2GB MONEY NEWS
WEDNESDAY, 4 SEPTEMBER 2019
Subject: National Accounts; The economy floundering under a floundering Government; Labor’s positive policies to take back control of the economy.
JOHN STANLEY: We've got problems with wage, we've got problems with inflation, we've got problems with jobs. So is it good enough for the government to just say ‘well look, we should wait to see the tax cuts flow through, we should wait till the September quarter’ or should there be action being taken right now? Andrew Leigh is the Shadow Assistant Minister for Treasury from the Labor Party. He joins us now. Good evening to you.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY: G’day, John. Great to be with you.
STANLEY: I'm assuming your answer is going to be that they need to be doing more.
LEIGH: I think that'd be the answer of every serious economist, John. I mean, we’ve had this per capita recession. So on a per person basis, the economy had been shrinking, not growing, and that's gone on for the longest period since the early 1980s recession.
STANLEY: Can you just explain that per capita recession for us?
LEIGH: The figure you talked about before is the total size of the pie. But if you look at the slice that each person has, that’s been shrinking rather than growing. The economy is growing because we're adding more people, not because individuals are getting better off.
STANLEY: And that would fit in with what a lot of people would say when they hear these figures, which is ‘well on I'm not doing that well’.
LEIGH: Absolutely. It's what you'd expect given how lousy wage growth has been. The Reserve Bank Governor has been emphasizing that slow wage growth is feeding through to the fact that people are spending down their savings, so we're having the household savings ratio declining. People are not spending in stores - retail sales numbers have been sluggish. New car sales figures are down and that there's general sort of lassitude in the economy. And of course that's what you expect when you have a public sector wage caps biting, when you have a government that's cutting penalty rates. You're going to get lower wage outcomes and that's going to hurt retailers.
STANLEY: Alright. In an alternative world, we would have had an election where Bill Shorten won, Labor was in office, you'd have been in a position presumably - let's just say hypothetically you would have been - you'd have been responding today to what would be. These numbers wouldn't have changed very much in the space of a couple of months, so what would you be doing today if you're able to?
LEIGH: That's a great question. We would have a couple of things differently. First of all, we would have brought forward infrastructure spending in order to sustain demand. That's one of the things that got Australia through the global financial crisis without a recession-
STANLEY: Just on that, what would it be? Because we talked a bit about this last night, whether it be dams or roads or something. I mean, because in the past we've seen things that haven't quite worked at the edges. So what would you be talking about?
LEIGH: There are a range of different projects you can bring forward, but I think the transport infrastructure is the key to it. And that way you're getting the double dividend - so you get the benefit of improving the performance of the construction sector now, but you get the benefit for households in the future reducing their commuting time. So we've seen through the HILDA survey research coming out a couple of months back that commuting times have been going up in Australia. But we also would have ensured that those low and middle income tax cuts were more generous. So we were arguing not for big tax cuts to millionaires off the never-never, but for more substantial tax cuts for middle Australia. And that's because those are people who spend their entire pay packet, so the money goes straight back into the economy.
STANLEY: Yes. Would that have happened by now? Would you be doing it now? Would you be able to do it now?
LEIGH: Absolutely. We would have, we would have implemented that straightaway and that would have had a big impact on retail sales straight away. But then there's also the big confidence issue for the Australian economy, which is the lack of an energy policy. The Government's had 16 energy policies over the course of its term, and you had the CEO of the Clean Energy Council on radio this morning castigating the government and talking about the problems for business confidence of not having an energy policy. You've got to be investing in schools and making sure that we turn around the productivity numbers, which have been absolutely lousy. That's not just a 2019 problem - that's been a problem that's been in place for the last five years, where we've seen extraordinarily slow productivity growth. And if you don't have firms becoming more productive, then in the long run you don't get those wage gains. So there's short term challenges that we need to tackle, generated in part by the external circumstances, but there's also long term challenges we've really got to invest in.
STANLEY: Okay. What about the view of the Treasurer and the Prime Minister, that we need to wait to September? Things will start to tick up, that you've got the impact of their tax cuts which will start to flow through and low interest rates as well?
LEIGH: The Treasurer today seemed to have two answers to Australia's economic woes. One is wait and see, and the other is it's Labor's fault. He had this extraordinary answer at the end of his press conference. It went for a minute and a half, referenced Labor, Chalmers or Albo nine times. So about once every eight seconds he's bagging out Labor. Not once did he actually talk about the importance of what the government could do. They should bring forward the budget update, and get policies which are supporting growth in place right now. We've got a really weak private domestic economy, dwelling investments collapsing, private business investment has been a problem. We're having this phenomenon called capital shallowing, in which there's a decline in the capital intensity of the economy because businesses aren't willing to invest. And all the Treasurer can do is accused Labor of practising ‘evil eye economics’.
STANLEY: So if I said to our listeners now ‘what was your policy that you took to the last election’, they would say franking credits, negative gearing. They were the two things that they'd remember. It was more than that, wasn't it?
LEIGH: If you're a business owner, you would have looked to Labor and seen that we were promising an energy policy that would spur investment in renewables. We were talking about an Australian investment guarantee, which has now been called for by the business community themselves. We want to incentivise-
STANLEY: Just on the investment guarantee, can you mention that? Because I see the business community is talking about that. Can you explain what that would be?
LEIGH: So that's essentially allowing businesses to write off more quickly new investments. We have something like this in the form of the instant asset write off for small investments, but the Australian investment guarantee that Labor took to the last election would have covered larger investments as well. The difference between that and a company tax cut, John, is that you’re incentivising just new investment by firms. So the tax dollars that you forego are getting you new investment - which is why a Victoria University study said it delivers three times the growth benefits of a company tax cut.
STANLEY: You can see the difficulty though, because I've just mentioned those two things that people remember and you've gone through a whole lot of things that people might think ‘well, that sounds very good’. What was the problem with communicating the policies during the election campaign?
LEIGH: It's always a challenge dealing in a noisy environment, in which there's a lot of scare campaigns going on, in which we were massively outspent in the advertising front. But we'll continue arguing for good policies - it's what Labor does, whether we're in government or whether we're in opposition.
STANLEY: Is it possible that the economy could be turning in your favour, based on this? Being pragmatic about it, in the way we heard John Howard at one stage say ‘the times would suit him’.
LEIGH: There's no Labor favour in this. I would be the last person who would want to be praying for an economic downturn, because it is vulnerable Australians who get hurt when the economy turns south. I left school in 1990, in the teeth of the last bad Australian recession and that was an awful time to be a young school leaver. I saw people just waiting for years before they managed to get their first job. So the most vulnerable get hurt when the economy turns down. It's absolutely vital the government steps in and sustains growth. I wish nothing but the best for the Australian economy, and I only wish we had a government that was up to the task of dealing with those big challenges of productivity, wage growth, bringing unemployment down, bringing down government debt, tackling inequality rather than just blame, blame, blame.
STANLEY: Andrew Leigh, good to talk to you. Thank you for your time.
LEIGH: Likewise. Thanks John.
Authorised by Paul Erickson, ALP, Canberra.