I spoke in parliament last night about the Opposition's threat to block an increase in Australia's debt ceiling.

Debt Ceiling
23 May 2012

On 17 April this year the member for North Sydney [Joe Hockey] travelled to London where he gave a speech in which he said that Hong Kong's government debt was 'moderate'. That speech pointed out that Hong Kong's gross government debt was then 34 per cent of GDP. As Simon Howson pointed out to me, given that Australia's gross government debt will peak at 18 per cent of GDP, the only appropriate word for Australia's debt levels is 'low'. Australia's net debt as a share of GDP will peak at 9.6 per cent of GDP. That is like somebody earning $100,000 and owing $9,600. This debt was, of course, taken on in order to save jobs—200,000 of them, and tens of thousands of small businesses.

Late last year, Australian banks were actually concerned that there were too few Australian government bonds in the market for them to meet the Basel III requirements. They were concerned that the Australian government had too little debt, and Australia's debt levels will peak at one-tenth of the average in major advanced economies. But now the coalition appears set to stand against an increase in Australia's debt ceiling, to stand against an increase in Australia's debt limit.

I want to use the opportunity tonight to inform the House as to the consequences of this reckless action. Rob Nicholl, head of the Australian Office of Financial Management has told the government:

‘Any uncertainty whatsoever as to the Government's ability to undertake normal debt management operations would create widespread and potentially serious negative speculation, this in turn creating unfavourable perceptions on the part of the investment community.’

Mr Nicholl told the government:

‘With increasing scrutiny of, and interest in, the market for CGS, it is critical to maintain a clear and unambiguous signal that debt market operations will not be impeded…’

We are raising the debt limit for two reasons. The first is that revenues tend to come in later in the year and payments are made throughout the year, so government needs to meet the gap through temporary further issuance in short-term markets. The second is to manage maturity of long-term bonds outstanding. Prior to their maturity, the Australian Office of Financial Management has to accumulate enough money to pay out the long-term bond holders because not enough tax receipts have yet flowed in. So for a little while we have twice the amount of bonds on issue before we pay off the first lot of long-term bonds. While the budget papers show that Commonwealth government securities on issue will be under the existing limit, fluctuations require us to raise the debt cap. This is, of course, sound economic management, as Paul Krugman pointed out during the US fight over the debt:

‘… since debt is the consequence of decisions about taxing and spending, and Congress already makes those taxing and spending-decisions, why require an additional vote on debt? And traditionally the debt limit his been treated as a minor detail.’

But not so under the wrecking ball approach of those opposite. As Stephen Koukoulas has observed:

‘Think back to what happened mid last year. Congress was going to block a required increase in the US debt ceiling. The US government was going to miss its bills. I don’t want to overstate it, but things got pretty ugly... Around 80 per cent of our bond market is held by foreigners. We can’t afford to alienate these people by playing silly buggers with the ceiling.’

The approach that the coalition is taking over the debt limit is an approach that is aimed at convincing investors that Australia is no longer a responsible country. As Mike Konczal of the Roosevelt Institute puts it, the approach of the US Republicans, which is effectively the approach of those opposite, is to come around with baseball bats declaring: 'Nice economy you have here. A real shame if something happened to it'.

Raising the debt limit is sensible economic management. Those opposite, including the member for North Sydney, have called for more 30-year bonds. He has spoken overseas about the 'moderate' debt of a country with nearly twice Australia's debt levels, and yet here, as Stephen Koukoulas has said,

‘… the opposition is willing to risk overseas investor confidence in Australia for the sake of a cheap political point.’

The opposition should stop playing politics with the debt ceiling and start focusing on the national economic interest.

I spoke in parliament last night about the impact on the environment of delaying the introduction of a carbon price.

Climate Change - the Cost of Delaying Action
22 May 2012

Tipping points are crucial in the climate debate. They can be the difference between success and failure and, if misjudged, can prove costly. While, thankfully, the global environment has not yet reached any tipping points, we have had a few political tipping points in the Australian climate debate. A lone voice that switched the opposition leadership from the member for Wentworth to the member for Warringah condemned the party of Menzies to be antimarket, and turn its back on economists and scientists.

Another tipping point, less well known, was just as costly. On 7 December 2009 five Greens party senators had the opportunity to act on climate change and ensure Australia had a price on carbon. They had the choice to join two brave Liberal senators and act in the interests of the future. Instead, the five Greens party senators chose political self-interest over the national interest. They chose to side with the sceptics and the antimarket forces. What was the result of their action? The Clean Energy Future package enacted by this parliament has the same 2020 emissions reduction target as that of the Carbon Pollution Reduction Scheme back in 2009. Both schemes aim to reduce our carbon emissions by five per cent compared with a year 2000 baseline. Both schemes are market mechanisms designed to find the least-cost method of reducing carbon pollution.

The economics of climate change is clear. A market based scheme is the cheapest, most efficient method of abating carbon in the economy. It is based on basic public economics; putting a price on the negative externality. The earlier you act the cheaper the cost of abatement to the economy and the greater the potential economic gain. So if you are aiming for a particular goal by 2020 then your total emissions will be higher if you start in 2012 than if you started in 2010. These principles underpin the work of Sir Nicholas Stern, Professor Ross Garnaut and numerous other economists both in Australia and overseas.

The CPRS was to have come into effect in July 2010. The Clean Energy Future package will come into effect in July 2012—two years later. That delay—that inaction—has meant a lost opportunity, both social and economic. The failure of the Greens party to put the national interest ahead of their narrow political interest has cost Australia. A report from ClimateWorks in April 2011 showed that delaying action by one year increased the cost of abatement by $1 billion. Since the Greens party delayed a carbon price by two years, they increased the cost of abatement by $2 billion. Over this two-year period, ClimateWorks also estimates, the delay has caused at least 10 million tonnes of abatement to be lost. We will still get to the same emissions reduction goal as the CPRS would have, but total emissions over the decade 2010-2020 will be higher than they would have been if we had put a price on carbon pollution back in July 2010.

That extra 10 million tonnes of carbon pollution equates to the annual emissions of two million cars. The increased carbon emissions due to the actions of the Greens party is equivalent to two million more cars on the road for a year. Two million cars—remember that, next time you hear a Greens party representative talking about their commitment to environmentally sound transport.

Delaying a price on carbon by two years also cost Australian households and businesses $5 million a week from unrealised energy efficiency opportunities. We have lost investment opportunities and there has been an increased cost to business caused by lack of certainty regarding climate policy. For all their claims to be green, the Greens party has a brown tinge. Pricing carbon is not a Greens party reform; it is a Labor reform. It sits proudly amongst Labor's achievements—economic, environmental and social. Like the market deregulations of Keating and Hawke, pricing carbon will keep our economy and industry competitive in the low-carbon-pollution world of tomorrow. On the way through, we are reforming the tax system by trebling the tax free threshold, saving one million Australians from filing a return. It was Labor that fought for the age pension and, as we price carbon, it is Labor that is ensuring that pensioners and families are assisted.

Long before environmentalism became a fad it was Labor that not only talked green but acted green, acting to protect the environment. It was a Labor Premier of New South Wales who founded the Kosciusko National Park in 1944. It took a Labor government—the Hawke government—to protect the Franklin River and it was Labor leadership on the world stage that preserved Antarctica. Labor heritage listed the wet tropics of Queensland—the Daintree. Labor created the Great Barrier Reef Marine Park. It was Labor in 2007 that ratified the Kyoto protocol, following in the proud footsteps of the previous Labor government, which had signed and ratified the United Nations Framework Convention on Climate Change in 1992.

Labor has been protecting the environment for over a century. While the actions of others have cost the environment and the economy, Labor has had the courage to act to secure the environment and the economy for generations to come.

Here's a writeup in Fairfax papers from David Wroe.

[caption id="attachment_2640" align="aligncenter" width="798" caption="Andrew Leigh and Grace Gill with Local Sporting Champions"][/caption]

I spoke in parliament last night about some of the many extraordinary volunteers in Canberra.

Volunteering in the ACT
22 May 2012

Over recent decades, Australians have lost social capital. We are less likely to be civically engaged in our communities; we are more disconnected than we once were. But this does not change the fact that there are many great volunteers in Australia, and no part of the country is more likely to volunteer than here in the ACT. Tonight I want to share with the House three stories of volunteering in the ACT worth celebrating.

Volunteering Awards

Last week I attended the 2012 ACT Volunteer of the Year Awards. Across a wide range of awards the contribution that volunteers make to our community and our economy was recognised. The 2012 ACT Volunteer of the Year was Dr Mary Webb. Nominated by Multiple Sclerosis Ltd, Mary has provided volunteer service to those people in the Canberra community with MS. Over the years, she has also made a valuable contribution through her service to various advisory bodies.

This year Volunteering ACT introduced new awards for Volunteer Teams of the Year across the various categories. This year's ACT Volunteer Team of the Year was the Adult Migrant English Program Home Tutor Scheme. The team has up to 150 volunteers assist people from different cultures and widely different levels of English literacy skills.

Other individual award recipients included David Hutchinson, Max Kimber, Hazel Giesecke, David Williams, Gordon McLoughlin and Frank Brown. Others team awards went to the St Vincent de Paul Night Patrol Team, the Stanford Course Peer Leaders and the   YMCA of Canberra Runners Club Committee. In addition to those, several other people and teams were highly commended for their work with the community, including Dot Mills, Neville Tomkins, Geraldine O'Connor, Di Evans, the Talking Newspaper Service Cooma and Narooma, ANU Volunteers and the Pegasus Hippotherapy Team. Finally, I would like to thank Maureen Cane and Rikki Blacka from Volunteering ACT for their efforts in coordinating this important event.

Parkland Volunteers

Parkland volunteers are essential in the Bush Capital, and earlier this year I had the pleasure of joining Chris Bourke MLA to launch the Frost Hollow to Forest Walk for the Friends of Aranda Bushland. Taking their modest Caring for our Country grant, the Friends of Aranda Bushland, particularly Peter Ormay and Jean Geue, partnered with Aranda Primary School and ACT Parks and Conservation to build the project. The many volunteers who make up the Friends of Aranda Bushland deserve thanks for their significant contribution to the project. Thanks to them, Canberra now has a self-guided walk for locals and visitors to enjoy. The walk has preserves and provides access to the unique treeless grasslands and the remnant snow and yellow box-red gum woodlands in the Aranda bushland forest. There are many other parkland volunteers doing terrific work through the Canberra community.

Sporting Volunteers

Another area in which volunteers are contributing to the community is in sporting circles. In my time as the member for Fraser I have had the pleasure of allocating the Local Sporting Champions grants. Local Sporting Champions assists young athletes aged 12 to 18 with the costs of competing at state, national or international competition. Often, huge amounts of volunteer time are involved, from parents and sporting club officials. Local Sporting Champions grants provide a modest amount of assistance to students who are engaged in sporting activities.

Over the past 18 months, assisted by sportspeople like Raider Bronson Harrison, swimmer Sally Foster, soccer player Sally Shipard and Canberra social entrepreneur Michael Pilbrow, I have awarded Local Sporting Champions grants to individuals and sporting clubs in my electorate. Recipients of a Local Sporting Champions grant over the past year include Jack Connell, Melissa Leary, Kenyah Lawler, Renee Polyak, Nicholas Tanner, William Pulley, Maris Colton, Andrew Meyer-Coyte, Jayden Sawyer, Reilly Shaw, Stuart Grey, Danusia Sipa Borgeaud, Anthony Joe, Nathan Cawley, Luke Sarris, Luke Letcher, ACT Badminton and Rowing ACT. Last week I held an afternoon tea in my electorate office for Local Sporting Champions recipients, where the soccer star Grace Gill talked about the joys and challenges of elite sport.

Volunteers are our unsung heroes. They give up their free time to deliver services, to lend a helping hand and to build a stronger community. I want to thank those volunteers I have spoken of tonight and all those across the ACT and Australia for their contribution and their dedication. Our community is richer for it.

In parliament today, I moved a motion on the importance of a strong public service. The motion and speech are below.

A Strong Public Service
Private Member's Motion
21 May 2012


To move—That this House:

(1) recognises the important role played by the Australian Public Service in upholding and promoting our democracy and its key role in ensuring stable government;

(2) commends the Australian Public Service on continuing to be one of the most efficient and effective public services in the world; and

(3) condemns plans by the Opposition to make 12,000 public servants redundant.

I rise to speak today about the dire plans the coalition has in store for the Australian Public Service and to contrast them with Labor's optimistic plan for a strong Public Service.

For the 11th time, the member for North Sydney on 16 May 2012 has gotten wrong the growth in the size of the Australian Public Service. For the 11th time, the member for North Sydney, Mr Hockey, has claimed that the government has grown the Australian Public Service by 20,000 when he knows in fact the true growth is 12,000.

The member for North Sydney's inability to grapple with the facts about the size of the Public Service speaks volumes about the coalition's attitude to the Public Service. Last August the member for North Sydney was offered a briefing at the Australian Public Service Commission to get his numbers right, to cease using a number that includes Defence Force reservists as public servants. But he has so far refused to take that up.

The opposition, if they are to be believed, have a plan to cut 12,000 public servants. In fact, repeatedly, when the opposition are asked how they will fill their $70 billion black hole, they point towards slashing the Public Service as their plan for meeting their budget black hole.

The member for North Sydney is a little like Rick Perry, the inept Texas governor who ran for the Republican nomination for President, saying that he would get rid of three US federal departments. The only difference is that the member for North Sydney, unlike Rick Perry, can actually remember the three departments he intends to scrap: they are the department of health, which he says is out of control, despite the fact that it employs about as many people as when the Leader of the Opposition was health minister; the department of climate change, despite the fact that, under a coalition Direct Action program, more administration would be required than under the government's much more straightforward carbon pricing plan; and the Defence Materiel Organisation.

So the coalition has said that they will scrap 12,000 Public Service jobs, but it is entirely possible that they will scrap many more than that. Asked on 7.30 on 8 May whether or not the coalition would get rid of 20,000 Public Service jobs, the member for North Sydney refused to rule it out. At the same time, the coalition has plans for a 15,000-strong standing green army without any detail whatsoever as to how that proposal would operate.

The opposition has formally placed on the table plans to cut 12,000—or maybe 20,000—Public Service jobs, but it is entirely possible that this is the tip of the iceberg. I have a copy of the Liberal-National Party's public administration policy, which the coalition took to the 1996 election. That policy said:

‘Our plans to reduce department running costs by 2 per cent will involve not replacing a proportion of those who leave, up to 2500 positions over the first term of Coalition Government, a process of natural attrition with no forced redundancies.’

What did the coalition actually do when they came to office? In 1996-97, they retrenched 10,070 public servants; in 1997-98, they retrenched 10,238 ongoing employees; and, in 1998-909, they retrenched 9,061 ongoing public servants. In total, upon winning office in 1996, the coalition retrenched 30,000 public servants—that is in clear contrast to their election policy's statement that said they would be not replacing 2,500 positions. Indeed, the number of public servants who eventually lost their jobs after the coalition won office in 1996 was more than 10 times the number whom they said would be made redundant.

It is interesting to note, if we turn to the bottom of the 1996 election policy, that it is printed and authorised by a Mr A Robb, who is now the shadow finance minister.

He is the shadow finance minister under Mr Abbott—the man who says that you do not trust anything he says unless he writes it down—and he is the person who said, prior to the 1996 election, that there would be only 2,500 Public Service job cuts. In fact, upon winning office, the coalition got rid of 30,000 public sector jobs. When asked why they would want to get rid of Public Service jobs, the member for Dickson noted that the federal department of health does not see one patient, does not run one hospital, does not employ one doctor,  nurse or pharmacist. It might surprise the member for Dickson to know that that is exactly how things have always operated in the Department of Health and Ageing, which administers a vast health promotion program, oversees health research and maintains a network of public hospitals throughout Australia. The coalition may be surprised to learn that the Department of Education, Employment and Workplace Relations does not have schoolchildren walking its corridors. They might be shocked to learn that the Department of Agriculture, Fisheries and Forestry does not regularly partake in office fishing trips. We can only hope that the coalition does not call on the Department of Resources, Energy and Tourism to demand room service and more towels.

Those opposite simply do not understand the important work of public servants. They do not understand the critical work that is being done to support Australian prosperity by the hardworking public servants in Australia, including the many public servants in my own electorate of Fraser. On this side of the House, we are proud of public servants. It was public servants who did so much to get us through the global financial crisis with a temporary, timely, targeted fiscal stimulus program that was recognised by international economic authorities, such as the IMF, as being a world-beating fiscal stimulus program because it was put into place quickly and efficiently. When those opposite see public servants, they only think of how to beat them up to win votes.

It is true that in the current budget we have made savings across the board. In the process of making savings across the board, there has been an impact on the Public Service. For example, there are redeployments from the Department of Education, Employment and Workplace Relations across to the Department of Industry, Innovation, Science, Research and Tertiary Education. There have been changes in the Department of Climate Change and Energy Efficiency as result of some of the pre-carbon pricing programs coming to an end. We have been honest about those changes, which will take total Australian Public Service numbers back to about where they were in 2009. Having had modest growth year on year in Public Service numbers under the Rudd and Gillard governments, this budget now sees Public Service numbers returning to about where they were in 2009.

This has been difficult for some public servants, including those in my electorate of Fraser. I have been keen to work with departments to make sure that redeployment policies are followed and to make sure that unfilled vacancies are filled. Where we are able to, we will redeploy across federal agencies and the ACT government, which is often struggling to find talented public servants. The cuts are difficult in the ACT, but they do come at a time when, according to the latest vacancy survey, there are around 4,900 job vacancies in the ACT. I do hope that the Canberra Business Council, which has spoken of the skills shortage in the ACT, is able to employ anyone who has taken on, for example, a voluntary redundancy and is able to grow and prosper in the current environment. In conclusion, Labor appreciates the value of a strong Public Service. Those opposite believe only in cutting it.

On 28 March 2012, I spoke at the Sydney Battle of Big Thinking about some of the ideas in my book Disconnected, and how we can forge a stronger civic community in Australia.http://www.youtube.com/v/nsh-44Wb9rE?version=3&hl=en_GB

An article in Fairfax papers today asks several MPs' view on raising unemployment benefits. Not surprisingly, it contains only a snippet of the conversation that I had with journalist Stephanie Peatling. So I thought it might be worth setting out my thoughts on the issue in more detail.

Unlike pensions, which are aimed at being ongoing for multiple years, unemployment benefits are designed to be a temporary payment. Nonetheless, I share the feeling of many of my colleagues that the current level of unemployment benefits are an extremely low amount to live on. If we doubled tax revenue, I’d raise unemployment benefits in a heartbeat. But tax revenue has actually fallen (from around 24% of GDP under Howard to 22% now). So anyone who proposes an expensive policy like significantly increasing unemployment benefits needs to identify which taxes they’d increase or which spending programs they’d cut. (And in the current parliament, how they'd get the change through both Houses.) For example, if you asked me ‘would you scrap an NDIS to raise unemployment benefits?’, I’d say no.

As an economist, I think about tradeoffs, which I’m starting to realise may be somewhat atypical in politics. Perhaps some people answer the question as ‘if the money was free and you didn’t have to lose any of your favourite programs, would you raise unemployment benefits?’. If that’s the question, count me in as a supporter too.

I’m also concerned about the social consequences of intergenerational poverty, since it does look like there may be adverse impacts of welfare dependence in families with children. This is something I’ve worried about quite a bit while since when I was an econ prof at ANU (see for example this paper, or this recent speech). So the JET scheme (which provides childcare to high-needs parents for 10 cents an hour) strikes me as important for the next generation. The ANU ‘Youth in Focus’ study has some valuable insights on the issues too (though the links to it are alas broken at present).

We're calling for tenders to build the Majura Parkway, funded 50/50 by the federal and ACT governments. Media release below.

Anthony Albanese
Federal Infrastructure and Transport Minister

Andrew Leigh MP
Member for Fraser Katy Gallagher

ACT Chief Minister
Minister for Territory and Municipal Services

MAJURA PARKWAY: CONSTRUCTION TENDER CALLED

From 26 May construction companies interested in building the new Majura Parkway – the Territory’s largest ever road project – will have two months in which to submit their best bids under the tender process to be conducted by the ACT Government.

Federal Infrastructure and Transport Minister Anthony Albanese said following many months of community consultations and detailed design work it was now time to begin building this long-awaited piece of infrastructure.

“Assessed and recommended by Infrastructure Australia, this new road is expected to generate long term economic, social and environmental benefits worth almost $1 billion,” said Mr Albanese.

“All up, Federal Labor has increased annual infrastructure spending from $72 to $114 for every man, woman and child living in the nation’s capital. Over the next 12 months we will not only begin work on the Parkway but also complete the duplication of the Monaro Highway between Canberra Avenue and Newcastle Street.”

The Majura Parkway will be an 11.5 kilometre long dual carriageway, with its construction being jointly funded by the Gillard ($144 million) and Gallagher ($144 million) Labor governments.

ACT Chief Minister and Minister for Territory and Municipal Services, Katy Gallagher, said the packages of work associated with the northern and southern sections of the project will be tendered together under a single contract.

“Qualified and experienced construction companies will have until Tuesday 31 July 2012 to submit their best bids,” the Chief Minister said.

“We are making an investment in Canberra’s future and once completed in 2016, the Majura Parkway will make it easier for Canberrans to get around the city.

“The Parkway’s final Forward Design took into account the feedback received from the public information sessions and stakeholder meetings conducted over recent months.

“A Development Application has now been submitted to the ACT’s Planning and Land Authority and approval by the National Capital Authority has been sought. Both processes are expected to be finalised in coming months.”

Andrew Leigh, Federal Member for Fraser, welcomed the co-operative efforts of the Gillard and Gallagher Labor governments. “Once constructed, the Majura Parkway will provide an important north-south transport link, directly connecting the Federal and Monaro Highways.”

“This will play a significant role in improving the main national and regional freight route, and the ACT will also benefit from additional capacity in its road network,” Mr Leigh said.

An industry briefing session will be held at 11 am on 5 June 2012 at Dame Pattie Menzies House in Dickson to further inform interested parties. For more information about the project, go to www.majuraparkway.act.gov.au.

Statement Ends 18 May 2012

I spoke today at the McKell Institute in Sydney on Australian economic history, with some ideas for the future. The speech is below.

What Do We Eat After the Low-Hanging Fruit? A Brief Economic History of Australia, With Some Lessons for the Future*

Andrew Leigh MP
Federal Member for Fraser
www.andrewleigh.com
[email protected]

18 May 2012
McKell Institute, Sydney

In the Pacific Ocean, off the west coast of South America, sit the Galapagos Islands. Although they straddle the equator, the pattern of ocean currents have a cooling effect, making them an ideal breeding ground for tortoises, iguanas, penguins, finches, albatrosses, gulls, and pelicans.

Because the islands are volcanic, what’s striking about animal life on the Galapagos Islands is that all of it came originally by flying or floating nearly 1000 kilometres from Ecuador. And yet for the species that survived, life on the Galapagos Islands was perfect. Migrating birds lucky enough to be blown off course found an environment with few natural predators. Tortoises that floated here found beaches perfectly suited to their breeding environments. Life flourished.

Looking back across Australian economic history, I am often struck by the extent to which luck has similarly played a part in our success. Politicians are sometimes reluctant to talk about luck – preferring to focus on the things we can control than those we can’t. It is true that ‘chance favours the prepared mind’. But I think it’s still worth talking about the role that luck has played, if only to help understand what preparations we should be making. If we don’t do that, we’re like the Galapagos tortoise, which must have thought itself the luckiest species on earth, until British sailors discovered the islands in the late-eighteenth century, and ate them in their thousands.

Over the 2¼ centuries since European settlement, there have been half a dozen strokes of luck, each of which has tangibly boosted average living standards.[1] Let me take a moment to talk about them in turn.

Read more

Canberra's paper of record has a terrific writeup of Gweneth's BLOOM exhibition. You can read it online here. The exhibition is on at the Gallery of Australian Design at Reconciliation Place until 9 June.

On 2CC this morning, I spoke with host Mark Parton and Liberal Senator Gary Humphries about the government's economic reforms, the importance of putting a price on carbon, and maintaining strong employment outcomes in the ACT. Here's a podcast.