Andrew Leigh

E&OE TRANSCRIPT

RADIO INTERVIEW

2GB MONEY WITH ROSS GREENWOOD

THURSDAY, 28 SEPTEMBER 2017 

SUBJECTS: New book Choosing Openness, German election, migration, inequality, energy policy.

ROSS GREENWOOD, HOST: Welcome back to Money News right around Australia. It's actually appropriate that you've actually got all this talk about Donald Trump and tax and globalisation and what happens to Australia now. Are we driven down a lower tax path? Is there more appetite in Australia to try and maintain competitiveness on tax with the largest economy in the world, and one that we have a free trade agreement with because, obviously, the free-flow of goods between the two countries is going to be influence by the cost of a whole bunch of things - it could be energy, it could be labour, or indeed it could be taxes as well. Now, it's appropriate I say, because today the Shadow Assistant Treasurer Andrew Leigh, who is also the Shadow Minister for Competition and Productivity, and for Trade in Services, has launched a new book that raises, in his mind, a whole bunch of questions. It is called 'Choosing Openness' and it makes a timely intervention into the debate about globalisation, free trade, but also immigration, which is a key issue. Let's get him on the line now. Many thanks for your time, Andrew

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: A pleasure Ross, great to be with you.

GREENWOOD: Alright, so you've also been an economics professor at Australian National University; you've done a whole bunch of things, awarded the Young Economist Award, a prize given every two years by the Economics Society of Australia. You've got skin in the game in regards to this. Many of your colleagues in the Labor Party have indicated that they would prefer more of a closed shop here in Australia, that they prefer Australia to be more protected and that really that we don't really openly trade with the rest of the world. Do you believe that is really the model for Australia for the future?

LEIGH: Ross, that's not the picture I see when I look around the Labor caucus. I hear first speeches that tell great stories of immigrants. I see a leader who was in Korea and Japan this week; a Shadow Treasurer and Shadow Foreign Minister who are releasing a paper on our Asian engagement tomorrow. The globalisers have the upper hand in my party - and have done so for at least the past generation.

GREENWOOD: Because let's be honest about that, because on both side of politics you have got factions in either side that say 'close up the economy' and then you've got a rump that says 'no it needs to be open, free trade agreements are reasonable things'. It would be fair to say that your party did have certain oppositions to some of the free trade agreements that Australia signed.

LEIGH: Indeed. Just because it has 'free trade' in the title doesn't mean it's actually bringing down trade barriers. The thing about the big multilateral deals, the last one of which was signed under the Keating Government, is that they saw trade liberalisation right across the board. Indeed, under Whitlam and Hawke and Keating, we took the rocks out of our harbours because that was a good idea in itself, not as a bargaining chip in negotiations with others. We are a party that believes in open markets, but also believes in having that social safety net, the strong support for education and a great healthcare system to make sure that people can move into well-paying jobs and that we are able to redistribute the benefits that come from openness.

GREENWOOD: But what you would recognise, and I can see this even here now, with the United States obviously wanting to bring down tax rates, both personal rates and also corporate rates, almost like water running down hill, business will naturally be attracted to the cheapest place to do business. We've seen that open up many part of South-East Asia. It means that many part of our Australian economy that have not been competitive have either left or closed down. This is the consequence. The problem is when businesses close down, it hurts the traditional followers of the Labor Party, the workers who are ultimately the grist of the mill.

LEIGH: Absolutely. When you look at South Australia, you see a state which is being hurt because of a withdrawal of foreign investment. Australia had car jobs for almost a century largely extent thanks to foreign investment. It is worth bearing in mind when you hear those who say we shouldn't take more foreign investment to Australia that it does support about one-ninth of our total investment. We've got to be looking to other countries, absolutely, but Australia will never win a race to have the lowest corporate tax rate. Across the biggest 20 economies in the world, we're ranked exactly average for our corporate tax rate right now. On top of that, we have dividend imputation - an unusual system that most of those other countries don't have.

GREENWOOD: So I'm interested when you say that Australia cannot compete on tax. Why fundamentally can't we compete on tax to try and attract capital, attract investment, and attract business to this country and therefore create jobs? Simply because we are a relatively low-cost country, why can't we get to that, why can't we aspire to that?

LEIGH: Well Ross, I didn't say we couldn't compete. I said  we couldn't compete to have the lowest corporate tax rate. The bundle of qualities that Australia offers to businesses is a well-educated workforce, great institutions, and strong infrastructure. That's traditionally been the offering that we've made to overseas corporations looking to relocate in Australia, and many have said yes. We do need to make sure that we are attracting that foreign investment, but there's nothing to fear about saying that multinationals ought to not be paying a different rate from a domestic company. Tax equity is fundamental to how we maintain the social compact, and we're kidding ourselves if we think we can skate through on the cheap, running a social safety net of much lower quality than Australians demand. We've got a terrific set of institutions here and we need to be proud of those, and I worry about this approach that Donald Trump is looking at. The proposed Trump income tax cuts - one estimate now is suggesting that 99 per cent of the benefits will go to the top 1 per cent. I don't think that's the road Australia should go down.

GREENWOOD: So then take me to another aspect of this, and that is Australia adapting to the new environment, to the fact that free trade means that jobs and opportunities can go to different places, and will. I mean, even energy policy is another important one here because if energy because ultimately too expensive in Australia, companies will move their capital to different places where maybe taxes are lower, labour is cheaper, and also the supply of energy is more plentiful and also potentially cheaper as well. This is something again that Australia needs to adapt to, it needs to have the businesses and it needs to have the specific advantages to make certain that we keep the jobs, keep the economic activity, and therefore the tax revenue here in Australia.

LEIGH: You are totally right about that Ross. Making sure that we have trade working in the national interest is fundamental. I'm old enough to remember 2016, when my party was arguing for a national interest test on new gas development and being told by the Coalition that we were being protectionist. They have changed their tune on that one as they have realised that there is nothing fair about a system in which Australian gas sells cheaper overseas than it does in Australia. Making sure that we have fairness in our trade rules is a fundamental openness policy, because unfair trade, unfair investment rules, mistreatment of temporary migrants; all of those undermine public support for globalisation. We are going to see change. I went through in Choosing Openness of some of the job titles that have disappeared - the public telephone money collectors, the railway crossing attendant, the lighthouse keepers - but also the new jobs that have been created, such as the snow groomers, the GIS technicians, the disability liaison officers, the life coaches, the biomedical engineers. There are a range of good jobs principally in the services sector that Australian economy has created over the last generation.

GREENWOOD: The one thing also is you are a believer not only that there should be open trade, but that migration should be relatively free and that there should be more foreign investment. As I say, there would be some in your party that would be curling their hair off the back of this conversation. Your argument here these are all things that all ultimately make the economic pie larger for all people and create more tax revenue for the nation.

LEIGH: Absolutely, and if I was speaking to traditional trade unionists, the quote I might use was the quote that the head of Labatt Breweries made when they were bought over by foreign investors. He said "What really matters is that our beer is made with Canadian raw materials, by Canadian employees that belong to Canadian unions". What really matters is that you are creating great jobs in Australia, and saying no to foreign investment is ultimately to see fewer jobs and worse paid jobs that we've got right now. We need to be engaging with the world, but we also need to be alive to these distributional questions. And people who put their head in the sand about inequality are fundamentally going to end up undermining the support for openness. You see in the reactions to openness around the world, and if we don't do something about inequality, that fuels the rise of the sort of right-wing populism that you are seeing in Germany, in Austria, Denmark, Hungary and the United States.

GREENWOOD: Which is more  dangerous, the rise of the right-wing populism, or the rise of the left-wing populism which can equally be as dangerous in places such as Greece, for example?

LEIGH: Right-wing populism has been more prevalent and I worry about the racial tinge to it really, Ross. I was in Germany on the weekend when Alternative for Deutschland entered the parliament for the first time since 1945. Their campaign posters make explicitly racial appeals, and that is so much at odds with the multiracial social compact that Germans extraordinarily managed to build in the decades after World War II. That is a corrosive factor that you don't really see in the left in the same way. Sometimes far-left and far-right are surprisingly similar on economics, but they tend to be very different on race.

GREENWOOD: I tell you what. It's great to have you on the program. This book called Choosing Openness - I say, it does grapple with some of the big issues, but it also take an alternative view of the economy as compared with some of those people of the hard-left of the union movement in particular. Can I say it, the Shadow Assistant Treasurer Andrew Leigh, I appreciate your time.

LEIGH: Thanks so much Ross, great to be with you.

ENDS