ABC SYDNEY BREAKFAST
THURSDAY, 19 MARCH 2020
SUBJECTS: Economic stimulus; charities affected by coronavirus; the Reserve Bank.
WENDY HARMER, HOST: This is very timely that we are speaking to Andrew Leigh. Andrew Leigh is a former economist and he’s Shadow Assistant Minister for Treasury and Charities. And I guess that he's been keeping his eye on the bailout packages, the stimulus that's been offered, this brand new tranche of measures that are supposed to be released tomorrow that are coming from the government to try and deal with this economic crisis. We welcome him to the program. Hello, Andrew.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: G’day, Wendy. Great to be with you.
HARMER: Now we are expecting something quite interesting to come tomorrow. We are, we have been told - this is the that the drop - that a central feature of the soon to be announced package will be something called a, well a survival package for those who are without jobs. A temporary wage.
LEIGH: I'm pleased that the government's recognised that last week's package wasn't enough. When you look at its scale compared to other countries, I think that becomes pretty clear. It was less than 1 per cent of GDP. The New Zealanders, for example, have just unveiled a stimulus package worth around four per cent of national income. People need to remember that this is a temporary shock and there's no reason that anyone ought to be pushed to the breadline, to be losing their job, have their business go bust because of a virus for which we'll have a vaccine within a year or two. This is exactly why we have governments, exactly why fiscal policy was developed, in order to help get us all through temporary shocks like this one.
HARMER: All right. So this is not a universal basic wage, of course. We know that people are very much divided about that. But it has been recommended that this kind of wage could be used in times of pandemic.
LEIGH: It certainly makes some sense to me. The best measures at this time, Wendy, are those which reduce the transmission of the virus, which have both a good economic benefit but also a good public health benefit. Sweden, for example, has announced that the government will assume responsibility for all sick leave payments for April and May. There's been calls by ACOSS to pause face by face to face reporting for welfare recipients, which I think makes some economic and public health sense. Countries around the world are also looking at whether they can put some of the surplus labour into hospital construction. Whether or not we'll need those temporary hospital beds, we can't be sure, but it seems a sensible measure that ticks both the economic and the health boxes.
ROBBIE BUCK, HOST: Okay. This $17 billion that the federal government put up last week is in addition to the $2.3 billion stimulus package that we've seen from the state government and Gladys Berejiklian. Tell us where, from your perspective, where is the best place to hit the Australian economy to try and maintain the economy ticking over that perhaps is different to the UK or New Zealand or other countries?
LEIGH: Well Robbie, I worry very much about the invisible Australians, people who don't have high powered lobbyists and access to the front page of the newspapers. So I think any package needs to make sure that it looks after pensioners, people with disabilities, the homeless, and Indigenous Australians.
BUCK: But to be fair, that $17.6 billion, it is going to include welfare payments, one off cash payments.
LEIGH: That’s right. So I'm not saying that these people have been completely left out, but I think there's always a risk at times like this that it's the powerful voices that get first dibs. So for example, charities - which employ around a million people, contribute 8 per cent of GDP - have been excluded from the business payments. We need to remember that charities have seen a massive drop off in their donations and they're also part of the frontline in responding. So if somebody is being forced to self-isolate, they can't go out and get groceries, who do they turn to first? It's likely to be a local charity. We need to make sure that our charities are looked after at a time like this.
HARMER: Andrew, the banks. This is an interesting one. A few of our listeners have said ‘well, can we please have mortgage breaks? Could we have a reduction in credit card fees?’ Tell us how the banks are coming to the party or otherwise, as you see it.
LEIGH: I’ve had a number of conversations with senior people in the banks about what they're doing. I think there's a recognition that they have a responsibility to step up. They play a unique role in the financial system, and when you look around the world you can see significant action that’s being taken in other countries. In Germany, they're calling it the bazooka - they're extending unlimited credit to all firms at reasonably low interest rates. There's been a suggestion by Bruce Chapman that that should be done through some sort of a revenue-contingent model - effectively HECS-for-firms - which recognises that then firms wouldn't need to repay until their incomes went up past a certain threshold, which we can do through the business activity statements. So we need to be thinking as creatively as possible about how to tackle this, and aware that this is a temporary shock and there's no need to make the hit any harder than it has to be.
HARMER: Now, I know that you being from the Labor Party – we’re speaking with Andrew Leigh, who is the Shadow Assistant Minister for Treasury and Charities - you probably haven't been at the table during these discussions, Andrew. Is that a disappointment?
LEIGH: I think it would have been a time in which you would have been possible to form a cabinet of national unity. The Prime Minister's gone instead for a weekly telephone hook-up with the states and territories. That's useful, but all the wisdom doesn't reside on one side of the political fence. So it would have been nice to be brought in there, but we're happy contributing ideas through public debate through channels such as this. We think that there's a range of useful proposals being put forward by the ACTU, by ACOSS, by a number of the peak bodies around.
HARMER: Yes. And now just finally, we're looking perhaps today at the Reserve Bank of Australia expecting to cut the cash rate by another 25 basis points to 0.25 per cent. Thoughts on that?
LEIGH: It’s well beyond time the Reserve Bank cut the rate to 0.25 per cent, and it'll be interesting to see what they do on the quantitative easing side. Their counterpart banks around the world have already moved pretty decisively and in many cases with measures which are encouraging banks to engage in additional lending. So for example, the Bank of England's facility says that for banks that provide additional credit to small businesses, they'll get better treatment from the central bank. And that's a creative way of ensuring also that cash flows where it needs to be.
HARMER: All right. We’ll we wait to see what the government comes up with tomorrow. But thanks for those thoughts this morning, Andrew.
LEIGH: Thanks so much for the conversation.
HARMER: Thanks. Andrew Leigh, former economist and Shadow Assistant Minister for Treasury and Charities.
Authorised by Paul Erickson, ALP, Canberra.