This evening I spoke on ABC RN Drive with Arthur Sinodinos and Waleed Aly. We discussed debt, school funding and standards and consistency in politics. Here's a podcast. And, below is the full transcript.
WALEED ALY: It seems though the Coalition and the Greens have reached a deal on getting rid of the debt ceiling. There’s some strange bedfellows in politics. We have the strangest coupling I suppose you can, although the new Senate may throw up some new challenges to that… To discuss this I am joined by our knights in shining armour, Assistant Treasurer, Arthur Sinodinos, and Shadow Assistant Treasurer, Andrew Leigh. Thank you very much for coming in.
ARTHUR SINODINOS: Hello Waleed.
ANDREW LEIGH: G'day Waleed. G’day Arthur.
ALY: It's the Greens, we love the Greens is it? Is that what's going on Arthur?
SINODINOS: I think our love has fluctuated from time to time, but at the moment…
ALY: I don't recall a fluctuation, I have to say. It's been fairly consistent.
SINODINOS: In all seriousness I want to thank them for the fact that they've approached this debate in a very constructive way. I was the President of Senate Estimates when this issue of the debt ceiling got quite an airing. The Secretary of the Treasury was being interrogated by senators and the Greens, in that context, raised this proposition around the debt limit and whether in fact it was better to move to a more transparent process of debating the uses and abuses of debt and being transparent about what they are used for, as opposed to having just an argy bargy over the fact that there was a limit and it needed to be raised every so often. So I think what we come to is actually something which will improve the transparency of the budget process. It also incorporates things like more references to climate change, intergenerational report and the like. So these are quite significant things.
ALY: Right so just to clarify, the deal is we get rid of the debt ceiling all together, the legislation that's there at the moment that imposes this, we just do away with it all together?
SINODINOS: We repeal that part of the Act.
ALY: We don't have an argument now about needing to raise the debt ceiling like we've had in America. We don't it anymore, but in exchange the Greens get a statement that has to come from the Government?
SINODINOS: Well every time the debt increases by about 50 billion, depending on when that is, the Treasurer within I think three days, would make a statement about why that is the case and with a statement…
ALY: And where it's going…
SINODINOS: Yeah, that would be debated and also there would be more augmentation of the budget documentation. Now we all know there is a lot of information in the budget, but the sort of information that we're now talking about, it will give people a better picture of the composition of debt, the trends in debt and I think also importantly it will help to clarify this debate we're having about good versus bad debt. And I think that's something that is quite constructive in this context, because we do get a lot of debate about the role of debt in financing, for example infrastructure. I think this will help to clarify the circumstances in which it's useful to have debt for that purpose.
ALY: The analogy Christine Milne used is, it's about separating the debt on the credit card from the debt on the mortgage. We're actually buying an asset, we're actually building something. Andrew Leigh this is actually one of the most interesting ideas in the election campaign that came from Jeff Kennet, I think it was at the time. Sounds like an eminently sensible idea, why did the Labor Party not strike this deal?
LEIGH: Well Waleed every now and then in politics I think you're entitled to look at the consistency of your opponents and to look at what they say before an election and what they do after the election. And I suspect if Joe Hockey and Tony Abbott had said back in August that what they were planning to do was to remove the debt limit entirely and that they would do so through negotiation with the Greens, people might have responded a little differently to them at the ballot box.
ALY: Which people? The Australian people?
LEIGH: I think so. Yes. I mean let's face it, what we were actually hearing from the Coalition pre-election was that if debt was the problem then more debt wasn't the solution. We heard some very cross words from Tony Abbott about the last increase to the debt cap and in fact the Coalition voted against past increases in the debt cap. So to suddenly move from voting against an increase to the debt cap to doing away with the debt cap altogether is a backflip of historic proportions.
ALY: Okay, well there are consistency arguments and I take them and we can explore those questions. But when you run a consistency argument it does suggest that there is not a substantive argument available to you to be run here and that actually the idea of having this debt limit that was imposed by your government, the Labor Government, the previous Labor Government in 2008 that introduced a bizarre sort of artificial barrier that we dare not cross. But then it would be crisis if we did and so you could never invoke this legislation, we have to keep amending it in order to keep raising the debt ceiling. That was all a bit of a farce as we've seen in America and now we've gotten rid of it. That's good isn't it?
LEIGH: Well of course we have the inconsistency argument and you know we can talk about whether Joe Hockey should or shouldn't be eating his greens, but then there is also the substantive argument and Labor has always said that on the current budget papers debt is set to peak at, gross debt is set to peak at $370 billion in 2016, so it was perfectly reasonable for Parliament, given that projection, to improve an increase in the debt limit to $400 billion. And our argument was that if Mr Hockey thought that debt would peak at a higher level, then he should release the budget update as Labor did every year in either October or November and then Australians could clearly see the extent of the deterioration under Mr Hockey's watch, and for example the impact of the $9 billion to the Reserve Bank, the $17 billion tax cut to mining magnates, to carbon polluters.
ALY: Ok well I still don't see what's wrong with it?
LEIGH: Well the argument that Labor made, was that if you want an increase in the debt limit you need to justify it. Just as Australians, if they were looking for an increase in their mortgage, would be asked by a bank ‘why do you need the higher mortgage?’.
ALY: And now they do have to justify it. They just have to make that statement.
SINODINOS: Well we have to make that statement whenever debt increases in $50 billion increments, or close to that. And I think that does create a capacity for the Senate, the House to have that debate. It's a separate issue about whether this is a licence to go out and spend, you know, beyond limits or anything. It's not. We have concrete commitments about getting the budget under control, getting the debt under control. That's a separate set of arguments to this. This was about exactly what you said, something that Labor imposed in 2008. They made a virtue of the fact that look debt will not go above 50 billion. And then we got into this argy bargy every time that was surpassed. So they created a rod for their own backs and I think we've actually ended up, almost by accident, in a much better place as a result.
ALY: Now I want to pick up the accident, because of course the accident was not remotely of your side's making Arthur Sinodinos. This is exactly what you were opposed to until it seems very recently. That is the consistency question that Andrew Leigh raises. Why the radically different approach to debt suddenly from the Government?
SINODINOS: No, I think that we were always, and when we were in Government we were of this view, that we didn't need to have a so called debt limit. It was something that happened under Labor and you saw the argy bargy that occurred. But what happened is, that from a piece of lateral thinking, when everybody was talking: well should the limit be 400 billion or 500 billion? There is this considered discussion in the context of Senate Estimates and everybody is sitting there, talking about the situation, how it's different from the US in this regard. And Christine Milne was very keen to make that point. Almost out of that came this idea, well yeah actually maybe we should contemplate getting rid of the limit. But the point is, the conditions that the Greens have put on this are quite rational conditions, which relate to actually creating opportunities to debate the substantive issue, which is the debt and what it's being used for, as opposed to the argy bargy over the fact that there is a limit and it's been surpassed.
ALY: Sure, but the point that the Opposition makes, is a fair point, isn't it? And that is a few months ago you were countenancing not raising the debt ceiling when you were in Opposition and if the Government did that would be a statement of failure on its part and that any increase in debt was merely a statement of continued failure.?
SINODINOS: I don't think in Opposition we made a statement that we would not increase the debt limit.
ALY: No, no you said that you were open to that.
SINODINOS: The point we were making in Opposition was every time the debt limit had to be raised this was a reflection of Labor's economic management and we stand by that critique.
ALY: Was it a reflection now that you sought to raise it?
SINODINOS: Well Joe Hockey's whole strategy around the Budget is that he will use the Mid-Year Economic and Fiscal Outlook to say this is essentially the fiscal outlook that we inherited, this was what it was looking like. And the Budget, which will also have the benefit of the work of the Commission of Audit, will be the opportunity to show how the new budget settings will apply, what the medium term budget strategy will look like and then there will be that comparison that we can make.
LEIGH: My concern I guess Waleed is that I don't think there is anyone in Australia who believes that if Labor had proposed this from Government, that Tony Abbott would have voted for it. There is no possibility that he would have done anything other than drive his debt truck around the country talking about how outrageous it was. And you know, I am concerned frankly that there’s an attempt to engage in what AFL fans call tanking, which is to try and dump problems into the 2013-14 Budget and then blame that Budget on Chris Bowen and Wayne Swan. We've seen this with the $9 billion to the Reserve Bank, which is I think an attempt to try and get greater dividends out in subsequent years and we're also seeing it with a range of other Government decisions which are worsening the public finances.
ALY: Well including additional spending on education, we don't know where that will come from and perhaps the Budget will fill us in on that…
SINODINOS: Well that Budget spending on education, which you raise and quite validly, that will be offset from within the portfolio. It will have to be.
ALY: What does that mean? Can I ask what that means exactly?
SINODINOS: That means other programs will have to be pared back to pay for it.
ALY: What sort of programs?
SINODINOS: Well that's a matter for the Education Minister.
ALY: Can you help me conceive of what…
LEIGH: Must be caps to university places.
SINODINOS: Well the cuts to universities are already factored in, unless you go ahead with your threat not to support them Andrew. But what I'm saying is, it's up to the Minister now to come forward with a package that will offset, through savings, the measures that he's had to introduce.
ALY: You can't help me with an example of what it might, we will never hold you to it..
SINODINOS: Well I don't want to pre-empt the Minister.
ALY: No, but I just can't think what it would be that doesn't worsen education outcomes.
SINODINOS: Well it's a big portfolio, so watch this space, it's a reprioritisation. We’ll watch Christopher Pyne's space, because he is the one who will explain that.
ALY: Is there excessive use of Comcars going on we could save money on? I don't know, I just can't, I can't think of…
SINODINOS: Well that would be more parliamentary than education.
LEIGH: This is a whole University we're talking about Arthur. I mean a typical university does have funding of about, you know $1.2 billion so you just, I mean you close a university, that would get it for you.
SINODINOS: Christopher Pyne will make the hard decisions necessary to pay for this.
ALY: I look forward to Christopher Pyne's receipt of your (inaudible), it will be very interesting…
SINODINOS: Look Waleed, the reality is that if we sat here and said that's fine, that's all just a further increase in debt, you and Andrew would be quite within your rights to say ‘well that's just further profligacy’.
ALY: No what I would say is that's very unlike you. I wouldn't say necessarily about the profligacy, that's a separate debate. The reason I raise education is because of the OECD report that we now have. Australia's education standards are slipping, relative to the world. Now part of that is the improvement of other countries, other parts of the world and we should keep that in perspective, but part of it is slipping in our own standards, particularly in mathematics. I am going to ask you first, how concerned you are, just get a brief response on that before we talk about the policy issues that this has raised. How big a deal is this for you?
LEIGH: It's a huge deal from my perspective, it's one of the issues Chris Ryan and I worked on when we were academics at the ANU. We went right back to the 1960s and it's all flat lining over that period, so I think there really is a concern and it's the absolute slump rather than the relative slump that worries me. I do think though that it gives stronger impetus to get the school funding system right and the work that was underpinning the Gonski review was having looked at the decline which we'd already seen going from 2003 to 2009. We'd seen a decline in absolute terms and the Gonski panel were looking at ways of getting a fair school funding system. Because aside from Christopher Pyne, I don't think there is anyone in Australia that thinks that the current school funding model is anything but broken.
ALY: Well you've kind of delivered us to the policy question, but I'll get your reflections first Arthur.
SINODINOS: Well look, we could get into a whole lot of argy bargy over what period some of these outcomes declined, but the point is now, where there is hopefully agreement between both sides about quantum of funding going forward, the real issue is the quality that goes with the quantum that we are talking about delivering. And that's an area where I think Christopher Pyne generally wants to put his own stamp on some of the proposals that are around. This is not about throwing Gonski out and saying it can't be used at all, because clearly there are issues around the needs basis of the system and all the rest of it that have to be addressed.
ALY: Except that he is not stamping it at all, isn't that the point?
SINODINOS: No, but the point is…
ALY: Once you get beyond the Gonski States, he is shovelling money at them, 1.2 billion, with no strings attached.
SINODINOS: No no. He has made some considered commitments around the quality of teaching, around independence of school, the role of principles and the like. And I think what we need to do is give him the time now, over the next year, to roll out that agenda as part of negotiating what goes with the funds that we're providing, because we will be holding the States to account. There will be, to use the buzz word of the moment, transparency around how our funds are being used and what they are being used for.
ALY: But there is no, as I understand it, unless I've got this radically wrong, there is no obligation that the States who receive this money, and the Territory I should say who also receive this additional money, that they have to put in any money of their own. We've received no indication that there has been negotiation on what obligations the States and that Territory would carry in to receiving that money. All we've been told is there is an in principle agreement, we're chucking money at them and we're going to be less involved, we're not going to do command and control.
SINODINOS: In the period before the Prime Minister and Christopher Pyne announced this funding agreement or deal on Monday, there had been discussions with those States and the issue here is that it's not one size fits all. You talk to Western Australia, you talk to Queensland, I was in Queensland last week and I saw Campbell Newman on other matters and he made it clear to me he had a particular view about how he wanted his education system or the State's education system to run. So to some extent we've got to deal individually with each of these States around how our funds are used and our understanding of what those States and Territories will do.
ALY: So a different funding model in every State?
SINODINOS: No, not a different funding model, but a recognition of where conditions differ. For example the Northern Territory has a particular Indigenous issue.
ALY: As does WA.
SINODINOS: As in part of the State, exactly. So what I'm saying is, what he's doing is not a one size fits all approach, he's been having those bilateral discussions and I think they will bear fruit.
LEIGH: I think that more money certainly creates the potential for improvements and if you strike a deal with a State, which doesn't increase the amount of money that goes to students, because the State withdraws a billion dollars for every extra billion dollars the Commonwealth puts in…
ALY: Cost shifting effectively..
LEIGH: Exactly. If all you do is you see that the education system is now payed for more by the Federal Government and less by the State Government, then there is no new funding available for schools and it's hard to see how you then begin to bring about change. I respect what Arthur is saying on terms of autonomy and so on. But I do think we've learned a bit from the economics of education over recent decades. Questions around teacher quality I think are paramount. And when I look at say the role that literacy and numeracy coaches are playing at some of the more disadvantaged schools in my electorate, that's a model which was federally driven, where you can actually be in a classroom and see the coaches working side by side with teachers, improving the way in which they raise literacy and numeracy. But if we'd simply said to the jurisdiction ‘well here you go, here's the cash, do with it as you will’, I'm not sure why any reasonable person would expect that to raise standards.
ALY: Well I think Arthur's saying is that's not necessarily what's going to happen and we'll have to wait for some detail. We're waiting on a lot of detail Arthur I've got to say, I do look forward to receiving it. I want to ask though about the higher education and the cuts to funding that you, your side of Government Andrew were effectively using to pay for the Goski reforms. You received a lot of criticism, taking money out of tertiary education to give it to secondary education. Now you've changed your mind on that, just at a time where the new Government is looking to fund its education. You asked the consistency question before, is this just political opportunism?
LEIGH: Well Waleed you and your listeners know the broad context to this, which is that over the period that Labor was in Government we increased education funding by about 73% and then introduced an efficiency dividend, which meant that people had expected we would increase it by 75% and instead we increased it by 73%. Either way you're talking about massive increases in university funding under Labor, largely because we took the cap off places, allowed a whole lot of kids to be the first in their family to attend university. And in terms of the efficiency dividend, the view we took was that it was worth imposing that while the money was going to go to schools, but if we're not going to see that money flow through to improve outcomes in schools, then we don't support it being taken out.
ALY: Hang on, but the money is still going to schools.
LEIGH: But we're not going to see that I don't think, because I suspect that, the States are pretty cash-strapped at the moment and I suspect many of the States will withdraw money from schools as fast as the Commonwealth puts money in.
ALY: But they still have to fund those original agreements with those States that signed on under Gonski. They still have to fund those and part of that funding was going to come from this and now you're denying them that funding that you yourself wanted.
LEIGH: Well it's unclear whether they're going to follow through on those deals. They're taking about four years of certainty rather than six years of certainty, which means that the total amount that they're putting into schools is considerably less than what we would have seen under Labor. They were saying during the election that it was a unity ticket on education, but I'm not sure that we've seen that delivered after the election, in fact I'm pretty sure we haven't.
ALY: Arthur I'll let you give expression to that smirk that I can see.
SINODINOS: No no, I wasn't smirking so much as reflecting on the fact that, having identified these saving, to now go back on them after the election, I don't think is a good look for the Opposition. I think there has to be consistency.
ALY: There's not consistency anywhere in the Parliament can I just say as a voter. Really, that seems to be the theme, I not sure anyone is entitled to run on it are they?
SINODINOS: On consistency?
SINODINOS: Well from our point of view, given the state of the Budget, we do need to maximise our savings going forward and these measures play into all of that.
LEIGH: We've got the two consistency issues, we would like the Opposition to be consistent in their attacks on debt, they would like us to be consistent on spending less on universities. I'm happy to be criticised that Labor now has a position where we believe we should be spending more on universities.
ALY: Kind of like the Coalition are happy to be criticised for spending more on schools. I expect in three years' time the Australian people will give their verdict on this gymnastics show that they are watching. We will see. Gentlemen it is always a pleasure to talk to you. I know it's very busy around here and you've got engagements to get to, thank you so much for dropping in.
SINODINOS: Thank you.
LEIGH: Thanks Waleed, thanks Arthur.
ALY: We'll be doing it again.
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