Andrew Leigh

‘EXPLAINING THE RISE OF AUSTRALIAN INEQUALITY’

JUST IDEAS TALK #2

PER CAPITA’S REFORM AGENDA SERIES

MONDAY, 5 DECEMBER 2016

There are many forms of inequality, but perhaps the starkest is the difference between those who own no assets and earn their living by selling their labour – and those who earn vast assets, and can live off the proceeds.

Between these two extremes lies home ownership. It’s not a perfect marker, but if you don’t own a home, it’s likely you live by the sweat of your brow. Conversely, if you’re living off your investments, it’s a pretty good bet you own your home.

At the end of World War II, Australia was a nation where just 53 percent of households owned their homes.[1] In the major cities, the figure was just 46 percent.[2] Most city-dwellers rented. And most homes were made of wood or fibro cement.

Then in the post-war years, something remarkable happened. The Australian home ownership rate surged. By 1954, it was up to 63 percent. By 1961, it was 70 percent. In just over a decade, the distribution of Australian housing wealth became significantly more equal.

It wasn’t just homes. Shared prosperity in the post-war decades meant cars became cheaper. By the 1960s, most Australian homes had a vacuum cleaner, a washing machine, a television and a fridge – items that in the pre-war era were only owned by the most affluent.[3] Even access to university was shared. For someone like my grandfather Keith Leigh, attending Melbourne University would have been impossible on a modest clergyman’s wage. Only a post-war veteran’s scholarship made it feasible.

The intellectual seeds for these changes were sown in John Curtin’s white paper on full employment, and his clearly professed view that ‘there will have to be a fairer distribution of wealth’.

But the surprising thing is what happened next. 

E&OE TRANSCRIPT
RADIO INTERVIEW
RN BREAKFAST WITH FRAN KELLY
MONDAY, 5 DECEMBER 2016

SUBJECT/S: Widening inequality in Australia; levels of home ownership; value of unions

FRAN KELLY:  The widening between the rich and the poor manifests itself in different ways around the world. Here in Australia the marker between the haves and the have-nots is fast becoming whether you've managed to get your foot on the property ladder or not. That's just one of the drivers of rising inequality in this country according to Labor's Assistant Treasurer, economist Andrew Leigh. Later today he'll give the second of three speeches he's written on inequality, in which he'll also identify Australia's tax system, falling union membership and increased market concentration as factors behind the widening gap between the rich and poor in Australia. Andrew Leigh, welcome back to RN Breakfast.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Thanks Fran, great to be with you.

KELLY:  Before we get to the reasons why inequality is on the rise in this country, let's get some perspective here. Because the gap between rich and poor in Australia is nothing like that in the US where CEO pay has skyrocketed and some states don't even have mandated minimum wage. Here in Australia we have a high minimum wage, a comprehensive welfare system, a national health scheme, and a state pension system. What really do we have to worry about?

LEIGH: You're right to say that inequality here isn't as bad as in the United States, but certainly if you look across the advanced world we're in the top third of the most unequal countries. We're a nation where inequality has risen markedly over the course of the last generation. The top one per cent's share has doubled; earnings have risen three times as fast for those at the top of the distribution like financial dealers and anaesthetists, compared to those at the bottom like cleaners and check-out workers. And that great egalitarian-

KELLY: So the rich are getting richer is the point?

LEIGH: They are indeed. You're right to say that, unlike the United States, it hasn't been true that the middle has completely stagnated, but we're a nation that prides ourself on our egalitarianism. A nation where we like sitting in the front seat of taxis, we don't much like tipping, we don't have private areas on the beaches. Egalitarianism is central to the notion of what it is to be Australian. And that's why it really matters that that egalitarian ethos is under threat from this continual rise in inequality we've seen.

The Turnbull Government has added competition reform policy to its 2016 list of failures and broken promises by reneging on the commitment it made in its response to the Harper Review to “unleash the spirit of competition”.

This time last year new Treasurer Scott Morrison was describing competition reform as:

“one of the best options we have to boost growth and productivity in the years ahead, and this is why it’s at the heart of the Government’s economic plan.”

Now it has abandoned its support for the funding altogether until the budget “is in better shape”.

This leaves only Barnaby Joyce’s “effects test” – which will have a chilling effect on competition and drive up the cost of living for Australian families – as the Coalition's signature competition reform.

This absurd focus on the effects test, according to Productivity Commission Chairman Peter Harris, demonstrates how far Australia has, ‘fallen off the pace in national economic reform.’

The day after Labor announced that the Senate Economics Committee will inquire into the Petroleum Resource Rent Tax, the Turnbull Government has hastily announced an “independent” Treasury review into the same issue.

As with the multinational tax debate, the Coalition is scrambling to follow Labor's lead. Labor's 2015-16 multinational tax inquiry, chaired first by Senator Dastyari and then by Senator Ketter, shone a critical spotlight on multinational tax avoidance and forced the Government to take action. 

Now we see the same pattern with the Petroleum Resource Rent Tax – Labor leads and the Turnbull Government is dragged reluctantly in our wake.

By failing to introduce into Parliament its Diverted Profits Tax legislation by the end of this year, Treasurer Scott Morrison has broken yet another Turnbull Government promise.

 On June 27 this year, Mr Morrison said:

             “The DPT will be introduced in the second half of 2016.”

 Later in the year, Mr Morrison said:

"We have budget revenue measures which are about improving the integrity of the tax base – there’ll be our diverted profits tax legislation which comes in later in the year.”

–     Scott Morrison, 20 October 2016, 3mins 39secs.

However, yesterday Mr Morrison confirmed that the diverted profits tax will not be introduced in 2016.

The delay matters because the Treasurer is still promising his diverted profits tax will commence on 1 July 2017. It will be a huge and complicated impost for businesses to prepare in the short time between its passage through Parliament – if it ever gets there – and its implementation.

WEDNESDAY, 30 NOVEMBER 2016

MEDIA CONTACT: TAIMUS WERNER-GIBBINGS    0437 323 390

Second Reading Speech 

28 November 2016

Labor has worked with the financial advice sector to deliver better advice and fairer outcomes for consumers and we are supportive of any measures to improve the quality of financial advice and minimise harm caused by financial advice remuneration structures. However, there is more to do in protecting consumers from misconduct in the life insurance industry. Labor's Future of Financial Advice reforms banned many forms of conflicted remuneration for financial advisers, including for life insurance policies held inside group life policies and superannuation. However, other life insurance policies remain exempt from the Future of Financial Advice ban on conflicted remuneration.

John Bonnett 

28 November 2016

When I ran for Labor Party preselection in 2010, two of the first people whose support I sought out were John and Kathy Bonnett. I remember the conversation in their lounge room. It was gentle and generous and focused on the big issues: the values the Labor Party stood for and whether or not I really believed that music had an important role in the good life. When I left their lounge room, it was with the support of John and Kathy, and without that, I might not be standing here today.

John was born in England and, after migrating to Australia, he served in the Royal Australian Engineers and the Royal Australian Corps of Transport, reaching the rank of Lieutenant Colonel. He was a true believer and a great friend to many in the Labor Party and served as president of the Gungahlin subbranch in the years shortly after its establishment.

Sadly, John lost his battle with cancer on 18 November, dying age 81. He leaves behind his widow, Kathy, and his children and children-in-law, Kevin and Catherine, Jonathan and Kate. He was the proud grandpa of Tatum, the brother of Christine and Linda. He was loved by his extended families in the United States and the United Kingdom. In the immortal words of Emily Dickinson:

Let no Sunrise' yellow noise

Interrupt this Ground

Vale, John Bonnett.

Ingram Family of Watson 

28 November 2016

I rise to speak on behalf of the Blackfriars Parish in Watson, who have organised this petition to advocate on behalf of the family that they have come to accept as important contributors to their community. It is one of the strengths of our system of representative democracy that private citizens can petition a minister directly when they disagree with the result of a ministerial decision. The organisers of this petition describe a humble and hardworking family that are making a valuable contribution to the disability support sector in our city.

I pay my respects to the Blackfriars parishioners and to the many members of the broader community who have joined their cause on behalf of the Ingram family. I acknowledge the value of this earnest and spontaneous expression of the community's shared values. On behalf of Jacquie Cortese, Carmel Lewis, Lucy Esau and others who have written to me about the Ingram family, and on behalf of all the signatories to this petition, I seek leave to table this document petitioning the House of Representatives regarding permanent residency for Mr Clive Ingram and Family, which was found to be in order by the petitions committee.

The Cost Of Inequality Can't Be Priced In Dollar Terms, Huffington Post, Monday, 28 November 2016

Why should we care about inequality? The starting point is to acknowledge what economics lecturers everywhere teach their first years. Economics is about maximising wellbeing, not money. If one person had all the money in Australia, we’d be just as wealthy, but much less happy.

Globally, there are about one billion people who live on less than a dollar a day. Most of it goes on keeping hunger at bay. But then there are about 1800 people who have more than a billion dollars. For them, more money means a faster jet, fancier jewellery or another holiday home. If you believe that moving a person from $1 a day to $2 a day brings more happiness than giving a billionaire another dollar, then you’ve accepted the idea of diminishing marginal utility of money. There is no better argument for caring about inequality.

Putting numbers around this can be tricky, but an analysis by Lateral Economics finds that to get the same increase in life satisfaction, you either have to give someone on $15,000 another $6000, or someone on $100,000 another $100,000. Lateral Economics estimates that the cost of inequality to national wellbeing is the equivalent of $54 billion, making it a bigger problem than mental illness, obesity or long-term unemployment. 

E&OE TRANSCRIPT

TV INTERVIEW

SKY AM AGENDA WITH KIERAN GILBERT

MONDAY, 28 NOVEMBER 2016

SUBJECT/S: Education funding; Senator Brandis’ shonky deals; Ipsos poll

KIERAN GILBERT: Joining me now the Shadow Assistant Treasurer, Andrew Leigh. This Grattan Report, I want to start with your thoughts on that. It seems to me to be a no-brainer – that you can have the same funding envelope, achieve the aims that the Gonski reforms intended without all of the additional costs simply by reining in some of the over-funding of just three per cent of schools?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Kieran, Pete Goss has done a lot of careful work on this report – it's certainly something that Labor will be engaging with. I had the privilege of seeing a draft copy of the report last week and I think it’s a thoughtful contribution. Obviously we'll work through it methodically. We need to make sure that the schools that need the resources get them, and that was what a good part of the last election was fought over. Labor's plan for funding schools where they needed it versus the Coalition's plan for a $50,000,000,000 corporate tax giveaway. 

GILBERT: But the government's also taking it seriously as we heard from Minister Birmingham there. If you've got some schools with 280 per cent of the funding required per student, surely there needs a re-think in that regard?