Andrew Leigh

On 19 August, I spoke with Waleed Aly and Arthur Sinodinos about the Coalition's paid parental leave plan. It was a thoughtful conversation as always, but I couldn't resist pointing out that the plan gives five times as much to the richest as the poorest, and is yet to be properly costed. Here's a podcast. Transcript over the fold.

Transcript

19 August 2013

ABC Radio National Drive Interview – Waleed Aly

WALEED ALY

Will that levy hold or will it break? Senator Arthur Sinodinos and Andrew Leigh join me now, respectively Parliamentary Secretary to the Leader of the Opposition and Member for Fraser, previously Parliamentary secretary to Julia Gillard when she was PM. Gentlemen welcome.

ARTHUR SINODINOS

Thank you Waleed.

ANDREW LEIGH

Thanks Waleed.

WALEED ALY

Arthur start with you: that’s not really a good enough answer is it? Might be this, might be that, I’m not really sure.

ARTHUR SINODINOS

Well I don’t know what papers Joe had in the car with him, but I think what he was saying is that all will be revealed in due course in the sense that there is a definitive set of costings coming out, which will cover not only this, but all the other commitments we have made during this campaign. He made a reference to 50-70% of the cost of the scheme being covered by the levy and then there are offsets because the Government scheme no longer applies. States potentially make a contribution if State public servants are covered by the Federal scheme. So there are things like that which would have to be sorted.

I mean what’s definitive is that the levy would be on the bigger businesses that we’ve talked about I think before, but they will also be subject to a tax cut, so they are not worse off in that sense. They just don’t get the benefit of the tax cut in the same way smaller businesses do.

WALEED ALY

Yeah I understand that point, but a margin of error of 20% of the cost, I mean if it’s a $5 billion scheme, that’s a billion bucks.

ARTHUR SINODINOS

To be fair to Joe, I don’t think it’s right to say there is a margin of error. I mean he will give the more precise figures when all the costings come out together and as you can appreciate policies are being announced as we go and then when they’re all tallied up, you’ll have all the savings attached and then they’ll be a further contribution towards the budget bottom line.

WALEED ALY

Not a new policy though that’s been around three years. I would have thought he’d know the figure off the top of his head, unless of course the costings aren’t done yet in which case there is no way that he or your colleagues can stand before us and tell us that it’s responsible.

ARTHUR SINODINOS

No, no I think he, to be fair to Joe, all these costings will come out together in due course, by the last week of the campaign.

WALEED ALY

That’s when they come out, but he would know what the figures are.

ARTHUR SINODINOS

But I think what he is doing is, he is saving up all the stuff so you can see everything together, see the overall impacts on the budget bottom line and the impact on where we end up on the deficit and surplus for a particular year, for the budget.

WALEED ALY

Allright, Dr Andrew Leigh, I might get your reflection on this. If there is a productivity case to be made here that a Paid Parental Leave Scheme like this is a productivity measure, not a welfare measure, doesn’t this show that the Government is really behind on this, that it doesn’t have, at least there is a blind spot here in the way in which it’s approaching productivity.

ANDREW LEIGH

Well if that were the case Waleed then that might be true, but I am not aware of any serious economist who argues that the Coalition’s Parental Leave Scheme would boost productivity or participation relative to the existing scheme, which has already benefited around 300 thousand Australian parents.

The thing about the Coalition’s scheme is that it gives the most to those who have the most and in that sense it is completely at odds with the way in which the Australian social safety net has always worked. Ours has been a very targeted social safety net, that’s why it’s done so much to reduce inequality, this scheme will dramatically increase inequality and it’s very unclear where the money is coming from. I can just imagine what Arthur would have told John Howard when he was working as his Chief of Staff, if Labor’s Shadow’s Parliamentary Spokesperson had said that they didn’t know what a policy would cost, whether it would cover 100 or 50% of the cost. My back of the envelope says that the Company Tax increases raise 2.3 billion, the policy cost 5.5 billion a year so it only covers 42% of the cost.

WALEED ALY

Well ok that’s 5.5 but then there’s your policy as it stands currently costs about what? 2 point something? So you take that off the 5.5, because that 5.5 is not net. That 5.5 is for the whole program, but if that applies then the ones that currently apply don’t need to…

ANDREW LEIGH

And this is the thing Waleed, if we had what we had from the Coalition in 2010 and certainly from Labor in Opposition in 2007, costings policy by policy, then we’d be able to go through this. The real concern with the way the Coalition are doing costings this time around is they’re not producing costings for every policy, as Oppositions in all past elections have done. And so it’s left to the rest of Australia to worry where the rest of the money is coming from.

WALEED ALY

Well hang on, before that though, you can’t go too hard on that point. I mean they’re going to release costings in the last week of the election campaign. By all indications they’re going to release with a lot more time for public and for media to digest than you did in 2010 or in 2007.

ANDREW LEIGH

That’s simply not right Waleed. What we did in 2007, was each time we released a policy, we described precisely how that policy would be funded. Then at the very end, in the last couple of days in the campaign it was clear how all of those things added up.

The coalition are taking a different step, they are not announcing policy by policy how things will be funded, so their Company Tax cut had no supporting documentation as to how the policy would be funded. They haven’t even met their own, fairly low standard from 2010, an election we subsequently they had an $11 billion costings gap and the accountants who’d done the costings were fined for breaching professional standards. That’s deeply concerning I think and it does raise the spectre of hidden cuts to pay for these policies.

WALEED ALY

They’re not doing that this year, they’re going by the budgetary office, which they’re perfectly entitled to do. The same kind of people with the same sorts of qualifications as Treasury. But isn’t part of the problem with asking the Opposition to put costings up that the system’s rigged against them, because they submit their policies and then the boffins look at it and cost it and release it straight to the public instead of going back to them in the kind of iterative process that happens with costings for a Government, so the Opposition only gets stung by doing this.

ANDREW LEIGH
Well you can do it either way, you can put your costings up before then election period and then they are yours privately to release as you wish, or you can do them during the election campaign and they get released as you say but this is not Labor’s costings process, by and large the Charter of Budget Honesty is a creation of Peter Costello and John Howard.

WALEED ALY
As amended by Labor..Yeah.

ANDREW LEIGH

Well we’ve provided more transparency and accountability around it but I’ll give Arthur his due, I’m sure he was involved in the production of the Charter of Budget Honesty in its inception, it is a very good charter and I just wish that the Coalition were adhering  to it better in this election.

ARTHUR SINODINOS
Waleed, can I just comment, in 2010, the Government seemed to send all its costings to Treasury and Finance, at the end of the last week of the campaign, so there was very little time to adequately scrutinise them now that’s a Government, presumably, that would have had the benefit of doing some of these costings while they were in Government, using the resources and incumbency to do that.

So, you know, really in a sense we’ve got to get on and look beyond the current debate on costings, judge what the Coalition will put out in the last week of the campaign and there will be time for people to adequately scrutinise what is put out and I think it is good to end the campaign with having a debate around costings as a basis for discussing economic policy options. Beacuse I think the major issue we face as a country is our budgetary options going forward. There’s no two ways about it and it’s actually good to end the campaign with a debate about economic management.

WALEED ALY
Ok and I want to come to some of the substantive questions about the policy in a second, but you’ve got to admit that they are a lot of people who are perfectly entitled to look at this and say there is a lot of money, a lot of spending promises coming out of the Coalition. A side of politics that has run almost entirely on fiscal restraint over the last 3 years and none of it is being explained. Exactly how it’s going to be paid for.

ARTHUR SINODINOS
Well look Waleed, this is a real dilemma for the Coalition, because if we run on a complete policy of fiscal restraint then Labor would be saying they have no agenda, they have no priorities…

WALEED ALY
But you’ve running on that Policy…

ARTHUR SINODINOS
…then when you put out your spending priorities, people say well you’re spending money on this, you’re spending money on that, but if we can demonstrate that we are spending money on X, Y & Z this is how we pay for it, this is how we make a contribution to reducing the pressure on the budget bottom line then I think we’ve done our job.

WALEED ALY

All right, we’ll come back to it, [inaudible] get a chance for costings, I just want to ask you though, Arthur Sinodinos, what exactly is the productivity case for this, because this is what Tony Abbott says but it’s unclear exactly how forceful the argument is that a Paid Parental Scheme of this scale aids productivity.

ARTHUR SINODINOS
Well one aspect of this is what the Productivity Commission noted in one of its enquiries around Paid Parental Leave, which was the health gains, which not only benefits families, but society at large. Lower long term health costs, the likely long run productivity benefits from kids getting a minimum period of exclusive care and breastfeeding…

WALEED ALY
That’s highly speculative isn’t it?

ARTHUR SINODINOS

Well they were consistent with the recommendations of both the Australian National Health and Medical Research Council and the World Health Organisation in terms of the minimum period that’s good for both mothers and kids.

WALEED ALY
Well that’s fine but that’s different from saying that there’s a productivity gain by funding woman to breast feed their kids more down the track because they were breastfed longer they will more productive.

ARTHUR SINODINOS
And I said there were aspects to this and the second aspect of this is to extent that it is maintaining attachment to the Labor force at various levels up the chain of jobs if you like, right, promoting labor force participation, particularly in a context where we have an ageing population, I think there is a major productivity benefit in an generic sense. Using productivity in its broadest interpretation if you like.

WALEED ALY
It doesn’t quite sound like the big winning argument that Tony Abbott is presenting as though it’s a productivity gain, it sounds like, it’s very watery I have to say.

ARTHUR SINODINOS
Well, he’s talked about it in generic terms I’ve given you some specificity and granularity

WALEED ALY

Ok…

ANDREW LEIGH
Can I just respond on those..

WALEED ALY

That was almost Rudd-esque

WALEED ALY
Yes you can.

ANDREW LEIGH
Just a , you know, there’s always a risk when three blokes sit around and talk about parental leave but I mean Arthur’s suggestion is first of all that there will be a productivity increase through children, I mean that may be the case but if you’re born in 2013, we won’t see that until at least the 2030’s when you’re entering, when that child enters the Labor force. And if there is a benefit in terms of participation, my read of the evidence is that attachment to the labour force is most fragile at the bottom of the income spectrum, rather than the top of the wage distribution. It’s early childhood workers who are wondering whether or not it’s worth their while to stay attached to the labour force, less so accountants and lawyers…


ARTHUR SINODINOS
Well can I just give a quick comment on that Waleed, because someone on average earnings will get I think $21,000 more under the Coalition scheme than they will under the Government scheme so for someone on average full time earnings, which admittedly may be be higher than that of childcare workers and there are actions being taken on that front, will get that $21,000 extra, so in fact it is very supportive of those who have a wage above the actual minimum wage.

WALEED ALY
Yeah but those who’ve got a low wage would be worse off under this scheme wouldn’t they?

ARTHUR SINODINOS
No, no they wouldn’t be, because they get their actual wage or the minimum wage whichever is the greater, from memory.

WALEED ALY

Ok, sure, just one thing I want to pick up on Andrew is the superannuation element…

ANDREW LEIGH

The Compulsory Superannuation that’s right…

WALEED ALY

The Coalition scheme includes Superannuation as part of this entitlement, Labor’s scheme doesn’t, because its not connected to work place entitlement, it’s a welfare programme effectively. Isn’t that a massive blind spot in Labor’s plan, particularly given the differential levels of Superannuation that happen at the other end for woman, in relation, compared to men.

ANDREW LEIGH
Waleed, our approach to Superannuation for low income earners is that low income earners, have traditionally been in a particularly unusual situation where their superannuation is taxed higher than their earnings, so we’ve taken away the tax on superannuation for those earning below $37,000. That’s of much greater benefit than providing superannuation for the period of Parental leave.

The Coalition may well provide Superannuation as part of Parental Leave, but they will raise the taxes on superannuation contributions for low income workers, for everyone earning under $37,000, two thirds of whom are women. So that’s I think going to be a much bigger hit to superannuation for low income earners and to the gender superannuation gap which I do think matters.

Just one other quick thing, Arthur’s claim about a Mother on average earnings being $21,000 better off, was rated mostly false by PolitiFact today and they did that on the basis that Mr Abbott appeared to have used an overly high figure for average female earnings.

ARTHUR SINODINOS
This was average salary for women who worked full time.

WALEED ALY

Indeed, so…

ARTHUR SINODINOS

That was the definition which is around $65,000. So it may be PolitiFact or whoever are looking at the average salary for women, we were looking at the average salary for women who worked full time.

ANDREW LEIGH

Indeed, and so, but Mr Abbott’s claim was the generic one, a mother on average earnings and to exclude part timers I think is a significant blind spot, particularly  given that there is quite high part time participation among women. I don’t like to get into too many of these scrappy things because Arthur and I do enjoy having a consensus on most of the big questions, but I think this is an important difference.

ARTHUR SINODINOS
Well, a bit of specificity and granularity is good from time to time.

WALEED ALY

You’ve gone there twice Arthur!

ARTHUR SINODINOS

Well it’s Kevin Rudd being back as you say, it’s sort of you know, a bit of programmatic specificity

WALEED ALY

Ah it’s in the ether I, look forward to your ascension to some sort of leadership role and the various other managerial words that  you can come up with Arthur, I’ll keep track of them and I’ll watch with interest.


Gentlemen we are out of time, but I look forward to us locking horns again…

ANDREW LEIGH

Thanks

ARTHUR SINODINOS

Thanks

WALEED ALY
On other issues of granularity or something, I can’t even keep track of it, Andrew Leigh, Labor MP for Fraser and Arthur Sinodinos, Liberal Senator for NSW, Parliamentary secretary for the Opposition Leader.

ENDS