TUESDAY, 6 FEBRUARY 2018
SUBJECTS: Stock Market; Corporate Tax Cuts; Workplace Laws; Adani
RAF EPSTEIN: We are joined by one of the members of Bill Shorten's economic team, Dr Andrew Leigh he is the Shadow Assistant Treasurer. Good afternoon.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good afternoon, Raf. Great to be with you.
EPSTEIN: Just on the stock market, America and here - it doesn't look like it's going to end too soon. Is that a big worry or a simple correction?
LEIGH: It is significant. It seems to be led out of the United States, Raf, with business responses to their jobs report. The reporting that I've seen out of there suggests businesses are concerned that with a fairly tight employment market they might have to start raising wages and that's prompted a bit of a sell off on the US market which has flowed through to here.
EPSTEIN: Is it a big worry?
LEIGH: You get these corrections around the place, I certainly am always careful about playing politics from the stock market. I think the link between the health of the economy and the stock market isn't rock solid, there are some things that are good for corporate profits that are not necessarily good for the macroeconomy as a whole and perhaps we'll come to some of those in the interview today.
EPSTEIN: What's wrong with company tax cuts, how do we know that they wouldn't lead to wage increases?
LEIGH: In principle, you'd always want to have the lowest tax you can in order to provide the services Australians need. But we're in an environment where debt is at an all-time high, people that have done their taxes will have gotten back a statement from the Government which said very clearly that the level of gross debt has gone to $501 billion and we have seen debt steadily increasing over the last few budgets. So the idea that we have a huge corporate giveaway funded by raising taxes on middle Australia just doesn't seem fair. This isn't just my analysis, the Treasury says the gross benefits of a corporate tax cut for households are 0.1 per cent in the 2030s. The Parliamentary Budget Office says that that will be paid for by the biggest increase in taxes coming on middle income earners.
EPSTEIN: You understand these things better than a lot of us, is the logic sound? If you give more companies money, they've got more money to give to their workers?
LEIGH: Raf, it's a long bow. Because we've got dividend imputation, the first-round beneficiaries are foreign shareholders. Domestic shareholders receive little of the benefits of a corporate income tax cut. And then the hope in these economic models is that these foreign investors then say Australia is a more attractive destination, so they put more money into Australia. That takes a lot of time and delivers very small benefits on the Government's own numbers.
EPSTEIN: But they don't get the big tax cuts, the big companies, for 5-6 years? It's the medium size companies that get the tax cuts right now.
LEIGH: Indeed, we're talking about a proposed tax cut in 2025 but the Government's own modelling is a long-run effect 7-10 years so then we're looking at 7-10 years beyond that 2025 measure.
EPSTEIN: Let's try and talk about what might happen at the next Federal election. There are tax cuts right now that turn over a bit of money, $25-50 million, would you wind them back?
LEIGH: We've said that we'll announce our position on those next tier of tax cuts in advance of the election, we'll support the small business tax cuts for businesses up to $2 million - that's the vast majority of Australian businesses. Raf, we just need to see the state of the books before we make a decision on those intermediate tax cuts.
EPSTEIN: Don't you need to tell people running those businesses now what your plans are? They're getting a tax cut in this financial year or the next financial year, don't you need to be honest with them right now?
LEIGH: We need to make sure we are balancing the books and certainly we've been absolutely clear we don't think the Government should be raising taxes on low and middle income earners, they want to raise income taxes for people earning from $21,000-$87,000 -
EPSTEIN: That's the Medicare Levy.
LEIGH: We've said we'll oppose that. We won't support that increase in taxes for people earning between $21,000-$87,000. We've said also we won't support the tax cut for big businesses. We've also said for those who are earning over $180,000 that the deficit levy should be restored. That was appropriate for the first couple of years under Tony Abbott, debt has continued to increase since then and we see no reason why the top 1 per cent should be the only group of Australians getting an income tax cut.
EPSTEIN: But you just don't have a position on any company that has a turnover of more than $2 million a year. You just don't have a position, is that sustainable?
LEIGH: No that's not right. We've said we won't support the big business tax cut and we've said we'll reserve our position on middle sized business tax cut. I believe that's a responsible position, Raf. You need to have a look at how the books stack up to make sure that we're able to pay the debt back. When you're paying interest that's a significant cost to the budget and those interest bills are getting bigger and bigger as a result of debt sky-rocketing under the Liberals. This is a group that used to do press conferences in front of debt trucks and frankly they'd need a debt road train to represent the amount of debt that they have now racked up. And yet they're talking about a tax cut for some of the biggest businesses in Australia. We don't think that that's sustainable.
EPSTEIN: What actual changes would you make to workplace laws? Bill Shorten has said that enterprise bargaining is effectively dead. What would you change?
LEIGH: One of the things that we've seen over recent years has been the award system moving from a safety net that covered in 2012, 16 per cent of employees now to being a system that is covering 24 per cent of the labour force. We're seeing very much this safety net being extended right across the work force.
EPSTEIN: You designed the safety net and appointed most of the people to the workplace umpire?
LEIGH: We're recognising that there has been significant changes in the economy. One of those changes has been the cessation of the enterprise bargains. So workers will sometimes be in a situation where they will negotiate in good faith as an employer and they will suddenly find that the legal entity which they have negotiated has ceased to exist, there's another legal entity employing them and the alternative is being thrown back onto the award system.
EPSTEIN: That's a diagnosis and not a prescription, what would you change?
LEIGH: We're working through precisely what we'd do there. I think it's important to bring out the diagnosis before the prescription, that's what any good doctor would do and just to recognise that we do have a challenge here. Part of this is also the shift in the structure of the economy when you've got an economy based around factory jobs it's harder for these sorts of shenanigans to go on. When you've got a more virtual economy, a gig economy as Hillary Clinton once dubbed it, it's easier for workers to get the raw end of the deal.
EPSTEIN: Do you think you'll maintain your lead in the polls if you don't give specific answers? You can't tell me if you would increase taxes on companies up to $50 million, you won't yet say what you'll do on workplace law. How long can you do that and maintain a lead in the polls do you think?
LEIGH: Raf, I think I'm not at all concerned about the polls, I think people that waste their time watching the polls should focus on policy. I also believe that when it comes time to the election we need to have a set of policy offerings that are able to stack up and be sustainable. We need to make sure we are balancing the books. I don't think it would be responsible to be making decisions on the fly without looking at where the books are at. We need to make sure we get the budget to surplus, Bill Shorten is passionate about reducing inequality in Australia. We've been very clear in protecting Medicare and schools and keeping taxes lower for ordinary people. We're talking about a $44 billion tax increase on low and middle income Australians over the course of the next decade. So we've been very precise on a range of things, I don't think that anyone would fault the amount of policy detail that has come out of Bill Shorten's economic team whether we're talking about trusts, negative gearing, whether we're talking about what we'd do broadly on housing affordability, whether we're talking about what we're going on multinationals and tax havens. We've got clear, costed policies out there. We've got more clear costed policies out there than any opposition in the last generation.
EPSTEIN: Another yes or no I'll attempt.
LEIGH: Journalists love the yes or no, Raf, the world is complicated.
EPSTEIN: Should the Adani Coal Mine go ahead?
LEIGH: I don't think the Adani Coal Mine is likely to go ahead. Certainly what the banks have said is that they don't believe there is a case for funding it. What Labor has said is that we don't believe that billion dollars of public money should go to a coal mining billionaire.
EPSTEIN: Less than a year ago, Bill Shorten was happy to say "I support the Adani Coal Mine", why won't he say it now?
LEIGH: We've seen allegations of falsification of samples, we've seen a real concern growing not just in the environmental movement but also in the financing sector. The question that many people are asking is why would you open another coal mine in Queensland in a world where demand for coal has fallen 6 per cent. Indeed, even Indian demand for coal has fallen. My friend Pat Conroy makes the point that Hunter Valley coal miners could well be hurt by the opening of the Queensland coal mine because you're putting more supply into a market with declining demand. So the case for it, is pretty weak.
EPSTEIN: Thanks for your time today.
LEIGH: Thank you, Raf.