Andrew Leigh

On the Forum last night, I spoke with Richard Glover, Joe Hockey and Hugh MacKay about my favourite Australian food, teaching the ANZAC tradition in our school curriculum and the latest revenue projections coming out of Treasury.

702ABC Sydney The Forum with Richard Glover

Last night I had a chat with Richard Glover, Joe Hockey and Hugh MacKay about my favourite Australian food, teaching the ANZAC legend in our school curriculum and the latest revenue projections coming out of Treasury

On Sky AM Agenda, I spoke with host Kieran Gilbert and Liberal Senator Simon Birmingham about the drop in federal government revenue, and the challenges this poses for policy costings on both sides of politics.

TRANSCRIPT – SKY AM AGENDA
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
30 April 2013

TOPICS:                                New revenue and budget forecasts, Coalition plans for cuts, the challenging fiscal environment.

Kieran Gilbert:                   This is AM Agenda, thanks for your company. With me now are Liberal front bencher, Senator Simon Birmingham and Labor MP, Andrew Leigh. Andrew Leigh thanks for your time. I’ll start with you if I can. On the Budget, Joe Hockey is saying, well, the Disability Insurance Scheme, if the Government is going to pursue a Medicare style levy it’s only going to fund a fraction of the overall cost. You’re going to have find a lot more than just a levy, aren’t you?

Andrew Leigh: Well Kieran, we’ve been very clear that there are significant pressures on the Budget and that’s because of these surprising international circumstances that have seen commodity prices come off but yet the Australian dollar stay high because of the demand for our bonds. So we’re looking at a range of different ways of making the necessary saves, raising the additional revenue required for something like Disability Care Australia, which I know so many of your viewers are passionate about. Australia shouldn’t be the kind of country in which someone with a disability only gets to take one shower a week and we need to find space in the Budget to do that.

Kieran Gilbert:                   A lot of economists believe that a levy is the right way forward. The Productivity Commission recommended it; Sorles Lake from the Bank of America, Meryl Lynch also believes it. If you’ve got an insurance policy, you need a premium… do you see the merits in that case? And I suppose, why did the Treasurer ever rule it out in the first place?

Andrew Leigh:                   Well, I think in an ideal world, consolidated revenue is where you draw on for all of your schemes, but as we’ve seen this substantial hit to revenues, revenues down from 24% of GDP in the mid-2000s down to now 22% of GDP, that’s a substantial reduction. You’ll hear from people on the other side of politics that the dollar amount of revenue coming into the Commonwealth has gone up. But the fact is it hasn’t kept pace with the demand for things like the pension, things like health expenditure, and of course a growing population. So, that’s why we’re in the position we’re in now.

Kieran Gilbert:                   Senator Birmingham, “Every Australian Counts”, that campaign on a Disability Insurance Scheme believed that a levy is the way forward, what do you make of this debate?

Simon Birmingham:         Well Kieran, we want to see the NDIS implemented, and we’re very concerned about the fact though, that this Government has now taken it to a stage of having ruled out a levy, is now considering a levy. And this is of course sadly politicising something that should have been done in a far more sensible way. We have for a long period of time called for a Joint Parliamentary Committee that could work in a bipartisan way, to get the NDIS implemented and deal through these issues. Instead now, at the eleventh hour as the Government is creating its own Budget crisis, and it is a crisis of its own creation because the truth is, though Andrew wants to talk about revenues from a decade ago, the truth is this Government will still have more money this year than they had last year. They still will in fact have around $25 billion dollars or so more in revenue this year than they had last year. So, revenue is significantly up over the year. It is the Government’s spending that is the problem and it’s a tragedy the NDIS has been caught in the middle of this vortex.

Kieran Gilbert:                   That’s the point that was made repeatedly by Joe Hockey this morning and yesterday and Senator Birmingham just now on this revenue increase of 7.6% year on year. So you’re saying that spending has outstripped that. Is it time politicians, policy makers, re-think the way they do budgets?

Andrew Leigh: But Kieran, the point I was making was that demands of our society are outstripping that. The health expenditures have gone up…

Kieran Gilbert:                   So do expectations have to change?

Andrew Leigh: Well, I think we have to make responsible savings measures. Ever since the global financial crisis, every new spending measure Labor has made has been offset by an appropriate savings measure. But it’s just not helpful to talk about the dollar amount of revenue. What you need to focus on is revenue as a share of GDP because that brings into mind the increase  in the demand for health expenditure, the increase in the overall population, and so taken as a share of GDP, our tax revenue is well down on what it was in that boom period of the Howard years.

Kieran Gilbert:                   Senator Birmingham, that specific point there, if you could respond to that specific point? The revenue as a share of GDP as opposed to simply the dollar amount which has been referred to the last day or so.

Simon Birmingham:         Well Kieran, what is a good thing is that the Australian economy has kept growing and that’s why we should be in a surplus position, and when the economy grows, if it grows at a particular rate, ahead of the rate that taxation grows, then the revenue as a share of GDP will shrink. That is actually a good thing if that happens and governments should be able to manage in those circumstances. Revenues are still growing, that is an absolute fact. What is a complete bunkum, utter untruth, is when Andrew says that the Government has banked savings to offset new spending initiatives. That’s just not true. The Government has claimed to have revenue from its mining tax, made all these spending decisions based on it and not had the revenue there. The same thing is unfolding with the carbon tax. We see in other areas where the Government has shuffled around the timing of when it’s going to get its revenue from spectrum sale. So, this Government has played a lot of games on the revenue side, has made a lot of assumptions on the revenue side, and those assumptions have simply been wrong. Their problem is they’ve made all their spending decisions based on assumptions of their own making.

Kieran Gilbert:                   I suppose you get to the Treasury forecasts in that context, why are they so far out?

Andrew Leigh: Well revenues are a difficult thing to forecast, Kieran. I mean, we saw errors in the opposite direction under the Howard years. This isn’t because people are behaving in a mendacious way, it’s simply that revenues are challenging to forecast. But Kieran, we will continue to find those responsible saves. We’ve found $100 billion of them in past budgets. Let me just give you a couple of examples to answer Simon’s comment: means-testing the Private Health Insurance Rebate, means-testing the Family Tax Benefit Part B, means-testing the Baby Bonus. All of those of course, opposed by the Coalition who when we reduced the amount of the Baby Bonus Paid to second and subsequent children, compared it to China’s One Child Policy. So the Coalition also need to recognise that the current fiscal condition is very challenging for them, for example, they need to recognise that if they’re going to fund a parental leave scheme with a levy on company tax, that the huge reduction in company tax revenues is going to have an impact on that budget costing.

Kieran Gilbert:                   Let’s get to Senator Birmingham on that point, that reality that we saw yesterday. It is going to affect the Coalition if in government and on that specific policy.

Simon Birmingham:         Kieran, we don’t pretend that it’s going to be easy to get this budget back into shape. Especially not after the type of spending decisions the Government has taken. We know it will be hard, that’s why we’re being up front about having to make some difficult decisions. We know that it’s not popular to say we’ll axe the SchoolKids Bonus. Those people who are getting that money in the bank don’t like the fact that we’re going to cut that. But we recognise these types of savings decisions must be made and we will make those difficult decisions just as we outlined in our costings at the last election. We’ll outline them again in our costings at the next election. Most importantly, we will get the size of the bureaucracy under control as well. We’ve seen phenomenal growth in the bureaucracy, and I know it’s in Andrew’s own electorate there much of it. But we’ve seen huge growth in the size of our health bureaucracy, our education bureaucracy, despite the fact they don’t run any hospitals or schools. These are areas where Government has to keep a really tight rein on spending.

Kieran Gilbert:                   Senator Birmingham, Andrew Leigh, thank you for your time this morning. We’re out of time. That’s all for AM Agenda.

TRANSCRIPT – 2CC MORNINGS WITH MARK PARTON
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
30 April 2013

TOPICS:     Budget Deficit, falls in revenue, the Budget, Australian economy

Mark Parton:     … So much talk around town over the big announcement from Julia Gillard. We knew it was coming because so much of it had been leaked: that there’s this $12 billion black hole in revenue and obviously all these new things are going to be considered when it comes to the Budget which is delivered in a couple of weeks. Who do you blame for it? You know, it looks as though again that Treasury has overestimated the money that we were going to get as they’ve been doing for quite some time.  I know that there are a number of economists who sort of track it back to’96 and look; the question is how do we deal with it? We’ve got Andrew Leigh on the line. He is of course the Labor member for Fraser. Now, I know that there are those on the Right who are always extremely critical of whatever Andrew says about economics and look, I seriously think they should listen. He’s a very esteemed economist. I’m not, and I think it’s folly to dismiss what Andrew says.  You can have your ideological differences with him, but let’s see what the bloke’s got to say. G’day Andrew,

Andrew Leigh: G’day Mark

Mark Parton:     When Greg Hunt came on the program yesterday he said that basically what Treasury and your Government have done is budgeted for winning lotto and spent as though you’re going to win lotto and then found out that you hadn’t.

Andrew Leigh: Well the challenge, Mark, of predicting revenues is a big one. I mean, you said before that Treasury has traditionally overestimated the amount of revenue that will come in. Actually, the problem under the Howard Government was the reverse. They ended up getting a little more revenue than they expected and what we’ve found now is that the same Treasury forecasters are making the mistake in the opposite direction. Here’s what’s happened to this one: we’ve seen commodity prices come down a bit. Normally that should bring down the Australian dollar and that has benefits for many of our exporters. But the problem is that so many banks around the world are buying Australian government bonds which has kept the dollar high even while commodity prices have come off. It’s a pretty unusual set of circumstances and that’s meant that revenues are down $12 billion just from what we were forecasting in October last year. $30 billion down on what we were forecasting a few years ago.

Mark Parton:     But Andrew, like, I mean, you know much more about this stuff than I do. Why is it that so many others were able to predict that we were going to get this black hole but up until as late as December, your Treasurer and your Prime Minister were still talking about a surplus come hell or high water? Surplus was never going to happen was it?

Andrew Leigh: Well Mark, I think the reason for focusing on the surplus last year when we had better revenue projections was it gave a sense of discipline to spending decisions. In a sense, the global financial crisis, every new revenue measure we’ve made, and every item we’ve spent on we’ve offset by finding another saving. Something like means-testing a payment or something like that. And so we had that simmering through the Budget process until it became pretty clear at the end of last year that the utter collapse in revenues caused by what’s going on around the world meant that that surplus wasn’t going to be achieved and now we’re, I guess, laying out for the Australian public the fiscal challenge that’s ahead of us. That’s there for the Labor governments but it’s also there for the Coalition/opposition. Just to take one example, they’ve got a paid parental leave scheme, which is very expensive, paid for by a company tax levy. When you’re company tax returns are down, that’s going to affect the affordability of that plan. So, being up front about the revenue situation matters for everyone.

Mark Parton:     Medicare Levy. Talk to me.

Andrew Leigh: Well, this is certainly… I’ve seen mooted in the papers as you have but as you know, Mark, the Budget is a tightly kept document and no one wins any prizes for announcing the Budget before Budget night. We’re obviously looking at a range of different ways of addressing the revenue shortfall, but it’s a big shortfall. If you go back to the mid-2000s, we’ve got government revenue that’s 24% of GDP. Now it’s 22% of GDP. So, that 2% gap is pretty substantial…

Mark Parton:     …are there bigger, wider, long term questions to be asked here though, Andrew, in terms of like, the mining boom looks as though it’s over and certainly the Prime Minister is saying those good times will never return. If that’s the case, it’s going to take us a long time to get back into the black, isn’t it?

Andrew Leigh: I think we do have revenue challenges Mark. I’m not quite as pessimistic about the mining boom as you’ve said there. We’re seeing prices come off a smidgeon but we’re also seeing volumes go up a lot, so we’re moving out of a phase of the mining boom where it was driven by this once-in-a-150-years price spike to a phase where we’ve got still  pretty high prices but we’re just digging a whole lot more stuff out of the ground. I mean, some of these extraction projects are extraordinary in their scale and scope and that’ll drive mining profits as well.

Mark Parton:     What a challenge for the Treasurer who’s got to come up with this Budget, which I mean, obviously most of it’s worked out, but there will be some finer details still being sussed out now. A Budget in an election year which has to be desperately tough, but then you’re standing before the Australian people saying, “please vote us back in”.

Andrew Leigh: I think the important thing in politics, Mark, is to be upfront and honest about the challenges that we’re facing.

Mark Parton:     So do you think perhaps the Government hasn’t been as upfront and honest as it should have been in the last year and a half?

Andrew Leigh: No, we’ve been very clear about the revenue situation. What this reflects is that as that projection’s been updated, where the Prime Minister came out yesterday talking about the challenge that it poses. I mean, you’ll hear people saying that the total amount of dollars that they’re getting in in revenue is higher than last year. That’s true, but, it hasn’t kept pace with the increases in the Australian population, the demand for the pension, the health expenditures and so on. So that’s meant we need to look at belt tightening, look also at whether we can find government revenue in other ways. That’s just the political reality that all of us face. Look around the globe though and we’re in a pretty good position. We were the 15^th largest economy in 2007, we’re now the 12^th largest economy and so we’ve moved up the global rankings. And I bet many countries in Europe would rather have our challenges than theirs.

Mark Parton:     Andrew, thanks for your time this morning.

Andrew Leigh: Thank you, Mark. Appreciate it.

2CC Breakfast With Mark Parton-20130430

On ABC24's Capital Hill program, I spoke with host Lyndal Curtis and Liberal MP Sophie Mirabella about the challenging budget circumstances Australia faces, with federal revenues having fallen from 24% to 22% of GDP.

Recently, I spoke with Media Watch's Jonathan Holmes about social media and politics. A podcast and (mostly correct) transcript of the interview are available on the ABC website.

My op-ed in the AFR looks at the Coalition's climate change dilemma - do they meet their pledge to reduce emissions by 5% by 2020, or do they spend the paltry underestimate that they say their climate policy will cost?

Abbott's no-go carbon plan, Australian Financial Review, 22 April 2013

Over the past few weeks we have seen the Coalition dip their toes in the water of policy debate. Amidst running around the nation shouting ‘no’, Tony Abbott has revealed that the Coalition’s plan for superannuation includes taxing 3.6 million of Australia’s lowest-paid workers to the tune of $4 billion. We have seen them outline their tin-can-and-string broadband strategy. We have learned that families and small businesses will be expected to cough up to $5000 to connect to a service Labor will provide for free.

This is the most information we have heard about the Coalition’s vision for the future of Australia, and while it may not be pretty, it is a marked improvement from their three-year tradition of providing no alternative at all.

It seems strange then, in light of their cautious new ventures into actual policy discussions, that Tony Abbott has remained almost silent on the one issue he has pegged the bulk of his negative rhetoric: climate change.

We are no longer hearing the Coalition claim that putting a price on carbon will ‘crush’ the Australian economy; time has proven the emptiness of this fear-mongering and the economy continues to go from strength to strength.  Given the vehemence with which Tony Abbott has promised to rescind the carbon price (despite strong contrary advice from key industry groups such as AIG) you would expect to have heard more about the ‘Direct Action’ plan that he would have as the replacement. But we have not, and this is in no small part due the Coalition’s unwillingness to provide costing information.

When asked by reporters last month what the ‘Direct Action’ plan would cost, Tony Abbott responded that ‘our policy will cost what we commit to it in the policy that we will announce before the election’. Take what you will from this garbled tautology, but you certainly cannot take an answer.

Perhaps aware of the unsatisfactory nature of this response, Tony Abbott further offered that ‘we will spend no more and no less on reducing emissions than we allocate’. Clearly, we need to look further afield for answers on costs. In the Liberal Party’s ‘A Strong Australia’ policy direction statement, they claim their emissions reduction fund would spend $1 billion a year on average. This lines up with the figure provided in 2010, which was an expenditure of $10.5 billion out to 2020. The emissions reduction target that the Liberal Party set then was a 5%  reduction by 2020 – an annual reduction of 155 million tonnes in 2020, which they have reaffirmed in their policy platform.

But therein lies the fundamental problem. If the ‘Direct Action’ plan is implemented, Tony Abbott will either have to break his promise to spend no more than allocated, or fail to meet his own reduction target.

Treasury analysis shows the Liberal projection of $10.5 billion is a woeful underestimation, with the real cost by 2020 totalling at least $48 billion. Treasury analysis attributes this dramatically different figure to two key factors: first, ‘direct domestic action would forgo opportunities for cheaper, internationally sourced abatement’, and second, ‘direct action programs are generally less effective at driving take up of all potential abatement opportunities’.

The Grattan Institute has estimated that reliance upon a grant-tendering scheme in an effort to meet the 5% target would mean at least $100 billion would need to be put towards an abatement purchasing fund. This would be equivalent to nearly one third of the entire Federal Government budget. And because the ‘Direct Action’ plan is funded by taxpayers (compared to the Labor Government’s carbon price, which is funded by the biggest polluters), that means everyday Australians are expected to foot the bill for this ineffective policy. It would cost each household at least $1,300 a year in new taxes.

That the Coalition is finally giving us some insight into their plan for Australia’s future is a good thing. But they are not giving us the full picture – at best they are confused about their costings, and at worst they are being intentionally deceptive. The question Tony Abbott needs to answer now is this: which aspect of the ‘Direct Action’ plan would change if he won government. Would he fail to meet his promised emissions target, or would he let the cost blow out?  In reality, as Malcolm Turnbull has said, Direct Action is a “fig leaf” and Mr Abbott will not unwind Labor’s carbon price.

Andrew Leigh is the federal member for Fraser, and Parliamentary Secretary to the Prime Minister. His website is www.andrewleigh.com.

Note: An abbreviated version of this piece appeared in the AFR print edition.

I launched Stuart Cunningham's new book Hidden Innovation tonight.

Launching Stuart Cunningham, Hidden Innovation: Policy, Industry and the Creative Sector
Paperchain Books, Manuka
9 April 2013

According to one study cited in Stuart Cunningham’s book, there are two opposing groups of people: ‘political junkies’ (PJs) and Big Brother fans (BBs). PJs think that it ‘beggars belief’ that anyone could think Big Brother was useful. BBs say that politicians are unapproachable and out of touch.

So as an MP who used to quite enjoy watching Big Brother, I found myself torn. Am I a BB or a PJ? A PJ in BBs? Or a BB in PJs?

The reference to Big Brother is just one of a myriad of cultural touchstones in this fascinating book. Stuart Cunningham’s book romps through Survivor and Go Back to Where you Came From, Korean bloggers and Fat Cow Motel, Australian iTunes game Fruit Ninja and Nigeria’s ‘Nollywood’.

Stuart Cunningham has also read a plethora of OECD and overseas government reports on creativity and innovation – so you don’t have to. What’s striking about many of the OECD reports is how un-creative and un-innovative their titles are (‘Content as a New Growth Industry’, ‘Innovation and Knowledge-Intensive Services Activities’, ‘Demanding Innovation’, ‘Creativity, Design and Business Performance’). Naturally, the very readable and pithily titled Creative Australia, the Australian Government's 2013 national cultural policy, is an obvious exception to this general rule.

One thing that I enjoy about such reports (and Stuart Cunningham’s book itself) is that they point out the increasing role that creativity is playing in the jobs of the future. Indeed, the pace of change is so rapid that many of today’s school leavers will spend the bulk of their career doing a job that hasn’t yet been invented.

We cannot forecast the future, but as MIT economists David Autor and David Dorn have pointed out about the US job market, we can make some predictions about the impacts of trade and technology:

‘technical change, augmented by offshoring, is eroding demand for middle-skilled ‘routine’ cognitive and manual activities, such as bookkeeping, clerical work, and repetitive production tasks. Because the core job tasks of these occupations follow precise, well-understood procedures, they are increasingly codified in computer software and performed by machines or, alternatively, offshored over computer networks to foreign work sites. This displacement of routine job tasks raises relative demand for non-routine tasks in which workers hold a comparative advantage over current technology, in particular ‘abstract’ tasks requiring problem-solving, creativity, or complex interpersonal interactions (e.g., attorneys, scientists, managers) and ‘manual’ tasks requiring, variously, situational adaptability, visual and language recognition, and in-person interactions (e.g., janitors and cleaners, home health aides, beauticians, construction laborers, security personnel, and motor vehicle operators)’[1]

This hollowing out of the middle of the US wage distribution has important implications for Australian workers. As technology improves, one of the worst places to be is in a job where you’re doing a task that a computer program can substitute for. One of the best places to be is in a job where your skills complement what a computer can do. So I commend Stuart Cunningham for his strong focus on digital design, from computer game designers to creative workers who are using animation to convey health information to remote Indigenous communities.

If there is a single idea at the heart of this engaging book, it is that it’s not just scientists who ‘do’ innovation. As Stuart Cunningham puts it, ‘the concept of innovation has been virtually soldered to science’. He draws on C.P. Snow’s splendid ‘two cultures’ notion to highlight the disconnect in Australian public life between scientists and creative people.

I agree that this is a real divide, but it’s important not to take from it that science is in the inner circle, and the arts are on the outer circle. As part of last year’s Science Meets Parliament campaign, each Australian parliamentarian was given a copy of Mark Henderson’s The Geek Manifesto. It’s a book that frets about the lack of scientific knowledge and engagement by politicians. After citing C.P. Snow, Mark Henderson argues that the real problem is that parliamentarians understand less about thermodynamics than they do about Shakespeare. So if you’re a creative type, don’t assume that you’re any less ‘plugged in’ to the policy process than any other group.[2]

What should parliamentarians be doing to promote creativity? Stuart Cunningham discusses the Convergence Review, and the recognition that media laws may need to change as technology transforms the industry. For media outlets, attempting to hang on to what Jay Rosen referred to as ‘the people formerly known as the audience’ is no easy task.[3]

Another oft-proposed solution is to make intellectual property laws stricter, but as Stuart Cunningham points out, many parts of the creative sector have thrived through open innovation (eg. via creative commons licenses). Indeed, given that sensible critics are now arguing that the US has gone too far in protecting IP, it seems that a much smaller country such as Australia should carefully assess any claims that toughening up IP laws would boost innovation.[4]

And that brings me to a point I greatly appreciate about this book, which is its recognition that the creative industries aren’t just good for GDP.

Interestingly, claims about why particular things are good for GDP aren’t typically made by economists. If you’ve taken an introductory economics course, you know that economics is about the concept of utility, which encompasses happiness, fulfilment and pleasure. Standard economics recognises that a Carl Vine piano concerto or a new novel by Tim Winton has a benefit that goes well beyond the price of the concert tickets or book purchases.

Indeed, it’s no coincidence that one of our great economic reformers, Paul Keating, was also a deep lover of the arts for their own sake.[5] When Keating was asked by the West Australian Symphony Orchestra to introduce Mahler’s 2^nd symphony, he didn’t talk about how the purchase of trombones and timpanis raises economic output. Instead, he quoted Kant: ‘Only artistic genius discloses a new path to us’, and he talked about how the symphony melded biblical themes, folk songs, and Mahler’s experience of seeing a children’s choir sing a resurrection chorale.

Similarly, when Keating spoke at the funeral of Geoffrey Tozer, he didn’t discuss the way in which government investment in Tozer’s training had been more than repaid in CD sales. Instead, he talked about why someone of Tozer’s genius only comes along once a century, and observed that ‘When one has been touched by the stellar power and ethereal playing of a sublime musician, one is lifted, if only briefly, to a place beyond the realm of the temporal.’

Understanding that creative output matters for its own sake is good for a number of reasons. First, it’s a more sensible way of viewing the world, since none of us wake up believing that maximising GDP is the only thing that matters. Second, it’s useful because – as Stuart Cunningham notes – the literature on creativity and economic growth is notoriously fragile. Sure, countries, cities and companies that are more creative also have more output, but it doesn’t follow from this that the relationship is causal.

It might run the opposite direction (when you get rich, you get creative), or it might be that some third factor drives both creativity and growth. As Harvard economist Ed Glaeser pointed out in his critique of Richard Florida’s book: ‘Sure, creativity matters. The people who have emphasized the connection between human capital and growth always argued that this effect reflected the importance of idea transmission in urban areas. But there is no evidence to suggest that there is anything to this diversity or Bohemianism, once you control for human capital.’[6]

Dropping the more fragile reasons for caring about creativity brings us back to the basics. We want a more creative Australia because culture enriches our lives and soothes our souls. As Stuart Cunningham points out, creativity and innovation are closely intertwined, and dynamic developments in both help make Australia a more interesting place in which to live.

Focusing on culture in its own right also helps concentrate the mind on how we should be measuring the success of government programs. The most interesting question to be asked about a government grants scheme isn’t ‘what did it do to GDP?’, but ‘what did it do for creativity?’. We need more rigorous impact assessments (eg. through randomised trials) of the various ways in which government might boost creativity. Is it more effective to reduce venue hire costs (as Marcus Westbury advocates) or provide scholarships to young artists? Shall we focus on regions with the highest levels of creative output or the lowest levels? The better we understand the answers to these questions, the more effective we will be in boosting what Stuart Cunningham calls the ‘hidden’ innovation of the creative sector.

---

[1] David Autor and David Dorn, 2009, ‘This Job is ‘Getting Old’: Measuring Changes in Job Opportunities using Occupational Age Structure’, American Economic Review, 99(2), 45-51

[2] The classic discussion of this issue is Robert Reich, 1998, Locked in the Cabinet, Vintage Books, New York. Reich finds that the closer he comes to power in Washington DC, the more there seems to be someone else better connected than him.

[3] Jay Rosen, quoted in Stuart Cunningham’s book.

[4] See eg. Alex Tabarrok, 2011, Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast (TED Books) [Kindle Edition]

[5] Both of these speeches may be found in Paul Keating, 2011, After Words: The Post-Prime Ministerial Speeches, Allen and Unwin, Sydney.

[6] Edward L. Glaeser, 2005, ‘Review of Richard Florida's The Rise of the Creative Class’, Regional Science and Urban Economics, vol. 35(5), pages 593-596.

TRANSCRIPT - SKY AM AGENDA
Andrew Leigh MP
Parliamentary Secretary to the Prime Minister
Member for Fraser
8 April 2013

TOPICS:                                Prime Minister’s visit to China, Australia-China trade relations, Tony Abbott’s comparison of Australia and Cyprus, the NBN, the Budget.



David Lipson:                     Hello and welcome to the program, I’m David Lipson. Pledging a new level of relations between Australia and China; that’s the message from the new Chinese President, Xi Jinping after a forty-five minute meeting with the Prime Minister, Julia Gillard yesterday.

[CLIP JULIA GILLARD]

Julia Gillard:                        You can take it from the nature of the discussions today that there is a great deal of confidence about the state of the relationship now, and optimism for the future. When words are being used about taking the relationship to a new level, I think that that is indicating a spirit of optimism about how we can grow this relationship.

David Lipson:                     Today, the Prime Minister will formalise a deal that will allow exporters to trade directly the Australian dollar with the Yuan. There’s also a big trade push with plans to set up a major trade fair along the lines of the G’Day USA campaign in the United States, a very successful campaign, and following in the footsteps of that.

[CLIP CRAIG EMERSON]

Craig Emerson:                  It is very important because just as we have G’Day USA, we’ll have G’Day China and that’s about bringing the best of Australia to the hustle and bustle of Shanghai. This is the most populous country on Earth, it’s an increasingly wealthy country, fabulously large middle classes, so we’re going to bring the best of Australia to the hustle and bustle of Shanghai. It’s a very exciting time.

David Lipson:                     Laura Jayes is covering the Prime Minister’s trip to China and she filed this report for AM Agenda

[CLIP LAURA JAYES]

Laura Jayes:                        This is Julia Gillard’s second visit to China and so far it is being judged as a success. So far, so good. Julia Gillard is pretty confident on the world stage and by all accounts her meeting with Xi Jinping went pretty well. They spoke for forty five minutes about the situation in North Korea but also Australia’s important relationship with China as expected. But, there was other things as well and Julia Gillard sought out and went out of her way to really reassure the President, Xi Jinping that Australia is a friendly place for China to invest. There’s also talk of a free trade agreement. Now this has been in the works since about 2005, so talked about for a good eight years. Now there was an indication, and this is a priority in the Asian Century White Paper, that you get the feeling it might still be a few years off. Now, more immediately, the Government has sought to really capture that Chinese dollar, the tourist dollar here in China with the growing middle class. 70 million Chinese travelled overseas in 2011, and spent about $70 billion dollars. Comparing that to 625,000 Chinese tourists that went Down Under last year, well Australia is only capturing a small portion of that. That’s why the Government is committing to spending about $2 million to throw a big party to really showcase Australia’s best. It worked so well with G’Day USA in the States, it only makes sense to replicate it here in China. Laura Jayes, Sky News, Shanghai

David Lipson:                     Well joining me now on AM Agenda is the Parliamentary Secretary to the Prime Minister, Andrew Leigh and the Shadow Disabilities Minister, Senator Mitch Fifield. Good morning to both of you gentlemen. First to you Andrew Leigh, Xi Jinping’s comments about a new level of ties between Australia and China: are there any risks in those new level of ties, for example, with our relationship with the United States?

Andrew Leigh: David, I think it’s a reality that Australia’s economic integration with China has been growing apace. I remember when I was first involved in politics working for the late Shadow Trade Minister Senator Peter Cook in the late 1990s China was important but very much second fiddle to Japan and that has just transformed as the economic relationship has blossomed. I was in Beijing last year for an Australia-China forum talking about the engagement. It is really important, I can understand that some Chinese would have been a little rattled by some of the scare-mongering over foreign investments that say people like Barnaby Joyce were engaging in last year, and part of this is just reassuring China that Australia’s doors are open for business, that we are keen on having a relationship that spans foreign investment, trade, huge tourist flows there: two thirds of a million Chinese tourists coming to Australia, and that ensures that Australia gains as much as we can in this the  Asian Century.

David Lipson:                     So that won’t put off America?

Andrew Leigh: I certainly think America has a deep commercial relationship with China as well. That will obviously co-exist with robust discussion around for example around human rights – we have disagreements with China over issues such as Tibet for example – but we’re able to be firm friends to be frank about where we disagree, but also to find those many areas of commonality, the Australian architects that are helping to design projects in China, the Chinese students coming to study in Australia, both enriching each other’s countries.

David Lipson:                     Mitch Fifield, it was a very positive message from Xi Jinping, the leader of our most important trading partner and it’s been backed by action as well, as I mentioned, the trade fair and the currency deal too. Do you support those elements and indeed the language coming from China?

Mitch Fifield:                      look, we support the Prime Minister’s visit to China. It’s important for Australian Prime Ministers to be frequent visitors to China and we hope that the mission is a success and the outcomes are achieved. But look, it’s well and good to go to China, to say the right things, but a nation like China looks for certainty in its trading partners and that certainty was damaged in relation to Australia as an investment destination by the mining tax, by the xenophobia that we’ve heard from this government in relation to 457 visas. Now that has not helped Australia’s reputation as a safe and predictable place for foreign investment. On the other side of things China looks to its trading partners from whom it imports to also be reliable and what Minister Ludwig did in relation to live cattle exports to another of our trading partners could only have caused concern in China. Look, it’s good to talk to talk and we wish the Prime Minister well on her venture in China but you’ve got to have the policies that back up that certainty that our trading partners are looking for.

David Lipson:                     what about another round of free-trade talks as we’ve heard Laura Jayes saying there. There’s been talk about this for quite a few years already – more than half a decade. Is a free-trade deal, Andrew Leigh, with the Chinese automatically a good thing when you consider that they can produce goods much cheaper than we can?

Andrew Leigh: Well I’m an economist David, and it’s almost a hallmark of entry to our profession that you have to believe that free trade raises incomes, and I think empirically the evidence bears that out very strongly. Australia is better off for being engaged to the world not only because we buy things at cheaper prices but also because we get the innovation and the know-how from engaging with other countries. Practically, how to bring down those trade barriers? Well I tend to be a supporter of multilateral agreements where you can, but increasingly the World Trade Organisation has stultified. The Trans-Pacific Partnership which is a smaller sub-set of countries trying to strike a trade deal, looks more promising but hasn’t yet delivered the goods so then you begin to look at these bilateral relationships. They’re not ideal but if that’s the best we can do to bring down trade barriers to allow our exporters better access into Chinese markets then that’s something we may have to look at.

David Lipson:                     has there been a failure of this Government and of the previous Rudd Government as well that there has been talk for so long about a free trade deal and we haven’t got, really, anywhere?

Andrew Leigh: These negotiations are progressing but they progress on a number of fronts. There’s typically an enormous number of things that need to be nailed down in a bilateral deal. Bilateral deals, David, tend to be more complicated that the multilateral deals: countries are more tempted to put new things on the table when they’re dealing one-on-one than they are when they’re sitting around the table with 180 odd countries. So sometimes you get too many issues on the agenda and that becomes difficult to resolve. I’d be keenest, I think, to see China playing part of a really strong push to bring down trade barriers to the WTO. World-wide benefits of that are in the hundreds of billions of dollars. It’s good we didn’t see a big increase in tariffs during the GFC as some had feared. It would be better yet if we could bring down those tariffs further.

David Lipson:                     Mitch Fifield, what’s the Coalition’s position on a free trade deal with China?

Mitch Fifield:                      look, unlike the Labor Party, we’ve always been strongly supportive of bilateral free trade agreements. The ALP in government have always had preference for working through multilateral agreements and particularly under Kevin Rudd. But we take a much more pragmatic approach – if you can get a good economic outcome for Australia, whether it be a multilateral or a bilateral agreement, then you should pursue that. And if multilateral negotiations aren’t travelling too well, then the real opportunity is there in the form of bilateral trade agreements. And the way that you get those is by intensive, constant negotiation and discussion and probably Australia has suffered from a lack of that by having Craig Emerson as the Trade Minister because as you would know, David, whenever Dr Emerson isn’t on Sky, he is on another network. He is doing a doorstop somewhere else. He is almost never focussed on or talking about his trade portfolio. He is always focussed on and talking about domestic Australian politics, and more than that, he is almost always talking about internal Australian Labor Party politics in the media. So, I think it would be a real boost to Australia’s negotiating position in bilateral FTAs if Dr Emerson did less media, spoke less about domestic politics, spoke less about internal Labor party matters and focussed on his day job.

Andrew Leigh: David I should just say something on that, I mean, Craig Emerson is a very strong advocate for Australia in the world and I reject the sort of nasty attacks on Minister Emerson who has travelled extensively to the Middle East and America…

Mitch Fifield:                      (indistinguishable)

Andrew Leigh: …to Asia, he’s been as strong advocate of Australia’s interested around the world. He is deeply committed to an open Australia, engaged in the councils of the world. I think that’s exactly the sort of Trade Minister we need following very much in the traditions of people like Bob McMullan and Peter Cook.

David Lipson:                     ok we’ve got to take a quick break on AM Agenda but we will be back very shortly after this commercial break.

BREAK

David Lipson:                     Well, in china, Julia Gillard couldn’t escape he superannuation debate that was going on back here in Australia. She was asked about comments made by the Opposition Leader Tony Abbott where he compared the government’s superannuation changes to Cyprus and what the government is doing there. That resulted in Julia Gillard lashing out at the opposition leader as an economic simpleton. Let’s take a look and his response…

[CLIP JULIA GILLARD & TONY ABBOTT]

Julia Gillard:                        you know the kind of economic simpleton talk…

Tony Abbott:                     the Prime Minister shouldn’t use an overseas trip to make domestic political comments. I think that the extreme language of the Prime Minister is unworthy of that great office

David Lipson:                     Mitch Fifield and Andrew Leigh are still with me here on AM Agenda. First to you Mitch Fifield, that comparison with Cyprus, that’s overblown isn’t it?

Mitch Fifield:                      look, Tony Abbott wasn’t saying there was a direct parallel between Australia and the Labour Party’s policy in Cyprus. He was saying there were “shades of”. You know, clearly, this Government is on a hunt for revenue and they’re looking to gouge some of the retirement savings of Australians who have worked hard and put money aside. That was the point that he was making. And I defy anyone to say this Government is on anything other than a hunt for revenue to compensate for the fact that they continue to spend more money than they bring in in taxes. Despite the fact that their revenues have been increasing year on year.

David Lipson:                     but even “shades of Cyprus”, I mean, their two dramatically different economies, Australia and Cyprus.

Mitch Fifield:                      yeah, they’re different. But as I say, Tony wasn’t doing a direct analogy. He was just saying there were “echoes of”, “shades of”, “a hint of”, “a touch of”… you know I think the Prime Minister needs to take a big, deep breath. It was certainly a very strong and inappropriate response to refer to Mr Abbott as a simpleton. I don’t think anyone who leads a major Australian political party is a simpleton. Tony Abbott has an economics degree and I’m sure he’ll continue to be attacked by this Prime Minister and this Government whenever he points out the fact that this Government is living beyond its means, that it is entirely unpredictable when it comes to policy, and that it thinks nothing of gouging money from people’s superannuation and if re-elected we know that this government would continue the gouging.

David Lipson:                     Andrew Leigh was that appropriate? That sort of commentary from overseas, from a place like China?

Andrew Leigh: I think it was a response to a question about domestic politics, David, and it seemed perfectly accurate. I mean, the sort of doomsday cult mantra we get from the Opposition, talking the Australian economy down, constantly exaggerating any difficulty for the Australian economy, isn’t in the national interest. We saw again in the Telegraph today, Andrew Robb suggesting that Labor hadn’t saved Australia from the GFC. Well, against Andrew Robb I give you Nobel Laureate Joseph Stiglitz, who has said very firmly that it was Labor’s intervention to prop up an ailing economy in 2008/09 which saved those hundreds of thousands of jobs. And every one of those jobs is a life not blighted by a spell of unemployment. A spell of that sort-of deep sense of powerlessness and hopelessness that comes from looking for work and being unable to find it. That’s the difference between the major parties; we chose to save jobs when the GFC hit. The opposition are still walking around pretending as though the GFC didn’t happen. Pretending as though somehow Australia could have skated through without taking on any debt. I don’t know any sensible economist who backs that proposition.

David Lipson:                     Australia has indeed taken on a lot of debt…

Andrew Leigh: Not a lot, I would disagree with that…

David Lipson:                     well the deficit has, you know, the promise of surplus I should rephrase, has been thrown out and replaced with the likelihood of a deficit this year. And yesterday, Penny Wong the Finance Minister on Sky News, well she refused to confirm that Labor wouldn’t deliver a surplus in the years ahead, she said that the fiscal strategy would be transparent to all, so does this mean we’re going to have a deficit not just this year but in the forward estimates as well?

Andrew Leigh: We’ve been very clear that we will balance the budget over the economic cycle, but that is also something that needs to be balanced and taken in the context of what’s happening to revenues. We’ve seen this sort of ‘perfect storm’ with commodity prices coming off a little, but the Australian dollar still staying high. And that means we get this double whammy on prices, resource companies returning lower profits because the commodity prices are down but still challenges for other firms who are export oriented as a result of the high Australian dollar. That makes it difficult for government revenues which is why government revenues are well down on their average from the last decade. You know, if we had the Howard Government’s tax to GDP share, we’d be comfortably in surplusIf they’d had ours, many of Peter Costello’s budgets would have been in deficit. That’s just a simple economic fact.

David Lipson:                     Mitch Fifield, a response?

Mitch Fifield:                      yeah, look David, we’ve got to nail once and for all this idea that the budget is in deficit because of revenue write-downs. There are some simple facts here. This Government is bringing in $70 billion a year more in revenue than in the last year of the Howard Government. Even this financial year to date, revenues were projected to be up 5% on the previous financial year. The problem is that this Government, even though revenues are up, is spending $100 billion a year more than in the last year of the Howard Government. So it is completely untrue to say that revenues are down, revenues are up, $70 billion up on the last year of the Howard Government. The problem is that spending is up by even more. The reason why this budget is in deficit, and every single Labor budget has been in deficit is because they are spending more than they are bringing in in revenue, despite the fact that revenue is up on the period of the Howard Government. That is the truth. When this Government says revenue write downs, what they are talking about is a reduction in the forecast of revenue. Now, a revenue forecast is not a reduction in revenue.

David Lipson:                     the Coalition also has some big spending promises: a more generous paid-parental leave scheme, it’s on board with the NDIS, some pretty expensive commitments. One of the savings that the Coalition has identified is in the NBN and we may be seeing a Coalition policy sooner rather than later as Tony Abbott said yesterday. There’s a suggestion today though, Mitch Fifield, that the Coalition’s estimates of the Government’s NBN could cost in the end $90 billion dollars. That’s well more than double what was suggested. That’s an extraordinary figure. How does the Coalition figure that?

Mitch Fifield:                      well, there are some reports and some analysis that’s been done that indicate that this Government’s NBN program could cost double what the Government initially said it would cost. Now that’s not a huge surprise to us because this Government never produced a business case for the NBN, they didn’t do a cost benefit analysis, it was essentially back of the envelope stuff with Stephen Conroy deciding that the fast broadband network would be a new telecom or for those old enough to remember, a new PMG.

David Lipson:                     I’ve got to interrupt as I’ve got to give Andrew Leigh an opportunity to respond, we’ve just got about 30 seconds left

Andrew Leigh: The NBN will come in on budget. $37.4 billion dollars and completed by 2021. That’s because this is a very large infrastructure project, the largest in Australia’s history in fact, of this kind. And the alternative to not doing the NBN is the Coalition’s suggestion: that every household should have to pay $5000 to connect from the node to the home by fibre.

David Lipson:                     ok I’m going to have to interrupt you as well. Andrew Leigh, Mitch Fifield, we are out of time thanks for joining us on AM Agenda, the latest news is coming up next.

At Gungahlin marketplace today, I talked about the value of local representation, and the Labor Government's investment in the Gungahlin Library NBN Digital Hub.http://www.youtube.com/v/o36xZ7Kc8c0?version=3&hl=en_US