Sharing the future: Competition in the App Age

Sharing the Future: Competition in the App Age

National Press Club


I acknowledge the Ngunnawal people, the traditional owners of the land we meet on today, and thank the National Press Club for the invitation to speak with you. I also thank my parliamentary colleagues who have joined me, including Terri Butler, Pat Conroy, Mark Dreyfus, Ed Husic, Clare O’Neil, Melissa Parke and Tim Watts. It’s an honour to serve alongside each of you. If you’ve spoken with them, you will know that it’s impossible to come away from a conversation with any of these people and not feel optimistic about the future of the ALP.

I was proud to stand with Bill Shorten and Chris Bowen just a few weeks ago when we announced our package for fair taxation of multinational companies – a fully costed policy package, grounded in work from the OECD, delivered in the first half of the parliamentary term. You don’t see that every day.

Our multinational tax package is about ensuring Australia’s tax system keeps pace with changing business practices in an increasingly global economy. We want to see big multinationals pay their fair share of tax. We also want to see all businesses – big and small, local and international alike – have a fair chance of succeeding because they are competing on a level playing field where the same rules apply to all. 

That’s why our package targets debt and deduction arrangements which let big multinationals artificially shrink their tax bills. It’s also why we support better information sharing through third-party data matching, and why we’ll give the Australian Tax Office the resources it needs to properly tackle tax avoidance after savage cuts under the current government. This package will see big multinationals pay almost $2 billion more tax over the forward estimates. Importantly too, it gets our tax settings right for the long term.

I think it says a lot about how seriously Labor is taking that the long-term budget challenges Australia faces that the first significant policy announced is a revenue one.

But it also demonstrates the approach we’re taking across the board when developing new policies for the years ahead. We’ve consulted widely on the details of the package, talked to tax experts and the OECD, and had the Parliamentary Budget Office give us their independent, rigorous costings. We’re using our years in opposition wisely because we understand that three word slogans are no basis for governing. Unfortunately, the Abbott Government seems to just be learning that now.

Identifying future challenges, consulting widely, thinking hard and coming up with sound, robust policies – that’s Labor’s approach. Today I want to talk about a different area of policy where where we’ll be applying that method: the rise of the sharing economy. 

When AirBNB founders Brian Chesky and Joe Gebbia were seeking venture capital investment for their online start-up in 2009, they took meeting after meeting with no success. As Chesky tells it: “One famous investor was drinking a smoothie and just got up and walked out mid-pitch."[1] None of the investors they met with could see value in a website which helped people find spare beds to crash in.

In a last-ditch attempt to get funding, Chesky and Gebbia pitched their idea to the famous Y Combinator start-up program in Silicon Valley, run by the IT millionaire Paul Graham. Graham didn’t much like their idea either. But just as he was about to call time on the meeting, the AirBNB founders mentioned how they had originally pulled together the cash to start their site. During the 2008 Presidential race, they’d bought generic cereal in bulk and re-boxed it in limited edition packaging branded as ‘Obama-os’ and ‘Captain McCain’. They travelled around to the party conventions selling the cereal as a collector’s item, raising thousands of dollars in the process. Paul Graham later said that while he didn’t really believe in AirBNB, he believed that Chesky and Gebbia had the creativity and drive to run a successful start-up. He gave the pair a three-month residency at Y Combinator and $20,000 to rebuild the AirBNB site. Today, the company is valued at about $US10 billion. More than 25 million guests have already stayed in an AirBNB-listed property in one of 34,000 cities across 190 countries.

We’re getting more and more used to hearing stories like this: the little digital company that came out of nowhere and took the world by storm. The clever idea that turned an industry on its head and made millions in the process. UberX launched in Sydney in April 2014. Less than a year on, one in ten Sydneysiders have used a ride sharing service.[2] One in 300 Australian dwellings is currently listed on AirBNB.

Consider a Sydneysider who decided to come along to my talk today. Before leaving, she might arrange via AirTasker for someone to tidy her garden, drop her cat at a Pawshake petsitter, and pick up the GoGet car that she shares with others on her block. On arrival in Canberra, she could rent the car of a local resident via DriveMyCar, and use ParkHound to find an off-street parking spot. This afternoon, she might check into an AirBNB apartment, use Vayable to take a custom tour of Canberra’s funkiest spots, and enjoy a privately cooked meal in the home of a chef located via EatWith.

These businesses have emerged over the past decade thanks to the confluence of fast broadband, ubiquitous smartphones and innovative entrepreneurs. The creativity of people like Brian Chesky and Joe Gebbia is changing the way we think about buying and selling goods.

Often gathered under the banner of the ‘sharing economy’, ‘collaborative consumption’ or the ‘peer to peer market’, these app-based services link people who have surplus goods to those who can make use of them.

Unlike the kind of sharing your mum encouraged, money generally changes hands in the sharing economy. But the transaction happens directly between the provider and the consumer, with the companies themselves simply offering a platform for bookings and payments. Sharing economy companies are, first and foremost, tech firms. But they also offer real-world services which are fast becoming serious competitors to established players in a range of industries. Uber’s US$40 billion market capitalisation makes it more valuable than Delta Airlines, Hertz and Marriott Hotels.

As someone who spends a lot of time thinking about what the economy of the future will look like, I believe there is huge potential in this peer-to-peer market. Australia has a housing affordability crisis, yet there are 9 million spare bedrooms across the nation. Our major cities are in gridlock, yet the vast majority of cars carry only one person. Many people own a power drill, yet use it less than an hour a year. Sharing economy services can help us make more efficient use of the world’s existing stock of bedrooms, cars, trailers and more. They are a key reason why the fraction of car-free households is rising in San Francisco.[3] Sharing economy services may also create new and more flexible jobs for people who struggle to fit into the traditional labour force, like students, older people and parents with young children.

I am not, however, an uncritical cheerleader for this emerging sector. At the moment, sharing economy services operate outside the rules and regulations which exist to protect public safety, ensure people pay their fair share and guarantee workers’ rights. They are competing with existing providers in the taxi, hotel and other industries which employ hundreds of thousands of Australians, but without being held to the same standards and rules which those providers are bound by.

Uber defends its surge pricing model on the basis that it brings more drivers into the market when demand is high. But when surge pricing kicked in during the Martin Place attack, it left many feeling deeply uncomfortable.  If you own an apartment in a security-controlled building, you may not feel as secure when your neighbour starts renting her place out on AirBNB. An app like MonkeyParking, which enables people to auction off free kerbside parking spots, can lead to an upsurge of ‘parking squatters’, which is both inequitable and inefficient.

Labor wants to see Australians share the benefits of the sharing economy. But we also want to make sure we have the right rules in place to protect workers, consumers and the public good. This is a tricky balance and in a fast-moving digital context it will be a challenge to get it right. But we owe it to consumers to take this challenge seriously.

Today I want to make it clear that Labor supports the innovation and growth opportunities of the sharing economy. Our goal is to see these services brought within a fair and flexible framework of rules which supports their growth without lowering our collective standards. As Clare O’Neil and Tim Watts note in their forthcoming book Two Futures, ‘We don’t believe that technological change sets our society on an unchangeable path. So while there’s no doubt we’ll see enormous technological innovation over the coming decades, it will be our values and the decisions we make in response to these changes that will determine what our society looks like in 2040.’

At its heart, the question of how we approach the sharing economy is a question about ensuring fair competition in the Age of the App. Labor is, and always has been, the party of competition, stretching back to Gough Whitlam’s introduction of the Trade Practices Act in 1974. But I don’t want to exhaust the Press Club’s lunchtime wine supply by taking you all back that far, so suffice it to say that my party has delivered most of this country’s major competition reforms, and the major tariff cuts that opened our businesses to global competition.

In each case, our concern was that Australian consumers were getting a raw deal, because businesses cosseted from competition had little incentive to work harder, be more innovative or serve their customers better.

According to the Productivity Commission, Paul Keating’s National Competition Policy reforms led to productivity gains that raised the average Australian’s household income by $7,000 over the policy’s first five years in action.[4] The microeconomic reforms put in place over those years have paid lasting dividends ever since.

When Labor was last in office, we set out to tackle another major obstacle to competition: the regulatory walls between Australia’s states and territories. Through the National Partnership Agreement to Deliver a Seamless National Economy, we drove the introduction of a single, national regime for fair trading and consumer protection. We also steered significant reforms in areas like transport and infrastructure access, ensuring Australia’s states and territories were competing on a level playing field, not one littered with protectionist stumbling blocks. Modelling by the Productivity Commission estimates that just some of the reforms from this package are working to increase GDP by about 0.4 per cent a year.[5]   

We pursued these reforms because Labor believes in helping consumers. Labor’s fundamental test has always been: how can we help Australian families get a better deal? As we look ahead to the type of rules we’ll need in an app-based sharing economy, that question will continue to serve as the touchstone for Labor’s policy response. 

From an egalitarian perspective, the sharing economy offers both opportunities and challenges. Right now, one in five Australians cannot afford a week’s holiday away from home each year.[6] Low-cost services like AirBNB or no-cost services like could make the difference between a holiday or no holiday for some Australians. If you can’t afford a car, carpooling sites like can make an enormous difference to your mobility.

But while the consumer perspective looks rosy, I worry about the equity angle.[7] If you’re a banker, surgeon or lawyer, it might seem great to be able to call on casual workers to assemble your furniture, walk your dog, or come into your kitchen and cook a meal. But if those jobs are casual and badly paid, then the whole arrangement starts to look uncomfortably like a modern restoration of the Downton Abbey era.

Finding a balance between promoting the upsides and protecting against the downsides requires us to answer some hard questions about what’s important to us as a community. My party doesn’t claim to have the answers to those questions. That is why I am today releasing a Discussion Paper that will involve the Australian community in a conversation about what rules we really need to govern the sharing economy. I’ll have more to say about how we plan to conduct that conversation in a moment. First I want to flag some of the key regulatory challenges that the sharing economy raises, and the strong principles that will underpin Labor’s response.

First, worker’s rights. The ALP has spent a century and a quarter fighting to protect the rights of workers. We have no intention of giving that most vital game away now. The sharing economy shows us just how much the world of work is changing: instead of working for an employer, we can each become CEO of our own microbusiness. This new autonomy provides great opportunity, but the flipside is that it’s not often accompanied by minimum protections, entitlements and standards that are a key feature of our fair society.

We don’t yet know enough about sharing economy jobs. For example, a US study co-authored by Alan Krueger, a former adviser to President Obama, suggests that Uber drivers probably earn more than taxi drivers.[8] But we have no similar research for Australia. As a progressive, I’d feel more comfortable if I knew that the sharing economy wasn’t driving down prices merely by driving down wages.

Embracing peer-to-peer services – and a digital economy more broadly – will undoubtedly require some adjustments in our thinking about the relationship between employers and workers. But as the party of labour, you should have no doubt that my colleagues and I will always make workers’ rights a priority.  

Second, public safety and consumer protections. One of the more interesting aspects of the sharing economy is how these services employ user feedback and ratings systems as a form of self-regulation. Lyft drivers and passengers rate each other after every ride; AirBNB visitors leave comments about each stay. These public feedback channels let consumers make informed choices: do I stay in the apartment above Berlin’s biggest trance club? Should I accept a ride with the driver who runs red lights while telling me all the reasons he loves Tony Abbott?

Ratings also offer a way for the companies themselves to monitor the quality of the services being delivered under their brand. Drop below 4½ stars, and you’ll struggle to keep your job as an Uber driver. But are reputation-based systems good enough to force out dodgy operators and keep consumers safe? Should leaving negative feedback be the only recourse open to someone who feels their rights or wellbeing have been compromised? We believe that these public feedback channels are great for building a culture that supports good behaviour in the sharing economy. But we also believe they need to be backed up by reliable external frameworks for when things go wrong. Australian consumers quite reasonably expect that they’ll be covered by the right kind of insurance if they are injured, that they will have legal avenues to seek redress if they get ripped off, and that the people they’re buying goods or services from won’t knowingly put them in harm’s way.

Ensuring these expectations are met within the sharing economy will not necessarily mean extending all the same rules and regulations that apply to traditional operators to these new services. In some cases, different standards might apply because there are differing levels of risk. In other cases, there may be an argument for updating the rules for traditional operators and then applying these across the board, so that new and old service providers alike are bound by laws that best reflect the community’s expectations today.       

Third, accessibility. Australia is a country where we work to break down obstacles for people with disabilities and those facing other forms of disadvantage. That’s why we require public buildings to meet accessibility standards, and why taxi companies have to include wheelchair accessible vehicles in their fleets. I’m concerned that there hasn’t been enough discussion of access issues in the conversation about the sharing economy so far. Government has a proper role in addressing these accessibility and equity issues as part of designing fair rules for the sharing economy.

Finally, a level playing field. Today, sharing economy services aren’t just competing with established players by offering quality services that Australians want. Their rapid growth comes, in part, from their ability to help people with the cost of living. For example, the number one reason people say they prefer ridesharing services is that they are cheaper.[9] Can they still do that if they are bound by a fair set of rules covering the employment, public safety and accessibility issues I’ve just mentioned? And what about paying their fair share?

As Youth Hostels Australia CEO Julian Ledger put it to me, ‘What you call the sharing economy, we call the black economy.’ Fortunately, I’m yet to meet an advocate who thinks the sharing economy’s main value proposition is not paying their share. In general, the sharing economy companies I meet with agree that providers and customers should pay their fair share, just like the rest of us. For example, a car run by Uber or Lyft does the same damage to the road that a taxi does, so it’s only fair that it makes the same contribution to the public cost of building and repairing roads.

Once we bring sharing economy services inside a framework of rules, there are plenty of companies which will still flourish, but some may find their comparative advantage withers. That’s the nature of competition. Labor understands that our goal as policymakers isn’t to ‘pick winners’ by protecting some industries through regulation, or letting others gain an advantage from the lack of it. Our task is to set up a system which supports fair competition and then let consumers decide what best meets their needs.

So these are the principles that will underpin Labor’s project for a fair and flexible regulatory framework for the sharing economy. We want to protect workers’ rights, promote public safety and consumer protections and improve accessibility and equity; while ensuring fair competition. How we translate these principles into practice is now up for discussion between our party and the Australian community.

The Discussion Paper I’m launching today is online, and I’d encourage you to read it – and share it, for that matter. We look forward to hearing a broad spectrum of views on the questions that this paper raises. I have already begun consulting with industry groups, companies and other stakeholders to find out what their priorities and concerns are, and I’m looking forward to having many more of these constructive conversations as our work goes ahead.

I also want to acknowledge that several of my state Labor colleagues are working on their own local responses to aspects of the sharing economy, including Chief Minister Andrew Barr in the ACT, Opposition Leader Luke Foley in New South Wales, and Transport Minister Stephen Mulligan in South Australia. I particularly look forward to working with state and territory colleagues from all sides of politics on an integrated national response to this challenging new area of regulation.

There is one final point worth making about the sharing economy, and it is this: Australian consumers – like those around the world – have embraced these new services with gusto. Whether or not any one company survives, the model of peer-to-peer, app-enabled service delivery clearly resonates. We would be squibbing our responsibilities as policymakers if we simply tried to shut these services down or punted addressing them into the too-hard basket. A tide that cannot be held back should be carefully channelled, and that is what you’ll see from Labor.

Back in January I was speaking on ABC Radio in Sydney about the sharing economy. Afterwards, a woman from the outer suburbs of that great city called my office with a story about how hiring out her spare room through AirBNB had allowed her to meet her mortgage repayments and stay in the house after a difficult divorce. For her, the service wasn’t some techie toy for hipsters. It was a lifeline at a time when she really needed one. Without AirBNB, she might well have lost the house.

There may be very real benefits in this emerging economy. Getting the rules right will mean millions of Australians can share them.  


HOST: Well, thank you very much Andrew for that very illustrative peek into the future and a commentary on the rapidly-changing economy we've seen just in recent years. As usual we're going to have a series of questions from our working media today. I might just kick off by asking you a question which goes to that issue of regulation. You say that getting the rules right is going to be very important. It is also going to be very, very challenging because there are so many long term interests already established in those markets. I'm thinking, for example, in the taxi market. A taxi licence may be an investment of several hundred thousand dollars for people holding those plates, but they're now competing with, theoretically, people who are not carrying those legacy costs. I might just say, in my industry, there's a parallel there with the legacy costs of newspapers, I suppose. So, how do you deal with not just the questions of equity and the questions of public safety but also the embedded economic issues around various sectors of the economy?

ANDREW LEIGH: Mark, that's a terrific question in terms of the significant investment that people have put in. My philosophical approach to this is the same as people who have occupied this portfolio for Labor governments and Oppositions gone by, people like Craig Emerson and Chris Bowen. Our approach to competition should always be about protecting consumers rather than particular competitors. That's as challenging in this area as in any other area. We don't want to entirely discount the investments that people have made but we do need to make sure that any decisions we're making are in the interests of consumers in the long term. It's a very live issue. It's one that's come up in a number of the state jurisdictions as they've looked at changes to taxi licencing in general. Victoria has faced this issue square on and it's one that we're certainly hoping to hear back on through the Discussion Paper process.

HOST: Thanks very much. Next question from Jacob Greber.

QUESTION: Andrew, excellent speech on a fascinating and difficult topic. I just wonder, on the issue of worker's rights and wages, whether some of the concerns you've outlined are a little overstated given that one of the primary factors in this new economy is that it is a voluntary thing. It's based very much on trust. You gave a number of examples of jobs that are being created that probably didn't exist six months ago. Is the issue perhaps that it goes too far in this if you start to try and regulate things that probably don't even exist yet?

ANDREW LEIGH: Jacob, it's always easier for economists to identify where job losses will occur than where the new jobs will be created. It's a perennial challenge whether you’re talking about someone in my old occupation or my current one. But I do think that the issue of labour standards is important. I'm worried about an environment which creates a set of jobs which don't allow people to get a mortgage, which don't allow them the flexibility to take a holiday, which don't allow them the certainty of being able to get ongoing education. Those things aren't old fashioned concerns, they're as real today as they were in the more manufacturing and agriculture-dominated Australia of a generation ago. So the way in which we protect working standards may change, the instruments through which we operate may be different. But the fundamental concern of having a well-paid, stable job is one that I certainly don't expect to go away.

HOST: David Speers.

QUESTION: David Speers from Sky News. You mentioned towards the end of your speech a woman in Sydney, I think it was, who after a divorce needed to rent out the spare room on Airbnb as a lifeline. Do you know whether she collected GST or paid GST? I mean this is a detailed question, but an important one. I've used Airbnb overseas and I don't recall paying GST or sales tax in the US for it, so what do you think should happen on that?

ANDREW LEIGH: As I said David, sharing economy businesses ought to pay their fair share. I certainly see no principled argument why someone providing a good or a service in Australia which is functionally equivalent to one that's GST-paying shouldn't be responsible for paying GST. Now, there's thresholds for GST, as you know. If you've got a turnover under $75,000, you're not responsible for paying GST. So it's possible that the person who provided the Airbnb services to you falls within that threshold. But it's also really important that we think about how each of these rules operates. This is no tax grab for extending the remit of the tax system. It's about ensuring that we've got a level playing field. As I said in the speech, when I talk to representatives of these sharing economy firms, that's what they want. They believe they're offering a better product for Australians, not simply a product which is benefitting because it's making an end run around the tax laws.

MARK KENNY: Next question from Gareth Hutchens.

QUESTION: Andrew, the UK Government last week responded to an independent review of the sharing economy sector and the UK Chancellor, George Osborne, said that he wanted the UK to become the global centre of these sharing economy activities. So, two questions for you, if I may. Would you like policy makers in Australia to draw on some of the UK Government's recommendations? And how quickly do you think we need to push ahead with regulation of the sector? Will we gain any first-mover advantage in the Asian region by pushing ahead with this?

ANDREW LEIGH: Gareth, you were kind enough to mention to me about 10 minutes before the speech you were going to ask me about this, but my speed-reading not being what I'd like it to be, I haven't had a chance to go through the UK discussion paper. These are certainly big debates that are being had in different parts of the world. Portland, Oregon struck a deal with Airbnb whereby they agreed not to prosecute in exchange for Airbnb services paying what the Portland City thinks are fair tax rates. New York City's way of addressing Uber was to say that Uber cars and drivers had to fall within their existing regulatory net that applies to taxis. And certainly I'm aware that people in Britain are looking at how to address the sharing economy. I see this fundamentally as about expanding the goods and services available to Australians and by doing that there may well be a spinoff benefit that we encourage Australia as an innovation hub. A person who's been doing more thinking about this than I think anybody else in our party is Ed Husic, who's recently done a trip to the US talking to a range of these technology firms and thinking about how to build those technology industries in Australia. It's important because it's part of the answer that so many constituents will ask me on street corner meetings or forums: where are the jobs of the future coming from? If we muck up the regulatory arrangements, if we create a Wild West or if we over-regulate, then we lose that opportunity to create more of these good jobs and new industries.

HOST: Our next question from the West Australian's Shane Wright.

QUESTION: Dr Leigh, Shane Wright from the West Australian. I just want to put your Shadow Minister for Competition hat on for a second, and this crosses over into new technologies. One of the biggest looming issues in terms of the Federal Budget is Australia Post, given that it is starting to lose money now and will drain the Federal Budget. They've come up with an idea of slower mail and higher costs, which as an economist I'm not sure you'll support. But does that mean in your mind, that the Labor Party – which pioneered privatisation in this country for many different businesses – has to bite the bullet and say it's time to put the For Sale sign out the front of Australia Post?

ANDREW LEIGH: Shane, we've been engaged with the Government on this issue. It hasn't been one in which we've simply chosen to play cheap populist politics. Jason Clare been working directly with the Communications Minister on this, trying to think through the challenges that changes in technology are bringing about for Australia Post. Parcel volumes are going through the roof, letter volumes going through the floor. We'll continue to engage, but certainly, we don't see asset sales as something that should simply be done in order to find a cheap backdoor way of balancing the budget. We believe that assets ought to remain in public hands if there's a strong public case for it, but the notion that you would just willy-nilly sell off public assets in order to try and better the budget deficit is not one that Labor supports.

HOST: John Millard.

QUESTION: Thank you, Mark. John Millard, freelance. Dr Leigh, your predecessor in Fraser, Bob McMullan, was variously a minister in previous Labor governments for the arts, admin services and trade. Some people have suggested that he didn't rise to the ranks of the ministry that his talents undoubtedly deserved. Some people suggested that was because he wasn't aligned with any particular faction in the Labor Party. Now you're one of the better-qualified economists on the front bench of the Labor Party and currently Shadow Treasurer. Do you think that…

ANDREW LEIGH: Shadow Assistant Treasurer.

QUESTION: Sorry, Shadow…

HOST: You just promoted him.

QUESTION: Shadow Assistant Treasurer - just a slip of the tongue. Perhaps one day you would hope to rise to a higher level within the ministry, even treasurer. Do you think it's likely on talent alone, or do you think it's necessary that you should join a faction?

ANDREW LEIGH: John, it's a very niche question, but one that I'm certainly grateful for. One of the great things about the modern Labor Party is you have people in the left, people in the right and people who are not aligned. And certainly everything I've seen under Bill Shorten's leadership is that he's interested in having us working as a team and drawing out people's talents and abilities from wherever he finds them. I haven't found a glass ceiling sitting above the independents and I don't think Alannah MacTiernan or Nova Peris have either.

HOST: Well that's the thing about glass ceilings, you can see straight through them. Next question from Ken Randall.

QUESTION: Ken Randall from iSentia, Dr Leigh. Despite the best intentions of what you've said today, wouldn't the development of the sharing industry simply involve the development of another regulatory sector in addition to the one we've got? And it goes back to Mark Kenny's first question, doesn't that automatically tend to create assets which are valued on the regulatory system?

ANDREW LEIGH: Ken, you can certainly go back through history and find firms whose asset values were affected by technological change. There was a significant capital stock for those who owned large forest plantations which grew trees tall enough for sailing ships. The advent of steam destroyed that capital stock, as did the advent of the motorcar to people who had large numbers of horses. As a broad principle, I think governments need to be looking to what's going to create the greatest consumer value and that's always been the focus that Labor's had. It's not an accident, when we go back through those competition policy reforms, that we find Labor governments spearheading each of them. Fundamentally, our notion is to be on the side of the worker and the consumer, not simply bolstering profits of one firm at the expense of another.

HOST: If I could just follow up on that.


MARK KENNY: Isn't, though, the point that you talked about sort of technological change there, change from sailing to steam for example and these sorts of things. What I think Ken's question goes to is changes in the regulatory environment, driven by, perhaps, technology in the sense of the internet, but which leave those assets stranded. I mean, a taxi licence, for example, is only worth what it's worth because of its scarcity value, because the regulatory environment attached that value to it. If we then start allowing other people who haven't had to carry that cost to operate taxis, then someone's licence is basically not worth much, not able to be sold even. So, that's the question there. And then I suppose you have, as Ken's question goes to, the growth through the new system of other regulation-based values.

ANDREW LEIGH: Mark, I think it's important, but let's not pretend that taxi licence values aren't already falling. Over the last few years Sydney taxi licences are down – the figure is somewhere buried in the footnotes of my speech - I think it's about 10 per cent. If you look at New York and Chicago, you've had bigger drops still in the value of taxi licences. So, these new technologies are already affecting asset values. I think we need to get the regulatory settings right for the future, but certainly part of a reasonable conversation would be how you treat some who, for example, is a widow whose main asset is the taxi licence that her husband left her. Those are reasonable conversations to be had, and they're certainly issues that Victoria and New South Wales have looked at in their specific reviews of the taxi industry.

HOST: Thank you. James Campbell?

QUESTION: Recently, the Intergenerational Report attracted quite a lot of negative attention, with even the Treasury Secretary disavowing all knowledge of it; in a couple of years' time, let's say you get that promotion, how would you reform the document to ensure that it better fulfilled its original purpose?

ANDREW LEIGH: Thanks James. Well the Shadow Treasurer, Chris Bowen – and can you all take back the message that I have no designs on Chris' job? – Chris spoke in this place ahead of the Intergenerational Report about his fear that Joe Hockey was going to use the Intergenerational Report to play political games. Unfortunately that was what we saw. We saw a line which said ‘previous policy’, which purported to be a Labor policy, but instead was the first budget update brought down by Joe Hockey, including the $9 billion grant to the Reserve Bank and a billion dollars given back to multinationals. You've seen the extraordinary case of a group in the Coalition who came to office saying that we should be scared about a debt truck, now saying that a debt aircraft carrier wouldn't be any problem, a 50 to 60 per cent ratio of debt to GDP would be perfectly fine. So that's why when Chris spoke at the National Press Club, he said a Shorten government would put the job of writing the Intergenerational Report in the hands of the Parliamentary Budget Office, would depoliticise this important document, and would allow us to have a substantive conversation about those long term issues. You've really got to look hard through the Intergenerational Report to find discussion of the big challenges for Australia's future - climate change, inequality, innovation, engagement with Asia. Instead, you have these narrow partisan attacks which don't set us up for those big and important conversations.

HOST: Can I ask you also about the Intergenerational Report in terms of its 40-year protections. I mean, going back to some earlier comments in your speech, you talked about the exponential growth of these new industries and new services provided- facilitated by the internet. Given that rapid transformation of the economy, and perhaps extrapolating that exponential growth, I mean, how can we make any sort of useful projections about what the economy will look like in ten years, let alone in 40 years?

ANDREW LEIGH: Projection is more art than science. You look at the population projections from successive intergenerational Reports, for example you go from the first IGR at the beginning of the Noughties to the one at the end of the Noughties, you've got mid-century population projections going from 26 million to 35 million, and now going close to 40 million. So what an Intergenerational Report, I think, is most valuable for is less the precise number that it's projecting, and more an opportunity to have those conversations about long-term investments. We know if we're going to be creating more and better jobs in the future, then we need more investment in science. That means not getting rid of one out of five CSIRO staff, and boosting engagement with the scientific communities. We know that in order to create more of those sorts of jobs, then we're going to have to increase our levels of education. Yet we've got an Intergenerational Report which aims to halve the spending on education by mid-century. So it's the broad policy settings that trouble me the most about the document, rather than the third decimal place of the projections.

HOST: Jacob Greber.

QUESTION: Andrew, I wonder if I could ask you a quick question, have you sort of go back to the skills of your previous occupation as an academic.

ANDREW LEIGH: This is always dangerous, when people preface questions like this.

QUESTION: It's partly because you made mention of this in your speech, that it's really difficult to get good numbers and modelling on what we're talking about here with this sharing economy. What's your best guess of how big it might become, perhaps in terms of GDP for Australia? And secondly, do you see it as a thing that might boost productivity in the long run, or is it something – given the capital destruction that we're perhaps talking about in some instances – that would actually be negative for that?

ANDREW LEIGH: So I think it was Bob Lucas who said that the only function of economic forecasting is to make astrology look respectable. You should always be very careful in taking advice about the future from a profession that missed the Global Financial Crisis. But I do think there is big potential for creating jobs here. We've seen a rise in the share of workers whose main job is delivering household services, and we've certainly seen evidence that Australians have an appetite for the sorts of products being offered by the two biggest sharing economy companies, Uber and Airbnb. I'm optimistic from both a consumer and a worker side, but I've been concerned that the Federal Government has been essentially missing in action in what I think is one of the most important policy conversations for how we generate jobs in the future.

HOST: Next question from David Speers.

QUESTION: I want to take you to debt. You referred to the possible debt-to-GDP ratio of 50 to 60 per cent as a debt aircraft carrier. If that is an aircraft carrier and we're now at about 15 per cent debt-to-GDP ratio, if that's presumably okay, where should it peak, in you view?

ANDREW LEIGH: David, certainly we need debt to be on a trajectory of coming back to balance. I'm strongly supportive of that, that's why we made more than $100 billion worth of savings under the previous government, and why after putting in place fiscal stimulus we put in place a two per cent real spending cap. We stuck to that two per cent real spending cap. One of the reasons why the ‘previous policy’ lines look terrifying in the Government's documents is that they assume the two per cent spending cap comes off. So, we will certainly support sensible savings measures. Part of the notion of our multinational tax package wasn't simply to say ‘Labor's up for hard policy conversations’ but also that if the government wants to add $2 billion to the budget bottom line, here's a Parliamentary Budget Office policy, costed, ready to go. Now you're going to say that $2 billion doesn't get us back to surplus, and you'd be completely right about that. But what Labor is looking for is a conversation that recognises that the entire community needs to bear some portion of the heavy lifting. It's a strategic policy choice, when you say the first thing you're going to do is to put in place an audit commission which will target spending, and then you kick the can down the road in your tax white paper. Because we know when you focus first on spending then it's the most vulnerable that bear the pain, and when you look at tax you're able to find progressive solutions. Just take superannuation. We've got a government which said no to a Labor measure which would have imposed a slightly higher tax rate on people with more than $2 million in their superannuation accounts. That's, I think, the risk of delaying and delaying a tax white paper. Now effectively this tax white paper is going to come down too late to be considered for their second Budget, so it's a tax white paper which will feed into a pre-election Budget. And I don't think anyone expects that the Abbot Government - or whoever’s government it is by then – is going to use a pre-election Budget to take on serious tax reform.

HOST: Shane Wright?

QUESTION: Dr Leigh, in terms of the sharing economy, apart from company and tax and GST, much of it comes down to the states themselves and state regulation. Do you see that the discussion encompasses allowing states to compete in terms of tax rates and in regulation, allowing some states to reduce regulation to encourage start-ups in that field? And secondly – I see that the Member for Fremantle is here – everyone in Western Australia will know about the West Australian spud police, in that in terms of competition the growing of potatoes is regulated by a board. As the competition shadow minister, do you think it's time to get rid of the spud police in Western Australia?

ANDREW LEIGH: Shane, I have no strong views on the Western Australian spud police. I will leave that to Melissa Parke, who I'm sure can give you an eloquent dissertation on it at the conclusion of today's event. But I do think it makes sense to, not necessarily aspire towards perfect uniformity, but for states and territories to work together to find sensible models of regulating the sharing economy. Australians don't want a race to the bottom, and I don't think there's a strong case for, to take one issue I raised in the speech, the way in which disability-accessible taxis are dealt with in Tasmania to be different from the way they’re dealt with in New South Wales. There's a set of common challenges, they're hard. The technologies are coming much faster than regulators are used to keeping up with. To the extent that we can bring together brain power across the country, I suspect we'll get to better regulatory outcomes. And to the extent that there's commonality across jurisdictions, it will also assist those firms who like to work across borders not to have to deal with eight different types of regulation. A Labor government did this in 1990 by putting place uniform company laws, and I think that's broadly regarded as a success. It’s a way of ensuring that companies don't have to spend more time than necessary getting their head around state-by-state company laws.

HOST: John Millar.

QUESTION: Dr Leigh, in your academic career you made something of a study of the differences between income levels in developed societies, and the differences increasing between them. I won't make [indistinct] again but when you get into government, what do you think that governments can do about such an increasing level [of inequality], short of very blunt instruments like increased taxation, or decrease in taxation or distribution of welfare? What do you think can be done by governments?

ANDREW LEIGH: John, inequality is certainly an issue that's close to my heart. Over the last generation we've seen earnings rise three times as fast for the top tenth as for the bottom tenth; the top 1 per cent share double and the top 0.1 per cent share triple. You've got three Australians with more wealth than the poorest one million Australians. And so I do think equity is an important issue. One of the things that worries me is that into that environment in which Australian inequality is as high as it has been in three quarters of a century, we've had the most regressive Budget in probably three-quarters of a century. Cutting back on the sorts of spending which boost opportunities for young people; cutting back on things like the literacy and numeracy coaches who work in some of the most vulnerable schools in the north of Canberra, and who create opportunities for children to move out of poverty.

I spoke before about the Government’s decision on superannuation not to proceed with a slightly higher tax rate on people with more than $2 million in their super accounts. But at the same time as cutting the super taxes on those with more than $2 million in their accounts, they raise the super taxes on those earning less than $37,000 a year. That's fundamentally at odds with the egalitarian Australia which is not just beloved of Labor members, but also I think of all Australians. Our egalitarian story is a great one, and we've got to make sure that those fundamental national values aren't trashed by a set of policies which take from the most vulnerable to give to the most affluent.

HOST: Just time for two quick further questions. One from Ken Randall.

QUESTION: Dr Leigh, just can I take you back to death and intergenerational equity. It's not so long ago that it was regarded as just common sense that for long-term infrastructure financing you borrowed money, often on quite a long term. How did we lose that common agreement, and what's it going to take to get it back?

ANDREW LEIGH: Ken, I think taking a bit of time – allowing the use of debt for long-term financing – certainly makes sense. That's a position which would be supported on a bipartisan basis. But you do want to aim towards having the budget broadly back in balance. I'm worried when the Treasurer has blown out debt by $80 billion since coming to office. You go back to the last year of Labor, the gap between revenue and spending was 5 per cent, this year it's now 13 per cent. And you've got Peter Costello, who was able to deal with an Asian financial crisis, Wayne Swan who was able to deal with the Global Financial Crisis, and yet Joe Hockey is telling us he can't deal with a fall in the iron ore price. I don't think that's good enough. I think we need a broad, sensible conversation which brings in conversations about tax expenditures, and which doesn't automatically say that we have to balance the budget off the back of the poorest.

HOST: Final question from James Kent.

QUESTION: The Labor Party's been repeatedly pummelled on using the false comparison of the economy with the household budget. Why aren't you cutting through on this issue?

ANDREW LEIGH: James, it's an issue near and dear to my heart, as a former teacher of economics. The household analogy can be useful. If you're making a simple case – such as why might a country take on debt to get through a global financial crisis – you can easily imagine households which, when there's floodwaters rising around them, are willing to put a lifeboat on the credit card. But it does get into problems when households are interrelated to one another. So, in a household or a business analogy, you're able to save by paring back costs. A business can boost its bottom line by cutting wages. But it's not the case in an entire economy, when your wages flow into consumer spending for my product. When we're all interrelated in that way then cutting wages simply ends up being a race to the bottom. I think the answer to that, to how we do it, is simple old-fashioned communication. Paul Keating is the master of the economic metaphor. Thinking about the appropriate metaphors, I remember Keating talking about flexible exchange rates as a shock absorber for the Australian economy. We need to be clear in our communication about the importance of long-term investment. The notion that yes, debt and demographics matter, but so does engagement with Asia and innovation. What I've been trying to do today is to talk about a piece of that innovation puzzle, which is ultimately as important to our future prosperity as any other challenge that we're facing as policy makers today.

HOST: Ladies and gentlemen, can I ask you to put your hands together for Labor's Shadow Assistant Treasurer, Andrew Leigh.

[1] Andy Kessler, ‘Brian Chesky, the sharing economy and its enemies’, Wall Street Journal, 17 January 2014, available at

[2] Independent Pricing and Regulatory Tribunal, ‘Sydney taxi fares to apply and new licences to be released from July 2015’, Transport — Draft Report, December 2014, p.41. Another marker of the impact of ride-sharing services is that the prices of taxi licences in Sydney are now at a seven-year low:

[3] Aaron Bialick, ‘Car-Free Households Are Booming in San Francisco’, Streets Blog, 15 August 2014, available at 

[4] Productivity Commission, 2005, National Competition Policy Reforms – Productivity Commission inquiry report, available at:

[5] Council of Australian Governments, 2014, Impacts of COAG Reforms: Business Regulations and VET, available at:

[6] Andrew Leigh, 2013, Battlers and Billionaires: The Story of Inequality in Australia, Black Inc, Melbourne, p.63.

[7] On the relationship between productivity, innovation and inequality, see Andrew Leigh, ‘Race against the machine or race with the machine? Laying the foundations for an innovative, productive and equitable Australia’, Speech, Corrs Chambers Westgarth, Perth, 10 March 2015.

[8] Jonathan Hall and Alan Krueger, 2015, ‘An Analysis of the Labor Market for Uber’s Driver-Partners in the

United States’, available at

[9] Independent Pricing and Regulatory Tribunal, ‘Sydney taxi fares to apply and new licences to be released from July 2015’, Transport — Draft Report, December 2014


Showing 7 reactions

Please check your e-mail for a link to activate your account.
  • Vishal Kr
    commented 2016-12-09 07:52:13 +1100
    Andrew you are absolutely correct – the sharing economy is important and we don’t want to stunt its development in Australia through rules and practices that benefit the incumbents no matter how cleverly they shroud their arguments in concerns for the public interest, workers and safety.

  • Uber Estimate
    commented 2016-07-19 21:42:00 +1000
    This is really a nice post and total agree with OP. Today is app generation such as Uber, Lyft and more they are really doing good with app generation.

  • Thelma G. Wheeler
    commented 2016-07-07 02:02:06 +1000
    It’s really true: “If you’re making a simple case – such as why might a country take on debt to get through a global financial crisis – you can easily imagine households which, when there’s floodwaters rising around them, are willing to put a lifeboat on the credit card.”
  • Ned Ludd
    commented 2015-09-28 00:40:04 +1000













    The New South Wales opposition has called for Uber to be legalised, supporting regulation of the ride-sharing app and Airbnb.

    The NSW opposition leader, Luke Foley, used his budget reply speech to announce he would be introducing a private member’s bill to legalise and regulate Uber.
    Travis Kalanick-CHIEF OF UBER



    From Wikepedia


    In 1998, Travis Kalanick dropped out of UCLA with some of his classmates to found Scour Inc., a multimedia search engine, and Scour Exchange, a Peer-to-peer file sharing

    service.In 2000, the Motion Picture Association of America, the Recording Industry Association of America (RIAA) and the National Music Publishers Association (NMPA) brought

    a lawsuit against Scour, alleging copyright infringement. In September of that year Scour filed for bankruptcy to protect itself from the lawsuit.


    In 2001, with Scour’s engineering team, Kalanick started a new company called Red Swoosh, another peer-to-peer file-sharing company. Red Swoosh software took advantage of

    increased bandwidth efficiency on the Internet to allow users to transfer and trade large media files, including music files and videos. In 2007, Akamai Technologies acquired

    the company for $19 million




    Peter Andreas Thiel (born October 11, 1967) is an American entrepreneur, venture capitalist, hedge fund manager, and social critic. Thiel co-founded PayPal with Max Levchin and Elon Musk (see PayPal Mafia) and served as its CEO. He also co-founded Palantir, of which he is chairman. He was the first outside investor in Facebook, the popular social-networking site, with a 10.2% stake acquired in 2004 for $500,000, and sits on the company’s board of directors.

    Thiel serves as president of Clarium Capital, a global macro hedge fund with $700 million in assets under management; a managing partner in Founders Fund, a venture capital fund with $2 billion in assets under management; co-founder and investment committee chair of Mithril Capital Management; and co-founder and chairman of Valar Ventures.
    Thiel was ranked 293 on the Forbes 400 in 2011, with a net worth of $1.5 billion as of March 2012. He was ranked on the Forbes Midas List of 2014 at $2.2 billion.Thiel lives in San Francisco.

    Bilderberg Group

    Thiel is listed as a member of the Steering Committee of the Bilderberg Group, a private, annual gathering of intellectual figures, political leaders and business executives

    What It Takes to Replicate the PAYPAL MAFIA’s Success

    Elon Musk, Peter Thiel, and Max Levchin are among the big-name PayPal alum who went on to have their hand in creating billion-dollar tech startups. Learn what it is that these men have in common.

    By Thompson Wall
    Web producer, Inc.@thompson_wall

    When eBay buys your company for $1.5 billion, you might consider spending the rest of your days sipping cocktails on the beaches of Silicon Valley (or just go ahead and buy the beaches themselves). But that’s not what these seven former PayPal colleagues did. Instead, the so-called PayPal Mafia went on to invest in so many of the same wildly successful private tech startups that The New York Times had to map it out.

    Take a look at the billion-dollar boys club below:

    Peter Thiel, one of PayPal’s co-founders and the company’s former chief executive, has invested in four of the most valuable tech companies in Silicon Valley: Airbnb (valued at $40 billion), Palantir ($15 billion), SpaceX ($12 billion), and Stripe ($3.5 billion). Thiel was also one of the earliest investors in Facebook

    Jeremy Stoppelman, PayPal’s former vice president for engineering, similarly invested in Airbnb and Palantir as well as Square, Uber, and Pinterest.

    Keith Rabois, PayPal’s former head of business development and current partner at Khosla Ventures, previously held executive roles at LinkedIn and Square and now holds shares in Airbnb, Stripe, and Palantir.

    Elon Musk, who co-founded the company that became PayPal, went on to launch SpaceX (now worth $12 billion) and Tesla (worth $23 billion). Oh, and he also invested in Stripe.

    Scott Banister, a former PayPal board member, co-founded email service IronPort, which sold to Cisco in 2007 for $830 million. Banister has also invested in Uber and SpaceX.

    Max Levchin, PayPal co-founder and its former chief technology officer, sold social gaming company Slide to Google in 2010 for $182 million and recently started online payments company Affirm. Levchin also has stakes in Pinterest and Stripe.

    Roelof Botha, former PayPal head of business development and current partner at Sequoia Capital, has investments in Square.

    The undeniable presence of former PayPal executives within Silicon Valley’s tech landscape goes even deeper than just the big seven. LinkedIn, now worth $31 billion, was co-founded by former PayPal chief operating officer Reid Hoffman. Stoppelman and lead software architect Russell Simmons co-founded Yelp, worth $3.51 billion. In 2006, Steve Chen, Chad Hurley, and Jawed Karim—all PayPal alum—founded YouTube, which was acquired by Google for $1.6 billion. So how is it that one dot-com-era company continues to churn out billion-dollar success stories?

    One part of the equation is that “success begets success,” the Times notes.

    “There’s a network effect to these things,” Yelp CEO Jeremy Stoppelman tells the Times. “If you have a name that’s associated with success, people will seek you out. Why do smart people go to Harvard? Because previous smart people went to Harvard.”

    The second part of the equation is slightly more feasible for most entrepreneurs but nonetheless vital for setting up your business for industry domination at the get-go. In his book Zero to One, Thiel identifies seven questions that every business must answer if it hopes to reach the same level of success as PayPal:

  • Stephen Lacaze
    commented 2015-03-25 13:25:43 +1100
    Pretty long bow you are drawing there Andrew M.
    The sop given in this presentation came with conditions and those are wide ranging and ill defined, hence the edge in my reply.
    There is nothing new in the “sharing” concepts being thrust into our market place apart from the shear financial weight that is behind them. Even the so called revolutionising apps are only a very small development on techniques that have been in use for some time.
    what we are seeing with these American companies is a form of commercial terrorism, where major compliance overheads are evaded with what looks like criminal intent.
    The only thing that is at all worthy , is the demonstration of 21st century marketing by the book and how well it works.
  • Andrew McCredie
    commented 2015-03-25 12:35:43 +1100
    Andrew you are absolutely correct – the sharing economy is important and we don’t want to stunt its development in Australia through rules and practices that benefit the incumbents no matter how cleverly they shroud their arguments in concerns for the public interest, workers and safety.

    The recent deaths of Malcolm Fraser and Lee Kuan Yew have caused me to reflect on what happens to an economy when the interests of incumbents dominate.

    To much applause from Australian business, Malcolm Fraser reversed the Whitlam tariff cuts on industries such as clothing and footwear and abolished the R&D incentives that had supported significant business R&D centres in bio-pharmaceuticals, chemicals and electronics, particularly in Melbourne and Sydney.

    Lee Kuan Yew understood that productivity is the primary driver of economic growth and that research and highly skilled people are the drivers of productivity. He jumped at the opportunity that Fraser’s blindness offered, grabbed the R&D centres in biopharmaceuticals, chemicals and electronics that Fraser spurned and manipulated Singapore out of the low wage clothing and footwear industries.

    No wonder Lee Kuan Yew told Bob Hawke that Australia was on the path to becoming the poor white trash of Asia. It took a decade of R&D incentives under the Hawke Government for business R&D as a per cent of GDP to climb back to the level its was prior to the Fraser policy induced collapse. It should be noted that the R&D incentives were always a small fraction of the support handed out to incumbent industries such as clothing and footwear.

    The Fraser economic experiment, which was dominated by an emphasis on fixing the budget, proves that if you block the forces for dynamic change in an economy long enough ultimately the economy performs so poorly that even balancing the budget cannot be done.
  • Stephen Lacaze
    commented 2015-03-24 18:23:12 +1100
    Andrew, can you please tell me if everyone was polite enough to stay awake and focussed through this?
    Are people in our community really as uninformed as your speach would lead us to believe? You are talking to, presumably, the opinion moulders and generators of the country yet from the content of your speech it would seem they have the base level knowledge of a bush yokel about these matters.
    There is one message that needs to be delivered about most of these operators … they are outlaws, by design, as they skimp and shirk on compliance to deliver an artificially cheap product to build market presence.
    The Australian public blithely believe that no one would be so brazen as to completely disregard even basic liability insurance requirements , yet the uber and airbnb models rely heavily on misrepresentation of this issue, to the public and their contractors.
    So lets get to the real issue … the outfits do not create employment , except maybe in legal practice. Uber employs just 2300 people world wide (two thousand three hundred…. source uber ceo interview in ft) The so called uber “partners” are little more than dodgy self employment opportunities in a dodgy party plan. They take all the risk, everything they have now and into the future, as they cheat insurance companies, their customers and the community.
    Make no mistake, we the community are subsidising uber cars to the tune of $120 per week, as their risk is bourne by the nominal defendant.
    You glossed over these points, but it is your job NOW, to ensure that current safegards and law are met, maybe even moreso than waffling on about what might or might not get done in the future.
    Australian businesses are under attack by commercial terrorists , who use regulatory ambiguity to even collect and retain GST.!!! Forget about the future, get your feet on the ground and deal with the here and now.

Stay in touch

Subscribe to our monthly newsletter


Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.