MONDAY, 15 APRIL 2019
SUBJECTS: Labor’s plans for a fairer Australia; Healthcare funding.
PATRICIA KARVELAS: To talk through some of these issues I'm joined by a panel and you won't expect this, so keep listening. Nicki Hutley is a partner at Deloitte Access Economics, responsible for the report and the Shadow Assistant Treasurer Andrew Leigh has agreed to join us to answer questions on what they've come up with. Welcome to both of you.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: G’day, Patricia. Great to be with you.
NICKI HUTLEY, DELOITTE ACCESS ECONOMICS: Thank you.
KARVELAS: So Nicki, I’ll start with you. Deloitte is arguing that Labor's policies would lower economic growth eventually by a third of a percent. Can you take me through the rationale that got you there?
HUTLEY: Yes, so I think it's important to know that there's a whole load of explanatory, you know, suggestions accompanying that number and what it is, what it is based on is saying that on the basis of tax policy alone that would be the impact on the economy. So compared to what the Coalition are offering, the Opposition are saying that they will have fewer tax cuts in the hands of people - so those tranches that the Coalition are promising to higher income earners, particularly further out at this stage not going ahead although they do have more at the lower end of the spectrum, and there are another raft of generous tax concessions that will be pulled back, in the form of negative gearing and franking credits and so on. And as a general rule of thumb when you take, you know - we are comparing two scenarios of one versus the other and saying that compared to the Coalition policies the higher amounts of tax collected have a negative impact on on the economy. But that said, there are a lot of other factors that are not taken into account and it's important to consider those things when we look at the picture as a whole. But of course people do tend to grab the headline.
KARVELAS: Andrew, what's your response to this analysis from Deloitte? Do you accept that there will be an economic cost from these revenue raising measures?
LEIGH: No I don't Patricia. This was a report that came out last month. There's no detail in the report as to how it's arrived at this figure of a third of a percentage point. That's just a one liner on page five and it looks only at the tax impact. So we don't accept that that's the impact of our bigger, better, fairer tax cuts in the economy - we actually think they'll have a stronger growth benefit. The report doesn't even look at the benefits for the Australian economy of Labor's spending on infrastructure, our spending on healthcare, our spending on education. If you uncap university places, get 200,000 more young people to university then that's got to have a productivity gain. If you put in place our competition reforms, that'll have a big gain. If you have a bit of stability in political leadership - not three prime ministers, three treasurers over six years but a stable, united government - then that will also have a growth gain. And if you ensure that you put aside those fiscal buffers which as Labor would do, paying down debt faster than the Coalition would, then you're better able to deal with a situation in which the world economy starts to wobble and we have to ensure that Australia doesn't go into recession - as the last Labor government had to do.
KARVELAS: Nicki you've heard the rebuttal there if you like from Andrew Leigh. What do you make of it, particularly that argument about economic growth. that he thinks actually some of these measures that Labor has in its economic program would increase economic growth?
HUTLEY: Look, he's correct in those assumptions. But when you think about things like capping - sorry, uncapping student places at universities for example. We know that from NATSEM modelling - the main modelling body that does this type of work - that somebody who finishes their education with a tertiary qualification has a much higher earning potential than somebody who finishes at year 10 or 12. And so it will over time definitely add to the economy, but that's one of the things that was pointed out in this report, that there is a lot of timing considerations to take into account and a lot of it depends on how quickly tax measures are brought in, how quickly the spending measures are brought in and how quickly some of those spending measures are able to flow through to the economy. A lot of them will take a lot longer to flow through in the benefits. So you can say as Andrew is pointing out that whilst there might be a short term negative impact, over the longer term there could be a larger positive impact. That's not - that's quite correct.
KARVELAS: If you're just tuning in, this is RN Drive and we're doing something a bit different tonight and clearly I'm very excited about it. We're putting together Nicki Hutley who's a partner at Deloitte Access Economics, who is one of the authors of this report looking at the economic growth, I suppose, consequences of the competing Labor and Coalition policy program. And also the Shadow Assistant Treasurer Andrew Leigh, who I know is very eager to respond to that point. Andrew Leigh?
LEIGH: Well, I think Nicki makes an excellent point about those benefits paying off over time, PK. Households make these decisions themselves. We ensure our kids do their homework and that they finish school and get the best education they can, not because we think it's going to have an economic payoff this year but because we know that they will live happier, healthier and more productive lives in the long run. Some of the work I did while I was a professor at the Australian National University was around estimating the earnings benefit to each additional year of schooling and that can be somewhere between 8 and 10 per cent, suggesting that the benefits of finishing school compared to leaving Year 10 might be 20 per cent in earnings over the life. The benefits of a university degree: 30 per cent. So that's a huge gain. We make these decisions as parents and we need a government that supports it, not a government that's taking resources out of the schooling system, out of the university system. We've had a halving in the number of apprentices in Australia under the Liberals and Nationals. That again is a big hit to future prosperity. So unless we make sure we're investing in these skills then as we get increasing technological change we'll be ill prepared to deal with it. If the robots are coming, we need a great education system to ensure that Australians aren't left behind.
KARVELAS: You're freaking me out now - the robots are coming.
KARVELAS: This is RN Drive. 0418226576. The scariest of scare campaigns - [laughter] - the robots are coming. Labor's next scare campaign-
KARVELAS: Look I'm sorry, I digress. Nicki, what about Labor's argument that the target of these revenue measures are mostly people whose relative wealth means they don't need or deserve tax breaks, especially in a softening economy?
HUTLEY: Well I think that's something that, you know, we do call out in the report is that whilst there may be some short term impacts on prosperity - and there is no doubt that the higher taxes do have an imposition on growth, but they are also put there for fairness and that's one of the things that you or all of us as voters have to weigh up in our minds, is to say ‘well, you know, where do we want the spoils as it were to go to’. Are we prepared to pay slightly higher taxes and have more spent on health and education or do we believe that that not necessary. It's very hard to just pull a headline figure out and not weigh up all the benefits. But we do, in making those decisions to increase taxes or at least not hand back taxes through bracket creep, we are making a direct decision to say ‘yes, we value those investments in education, in health, in other social services more than we value the short term impact to our individual wellbeing’.
KARVELAS: So Nicki, in that sense your report also acknowledges that increased spending in health and education helps to generate a fairer, healthier and better educated society. So that presumably has some economic benefits too, right?
HUTLEY: Oh, absolutely. There's no doubt about it. I mean, one of the things you hear people say all the time is that we have chronic skill shortages, particularly in the ICT sector and related sectors like cyber security, for example, where we have so many people come in on 457 visas because we're not producing enough graduates of our of our own who can code and think creatively and have those skills. So the more we invest in our people at any age, the better off an economy will be and you can see that right throughout the world. That is the difference between an economy and a country that has much higher standards of living. It's one that invests deeply in education.
KARVELAS: I've got to ask you a question that one of my texters has sent - a little bit of a blunt question, but that's okay. Texters are allowed to do that. Matt from Canberra has asked ‘who paid for the Deloitte report? I doubt they just did it just for the fun of it’. Although you may have done the fun of it, I know that you enjoy doing these reports. Who actually commissioned it?
HUTLEY: It's not commissioned by any one person. This is a report that Access Economics does every quarter and we have subscribers to the report. But it is modelling that we we do without regard to any particular, one particular client. So we pride ourselves on being very unbiased and you will see us be both critical and praising of both sides of government. We look at the policy, not the platform. And I would like to think that this report is no different from any other. The challenge for us always is in saying one thing, for example ‘higher taxes in the short term might cause some downturn or offset to economic growth’, we also say things like ‘however the offset to this is that it is fairer and we haven't taken into account other policies that are yet to be announced in detail in it’. For example, some of the education and health policies. So it's very hard when you're an economist and you’re on a program like this and everyone wants you to say it's good, it's bad - but nothing is ever that straightforward, unfortunately.
KARVELAS: No, life is more complex. Nicki, thank you so much for coming on the program.
HUTLEY: You’re very welcome.
KARVELAS: Nicki Hutley is a partner at Deloitte Access Economics. I'm going to keep you just for another second, Andrew Leigh and I'm pointing at you. He's in the studio with me-
KARVELAS: Andrew Leigh being the shadow assistant treasurer. I just want move to health, if we can, because that's been the big issue of today. There has been some confusion today over which cancer treatments would be covered by your policy and whether we're talking about one Medicare item or more than one. In fact, Brigit McKenzie, the Deputy Nationals Leader, is about to join us. I spoke to her a short time ago and she says there's no explanation here. Is it one or is it many?
LEIGH: Well Patricia, we're putting in place a new bulk billing item which will allow people to get those cancer scans for which they're currently paying hefty out-of-pocket fees bulk billed. That's an important change. It will mean that for many people who've received a cancer diagnosis they're able to get those MRI or CT scans without paying the out-of-pocket fees. It was interesting when we first announced it, the Prime Minister's first response was to say there is no problem with out-of-pocket fees whatsoever. Today he's changed his tune and said that the problem is so vast that it's impossible for us to do anything about it. I don't know which scare campaign he wants to have, but he needs to pick his poison and decide whether he wants to say there's no problem and all of those people complaining about out-of-pocket costs are liars or whether he's instead saying that it's impossible for government to act. The fact is that there is a middle way through. The list that Greg Hunt's referring to includes items like surgery by specialists in private hospitals. So we're not intending to remove out-of-pocket costs in that case. What we are intending to do is to reduce those out-of-pocket costs which for the the half of us who get a cancer diagnosis averages around $5,000 dollars a year.
KARVELAS: And how about this hospital pledge of a 50 per cent funding benchmark with the states. When are you going to achieve the 50 per cent?
LEIGH: We've said we'll work towards it. This is a matter of negotiation with states and territories, So it's difficult to put a precise timetable on it. But what the government said when they came into office in 2013 was that they would stick with the agreements that had been settled under Labor. Instead we've seen a significant fall in the Commonwealth contribution, down to some 45 per cent. That's had an impact on waiting times, which have blown out for elective surgery by 10 per cent under the Liberals and Nationals-
KARVELAS: So you don't have a timeframe for when you’ll get 50/50?
LEIGH: Look, we'll work it work to it as quickly as we can, but it's dependent on negotiations with states and territories and the precise timing of that will differ according to the particular state and territory. But that's our objective. We think the Commonwealth needs to do more on health. Labor is able to do more because we're closing those multinational tax loopholes which are allowing billions of dollars to slip offshore under the current arrangements. Tough decisions on tax then translate into being able to make generous decisions for cancer patients, and that's the tradeoff that that Labor is taking to the Australian people.
KARVELAS: Andrew Leigh, thanks for coming in.
LEIGH: Thank you, Patricia.
Authorised by Noah Carroll ALP Canberra.