ABC Lateline on Budgets & Priorities

I appeared on ABC Lateline to discuss budget speculation and the government's priorities.

FRIDAY, 2 MAY 2014

SUBJECT/S: Deficit Tax; Commission of Audit Report; Federal budget; GP Tax; Federal ICAC.

EMMA ALBERICI, PRESENTER: As we heard earlier, the Prime Minister has cancelled his trip to Bali, rejecting an invitation by the Indonesian President that many had seen as an olive branch extended after a period of strained relations between the two countries.

That news broke just after we recorded our political forum tonight which was dominated by discussion of the Government's first Budget.

We were joined from Melbourne by Coalition's Kelly O'Dwyer and in Canberra by Labor's shadow assistant Treasurer Andrew Leigh.

Welcome to you both.



EMMA ALBERICI: Kelly O'Dwyer, on the deficit tax, why is it okay for the Coalition to break an election promise but when Labor did it Tony Abbott said it brought our democracy into disrepute?

KELLY O'DWYER: Well, Emma, I think we're getting a bit ahead of ourselves here. While there's been a lot of reportage about a deficit or a debt tax or a levy, we've seen that reportage be quite different in all of it papers and the Budget yet hasn't been delivered. It will be delivered...

EMMA ALBERICI: Are you saying we're not going to get such a tax or levy?

KELLY O'DWYER: The Budget's going to be delivered on the 13th of May and I haven't seen it yet Emma, so I can't tell you exactly what's in it but the Treasurer will deliver it on the 13th of May and at that time we'll know exactly what is part of it Budget rather than the fevered speculation that we have seen to date. We also know that Labor is running a pretty strong scare campaign on all sorts of issues but I don't know that that's terribly helpful or constructive.

EMMA ALBERICI: Hold on, back to the deficit tax, the Prime Minister and Treasurer have both had ample opportunity to deny it and they haven't done so, in fact the Prime Minister has been at pains to defend the idea.

KELLY O'DWYER: All prime ministers and treasurers a couple of days out before a Budget - and I think we're something like 10 days out before the Budget now - they don't rule in or rule out anything that may or may not be in the Budget. I mean this is pretty standard practise.

EMMA ALBERICI: It is step further to defend it though, isn't it?

KELLY O'DWYER: That's your assessment of what's being done here. I think the fundamental point to note here is we have been having a discussion over the last little while about the legacy we have been left by the Labor Government and that is a pretty serious one. They trashed our Budget, they refused to fix it and they locked in spending in the future years.

EMMA ALBERICI: Let's go back to the question though because otherwise we're going to run out of time. And it was about breaking promises. Andrew Leigh?

ANDREW LEIGH: Tony Abbott had the opportunity over past years to say that he was going to increase income taxes or he could have said promises don't matter all that much because situations change.

He did neither of those two things. He criss-crossed the country talking about the importance of promise-keeping and in fact at one stage he said that there should be no new taxes without a new election which does make you wonder whether he's about to take us back to the polls.

Fundamentally, Mr Abbott needs to stand up to the test that he set for the former Government which he castigated for putting in place a temporary fixed-price period on the carbon price. I'm really concerned we're seeing the unravelling of the carbon price which increased the taxes on pollution and lowered the taxes on work. Mr Abbott's discovering that once you forego the substantial revenue from the carbon price, now he's going to have to increase taxes on work. That's the wrong recipe for an Australia in which we should be seeing more people in the workforce but less pollution.

EMMA ALBERICI: Andrew Leigh, in Government Labor spent money it didn't have in every one of its six years in power. How can you now criticise it Coalition for trying to be more responsible with taxpayers' money?

ANDREW LEIGH: Emma, you know if you look around the world that Australia's public finances are in extraordinarily good shape. When we left office debt around a 10th of GDP and we were one of just three developed countries to avoid recession through the global financial crisis.

In half a year in office Joe Hockey has managed to double the deficit, adding $68 billion to the deficit through things like going soft on multinational profit shifting, not being willing to pursue modest labour measure to more fairly tax the superannuation of people with more than $2 million in their super balances.

Collectively, those decisions have doubled the deficit and now the Government is turning around and saying, well, it's going to have to be those with chronic disease, people with disabilities, low-income Australians who bear the burden of the fact that Mr Abbott and Mr Hockey haven't been willing to fairly tax multinational companies when they try and shift profits to other jurisdictions.


KELLY O'DWYER: Well what Andrew Leigh didn't say is where Australia started on the journey when Labor was actually elected. We started in a very strong position because we'd paid back all of Labor's debt. That's the reason we went through the global financial crisis very well and that's the reason we're in a stronger position today when you compare us to a number of other economies.

What Andrew fails to appreciate is what people have been saying all along and people including organisations like the International Monetary Fund and that is that we have a huge spending problem. Labor got us into a huge spending problem. Of the 17 most advanced economies that they looked at recently, they said that Australia was increasing spending at the fastest rate.

That's ahead of Canada, that's ahead of the USA, that's ahead of France, that's ahead of Germany. I just don't think that Labor gets it. They're not accepting any responsibility for the position that they left us in. They talked about delivering surpluses. They didn't deliver one in the six years that they were in Government, in fact they delivered the highest deficits, five of the highest deficits that we have ever achieved in our nation's history and they added huge debt burdens to future generations. Looking forward, up to $667 billion that we know about if we do nothing today.

That's why the Commission of Audit was so important in being able to provide recommendations to Government. It was to actually look at how do we go about fixing this problem that we have inherited by Labor? And the fact is Labor don't want to be part of the solution. They in fact want future generations to pay for their recklessness.

EMMA ALBERICI: Kelly O'Dwyer, we wouldn't be facing this so-called Budget emergency if John Howard hadn't got the ball rolling on middle-class welfare, things like the unmeans-tested baby bonus and the Family Tax Benefit.

KELLY O'DWYER: We'd actually delivered surpluses. We could afford to pay for the money that was...

EMMA ALBERICI: So it was okay to introduce those measures just because you could afford them at the time because we were in a mining boom?

KELLY O'DWYER: The point I was about to make Emma is we were balancing the Budget and doing more than that. We were in fact putting money aside so after we'd paid off Labor's...

EMMA ALBERICI: Aren't the structural problems with our Budget on account of the fact that this middle-class welfare started under John Howard?

KELLY O'DWYER: If you'd let me finish Emma, I was just saying after we'd paid back Labor's $96 billion they left us with, we'd put $45 billion aside which forms the Future Fund today which is a net asset. We actually delivered a net asset to the Australian people. The Labor Party certainly have not done that. They have in fact left future debt for future generations and they have locked in spending. The truth is that they actually received more revenue, despite what they have said in the past, they received more revenue than the previous Coalition Government, $70 billion more. It's just that they doubled spending. That's why we are in the situation that we're in today.

ANDREW LEIGH: Emma, there's a number of points to respond to there. The first is that as you correctly identified, the proceeds of Mining Boom Mark I were largely squandered by the Howard Government because it was locking in spending that was not sustainable so in Government we made the decision to end the baby bonus. We got little help from the Coalition there. Joe Hockey at one stage comparing it to China's one-child policy to scale back the baby bonus and we means tested the private health insurance rebate.

It's still Coalition policy to take away that means test despite the fact that the private health insurance rebate's one of the fastest-growing areas of Government expenditure. Now Kelly refers the to the recent IMF report but of course that report is based on Joe Hockey's recent fiddling of the figures. While we were in office we kept a two per cent real spending cap on Government spending after the global financial crisis.

KELLY O'DWYER: But you didn't achieve it Andrew.

ANDREW LEIGH: We achieved it every year.

KELLY O'DWYER: No, no it was 3.5.

ANDREW LEIGH: When Joe Hockey became Treasurer, he took that cap off and of course when you take that cap off then you see a big blow-out in spending so the IMF is assessing Joe Hockey's Budget update which is a worrying Budget update. It's an extraordinary Treasurer who can manage to double the deficit in just six months.

KELLY O'DWYER: What Andrew's said is not correct.

ANDREW LEIGH: Now going back to trying to balance the Budget off the backs of the poor and what really worries me about this Commission of Audit is that we've had 20 years in which CEO pay has risen twice as fast as average wages and three times as fast as the minimum wage. But what does a CEO-dominated Commission of Audit say is their recommendation? They think there's a wages problem and it's the minimum wage that needs to be cut. It is this dystopian vision of Australia I think and one that hurts the poorest and most vulnerable in the area of fighting an equality.

KELLY O'DWYER: I didn't realise this was a monologue Andrew.

EMMA ALBERICI: Let me bring, let me bring... let me bring Kelly O'Dwyer in here because you have made a number of points which clearly Kelly O'Dwyer is taking offence to so let's have a listen to what she has to say.

KELLY O'DWYER: Well they talk about this cap that they put in place, this cap on growth in real spending. They say, 'wasn't it fantastic? We put this cap in place and it was two per cent.' The problem is they didn't abide by it. On average it was 3.5 per cent and when you look beyond the forward estimates, when you look in...

ANDREW LEIGH: After the global financial crisis.

KELLY O'DWYER: Andrew, let me finish. I listened to your monologue. In 2017/2018, in the fifth year beyond that forward estimates period in fact the real growth was six per cent. That's going to be encapsulated in this Budget this year which was a tripling of their supposed cap. They want to talk about Budget forecasts, they want to talk about projections. Let me tell you they, for instance, projected they were going to get a surplus almost every year. The deficits that they started with in some years were $12 billion which turned into $44 billion. They had heroic assumptions in there regarding growth. We really, coming into Government...

EMMA ALBERICI: We can't ignore the facts that there was a global financial crisis during their years-

KELLY O'DWYER: That was only part of their spending. They doubled spending ongoing. It wasn't just a one-off. It was entrenched within the Budget and this is the problem we need to address today.

EMMA ALBERICI: Let's talk about some of the issues we assume will form part of the Budget thinking. On the GP co-payment, Andrew Leigh, when you were a PhD student at Harvard you argued co-payments were sensible because it would make people think twice before going to the doctor. What or who changed your mind on that?

ANDREW LEIGH: Emma, I've changed my views since university days, as have many other people, and fundamentally on this I think it's the evidence coming forward from health professionals who weren't represented on the Commission of Audit, like the Australian Medical Association, the doctors reform society, they've said that the real challenge in Australia is that if you deter people with chronic disease from both going to the doctor, you end up having more people in hospitals.

EMMA ALBERICI: Can I just point out what you had said in a paper back then. Yes it was 10 years ago but you're a PhD student and you argued that as economists have shown "the ideal model involves a small co-payment, not enough to put a dent in your weekly budget but enough to make you think twice before you call the doctor."

ANDREW LEIGH: A co-payment might have been right when the Hawke Government proposed it in 1990 and maybe it was right in 2003, but we've seen massive increases in out of pocket costs in Australia and we know when we look across developed countries the real challenge for Australia is we have too many people in hospitals. If you curtail access to private health care you end up getting into a situation where you blow out a number of people in hospitals and a hospital is far more expensive than a GP.

I've spoken to a large number of GPs in my electorate, to friends who deal on the front line as doctors with people with chronic disease and I'm strongly persuaded that a GP tax would be a bad idea and that we ought to listen to the health experts on this.

EMMA ALBERICI: Is there anything in the Commission of Audit, Andrew Leigh, that you do support?

ANDREW LEIGH: I think the Commission of Audit suggesting that Tony Abbott shouldn't go ahead with his parental leave scheme is wise indeed.

EMMA ALBERICI: I don't think it says quite that, does it?

ANDREW LEIGH: They don't go as far as the Productivity Commission when we asked the Productivity Commission whether a wage replacement scheme would be appropriate they said no, that wouldn't boost productivity or participation and you've got independent experts like Saul Eslake saying the same thing.

The reason for saying that the flat rate scheme is better is that it fits also with Australia's social safety net which is either giving more to the most disadvantaged or having flat-rate payments across the board. This is an unusual payment that gives the most to those who have the most. It was described by the Liberal Party as being appropriate because parental leave is an ‘entitlement’. So much for the end of the age of entitlement - if you're a millionaire family having a baby then the age of entitlement's just beginning it seems.

EMMA ALBERICI: I want to move on because we are running out of the time. Let's talk about the corruption inquiry in NSW. It's claimed the scalp of the State's Police Minister today and this afternoon Kelly O'Dwyer, your fellow Federal MP Karen McNamara has been accused of electoral fraud. Given what's already happen to former assistant Treasurer Arthur Sinodinos, how unsettling is all of this for your Government?

KELLY O'DWYER: Look, my understanding is that both Karen McNamara and also Senator Arthur Sinodinos were called as witnesses to ICAC and both of them have been involved in presenting evidence to them but not been directly accused of any corruption and I think that's an important point to make. There have been other allegations made at ICAC regarding corruption. That needs to be fully investigated and those people who have been found to be corrupt need to face the full force of the law. Corruption is a terribly corrosive aspect to our democracy and our society and it's not something that any one of us can stand for.

EMMA ALBERICI: Just finally and briefly, former Federal Independent MP Tony Windsor has called on Clive Palmer and the other Federal Independents this week to call for a Federal corruption inquiry. I'm wondering from you both, would you be in support of such a move? Andrew Leigh?

ANDREW LEIGH: I think it's an idea worth exploring and people have noted that the Federal level it's the stand-out on not having a corruption panel. I do think that as Kelly has rightly said, corruption is insidious because it cuts into confidence, confidence that people can rely on those with whom they're doing deals, that contracts will be fair, that they can rely on getting a fair go from the Government. Also as a former judge's associate, I have a strong view that no-one should be above the law but that everyone's entitled to the presumption of innocence, and that certainly goes for the Coalition members that Kelly mentioned before.


KELLY O'DWYER: I certainly think that there has been no allegations of corruption Federally and if there were then obviously they need to be investigated by the appropriate bodies and my understanding is that that can be investigated currently so my view would be any criminal activity should be investigated and anybody who does the wrong thing should face the full force of the law.

EMMA ALBERICI: Kelly O'Dwyer, Andrew Leigh, thank you both very much.

ANDREW LEIGH: Thanks, Emma. Thanks, Kelly.

KELLY O'DWYER: Terrific to be with you.

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.