Rafael Epstein:
Pretty big announcement from the federal government today. They’re going to let the banks, when they lend you money for a mortgage, they can relax the rules when it comes to the debt you owe for your university degree. So, you might say, woohoo, fantastic. You can borrow more or borrow sooner. Is it financially smart? Andrew Leigh joins us. He speaks for the Albanese government on this.
Andrew is the Assistant Minister for Competition, Charities, Treasury and Employment. Andrew Leigh, good morning.
Andrew Leigh:
Good morning, Raf. Great to be with you.
Epstein:
Is it a good idea?
Leigh:
Certainly is. We need to make sure that more Australians get into housing and to the extent that lenders have been taking into account your HECS debt, that can sometimes hold young people back from home ownership. And the fact is HECS is not a debt like any other, it’s a debt whose repayments stop if you lose your job. It’s proportional to your income. It is a repayment that occurs through an income contingent loan. And so, taking that off the table when lenders are considering how to allocate funding and who to lend to is really important in terms of boosting home ownership rates.
Epstein:
So, I understand that it’ll allow more people to buy a home. That’s a good thing. I’m just not sure if it’s a smart thing financially. I mean, if I’m earning say $80 grand, I still have to, I’ve got to pay that HECS debt. So, if interest rates go up suddenly, it is an extra cost that I have to pay. Why should the banks not take that into consideration?
Leigh:
Well, the first thing to say, we’re reducing those HECS debts. A re‑elected Albanese government would cut all the HECS debts by 20 per cent. We’ve already changed indexation so that that’s operating off the lesser of wages or inflation and backdated that over a year, saving hundreds of dollars for the typical HECS debtor.
But more broadly to your question, Raf, this is an appropriate way of recognising that an income contingent loan isn’t like having a car loan, for example. It’s a fundamentally different kind of loan and we want to make sure that people don’t have to choose between getting an education or getting a house, that both of those are easily open to young Australians.
Epstein:
A slightly different issue. I know your time is short because parliament is sitting. Free trade is clearly something that Donald Trump supporters don’t like. And I think it’s worth noting the US Presidents kind of almost torn up the free trade agreement between America and Australia by even talking about tariffs. But is free trade, is it actually fair? Is it effective? Does it actually help all of us?
Leigh:
Well, Raf, the way I think about trade is it’s another form of comparative advantage. Just as most of us don’t fix our own car or cut our own hair or make our own wine, so too countries tend to specialise in what they do best. And this isn’t a zero‑sum game. Trade isn’t like the Eurovision Song Contest or the Olympics. Trade is a way in which each of us can benefit from specialising in what we do best. And just as your hairdresser doesn’t defeat you when you get a haircut, Japan doesn’t defeat you when you buy a Honda.
That is an example of comparative advantage in action. And Australia, with 0.3 per cent of the global population, benefits enormously from open markets. The tariff liberalisation in Australia saved the typical Australian household around $4,000 a year. And my party, the Labor Party, was in the thick of that with Whitlam, Hawke and Keating spearheading significant tariff cuts. So, of course we’ve been strong advocates of open markets on the global stage.
The conversation between Prime Minister Albanese and President Trump went well and the Americans are considering our request for an exemption.
Epstein:
I just wanted to give you one example. There’s a window maker in Melbourne called Oceania Glass in Dandenong. They’ve got 260 employees. Their problem, they say, is the dumping of cheap windows from Thailand. I did go on the default website.
We’ve had a free trade agreement with Thailand for 20 years, so we get lots of tariff‑free cars, trucks and air conditioners. So, that’s the good part of free trade with Thailand. The bad part of free trade with Thailand is they can sell really cheap windows.
And we’re going to lose our only domestic architectural window maker. Is that just a sort of a cost we have to put up with, so we get cheap air conditioners? Is that the trade off?
Leigh:
Well, the Australian Government takes anti‑dumping very seriously. Dumping is where an overseas exporter aims to drive down the price, temporarily knock out the local producers and then spike the price back up again. So, ultimately consumers suffer.
What we’ve seen over the course of, of the last couple of decades, Raf, is Australian manufacturers increasingly moving into higher and higher and more advanced manufacturing, more value added. We don’t produce kids’ pyjamas anymore, but we do well in high‑end fashion.
Epstein:
But we’re not going to have anybody making windows for houses at all in the country. Is that a cost? Are we just happy to lose that because we’re moving into more advanced manufacturing?
Leigh:
Not at all. The government strongly committed to advanced manufacturing and strongly committed to working with our manufacturing sector. We’re investing in the skills that are available. The Future Made in Australia plan provides resources to encourage a strong Australian manufacturing sector. But the trend throughout the advanced world is for manufacturers to steadily move up and up the value chain.
That means better jobs for the people working in those sectors, and it means more earnings for the firms in those sectors. So, I think there are great opportunities for Australian manufacturers to increasingly capture that high advanced manufacturing sector.
Epstein:
I appreciate your time this morning. Andrew Leigh, thank you.
Leigh:
Always a pleasure to chat, Raf.
Epstein:
Part of the Anthony Albanese Labor government. Andrew Leigh is the Assistant Minister for Competition, Charities, Treasury and Employment.