ABC RN DRIVE
THURSDAY, 4 JULY 2019
SUBJECTS: Tax cuts, John Setka.
PATRICIA KARVELAS: Andrew Leigh is the Shadow Assistant Minister for Treasury and Charities. Welcome.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: G’day, Patricia. Great to be with you.
KARVELAS: Labor said it didn't want to stand in the way of badly needed economic stimulus, but this was going to pass with or without you. So why didn't you decide to back it earlier?
LEIGH: Patricia, we wanted to fight for what's right for the economy, which is ensuring that we got money into the hands of workers straight away. We moved amendments in the House of Representatives and in the Senate that would have seen the middle income tax cut brought forward from 2022 to 2019. The economy is really fragile right now. Just today we've had problematic figures come out on job vacancies and retail sales. Yesterday we had dwelling approval figures coming out that were of equal concern. Tuesday the Reserve Bank was cutting rates down to historically low levels. Wages have been flatlining for six years. Productivity, according to the Productivity Commission, is ‘mediocre’. We’re nine months into a per capita recession and economists think that there's about a one in three chance that will fall into a full recession in the next few years. So our priority was always on ensuring that the economy got the stimulus it needed now and that's why we moved those amendments in the House and in the Senate. And when they were unsuccessful, we ultimately had to make a decision as to whether to vote for or against the unamended package, and we took the view that we wouldn't stand in the way of getting money into the economy now.
KARVELAS: Shadow Treasurer Jim Chalmers says Labor will campaign on repealing stage three of the tax cuts, which flattens the tax rate by removing thirty two and a half per cent. So is that what you're going to be arguing for, a repeal?
LEIGH: We’ll set out our economic policies as we come to the next election. A lot of that Patricia is going to depend on how the economy travels.
KARVELAS: But you haven't - just to get clarity, do you believe it should be repealed or not?
LEIGH: I actually think would be irresponsible to be sitting out our tax policies in 2022, given all we know about the uncertainty of the global economy right now. You've got the implications of a hard Brexit. You've got a trade war. You've got economists in the United States talking about a serious risk of a US slump. With all of that uncertainty around, fiscal policy needs flexibility. You know Patricia, there's two parts to what government does with growth. One part is the long term investment in productivity, the other part is the short term focus on timely, targeted and temporary stimulus to smooth out the booms and busts in the economic cycle. And that requires a government that is nimble and adept and able to respond, as the Rudd Government did in 2008-2009, preventing the economy going into recession then. So we need to be ready to act. One of the things that concerned us about the 2024 tax cuts is that they made it more difficult for the government to be adept and nimble as it needs to be in the next few years.
KARVELAS: Ok. So it depends on circumstances whether you determine to repeal stage three or keep it in place?
LEIGH: We'll take a tax package to the next election and I expect the Coalition will as well. I'd be very surprised if the Coalition's policy at the next election on tax is ‘nothing to see here, no changes’. They'll be taking policies and our policies will be based on Labor values - wanting to make sure that we get strong middle class growth, not trickledown economics which says that we can create growth by cutting taxes for lowest-
KARVELAS: Is stage three trickledown in your view?
LEIGH: If you look at the Grattan Institute's analysis of distributional impacts, they say that stage three makes the tax code less progressive than any other time since the 1950s. And they say 31 per cent of the benefits go to the top 3 per cent of taxpayers. So they're getting about 10 times their proportionate share. We went to the last election arguing for a larger and more equitable tax cuts than the government, in particular emphasizing tax cuts for people earning less than $48,000, who spend their entire pay cheques. So that's got a good economic kick for the economy in a way that high end tax cuts don't. We'll lay all of that out ahead of the next election. But people should know that Labor's main priority right now is ensuring we save jobs, that we don't go into a serious economic crunch which could see a whole lot of people thrown on the unemployment scrapheap. Unemployment is a full percentage point higher here than it is in Britain, New Zealand and Germany. The economy is not travelling well already, but there's big red warning lights flashing suggesting that it could get worse still if the government doesn't act.
KARVELAS: Okay. So ultimately the jury's out on what you think should happen to stage three.
LEIGH: We’ll announce our tax policies for 2022 in the lead up to that election-
KARVELAS: I understand that and I respect that. Actually, I understand that is a process but yet the point of what I'm asking is that Labor hasn't settled, because you say essentially it's too early, on whether you decide to keep stage three or make changes to it.
LEIGH: I mean, we've argued that it's irresponsible to commit to stage three five years out and that remains our view. We do think that the government hasn't acted with the sort of fiscal prudence that the economy demands. As the Grattan Institute argued in its analysis, it's better in a world in which there's so many choppy waters and so much uncertainty not to be locking in these 2024 tax cuts. So they remain a significant concern to us. Our real priority now is what we can do for an economy that's seeing falling new car sales, falling building approvals, where inflation's virtually non-existent and where the Reserve Bank is crying out for a bit of help. If you've only got monetary policy and no fiscal policy, it's like a boat rowing with one oar. You just end up going round and round in circles. So we think the government could have done more to sustain growth in the economy by bringing forward stage two tax cuts. I was frankly a bit surprised to be sitting in the House of Representatives on Tuesday night watching the Liberals and the Nationals sit on the same side as the Greens, opposing a middle income tax cut in 2019.
KARVELAS: Just finally and it's on another topic. Victorian CFMEU boss John Setka will launch a legal challenge against his expulsion from the Labor Party. Are you confident the party's on safe legal grounds here?
LEIGH: Yes, I am. I mean, I don't think any individual is bigger than the movement. The party executives have given him an extension of time to lodge his case, but as the leader has said, I don't think he'll be a member of the Labor Party after the 15th of July.
KARVELAS: Andrew Leigh, thanks for your time.
LEIGH: Thank you, Patricia.
Authorised by Noah Carroll ALP Canberra.
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