THURSDAY, 21 NOVEMBER 2019
SUBJECTS: Superannuation; Innovation + Equality.
ALAN JONES: I spoke last month to the Federal Labor MP Andrew Leigh. We discussed the great Australian athlete Peter Norman, and the price Peter paid for standing in solidarity with the black American athletes John Carlos and Tommie Smith at the Mexico Olympic Games. In the wake of that interview, Dr Leigh dropped me a line about a new book he's co-written with Joshua Gans. It's called Innovation + Equality, with the argument being amongst some that you innovate and you create an unequal society. The thesis here is no, no, no - that's not necessarily the case. The book is subtitled How to Create a Future That Is More Star Trek Than Terminator, which I think is quite funny. The book's being launched tonight. These two blokes have got a few brains. Joshua Gans is a professor of strategic management, and holds the Jeffrey S. Skoll Chair of Technical Innovation and Entrepreneurship at the University of Toronto. Dr Leigh is a Federal Labor MP, the Shadow Assistant Minister for Treasury. But he's a former professor of economics at the Australian National University. He also holds a PhD in Public Policy from Harvard. He has a first class honours degree in Arts and Law from Sydney University, which of course immediately means he is totally disqualified from having any political future. Here's me telling you, Dr Leigh will never, ever make it in politics because you see, he's got brains and ideas, and they are much despised in the world of politics. And that's the great sadness. I'm being ironical here, of course. I hope that people like this do make it to the top. He's bright, he's a thinker. He’s trying to get the rest of us to do the same and read the new book. He's on the line. Dr Andrew, good morning.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: Good morning and thank you for the generous introduction.
JONES: You've got no hope.
LEIGH: None at all. But then again, here am I, talking to you.
JONES: You're a chance then, you're a chance. Look before we get onto the book, you're the deputy chair of this House Economics Committee and today you'll be putting the Super fund bosses under the microscope over the performance or the underperformance of retail funds. Two questions, Andrew - how big of an issue is this? And the second, I suppose the second question is the first - do people really know where their superannuation money is?
LEIGH: I don't think they do, Alan. Increasingly we just set and forget, and so the important thing is that you have good defaults in place. Superannuation is a key pillar of retirement security. But if too much is being taken out by for-profit managers, that leaves too little for people to live a dignified retirement.
JONES: And what about the performance then of retail funds, vis-a-vis industry funds?
LEIGH: They've been worse. I mean, we know that systematically they underperformed by about 2 per cent, and that adds up to tens of thousands of dollars over a lifetime. We've also seen the scandals a few years ago, of kickbacks being provided to employers - iPads and the like - in order to put their employees into underperforming superannuation funds. So we need to properly scrutinise the sector.
JONES: So what are you saying - I mean, just two questions. What are you saying to people out there who have super, we should be more fastidious about where it is and what's happening to it.?
LEIGH: Absolutely. You'll probably never have a better return on an hour spent than if you spend an hour looking at your super fund and working out whether or not you can get a better deal by moving down the road.
JONES: Now Paul Keating says we've got to get to 12 per cent in a hurry, otherwise we're not going to be able to, people are not going to be able to adequately provide for their retirement. What's your view on that?
LEIGH: Yeah, we need to increase the superannuation contribution. We need to do that steadily - increasing a quarter of a per cent every now and then is not going to have a tangible impact on wages and it's going to ensure people live a better retirement.
JONES: The figures being released today by Industry Super Australia show more than one and a half million accounts with under $6000 in them and inactive for more than 16 months have been copping fees and charges of up to 260 bucks a year. How do you stop all this?
LEIGH: You've got to make sure that funds are doing the right thing by their members. The funds that are focusing more on shareholders than on members are doing a disservice not only to the individuals in them, but also to all of the rest of us who have to pay more in part-pensions when superannuation funds underperform.
JONES: Well, tell our members - superannuation members who are listening to you - what questions should they ask?
LEIGH: They should look at the returns that they're getting – there’ll be a new APRA comparison site up next month – and make sure they can't get a better deal by moving down the road.
JONES: Good on you. I mean, that's essential - people do not know where this money is and yet when they retire they think ‘hello, I thought I would be better off than I am’. Tell us about the book, where did the idea come from?
LEIGH: Joshua’s done a lot of work on innovation. I've had a longstanding interest in equality. We were troubled by the idea that in order to have innovation we have to put up with the gap between rich and poor rising. In fact Alan, we think there are a lot of sweet-spot policies which can both boost growth and boost equity. One of those is to find the talents of entrepreneurs in disadvantaged backgrounds, so-called lost Albert Einstein and lost Marie Curies. Growing up in schools where maybe they don't know another entrepreneur, in families where no one's ever started a business. If we can connect them with the right sort of mentors, make sure that they can fund their start ups, society can become more innovative and more equal.
JONES: Isn't that an excellent point. I mean, in so many of these things it's very imitative, isn't it? If you're in an environment where people are comfortable with innovation, which is what you're talking about here now, then people are encouraged into that same kind of mind set. Andrew, how do you define innovation?
LEIGH: We think of it as starting something which is new, which other firms aren't doing. Right now only 8 per cent of Australian businesses say they're doing something which is new to the world. I'd love to see an Australia in which we're creating more fresh ideas, not simply adapting and imitating, but creating big and exciting things. Of course, we've got the Hills Hoist and the black box flight recorder and the rest, but we need more of those innovations flowing through.
JONES: There's a lot of this stuff going on in schools, I have to say. There are a lot of international competitions amongst schools for people, for kids with innovative ideas, aren't there?
LEIGH: There certainly are. The challenge that we have is to make sure that innovation is not just an elite sport, but that we democratise it-
JONES: You’re a sport man, aren't you? Not be threatened by it, not be threatened by it.
LEIGH: Exactly. UTS Startups has this terrific aspiration to ensure that half of all of their undergrads have a start up experience. That ensures that this isn't just something a few engineering students do, but a physiotherapy student might look at how they can create a new device which will assist their patients.
JONES: There's an article about your book in the Economist. The Economist makes the point, I'm just wondering if you agree, that it's possible to have both scientific progress and a fairer society. Do you agree with that?
LEIGH: Absolutely, and that's the story of the post-war decades, in which we see a huge outpouring of scientific research. We managed to put a man on the moon in the 1960s, and at the same time wages grew faster on the factory floor than in the corner office. So there's nothing in the laws of economics that says that this is impossible. It's just about having the right policies in place to encourage a really dynamic economy, not one that's cosseted by monopolies worried about protecting their moats.
JONES: How do you encourage innovation?
LEIGH: You need good start up ecosystems. Joshua runs a thing called the Creative Destruction Lab at the University of Toronto, which brings together mentors with new start up entrepreneurs. And he says it's mostly about judgment, Alan. These people have the smarts, they've got access to the cash, but in that case they don't have access to the judgment as to where their ideas could go. So that's the missing market.
JONES: Have a go. Good to talk to you, always good to talk to you. If we don't talk again, have a wonderful Christmas and a very beneficial new year, Andrew. Good luck in all you do.
LEIGH: Thank you, Alan. You too.
JONES: We need a bloke like that, don't we? It's a very interesting book, written - kids can read it. It's written with Professor Joshua Gans. It's called Innovation + Equality, How to Create a Future That Is More Star Trek Than Terminator. In other words, it needn't – as the dust cover says - is economic inequality the price we pay for innovation? And it needn't be. Andrew Leigh. It's published by MIT Press.
Authorised by Paul Erickson, ALP, Canberra.