Australia needs to build a better economy - Transcript, 2CC Canberra




MONDAY, 11 MAY 2020

SUBJECTS: Australia beyond the coronavirus; JobSeeker and JobKeeper programs; the Coalition tripling Government debt; the important of engaging with the world; high speed rail; Jack Mundey.

LEON DELANEY, HOST: Federal Parliament will resume here in Canberra tomorrow on what would have been budget day. Yes, this is like Christmas for political nerds. The budget has been delayed of course, but both sides are laying out their visions for Australia's economic future. The Treasurer Josh Frydenberg will be handing down a budget statement tomorrow, and today the Opposition Leader Anthony Albanese has delivered a major speech to Labor MPs outlining a vision for the future. Now amongst the things mentioned by the Opposition Leader today is the idea that while we're facing a massive challenge at the moment coping with the COVID-19 crisis, it is also not only a challenge, it is also an opportunity. Joining me now Member for Fenner and Shadow Assistant Minister for Charities and Treasury, Dr Andrew Leigh. Good afternoon.


DELANEY: Very well, thanks. Thanks for joining us today. This is an opportunity to overhaul Australia's economy, says your leader. How big an overhaul are we talking about?

LEIGH: I think the important thing here Leon is that the snapback isn't a throwback. It's not a throwback to the past in which we just accepted that a huge share of the workforce would be on casual insecure contracts. It's not a throwback to assuming that people can live on 40 bucks a day on Newstart. It's not a throwback to thinking that somehow cuts in company tax rates for big firms is the solution to Australia's economic problems. And it's not a throwback to a time in which we disparage scientists and suggest that they had not nothing to contribute in boosting productivity in research and development. So there's a lot that we can do in this time in order to invest in the nation's future - affordable housing, boosting manufacturing, putting a greater emphasis on job security and creating a more respectful relationship between business and unions are just a few of the things that Anthony talked about today.

DELANEY: Interestingly you mentioned this respectful relationship, the interaction I guess between Sally McManus and Christian Porter has certainly been very instructive in what can be achieved when cooperation is the primary motivating factor. But first of all, you talked about a snap back not being a throwback and it does seem clear that the message from the Prime Minister is very much that he can't wait to get back to business as usual as it was before. Essentially what you're saying though is it doesn't have to be that way. Is that right?

LEIGH: Yes, we want to build an economy which is better than what we had before, not one that simply just gets us back there. Of course the road back will be tough. We know from the Great Depression, the 1980s recession, the 1990s recession, that unemployment typically takes twice as long to recover than it did to go up. As they say, the unemployment rate goes up in the lift and comes down the stairs. And we're in an environment now in which we've lost one in 13 jobs, hospitality one in three, and in the arts sector we've lost one in four. Particularly for young workers and for women, it's a really tough environment at the moment. So we do need to ensure that we don't suddenly cut off those JobSeeker and JobKeeper supports, which are now due to expire in September/October. A sudden cessation of those supports could throw the economy into a loop. There's the Deloitte report-

DELANEY: There's a couple of issues there on that front, isn't there? I mean, with the JobSeeker payments for a start, Scott Morrison is talking about going straight back to what the old rate of Newstart was - basically falling off a cliff from the level of support currently being given back to where we were before the crisis began. Even before we confronted COVID-19, there was a massive movement to get Newstart increased. Those arguments are still just as valid as they were before, if not more so, aren’t they?

LEIGH: Yes, they certainly are and in putting in place the JobSeeker program the Government effectively acknowledged that the unemployment benefit wasn't enough to live on. Deloitte in its report today said there's an obvious case to keep JobSeeker at a higher rate than the old Newstart was at. So it's not just about avoiding a hard cut off in those programs, it's also about thinking long term about how we ensure that the JobSeeker allowance - that used to be called Newstart - is at a higher level and is appropriately indexed.

DELANEY: And as for JobKeeper, there's a lot of rumblings now that it's up for review next month and that it may well be, well I guess in one sense the Prime Minister is saying adapted and fine tuned. But a lot of people are concerned it's just going to be cut short. What do you make of what the Government's saying?

LEIGH: JobKeeper’s been the most important program that's put in place. Remember it wasn't in the first two packages, Leon. It only got into the third package after business, unions and the Labor Party argued very strongly that we needed to look around the world and do what other countries are doing to maintain employment. If we hadn't had that program in place, we'd be looking at unemployment more like 20 per cent than 10 per cent. So it's been critical, but it will continue to be important given the fragility of the Australian economy. Consumer confidence and business confidence have just hit their lowest levels in decades. We've got new car sales now lowest in 20 years. The housing market is looking fragile, and a whole lot of businesses that weren’t directly affected by the shutdown Leon are now seeing those knock on effects. So the government needs to recognise that the most important challenge right now is ensuring that the economy continues to grow and that there's creative ways of doing that. And that was what Anthony Albanese was focusing on today, ways of ensuring that we get people back to work, we avoid the scourge, the waste of unemployment and at the same time we're investing in infrastructure that we need.

DELANEY: Yeah, I made the point the other day that with unemployment expected according to some forecasts to still be at least 9 per cent by the end of the year, you can't just cut JobKeeper off as a sharp sudden cut off in September. It's more likely it's going to need to be extended in some form rather than cut short, isn't it?

LEIGH: I certainly think that makes sense. If you look around the world, you look at what countries are doing and generally they're going for these kinds of wage subsidy programs. The Government needs to tell us, the Australian people, what its estimates are of the key economic and budget figures as they'd normally be doing this week if the budget was handed down. We've got some of those estimates coming from the Reserve Bank which is talking about 10 per cent unemployment, ANZ which is talking about a whisker under 10, Grattan Institute that's talking about anywhere from 10 to 15 per cent. Given that the US is now reporting 15 per cent unemployment, it is a pretty parlous time for the Australian labour market. Certainly the labour market is doing much worse than the stock market through this period, which is a real worry given how many Australians rely on salary income.

DELANEY: That Deloitte Access Economics report you referred to also indicated a couple of whopping budget deficits for this year and next year, in excess of $130 billion each. Obviously this kind of largesse can't go on forever. How do we transition out of this level of support into an economy that actually sustains itself and grows by itself once again?

LEIGH: I think it has to come back to the principle of ability to pay, Leon. We need to ensure that a recovery isn't built on the back of the vulnerable people who've been hurt most by the downturn. It can't be a return to the horror measures the 2014 budget, of taking money away from pensioners and students and young people in order to try and fill in the budget hole. The Government can't continue to defend these tax breaks for multinationals, as it's been doing over recent years. We've got to have a serious look at the tax code in order to ensure that we're paying back the debt in a fair way. Debt's now going to about three times what the Government inherited when they came to office in 2013. It was already twice as high before the crisis hit. So the Government needs to outline a fair plan for paying back Australia's government debt.

DELANEY: The Labor Party policy going into the last election has been blamed to some extent for your failure at the election. In particular, things like negative gearing and capital gains tax reforms, things of that nature. But under current circumstances, is everything back off the table now so that we're going to start from scratch and figure out what our economic agenda should be?

LEIGH: I think for all political parties it should be time to reassess the old nostrums. If your idea of reform now is that the crisis has proved you right and everything you were saying last year you'd be saying next year, that doesn't show a great deal of flexibility and agility. Malcolm Turnbull's just come out with his autobiography which makes very clear that Scott Morrison for many years was advocating changes to negative gearing and the capital gains tax discount. He's just never been willing to say so publicly. But if he was willing to rethink his position on those measures, I expect he’d find a willing partner in Labor, willing to work with him also on new policies on small scale investment and ensuring that we've got the supports in place for getting an economy back into shape after what is after all going to be one of the biggest hits that the economy has taken in our history.

DELANEY: It's enormous. Anthony Albanese is talking about investment in some key areas including social housing, local manufacturing, decentralisation of government services and an end to public service outsourcing. It's a fairly broad agenda and obviously there's going to be a lot of work needed to be done to get the economy back into shape, or as Anthony Albanese says you know remade in a new fashion. Where do you begin with an agenda like that?

LEIGH: You begin from the fact that the Australian economy was pretty weak before the coronavirus crisis hit. As the Reserve Bank said last Friday, private demand had been weak. As the Productivity Commission had been saying, productivity was languishing since 2013. So we need to ensure that we have a stronger economy, not one that's just bumping along as it was before the coronavirus crisis hit but one which is really creating the start up businesses that are essential to a growing economy. We need a more diversified economy - we've got too many eggs in one basket, and we do need to make sure also Leon that we're continuing to engage the world. There's going to be a big push by the nativists to shut off engagement with the world as a response to coronavirus. But for Australia, trade, migration and foreign investment have been among the sources of our economic growth. So we need to be arguing not just-

DELANEY: One of the things that's emerged from the current crisis though is the obvious need for a certain level of self-reliance, isn't there?

LEIGH: Absolutely. But you also need to recognise that we benefit from tying into those global supply chains. We're an exporter of pharmaceuticals, and we don’t want to hurt that sector. We also benefit from ensuring that we can access the personal protective equipment that's coming in from countries in our region. If we want to make absolutely everything in Australia, it's going to cost us more. So Australia's approach in the past has been to argue comparative advantage, has been to say we’ll be a wealthier country with higher levels of employment if we engage in the global economy. That whole closing off of the economy that happened after World War One is especially damaging to a medium sized country like Australia that just can't be doing everything locally.

DELANEY: Okay. High speed rail is back on the agenda yet again. Are we ever likely to see it or is it just a pipedream?

LEIGH: As a train buff, I'd certainly like to see it. It's hard to get the cost benefit numbers precise in this, Leon, because it's hard to put a figure on the benefits that you have from reduced congestion in our biggest cities as you allow regional towns to grow. If you look across Europe, places where they've got high speed rail and people are able to commute a couple of hundred ks into the big cities, you do see it takes the pressure off the local roads and allows those regional towns to grow. It would effectively allow someone in Canberra or a little closer to Sydney to be able to commute there at least a couple of times a week. And of course it's got a huge environmental benefits compared to flying, and climate change is not going away as an issue to deal with. So I'm very enthusiastic about it.

DELANEY: And as far as local infrastructure is concerned, the ACT Government has rejected calls to bring forward projects like a new football stadium, a new convention centre. Is that the right call by the ACT Government?

LEIGH: Yes, I think it is. They've also been bringing forward a lot of the smaller scale work, the maintenance jobs around the ACT you see accelerating. I think that's an appropriate measure there, Leon, taking in account of the fact that there is certainly surplus labour available at the moment, but also the ACT needs to be careful of its budget position.

DELANEY: And very quickly, you're the Deputy Chair of the House of Reps Standing Committee on Economics, which is currently holding hearings as part of a review into major banks and financial institutions. Didn't we have a royal commission? What's going on?

LEIGH: Yes, we did - 18 months too late, but eventually the Government got there. This is a House of Reps inquiry which is looking at how the Government is going about implementing the Royal Commission recommendations. It's been a slow process. There's a lot of things they should have done by now, including things like banning unfair contract terms from insurance contracts. But we're following up with the banks, with the insurance companies, with the superannuation funds to make sure that they get things right.

Leon, can I just say at the end, you did start your interview talking about Jack Mundey’s death. As a Labor member, I am somebody who's admired Jack Mundey. Obviously, he was a communist in early life, and he was a Green at the end of his life, so he was well outside my political party. But the work that he did in order to save some of Australia's historic sites is pretty extraordinary. And I think he probably ought to also get another pat on the back for being kicked out of Builders Labourers Federation by Norm Gallagher, who then went on to be convicted of corruption. Anyone who is on the wrong side of Norm Gallagher in the BLF probably earned his stripes as a result of that. There are important parts of Sydney that exist today thanks to those green bans, thanks to those activities of the union movement in ensuring that Sydney is a more liveable city today.

DELANEY: A lasting legacy. Andrew Leigh, thanks very much for your time today.

LEIGH: Thanks, Leon.


Authorised by Paul Erickson, ALP, Canberra.

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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.