Deborah Knight:
We need all the help we can get with our economy barely growing at the moment and the government Assistant Minister with the job of getting productivity back on track is Andrew Leigh, Assistant Manager for Productivity, Competition, Charities and Treasury. Assistant Minister, welcome to Money News.
Andrew Leigh:
Thanks Deb, great to be with you.
Knight:
So you’ve got a decisive election win under your belt. Now is the time, presumably, for action and bold reform from your government?
Leigh:
Well, we inherited a real problem with productivity. In the quarter we came to office, productivity fell more than it had the previous 4 decades, and that decade leading up to 2020 was the worst productivity decade in Australia’s post war history.
Knight:
Admittedly that’s a global problem though, not just a problem for Australia?
Leigh:
That’s right, there’s global challenges here and that’s something that isn’t going to be fixed overnight. We know that productivity reform sometimes takes years to have an impact, but we’ve got to get going on this.
The Treasurer announced in the last Budget the scrapping of non‑compete clauses for low and middle income workers, making it easier for people to move to a better job. That will help start‑ups and it will improve the productivity of the economy. And that’s just one of the measures we’re putting in place.
Knight:
Is red tape and regulation the big hamper for productivity?
Leigh:
Look, I think we need to get regulation right and sometimes what we’ve had – particularly in areas like housing, or energy or infrastructure – is a series of well‑meaning regulations that together have added up to a bit of a thicket of regulation that means that approval times are blown out.
Now, I talk to builders who say that now doing the paperwork takes as long as it used to take to build the whole house, and so we need to deal with that. Clare O’Neil is focused very much on how we get regulation right in the housing sector.
Knight:
Do you feel beholden to the unions when it comes to regulation?
Leigh:
Look, I think the unions can play an important role and I certainly know there’s a bunch of workplaces where unions will often come up with useful ways of making the place work better.
Knight:
But they also have ways as well, of standing in the way, and many businesses put that as a big complaint?
Leigh:
Unions at their best ensure that the firm is profitable. Unions understand that profitable firms can grow and pay better wages, and so unions are keen on ensuring that safety is right, that wages are rising, and that’s what the Australian Government is committed to as well.
Knight:
What do you hope to achieve at the Productivity Summit?
Leigh:
Well this will be an open conversation, but a fairly focused one. It’s going to be taking place among a couple of dozen people. Really looking at some of what we need to do around skills and education, the energy transformation, how we adopt and adapt technology and the competition policy area that has been really important to us in the last term. Our big merger reform, the National Competition Policy agenda we’ve got going with the states; more competition in the economy naturally leads to more productivity.
Knight:
And it’s set down for August. One of the concerns and criticisms of announcing a summit is that it will be nothing more than a talk fest, and that’s a criticism already being levelled at the Jobs and Skills Summit. Do we really need to talk about how to boost productivity? Don’t we just need to get on with it?
Leigh:
We are a government that appreciates engaging. We are getting on with it through the reforms such as the non‑compete scrapping that I mentioned before, and the 5 inquiries the Productivity Commission have underway. But it’s also valuable to ensure that people are on the same page when it comes to big reforms such as productivity and being open to ideas.
As a former professor, I’m very keen to engage with best ideas in academia. I’m constantly engaging with stakeholders, everyone from the Business Council, the small business organisations, to the Minerals Council who I met with today. So that’s important to have that open door policy as we look to get the very best ideas to boost living standards inAustralia.
Knight:
And has there been enough incentive for small business owners to really give things a crack or has it been favoured towards safe government roles instead?
Leigh:
I would like to see a stronger entrepreneurial culture in Australia, particularly among kids who have grown up in disadvantaged backgrounds. We know from things like the UTS Startup Muster survey that startup entrepreneurs tend to be from more advantaged backgrounds, which makes sense. They’re the people who have access to the mentors and the money. But we can get a reform which is both good for growth and good for fairness if we provide more of those opportunities to kids with disadvantaged backgrounds to not only work in someone else’s business but to start their own.
Knight:
And where does AI fit in all this? Because your book, ‘The Shortest History of Economics’ talked up the wonder of innovation in building economies. Do we need to be seeing ourselves thrown into the AI revolution rather than worrying about what could be lost in the process?
Leigh:
Artificial intelligence is incredibly exciting, and I – like I’m sure many of your listeners – am finding new uses for it every day. The models are getting better, and there’s great potential to take out grudge work and ensure that people get to do more knowledge work. So, I’m excited by that.
I’m also intrigued Deb by some of the studies of consultants and coders that suggest that AI boosts the performance of lower‑performing workers more than higher‑performing workers – that it might actually have an equalising effect. Unlike past technologies, which have tended to worsen inequality, AI might decrease inequality as well as boosting growth.
Knight:
Because that’s the fear isn’t it, of so many that it’s just going to end up with job losses?
Leigh:
Yeah that’s certainly the risk, but there’s also great potential for reward if we’re able to use AI to deal with jobs that are not particularly exciting. Let me give you one example, I started my legal career working for Minter Ellison in Sydney. And the job that young lawyers hated the most was called ‘discovery’ where you would sit in a windowless room paging through documents for an upcoming court case trying to find relevant documents. I don’t think any young lawyer wishes that job was there now that much of it is being done through artificial intelligence. That’s a great example of ways that make the job of being a lawyer more interesting than it was in the pre‑AI era.
Knight:
Yeah, the opportunities in the medical space too are very exciting. Now we’ve got on top of the role with productivity, we’re waiting and watching to see what’s going to come of the Prime Minister’s first face‑to‑face meeting with Donald Trump. What do you think we should expect?
Leigh:
Well this will be following off the 3 substantive telephone calls the Prime Minister has had with President Trump. We’ve got to engage with the Trump administration on a whole host of fronts. Obviously, AUKUS is front and centre of our national security policy. The United States is a big economic partner.
The Prime Minister will be making the case that the US has a substantial trade surplus with Australia – a 2:1 trade surplus, and making the case against tariffs. No country though, has gotten an exception to the 10 per cent across the board tariffs that the United States has imposed. We want to be realistic about our expectations for that meeting.
Knight:
So, you don’t think that we’ll get tariffs being lifted
Leigh:
Look, it would be wonderful if we did. Those tariffs are not in the interest in American consumers. A tariff is basically a consumption tax on imports, so it’s driving up costs for Americans who are consuming great Australian beef, great Australian wine, and the other things we sell to the US. So, we will make the case there that these are not the act of a friend – that getting tariffs down is in Australia’s interests and America’s interests.
Knight:
But even if the tariffs were to be eased on us, the biggest concern for our country and our economy is the impact of tariffs on China, our biggest trading partner. Will that be raised with the meeting with Donald Trump?
Leigh:
No, you’re absolutely right about that Deb, and when we do the modelling of this, the direct impact of the US tariffs on Australia is relatively modest but the indirect effects of a broader trade war are problematic. No‑one wins out of a trade war, so I’m sure the Prime Minister will be raising the issue of ensuring that we don’t have a trade war when he meets with President Trump.
Knight:
And just finally, you gave a speech recently talking about the backing of what’s been called the ‘Abundance Agenda’. Explain to our listeners what that is and how we can implement those ideas here in Australia?
Leigh:
Yeah, we’ve touched on it a little bit before,Deb with that idea of a thicket of regulation where well‑meaning regulations – whether they’re environmental or other forms of compliance can add up to blowing out construction times. So, that’s an issue in housing, it’s also an issue in infrastructure.
It can be an issue also in research and in commercialisation of research, which is one of the other areas that I talked about. The big growth of a managerial set of workers within universities. So, it comes out of this US book ‘Abundance’, written by Ezra Klein and Derek Thompson, which has had a bit of a splash in the US. But I think it’s actually better timed for where we’re at in Australia.
Knight:
Well it’s a big task trying to get productivity and the economy firing on all cylinders as it should be. I know that you’re the first Assistant Minister for Productivity, so we thank you for joining us here on Money News.
Leigh:
Always a pleasure Deb, thank you.
Knight:
There he is, Andrew Leigh; Assistant Minister for Productivity, Competition, Charities and Treasury.