Andrew Leigh

E&OE TRANSCRIPT
NATIONAL PRESS CLUB ADDRESS
Q&A
TUESDAY, 29 AUGUST 2023

SUBJECTS: Australian Centre for Evaluation, multinational tax transparency, competition in the airline industry, supermarket prices, matters to be included in the Competition Review, Intergenerational Report, evaluation and public service capability building, industry policy, local manufacturing.

ANDREW TILLET (MODERATOR): Thank you Dr Leigh, unfortunately we’ve gone a little bit over time for this speech so we might have to get straight to the Choose Your Own Adventure part of the proceedings and go to questions from our colleagues. First up is Paul Karp.

PAUL KARP: Thanks very much for your speech Dr Leigh, Paul Karp from the Guardian. Could I ask on a different topic about country by country multinational tax transparency? Has Australia been warned that other countries might actually share less information if we enact these rules in their current form, and is the government preparing to water down the reforms so that we collect information in the same format as the EU?

ASSISTANT MINISTER FOR EMPLOYMENT, CHARITIES, COMPETITION AND TREASURY ANDREW LEIGH: Thanks very much for your question, Paul. Our multinational tax agenda isn't just closing loopholes, it's about boosting transparency. The House recently passed one transparency measure, which will require all public firms to report on the country of tax domicile of their subsidiaries. So if a company is doing business in a tax haven, then their investors will know about it. Another part of it as you rightly point out is country-by-country reporting. We're going to make sure we get that right, so that the information that is currently reported to the Australian Tax Office by its counterparts in other countries isn't diminished. The European Union moves to country-by-country reporting on the first of July next year. And our view is that aligning the Australian timetable with European Union makes sense. We're keen to ensure that the maximum amount of information is out there, while guaranteeing that the ATO still gets the data it needs in order to do its job.

TILLET: Next question is from Poppy Johnson.

POPPY JOHNSON: Thank you for your speech. On another topic. You've talked about low levels of job switching as a sign the economy is not as productive and dynamic as it could be. Non-compete clauses are on your radar. But is there more we could be doing, for example is the income support system providing enough insurance for workers considering the move?

LEIGH: Thanks, Poppy. The employers in the room won't like to hear this, but the biggest wage gains over the course of a career come when workers shift jobs. Job switching is beneficial to employees from the point of view of wage gains. But it also really matters in terms of productivity. If a new firm can't get access to the talent that it needs it is going to be stymied in its growth prospects. And so, as part of a number of speeches that I've given on competition over the last year, I've noted that the job switching rate has fallen over the last couple of decades. As you rightly point out, this could be because one in five Australian workers have a clause in their employment contract that constrains their ability to move to a better paying job. That's not just tech executives. That's also early childcare workers, security guards, and hairdressers. We used to talk about executives being put on ‘gardening leave’ between jobs, but even gardeners are now being put on gardening leave as a result of non-compete clauses. So we're certainly mindful of the challenges in that area, and of the productive benefits to the economy of improving job switching. There may be other areas outside non-compete clauses. But that's one specific issue that Jim Chalmers and I have tasked the new competition review from looking at the Treasury.

JOHNSON: Sorry, I just wanted to check on the income support system. Do you think that that's providing enough insurance for people who might switch jobs?

LEIGH: We're certainly always looking at the appropriate level of income support payments. Our main focus with income support is liveability. That's why we chose to increase the range of payments in the most recent budget. But certainly, the issue you raise is one consideration.

TILLET: And the next question from Patrick Commins.

PATRICK COMMINS: Thanks very much for your speech Dr Leigh. Patrick Commins from the Australian newspaper. Senator David Pocock this morning accused supermarkets of price gouging and taking advantage of consumers at a time when there's cost living crisis. To what degree is there price gouging out there by big companies? What evidence is there as Assistant Competition Minister? What can what can be done about this across a range of industries? It's a lack of competition leading to this.

LEIGH: Thanks Patrick. Certainly, we're concerned in Australia that our markets aren't as competitive as they should be. If you're a sports fan, then whether you're following the netball, basketball, AFL, you'll typically have a dozen or more teams to choose from. But if you're a consumer, often you've only got one or two firms to choose from. The entry of Aldi into the supermarket market did provide a welcome dose of competition. But supermarket concentration is higher in Australia than it is in the UK or the US, two countries we routinely compare ourselves to. That can potentially place a squeeze on suppliers as well as on consumers. And providing the ACCC with appropriate powers is important to us. Since coming to office, we've increased the penalties for anti-competitive conduct. And we've banned unfair contract terms, including where those unfair contract terms are used in the supplier agreement. So we're keen right across the board to use the competition review, and to assess the state of play within Australian markets, and try and ensure that Australian consumers have the same range of choices that Australian sports fans do.

COMMINS: So is there any evidence of price gouging in Australia?

LEIGH: It's up to the supermarkets themselves to account for their profits and for their approaches. Our focus right across the whole of the economy whether it's supermarkets banking, baby food or beer is to ensure that consumers have more choices, and that there is more competition.

TILLET: Our next question is from your fellow marathon runner, Shane Wright.

SHANE WRIGHT: Much, much slower than you Andrew. Let me assure you. You went through a list of the sectors by B ones where you'd like to see more competition. How about one that starts with 'A'? Do you think the aviation sector is competitive enough? Do you think that preventing a competitor from increasing the number of flights it might bring into Australia adds competitive pressures? And would that be beneficial to the passengers of Australia?

LEIGH: Thanks, Shane. Your question is obviously being asked in the context of the Transport Minister's decision on Qatar. As Catherine King made clear in her press conference yesterday, that was a decision based in the national interest, not around any single factor. The issue of airline competition is one that will be explored in the forthcoming Aviation Green Paper. But it's also an issue that's important to Australian consumers. As a range of my colleagues have noted, the level of complaints against Qantas from Australian consumers has been considerable. My ACT colleagues, Alicia Payne and Dave Smith, have pointed out that it's pretty frustrating for Canberrans when you catch a flight to or from Sydney to have a one in eight chance that that flight gets cancelled. And that's up to Qantas to account for the way in which those flight cancellations have occurred. We're keen to see more competition. I know that there's a range of airlines that are looking to fly more into Australia, and the particular case of Qatar, they're not banned  from resuming the flights into Canberra. I know there would be more benefits in competition and of course, many welcome flyers in this city, if Qatar was to resume those Canberra flights.

TILLET: Next question is from Ron Mizen.

RON MIZEN: Thank you Andrew, Ron Mizen from the Australian Financial Review, I just want to continue on that theme. I'm curious about how the Australian public can have faith in the competition review that you're undertaking when the government has made a decision in that aviation sector to effectively favour one carrier. We've seen today other carriers say that would actually limit competition that if you allowed that carrier it will reduce prices, which will benefit consumers. I think, why shouldn't Australians look at your review very sceptically when you've made this decision in the national interest, which your colleague Stephen Jones says is really in Qantas' interest.

LEIGH: Thanks, Ron. Competition is somewhat like evaluation in that it’s an issue that cross-cuts government. And just as the Australian Centre for Evaluation won't be able to evaluate all government programs, so our competition review, won't touch every facet of competition right across the government. The decisions about carriers are made on a bilateral basis between governments. There's some 100 of these agreements in place. And certainly, I would hope to see more airline competition in Australia. As Catherine King has said, this particular decision was made in the national interest. But more broadly, I think bringing down the cost of aviation is important. Now I remember as a kid, the people who flew overseas to take a holiday were the very rich. We've seen a change now where many middle-class Australian families can afford an overseas holiday. That's partly income gains. It's partly also because the real price of airfares has come down. And that's a good thing. I look to Europe with its range of low-cost carriers and see what looks like an even more competitive ecosystem. So moving us towards that, I think is a long term goal. And these are issues that will be explored in more depth in the upcoming Aviation Green Paper.

TILLET: But we talk about national interest in terms of this decision around Qatar and Qantas, we saw though during COVID, that it was Qatar, that took the lion's share of bringing  Australians back home for overseas, not Qantas which grounded it's fleet, by and large. The national interest would suggest that perhaps a government ownership policy by carriers, perhaps the way to go, we saw that happen in New Zealand where Air New Zealand went broke, and their government stepped in. I'm not suggesting that we renationalise Qantas but perhaps the experience of what we've learned over the last 30 years, is when we needed to an airline to get Australians home that we didn't take the opportunity to look at our government equity perhaps?

LEIGH: Well that's certainly the argument that Catherine King and Labor made at the time and wasn't listened to by the former government, and that's a horse which has now bolted. Our main concern is to ensure that we have a competitive aviation ecosystem, and that we're getting the consumer benefits that flow. I saw Qantas CEO Alan Joyce get a fair shellacking from senators from both sides of the political spectrum yesterday. That accountability is appropriate, and that's something that Qantas is answering for.

TILLET: Our next question is from Melissa Coade.

MELISSA COADE: Hi Dr Leigh, Melissa Coade from the Mandarin. Thank you for your rigorous speech you've referenced goodwill not being enough when it comes to evaluation and evaluating whether government services are sufficient. And to me that sort of strikes right at the heart of APS capability. And of course, randomised trials aren't the be all and end all. Very important as you outlined his speech, but not the be all and end all. So I'm interested to get your response with respect to APS capability on how the Centre for Evaluation and its work will interface with other things like real time monitoring, measuring of policy and unintended impacts, whole of policy portfolio management, and how the public will be involved in policymaking as well.

LEIGH: Melissa, thanks for the question. And thanks also, for the Mandarin's keen interest in how the public service operates. One of the things that we've tried to do as a government is to recognize the great value of the public service as an institution. To instil the new value of stewardship within the public service, and to recognize the importance of investing in people and capability, including bringing some of the activities that were contracted out under the former government back in house. A greater ability to work with data is really critical and I'll pay tribute to David Gruen, who runs the data profession, a cross cutting group within the public service that looks to build up data expertise within the public service more broadly. We might one day do something similar in the case of evaluation, building up that capacity across agencies. But it's also - and I was trying to touch on this at the end of the speech - it's a bit of a mindset shift. Moving away from the idea that if we come up with something that sounds really good, we should just roll it out to everyone, to the idea that even the best sounding programs sometimes don't work. And that was the purpose of giving you those four examples at the outset. They all sounded really good. They all failed to deliver as intended. And that's true even of ideas that we might be personally committed to. So having that scientific rigor is completely compatible with having optimism in achieving some of these stretch goals, such as Closing the Gap.

COADE: You mentioned contracting out. And I just quickly wanted to ask about that because we understand that there are small firms in Canberra who provide services to government who are having to lay off staff. So how have you sort of seen that shared role of more in house contracting and the survivability of the professional services?

LEIGH: There'll always be some use of contractors within governments. What we've sought to do is to restore the balance, which was badly out of whack under the former government. We're looking to consultants to tell us how they can improve the capacity of the public service. Rather than taking core policymaking roles and simply having them hived off to external consultants. We're thinking about how we can build up the rigor and the understanding within government. And randomised trials are going to be a part of that.

TILLET: The next question is from Ben Wescott.

BEN WESTCOTT: Ben Westcott from Bloomberg, thank you so much for your speech Assistant Minister. Just to follow up again on Ron's question, you said in response to his question on Qantas that your review can't touch on all areas of competition. I think if you were to speak to most Australians, they'd say that things like airlines and supermarkets are probably the areas of competition that they feel most strongly about. What areas will your what is the competition policy we will your review not be touching on? And will they include things like airlines and supermarkets?

LEIGH: Thanks very much, Ben. Well, we've simply been pragmatic with how we conduct the competition review, in not looking to overlap with existing government processes. Where we've got an Aviation Green Paper that's looking at competition, then it makes sense for airline competition to be looked at in that context. There's a big focus on issues that cross-cut government. So looking at the Australian Competition and Consumer Commission's proposals around merger reform, is a sensible task that the Competition Review will undertake. Looking to non competes is important. We'll also be looking at the interface of competition policy with states and territories who play an important part. So one of the issues that's arisen in terms of supermarket competition is actually not a federal issue. It's a state and territory issue, sometimes even a local issue, and that's planning and zoning decisions. If a new supermarket isn't able to get a site in a sought-after area, then the competitive ecosystem suffers. So we need to engage with states and territories. And in so doing, we're inspired by the work that Paul Keating kicked off in 1992, with Fred Hilmer's reforms, which ultimately delivered one of the best decades of productivity growth in the post war era. On the Productivity Commission's estimates, those Hilmer reforms put $5,000 a year into the pockets of the typical Australian household. That's a pretty dramatic gain, if you can get competition reform right.

TILLET: Next question is from Peter Martin.

PETER MARTIN: Your answer about Qatar, Andrew, you said it's based on the national interest not on any single factor. Can you expand on that? What are the national interest implications of that decision?

LEIGH: Thanks, Peter. National interest is one of those terms which is typically not defined in legislation. It allows the decision maker to take a broad view, right across the economy, across society. For example, when we're assessing Foreign Investment Review Board applications, you'll see a national interest test there, which allows the relevant minister to take into account all the factors that they...

MARTIN: No, I'm asking what the factors, the national interest factors were in this particular case, as you understand

LEIGH: Well, this is a decision that was made by Catherine King. And I refer you to her comments yesterday, where she said that there was no single decisive factor.

MARTIN: No I'm asking what the national interest considerations were, I accept that there was no single decisive factor.

LEIGH: So Catherine King's comment yesterday was that there was no single decisive factor. She made it in the national interest. I don't have anything to add to that.

MARTIN: So you don't know or don't want to speculate as to what the national interest might have involved in this particular case?

LEIGH: I don't think it's appropriate for me to speculate on the factors...

MARTIN: You're the Competition Minister.

LEIGH: I don't think it's appropriate for me to speculate on the factors that were driving another Minister's decision under the national interest. I'm comfortable accepting that that was the basis on which my colleague made that their decision. I'm a keen advocate for competition in the aviation sector. The Green Paper will have more to say on that.

TILLET: Might have to try and get Catherine King along - sounds very much like it's a vibe thing perhaps? Adrian Rollins for the next question.

ADRIAN ROLLINS: Hi Andrew, Adrian Rollins from the Canberra Times in the wake of the intergenerational report people are asking the obvious question, is our tax system fit for purpose? In terms of thinking about the tax system and really appraising how it works is this a case for randomized trial evaluation? What sort of changes do you think we should be looking at in that tax system?

LEIGH: Thanks very much, Adrian. We don't randomize tax rates, but the ATO is actually one of the agencies which has been doing a range of randomised trials, particularly looking at compliance, trying to work out if you've got somebody with an overdue debt, what is the best way of getting them to engage back with the system? So that A/B testing that I talked about before has been a feature of the way in which the Tax Office has operated. More broadly in terms of our tax settings, we've just passed through the House a measure which will close loopholes around debt deductions abused by multinational companies. That's pretty substantial, since we know that debt deductions have been a source of misuse within the multinational tax system. We're committed to the OECD-G20 process, which will see further multinational tax measures coming to the Parliament next year. We've also made changes in the case of high balance super and the petroleum resource rent tax. So they're the areas of tax reform that we're focused on right now. Don't allow anyone to understate the importance of this. We are talking about billions of dollars and some of the most complicated tax reform measures that the government could be tackling.

TILLET: Next question, Brandon Howe

BRANDON HOW: Thanks for your speech, Dr. Leigh, Brandon here from Innovation Aus.com. A question on industry policy around the world, we're seeing a shift towards large market interventionist manufacturing policies, especially in the US. Oz always seems to be trying to follow suit with the National Reconstruction Fund in the hydrogen restart program. What do you make of this shift towards more interventionist industry policy? And what do you think this means for competition for manufacturers in Australia, and when they export their goods globally?

LEIGH: Thanks very much, Brandon. We're certainly seeing a shift in Australia towards thinking about how we can play as good a role in some of these key value chains. We are a major miner of lithium, and therefore thinking about the role we play in the battery supply chain is important. As we move towards a renewables revolution, there's naturally thinking about how we could not just install more wind and solar, but whether there's ways in which we can bring Australian companies into the supply chain. There's also areas where Australia has very considerable strengths within manufacturing. Food manufacturing is a strong and terrific strength of Australia. Indeed, if you're going to go into Tasmania, I think it's one of the great strengths of the Tasmanian economy, food manufacturing. And then in health care. We've also contributed quite considerably. So there's a range of areas in which we're looking to build out the capacity of the economy, and to move ourselves up the Harvard Atlas of Economic Complexity. We find ourselves on that index, ranking somewhere around 90th, not far from countries such as Uganda, which don't typically sit next to Australia on international rankings. In making the economy more complex, we also potentially make the economy more resilient to external shocks. We make the economy less vulnerable to particular sectors or particular industries.

HOW: Do you have any concerns about the implications for competition on local manufacturers with this increasing investment in industry policy locally?

LEIGH: We always want to be thinking about competition. And I'm worried about the trends of the last couple of decades. We've now - through the ability to analyse longitudinal data - seen that market concentration has increased, that markups have increased, that the number of employing startup businesses as a share of the economy has fallen and that the job switching rate has fallen. And those four trends are all troubling for an Australian economy, which Labor would like to see become more dynamic, creating more jobs and increasing the opportunities for Australians.

HOW: And with regards to these industries? Do you suppose have any specific concerns about so battery manufacturing, for example?

LEIGH: I think we will always need to be looking at the competitive landscape. In that area, I don't have a specific concern. But to think about competition settings right across the economy is important. The parlour game is ‘how many Australian industries can you name that are not dominated by a couple of players?’I It tends to be a fairly short game at most dinner parties I've played it at.

TILLET: Last question today from Simon Gross.

SIMON GROSS: Simon Gross Canberra IQ. You gave us a big nerdy speech about evaluation. You got one question, I'm going to double your score. You're creating a new Centre for Policy Evaluation with a new system of policy evaluation. You talked about it being an ongoing process rather than an after the fact process. One thing that politicians and bureaucrats are very good at is gaming systems. So how will your centre stop policy makers from gaming their evaluation system?

LEIGH: One way of thinking about the Australian Centre for evaluation is it's more doctor than cop. It's not sitting there has an enforcer of good evaluation, it's looking to improve that evaluation health of the ecosystem. It's a resource available to agencies. But my experience of evaluation, looking around the world serving on the Global Commission on Evidence, having studied and worked in the United States and talked to a range of global policymakers is that as you change the ecosystem, you're able to change the norms, you're able to move people from a culture that says, ‘I can come up with a bright idea implement it, and the world will be better’ to an approach that says, ‘I need to test my ideas, I'm not that sure what will work and I'm willing to produce new ideas if these ones fail’. That cultural change will take time. But if we can achieve it, it will pay massive dividends, it will lead to government programs which are more efficient and more effective...

GROSS: It'd need to be very, very rigorous to make that happen, you just saying that plan doesn't improve policy. There's gonna have to be a very rigorous system to to cut through.

LEIGH: That's right and so we're that's why I talked about a range of the different areas in which we've talked about the way in which we engage the states and territories and the process through which new policies come forward with the opportunities that we have to work across government. This is a substantial agenda I'm pretty passionate about. I've been randomista for decades and having the opportunity to set up this new centre is exciting. Almost as exciting as the opportunity to come and speak with you all about it today. Thank you very much. [Applause]