic reform of the past 25 years, and Labor opposed it vigorously.

ANDREW LEIGH

Well Chris, I wouldn't rate the GST as major economic reform. What Labor did during the GST campaign – and I was working in this building at the time – was to ask some reasonable questions about the impact of putting up grocery prices on low-income households. That ultimately managed to help secure a deal in which food was exempted from the GST. But Labor was also part of sticking with the Coalition over trade liberalisation. That's been a bipartisan policy all the way through the Hawke, Keating, and then the Howard Government as well. What we've now seen is a Coalition that's walking away from things that have been fundamental to the Australian economic fabric for a generation – walking away from the idea of a floating exchange rate. We have the Shadow Treasurer, Joe Hockey, saying that somehow we shouldn't have an independent Reserve Bank setting interest rates, but instead that we ought to have interest rates set by Parliament again. This is really taking us back to the 60s and 70s.

SCOTT RYAN

Andrew is fundamentally misrepresenting both the past and the present in that. First, the ALP were not subject in any way – or had a role in any way – with the deal to exempt food from the GST, because the ALP refused to respect the mandate of the people. Quite frankly, I'm surprised that you don't think that abolishing nearly a dozen other taxes is a substantial economic reform. On the issue of whether there has been bipartisanship, in the 80s, the Coalition supported the reduction in tariffs, the various industry plans and the financial sector reform. As soon as Labor went to opposition, despite privatising everything that it could get its hands on, it opposed the privatisation of Telstra – even though it had plans to do so to parts of it in at the 1996 election. It opposed tax reform, despite it being voted on by the people, and it opposed the independence of the very Reserve Bank you're talking about now and threatened to take Peter Costello to the High Court.

ANDREW LEIGH

No, listen, this isn't right. Labor was the party that floated the dollar. Labor has always stood by the independence of the Reserve Bank.

SCOTT RYAN

(inaudible) … in 1996 – opposed it and attacked it in the House of Representatives and the Senate.

ANDREW LEIGH

Well let's focus on what we're saying today, which is the rise of what the Prime Minister has, I think, rightly referred to as 'economic Hansonism'. It was Joe Hockey being willing to say the Parliament ought to have a role in setting interest rates. This is very dangerous territory, it takes them back to the 1980s.

SCOTT RYAN

Joe Hockey hasn't said that at all. What Joe Hockey's speech was all about was about trying to inject competition into our financial services sector. Competition is something that Labor doesn't like, because it's outlawing it in telecommunications – I realise that. What Joe Hockey has outlined is a program and a plan to try and look at our financial sector, look at the impact of the last few years and say, 'how can we inject more competition into it?' That's what he said.

CHRIS UHLMANN

At the very least though, Scott, it's been a little untidy in the last week or so, it hasn't been entirely clear what Joe Hockey was on about really until he made that speech yesterday.

SCOTT RYAN

I read the speech earlier this week. I thought it was quite clear and comprehensive. The idea that we have debates in the Shadow Cabinet – I think that's a great idea. Otherwise we all become the 'lobotomised zombies' that Doug Cameron refers to the Labor Party as.

ANDREW LEIGH

Well I certainly don't think that's right. What you've seen here has been Malcolm Turnbull not willing to back in Joe Hockey. This morning, we saw Tony Abbott not willing to back in Joe Hockey's nine point plan. Really, you have Joe Hockey out there on his own, saying some stuff which would really take Australia back to the bad old days for Australian households. Ken Henry, last week, referred to his recollection of the mid-1980s, when young families couldn't get a loan because of the credit squeeze. That kind of credit squeeze is what we're going to get if we have Parliament regulating interest rates.

SCOTT RYAN

No one's proposing that except your coalition partners, The Greens.

CHRIS UHLMANN

Aren't Ken Henry and the ACCC also worried about a lack of competition in the banks?

ANDREW LEIGH

Well there's been a long-term reform agenda going on the Basel Accords. This is being run through the G20. Joe Hockey's late to the party on this one. This is a reform agenda which has been going on internationally. You'd think the Shadow Treasurer would actually know what was going on rather than just picking up on a few talking points.

SCOTT RYAN

Graeme Samuel has outlined that he would like powers to investigate the issue of price signalling because he is concerned about the level of competition in the financial services sector. Labor has refused to take up that recommendation and the Coalition has committed to looking at action on that front.

ANDREW LEIGH

There's a long-term reform agenda around this issue. It's going through the Basel process. It has been going on for many years. To pretend that suddenly competition in the banking industry is an issue which Joe Hockey has thought up is just…

SCOTT RYAN

Australian banks and the issue around price signals has got nothing to do with international accords or the capital requirements.

CHRIS UHLMANN

Alright gentlemen, we'll move on, because there's something that you might be able to get bipartisan agreement on, at least here. John Howard's in town today pushing his book 'Lazarus Rising'. In the speech that he gave today, he talked about the noble art, really, of politics – an idea that goes all the way back to Aristotle – and said that it was a matter of some pain to him about the way that politicians were being portrayed now and the lack of respect really that there is for politicians in some areas. Now you, Andrew Leigh, also have a book out – and this is not a book sale – but you talk in 'Disconnected' about the decline in trust and what you find is driving it across a whole range of areas in Australia.

ANDREW LEIGH

Well Chris, I think there are a number of factors driving it. One is technology – the rise in use of cars, the rise in use of ATMs, increased watching of television – all those things sap a bit of time from community activities. So people aren't joining political parties, but it's also true that they're not joining organisations like Lions, Scouts, the unions, they're not going to church. So it's, sort of, all of a piece, this big collapse in social capital. I'd like to be a part of trying to rebuild that, because I do think that it's important that that sort of compact that citizens and politicians have – the faith that people have in their elected leaders.

CHRIS UHLMANN

Scott Ryan, are you concerned that there has been a loss of trust in institutions, in politics, and in the church?

SCOTT RYAN

It does concern me. I think, particularly over the last fifteen to twenty years, we've had massive technological change, we've had massive social change. My generation has grown up in a very different social environment with 'working families' with child care much more relied upon than extended family than, I think, the previous generation. But I think one thing that's important here is that, when it comes to politicians, the increasing lack of faith that people have in politicians has, I think, been a reflection partly of politicians promising to do things they can't. When a politician promises to fix fuel prices or grocery prices but those aren't fixed, then I think that actually diminishes trust in all of us.

CHRIS UHLMANN

So how do you repair it, Andrew?

ANDREW LEIGH

Well I have suggested in the book a few things. The most controversial, as the Prime Minister mentioned when she launched it yesterday, was that people should contact two politicians – one politician to say something they like, and one politician that they said they didn't like. I don't know about Scott, but I would certainly welcome more contact from voters. I really enjoy being out there doing mobile offices, being in contact with people and talking to them about their daily problems. I've spent a lot of time in academia, but that conversation over the kitchen table is really important to understanding the issues and challenges that people are facing.

CHRIS UHLMANN

Scott Ryan, do you find that people say that they don't like politicians, but when they meet you, if they get to know you, they say, 'oh but not you – I quite like you'?

SCOTT RYAN

I'm a bit more humble than that. Maybe they'll tell the next person they see. But I think one of the challenges is the distance from our home bases. This place in itself, this building in Canberra, is actually a little bit surreal. I think we all enjoy the opportunity to get back out there with our community – wherever that may be – and actually talk to people about the problems that concern them, rather than what concerns us up here.

CHRIS UHLMANN

Well Scott Ryan, Andrew Leigh, we'll have to leave it there. Thank you.

Thanks to Scott for an enjoyable conversation, and for taking the trouble to transcribe it.http://www.youtube.com/v/w5mQ_KQdbyE?fs=1&hl=en_US