2CC DRIVE WITH LEON DELANEY
MONDAY, 20 NOVEMBER 2023
SUBJECTS: Merger reforms; Government’s cost-of-living measures; independence of Reserve Bank; Stage 3 tax cuts; multinational taxation.
LEON DELANEY: The Federal Government is considering some major changes to the rules around mergers and acquisitions. To tell us why, Assistant Minister for Competition, Charities, Employment, this, that and everything else, as well as our local Member for Fenner, Andrew Leigh. Good afternoon.
ASSISTANT MINISTER FOR CHARITIES, COMPETITION AND TREASURY ANDREW LEIGH: Good afternoon, Leon. Great to be with you.
DELANEY: Mergers and acquisitions. It sounds like something that, you know, the fellow on Wall Street, Gordon Gekko, might be excited about, but why is this important to ordinary everyday Australians?
LEIGH: Ultimately, Leon, mergers goes to cost‑of‑living. If you get big firms getting together, and they end up driving up prices, then that's bad for consumers. It can also be a risk to productivity if you've got mergers that aren't good for growth.
Obviously most mergers will pass the test, but over recent years, we've seen quite a few other jurisdictions – the US, UK, Canada and European Union – all review or amend their mergers rules. And an environment in which we've seen increasing market concentration and increasing mark‑ups, Jim Chalmers and I are concerned that we need to review our merger laws to make sure they're getting a good deal for Australian consumers, and the economy at large.
DELANEY: Okay. So what exactly are the changes that you're considering?
LEIGH: Well, there's been proposals that have come forward from the Australian Competition and Consumer Commission. They've suggested mandatory notification. Right now, most jurisdictions in the advanced world require notification of big mergers. Australia isn't one of those. So sometimes we just don't find out about mergers of multinationals.
The other possibility is to change the test for a merger. At the moment, that is whether the merger creates a substantial lessening of competition. So, we’ll review those proposals constructively, engaging with a whole lot of groups, and now is the opportunity for people to have their say on those merger settings.
DELANEY: So, if people have some sort of opinions about mergers and acquisitions policy, how do they express those opinions?
LEIGH: Just go to the Treasury website, where you'll find the consultation paper.
DELANEY: Fantastic. Now, you mentioned that the policy relates to cost‑of‑living issues, and of course while most of us probably struggle to get our minds around mergers and acquisitions, we all understand the cost‑of‑living challenge that Australians are facing right now. Despite your government's best efforts to look like you're doing something, there seems to be a lot of discontent in the community suggesting that perhaps the community doesn't feel as if you're doing enough. How do you respond to that?
LEIGH: Well, Leon, I think a lot of households are feeling the squeeze, there's no getting around that, and the interest rate rises that the independent Reserve Bank has put in place have particularly affected households with big mortgages; people who bought a house in the last few years are hit hard by those mortgage increases.
What we've done is to provide responsible cost‑of‑living relief. The energy bill relief, the cheaper childcare package, cheaper medicines. All of that targeted, not the big cash splash that would have seen us go into massive deficit as our predecessors did. We've delivered the first surplus in 15 years, which means that the Reserve Bank has said that our budget measures are putting downward pressure on inflation.
DELANEY: Of course, when we talk about inflation and interest rates, I think a lot of us struggle to see the connection when we're looking at a fight against rising prices, which means it's harder for ordinary everyday people to get by, it's hard for those people to understand why putting up their mortgage is actually going to help reduce costs, in fact it does the opposite for those people individually, doesn't it?
LEIGH: It will be up to the independent Reserve Bank to account for its monetary policy decisions, but we do know that ongoing inflation has a pernicious effect on the economy. It takes away the incentive to save, it can also create problems for business investment. The Reserve Bank even says that it can worsen inequality.
Once inflation gets a hold of an economy, Leon, it's pretty hard to dislodge, and that's why central bankers have worked so hard over the last generation to keep inflation low and stable. You don't get high and stable, you get high and volatile, and that volatility really is what hurts investment decisions, and ultimately means the economy grows more slowly than it would otherwise.
Right now we've got full employment. That's a fantastic outcome; 3.7 per cent unemployment, 3.5 per cent here in the ACT, a remarkable result for the 600,000 people who've gotten jobs since we came to office.
DELANEY: I notice that you've mentioned the independent Reserve Bank a couple of times, and it has been suggested by others that this is a deliberate ploy by the government to direct attention away from the government and say, "No, no, it's not our fault, it's the independent Reserve Bank making these decisions."
But the argument about whether or not it's appropriate to use the Reserve Bank's policy levers off adjusting interest rates as the only way to battle inflation, that's the core of this, isn't it, and is it right to leave it all to the Reserve Bank who can only put up interest rates, or should there be more that the government is doing to pull some of the other levers available to help address the problem of cost‑of‑living challenges, inflation in the economy and those matters. It's been suggested that there are other things the Government could be doing without leaving it all to the Reserve Bank of Australia.
LEIGH: Leon, I don't want to sound glib, but the best way of getting the cost‑of‑living crisis under control is to get inflation down. What we've done as a government is to make sure that we're not adding to those cost‑of‑living pressures by over‑spending in the economy. A government that engages in a big spending boom effectively makes the job of the Reserve Bank harder.
I call them the independent Reserve Bank because they are, and because I cherish that independence, as the Treasurer does. What we've got to do as a government is to provide targeted cost‑of‑living relief, but to recognise that as we're putting money into the economy, that that's adding to demand, and so we need to calibrate it right. The surplus is a real part of ensuring that we're working hand‑in‑glove with the Reserve Bank in order to get inflation down.
Our inflation peaked lower and later than other advanced countries, and so it makes sense that it's going to take a little longer than other advanced economies before inflation to comes back down to where it should be.
DELANEY: That's a bit of hard sell though, isn't it, when the current Governor of the Reserve Bank is on the record as having previously suggested that the only way to address inflation is to increase unemployment. Hardly an outcome you want to see, is it?
LEIGH: I think we're going to maintain good employment outcomes and good inflation outcomes. That's really important to me as a Labor person. Now one of the most important social justice outcomes is low unemployment. I remember leaving high school in 1990 when unemployment was double digits, school leavers just didn't get a look in, no chance of getting a job. And that was true of people who didn't have many skills or had a criminal record or an unconventional background. Now, 3.7 per cent unemployment, 3.5 in the ACT means we get to spread the benefits of work.
So at the moment our forecasts do have Australia maintaining good employment outcomes as inflation comes back into the target band, but I don't want to pretend it's not hard right now, Leon. There are plenty of Canberra families who are struggling, and that's where we've focused on that cost‑of‑living relief.
DELANEY: The other thing that's come back into discussion lately, whether the government wants it to or not is the suggestion that the Stage 3 income tax cuts, legislated by the previous government really should be revisited and perhaps redesigned to be better and more effectively targeted, yet the Treasurer insists no. Why is that?
LEIGH: We went to the election saying that we wouldn't change those Stage 3 tax cuts, and that remains our view. Those tax cuts are legislated, they are due to come in before long. We don't have any plans to change them.
DELANEY: Yeah, but they were legislated five years ago. Circumstances have changed, and surely common sense dictates that when circumstances change it's quite valid to go back and reconsider those policies, isn't it?
LEIGH: We are very clear about why we are doing those tax cuts, they will have an impact from $45,000 up, they'll take effect from July of next year, so they are tax changes that flow right through the income distribution.
DELANEY: Okay. So if you're earning $45,000 a year, you'll benefit by less than $1,000, but you've just had $1,500 taken away with the end of the low and middle‑income tax offset. They're actually going backwards at that level.
LEIGH: Well, those were decisions that were made by the former government. The former government scheduled that Low and Middle Income Tax Offset to end; they scheduled the Stage 3 tax cuts to come in. We were very clear that our priority is multinational tax reform. And Leon, you and I have had a number of good conversations about the government's agenda on multinational tax reform. We don't have any plans to change the Stage 3 tax cuts. We won't be changing those.
DELANEY: Okay. But, you know, I still think that, you know, when circumstances change, it's reasonable to go back and revisit things that were decided on long time ago and ask are they still relevant now.
LEIGH: Reasonable people can differ on this Leon, but I’ve told you very clearly what the Government's position is.
DELANEY: Indeed you have. Thanks very much for chatting today.
LEIGH: Thanks so much, Leon.