SKY NEWS AM AGENDA
MONDAY, 17 APRIL 2017
SUBJECTS: Liberal Party’s division; wages growth stagnating; housing affordability; Adani coal mine.
KIERAN GILBERT: With me to discuss the issues of the day, the Shadow Assistant Treasurer, Andrew Leigh. Andrew, thanks for your time. Tony Abbott says all politicians are on the nose. Is he right about that?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Certainly the Liberal Party is on the nose, with this extraordinary level of in-fighting. It makes you think the only reason they went to the polls early last year was so they could get back to the main job of ripping themselves apart. This is a government that makes Punch and Judy look like a love-in. They're far more concerned with fighting one another than they are with fighting for ordinary Australians. Challenges like climate change, housing affordability, economic growth going by the wayside while the Liberal Party engages in these internal squabbles.
GILBERT: Do you see it as a return of the Rudd-type behaviour or is this just genuine policy discussion on a range of issue? Where he is talking about the need to move - in his view - on renewable energy, on reform of the Senate, and so on. Are these not realistic and viable proposals from a backbencher?
LEIGH: Tony Abbott is obviously fighting a rearguard action to return to the Prime Ministership. And clearly, a significant portion of the Liberal Party are dissatisfied. You chat to Liberal Party backbenchers and what's evident is that all they're looking for is a clear challenger to coalesce around in order to bring on the challenge to Malcolm Turnbull. The reason this has happened is that Malcolm Turnbull isn't the great centrist that he'd led people to believe but is in hock to the right wing. A man who previously said he supported our race-hate laws but is now going against them. Previously said he supported marriage equality, but now won't bring a vote to the Parliament. Previously said he supported strong action on climate change, but now doesn't even support an emissions intensity scheme that's backed by his own Chief Scientist. Previously said he supported the Safe Schools program, and yet is now trying to destroy this effective anti-bullying program in our schools.
GILBERT: One of the things that Tony Abbott also suggested is that on his pollie pedal he picked up a lack of support for Labor as well. Saying that they're certainly on the nose as well in terms of politicians more broadly being unpopular. What do you say to that?
LEIGH: Bill Shorten is doing a great job as leader of the Labor Party. And to your point before about unity within parties - we did two things after 2013; we changed our rules so that the caucus no longer could simply change leaders, and we also put in place somebody who's a great consensus builder in that Bob Hawke style. Bill is working right across the party, ensuring that we get the best ideas. This old notion that leadership is best done by an Emperor - sitting atop his court - it's terribly corrosive in politics. People start to worry much less about the ideas and more about the personalities. It becomes all about whether you can get personal access to the leader and so on. Indeed, you see this now with the US system-
GILBERT: But supporters of Malcolm Turnbull would be saying that he has been building consensus, that's what he's been doing. He has been pragmatic within his party.
LEIGH: What you've seen with Malcolm Turnbull is a leader who is willing to do anything that his right wing wants. Who's making decisions which are based - not in the national interest - but in his own self-interest in staying in power. He's disappointed me, but I'm just one of 25 million Australians who feel let down by the promise of Malcolm Turnbull – before he came to the leadership – of being somebody who'd be above politics and who would bring a set of middle Australia values. Rather than simply making any compromise necessary in order to stay in office.
GILBERT: Let's look at a few issues around this morning. Wages stagnant - analysis done out of the ANU that shows the growth of wages at the slowest and flattest rate that they've seen in a number of decades. Not really a surprise to many of viewers and to many people around the country who feel that their living standards have been falling.
LEIGH: That's right, Kieran. It's work done by the Australian National University's Ben Phillips, one of the most respected economists in the country, and it's showing very clearly that wages growth is as low as it's been, translating into low household disposable income growth. We talk about the quarter-century of uninterrupted economic growth, but that's the aggregate Australian economy. If you look at living standards per person, they're barely above where they were in 2013. We had this spectacle at the end of last year of house prices in Sydney and Melbourne growing nearly 10 times as fast as wages. So for young couples, you see this massive mismatch between what they're getting in their pay packets and what they have to pay when they go to the auctions. They're getting beaten out by investors, and of course, low wage growth affects confidence right across the economy. People tend to be much less willing to make those discretionary purchases when their wages are growing at these glacial paces.
GILBERT: Chris Richardson points out though, that this isn't happening in isolation. That profits have also been down at the same time, in fact, by more as a percentage than wages.
LEIGH: If you look historically, profits are doing pretty strongly, wages are doing pretty poorly. Certainly, one of the shifts that you're seeing, I believe, has to do with increased concentration within the economy. When just a few big firms control particular sectors and the unionisation rate is as low as it's been in a generation, then what ends up happening is that you get a wages squeeze on the factory floor, while wages explode in the corner office. CEO pay is continuing to do very well, but the pay of average workers is stagnant.
GILBERT: So is this about a cultural shift within the corporate world as well?
LEIGH: It's the general rise in inequality, which is now as high as it’s been in three-quarters of a century.
GILBERT: But how do you deal with it then, in terms of changing that trend if you can?
LEIGH: Funny you ask, I've just been spending the morning working on a speech on actions to tackle inequality at ANU this Thursday. Part of it comes back to making sure we maintain a strong, targeted social safety net - we've got the best targeted social safety net in the advanced world and so-
GILBERT: It shouldn't be just about a safety net, should it? It should be just as much about having the corporate world provide incentives to workers. If you believe there is a disparity, why wouldn't you be urging them to do the same?
LEIGH: The safety net matters. We've also got to make sure we've got productivity-boosting investments. Because if we don't have strong investments in education and infrastructure then we don't get that long-term middle-class growth that really matters. We've also got to make sure that our education system is serving the very bottom, because the very bottom performers in Australian schools are doing among the worst in the advanced world. We need to make sure that we've got those investments and it goes back, not just in schools Kieran, but back to the pre-school investments. Even making sure that babies in utero are as well looked after as possible because we know that disadvantage in the womb perpetuates through the life-cycle.
GILBERT: Are we seeing a catch-up basically? As Chris Richardson again points out. His argument, again, is that wages aren't catching up because basically when wages were rising they weren't matched by a commensurate increase in productivity and now we're seeing the result.
LEIGH: Wages, in the long run, tend to track productivity. But what we've seen over recent years is that wage growth is going below productivity growth. In other words, workers are producing more output for their firms, but they're not getting their fair share.
GILBERT: He's saying that's catch-up. After strong income growth, ahead of productivity, and now we're seeing the reverse.
LEIGH: If you look in terms of the wage cycle I'm not sure that's right. I think Chris is looking at different measures of income there. In terms of wage growth, you've got to make sure that individuals have the skills they need and the infrastructure they need, and the infrastructure they need. We've got to encourage people to take up the latest technology, and that requires life-long learning, and an ability to continue learning on the job. We're not as good at that in Australia as we really ought to be.
GILBERT: We're seeing the Sydney Morning Herald report again on the housing crisis in that city. It's also prevalent in other major cities on the eastern seaboard, particularly Melbourne. A young couple is heading to Mudgee to buy a house instead of Sydney. Is this just the reality? Is this what young people are going to have to do in order to get into the housing market?
LEIGH: It shouldn't be, Kieran. The home-ownership rate is as low as its been in 60 years. For young people, it's about ten points down on where it was a couple of decades back. It ought to be possible for a couple on modest incomes to buy a house in the city in which they work. That's the way our social contract's operated in the post-war era. Indeed, one of the great achievements under Robert Menzies was of broadening out home ownership. Then the Liberal Party was the party of first home buyers. Now it's become the party of property investors. That's a mistake. We shouldn't have tax systems that are skewed towards people buying a tenth house for their baby rather than buying their first house in order to live in.
GILBERT: One of the criticisms of your policy has been that negative gearing will be scrapped except for new estates - housing estates. One of the things the Liberal Party says and has been arguing in recent weeks has been that you will simply drive investors to those areas - new housing estates where first-home buyers have traditionally tried to get into the market.
LEIGH: First home-buyers can buy across the board. The reason why we are encouraging people to invest in new supply is because that adds to the total housing stock. Oddly, the Liberal Party has supported changing first home-owner grants at state and territory level towards new-built homes. At the federal level, they've supported the idea that if foreign investors want to buy, that should be in new housing stock. We're just taking that principle that the Liberal Party supports for first home-buyers and foreign investors, and saying you should apply it to negative gearing too.
GILBERT: Do you recognise that really it's the RBA that has the whip-hand here? That a rise or two in interest rates would put a lid on some of these prices?
LEIGH: It would certainly affect housing, but it's going to affect investors and first home-owners alike. The difference a change in the tax mix - and indeed why Philip Lowe has recently argued for doing just this - is that you're able to shift the balance at an auction away from the investor and towards the first home-buyer.
GILBERT: The government's released some numbers - this is on a proposal by the Adani coal mine in the Galilee Basin - the government says it would create 15,000 direct jobs and also the rail line, which would be built as part of that concessional loan arrangement with the federal government, would support five other projects in that region. This sounds like quite an encouraging set of numbers?
LEIGH: They're certainly higher job estimates than anything I've seen floating around recently. But Federal Labor's view on the Adani mine is that it needs to stack up economically and environmentally. Adani themselves have said that getting a loan from the Northern Australia Infrastructure Facility isn't essential to their project going ahead. They've said it would be nice - well, of course, it would be nice to get the taxpayer to pay for a piece of monopoly infrastructure.
GILBERT: But if it's supporting other projects as well, why not?
LEIGH: At the moment it looks like it would simply be supporting Adani. Then you start to wonder how the Facility, which was set up to diversify the North, helps do that by investing a fifth of its resources into a single industry. How does a facility set-up to provide public benefit, provide public benefit if it's just going to a single firm?
GILBERT: This is something though supported, as you said in referring to the concerns of Federal Labor, very strongly by State Labor. So they've obviously been convinced by the economic argument.
LEIGH: There are differing levels of support from different tiers of government. What I can say, from a Federal Labor perspective, is we believe that this needs to stack up economically and environmentally. We don't believe the case has been made for spending taxpayers' dollars on this. You've also got to look at the fact that in many parts of the world coal-fired power plants are turned off. Lately, more than half of the new generation around the world has been in renewables. Not just because it has less climate impact, but because the marginal cost is essentially zero. The long-term outlook for any project needs to be viable. Adani need to show that they can get private sector investment for this and I suspect that there are many private sector investors who would be somewhat reluctant to invest in coal mines at this stage of the cycle.
GILBERT: Shadow Assistant Treasurer Andrew Leigh, I appreciate your time as always. Thank you for that.
LEIGH: Thank you.
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