RADIO NATIONAL DRIVE
TUESDAY, 25 AUGUST 2015
SUBJECT/S: Share market turmoil; Income tax; Industry assistance to BlueScope Steel; Australian involvement in Syria.
PATRICIA KARVELAS: Markets have been on a rollercoaster today, recovering slightly after heavy falls yesterday and in early trading. The Australian share market's benchmark ASX 200 has jumped 2.7 per cent, defying further steep falls in China and across Asia. Shadow Assistant Treasurer Andrew Leigh joins me now. Hi, welcome back.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: G'day Patricia, good to be with you.
KARVELAS: Have share markets bottomed out? What do you think?
LEIGH: Share markets are notoriously tough to forecast, Patricia. But certainly we've seen some huge falls over the last few days. We've seen this 8 per cent fall from the Shanghai Composite, the Nikkei in Japan is down 4 per cent, European stocks are down about 4 per cent. The Australian stock market yesterday fell back down to where it was in 2013. So these are pretty troubling developments and certainly speak to some of the concerns in the global economy. The first of those is the Chinese stock market and the devaluation there, and the second is the end of very low interest rates in the United States, which investors know is coming.
KARVELAS: Commodities have taken a particular hammering; they're now trading at GFC levels. Is that likely to continue? Because that has huge ramifications for Australia.
LEIGH: Not just GFC levels, Patricia. The Bloomberg Index of Commodities is now down to its lowest level since 1999. You've even got the odd situation of gold being down. Gold usually goes the opposite way from the rest of the market but apparently investors are having to sell it off because they've been holding onto it as a safe haven. So there's a whole range of economic indicators that have taken a battering over the past few days. I don't think we're heading for another Asian Financial Crisis but I do think there's a range of uncertainties around. Certainly how the Chinese authorities respond is going to be important. This is a personal view, but I wish they were paying more attention to the economic situation rather than to the military show that they're going to be putting on next week.
KARVELAS: The Prime Minister has really suggested that it's not such a big deal; so has the Treasurer. Your language is a little bit different – what do you make of the rhetoric coming from the Government? The 'calm down' rhetoric?
LEIGH: Look, I can understand the desire of the Prime Minister to try and reduce panic. But when all he can say is that people shouldn't 'hyperventilate' about these things, it doesn't give that sense of confidence and security that Australians are looking for, a sense of where our economic leadership is coming from. No-one blames the share market on Tony Abbott, but we've got the unemployment rate at its highest level since the early 2000s; we've got confidence down; we've got debt rising significantly. All of these are indicators that Tony Abbott told us would get better in 2013, and they have gotten worse. I think it's important that the Prime Minister give a major economic statement to account for how he sees these issues unfolding.
KARVELAS: On RN Drive I'm joined by Andrew Leigh, the Shadow Assistant Treasurer. Andrew Leigh, the Financial Review is reporting that the federal Government is considering industry assistance to prevent BlueScope Steel shutting its Port Kembla plant. Would Labor support that move?
LEIGH: Certainly what we did in government, Patricia, was make sure we had an industry participation plan so that on big industrial projects there was a chance for local companies to have their say. We'll engage with any constructive proposals that the Government is going to put on the table. I know my colleagues Sharon Bird and Stephen Jones have been actively speaking to workers and the company about what more can be done. It is important that we keep as many jobs as we can there because the unemployment rate in the Illawarra is already pushing towards 10 per cent. So the last thing the Illawarra needs is more job losses.
KARVELAS: I want to take you to tax because this is certainly shaping up to be a huge, defining moment between the major parties. What's your response to the Government's push, the Treasurer's push – and he's been on a blitz really in the last couple of days – of talking about personal tax rates and bracket creep. Surely you're concerned about bracket creep too?
LEIGH: Patricia, bracket creep is an inevitable result of wage growth. It has to be said that wage growth is at its slowest rate since the 1990s. So we're having less bracket creep than at any time in the last 20 years or so. And we know, of course, that most of the Treasurer's projected return to surplus at the outer edge of the forward estimates comes off the back of bracket creep. The Treasurer would like to deliver tax cuts; I would like a pony. But the question is how you pay for these things, not whether or not you'd like them.
KARVELAS: Sure, but do you share his concern for bracket creep driving people whose real income isn't going up into higher tax rates?
LEIGH: You'd always like income taxes to be as low as possible in order to pay for the services the community demands. But what we need from Mr Hockey is not more homilies, it is concrete suggestions on what we might do. For example, if Mr Hockey's plan is to raise the GST by 50 per cent in order to pay for cutting the top tax rate, then that's a proposal that would leave most Australians worse off. If his proposal is to slow down the National Disability Insurance Scheme in order to pay for tax cuts, then that cuts against what the Coalition has been saying over recent years.
KARVELAS: There's no doubt that the Government has to answer more questions – and we're all going to be asking more questions – about how they actually plan to fund these tax cuts. But I'm still interested in finding out what you think about bracket creep and whether Labor is prepared to deal with it in a policy. Are you prepared to do that?
LEIGH: We'll certainly have constructive tax policies going into the next election, Patricia. We're ahead of the curve in terms of our tax policies, with the multinational tax policy and the high-end superannuation policy both out there. We've said very clearly that we're happy to engage on questions around deductions such as negative gearing, so long as that improves housing affordability. So we're up for those big conversations. We're not ruling things out across the board. But when Labor comes forward with tax proposals, they're costed by the Parliamentary Budget Office and ready to go.
KARVELAS: I've got a good question from one of our listeners. It says: can you ask Andrew Leigh why Labor doesn't consider a multi-level, progressive GST? Is that something you've considered?
LEIGH: That's essentially saying why don't we go back to the sales tax system. The argument against progressive taxes of that kind is they don't do as good a job of tackling equity. Taxes need to be efficient and equitable. The best way of making sure we have equity is through the progressive income tax scale. Labor thinks that's a good thing; in fact it was a Labor Government that put in place federal income taxes in World War Two in order to pay for that war. It was also a Labor Government which broadened the tax base and lowered the rate in the 1980s under the Hawke and Keating governments. So we're committed to progressive income taxes, and I think they do a better job of equity than a stepped GST would do.
KARVELAS: Now Defence Minister Kevin Andrews has just been on Sky News this afternoon talking about the possibility of Australia bombing Syria. Here's what he said:
KEVIN ANDREWS, MINISTER FOR DEFENCE: No, it's not mission creep. The reality is that Daesh do not respect borders like you and I respect borders, David. The reality is that they are operating across the border between Syria and Iraq.
KARVELAS: So Kevin Andrews has also clarified that it will still be the same number of Australian planes involves that are now being used in Iraq, except they won't have to stop at the Iraq/Syrian border if they're on a bombing run. Does that change your position on whether Australia should be entering Syria?
LEIGH: We've had a briefing, I understand, on the Government's proposals and we'll be considering our position in the coming days. But I have to say, I don't find it particularly persuasive that because one of the world's worst terrorist groups believes something, then we should believe the same thing too. I want to know the Government's long-term strategy on this. We know that the conflict between Daesh and the Assad regime is a conflict between two particularly nasty actors. Assad has cost the lives of thousands people. I've spoken in the Parliament – as indeed has Joe Hockey – about the atrocities committed by the Syrian regime. Their strongest opponent on the ground at the moment is Daesh, which is a brutal regime; considered so brutal that Al-Qaeda cast it out. So in a conflict like that, you want to be very clear about what your long-term objectives are before you engage. They're the questions that Labor is going to want answered before we give support to the Government.
KARVELAS: Andrew Leigh, always a pleasure to talk to you. Thanks for joining us.
LEIGH: Likewise, Patricia.
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