Ellen Fanning:
We’re sort of at a crossroads in Australia, aren’t we? Economically, Australia could fall into US‑style inequality within a generation. That’s a warning from Andrew Leigh. He’s a former Economics Professor. He’s now the Assistant Minister for Productivity, Competition, Charities and Treasury.
He actually went to Harvard University, which is interesting because we see in the news now that that might be impossible for foreigners in future. Well, not only is he a former Economics Professor – as I say, he’s right now in the front benches of the Albanese government. He wrote his doctoral thesis at Harvard on the topic of poverty and inequality.
I spoke to him yesterday, and I wanted to talk about this concept he’s got about the risk of US‑style inequality. It’s to do with housing, training and access to opportunity, and he talked about Australia having to be engaged in a race to the top to become a more productive economy. Have a listen.
Andrew Leigh:
If we look at Australia and the US – since the 1980 both countries have doubled their top 1 per cent share, and we’ve ended up where they started off. So, if you fast forward that movie another 50 years, then we could have the same level of inequality as the United States.
That would sit fundamentally at odds with a country where we don’t have private areas in the beaches, we prefer the word ‘mate’ to ‘sir’ and many of us sit in the front seat of a taxi. That egalitarian character is really important to Australia, and I think it’s one reason why we’ve tended to be more equal than the United States. It’s been good for our growth trajectory, because we’ve worked together in times of challenge.
Fanning:
There is an alternative theory around all that. I mean, we certainly see the uber rich, don’t we? Eye watering wealth of Gina Rinehart or Mike Cannon‑Brookes. But there’s another school of thought that says well, look at our generation if you like. Mass asset ownership of working people whether it’s their house or their super, I mean you could conclude we’re not nearly as unequal as many people believe.
Leigh:
Well, one of the big gaps between haves and have‑nots in Australia at the moment, Ellen, is in home ownership. And that’s why we’re doing so much as a government to try and build more homes. And unless we get on top of housing supply, I worry that that real big wealth gap could get bigger still.
Fanning:
What about poverty traps? To what extent does Australia have poverty traps? I heard a story the other day about a young guy – his athletic career ended early due to an injury. He’s now got a young family. He can’t afford to undertake an apprenticeship because the pay is so low, you know, it’s about $600 bucks a week. So he’s stuck labouring which pays more than twice as much, but he’s in a poverty trap because he’ll never get out of that labouring. He’ll never do any better.
Leigh:
We’ve certainly been very concerned about making sure that everyone has an opportunity to make it. I left school in 1990 in the teeth of the 1990s recession. I’ve got to tell you, when unemployment was heading towards double digit levels, there was no chance for young people to get a job.
So keeping unemployment low is actually one of the very best ways we can do that. Free TAFE is part of that. It’s also about providing childcare opportunities so families don’t have to make the choice between raising kids and getting a job that will pay well.
Fanning:
It’s hard though isn’t it? It’s always been hard for apprentices, but if you’re in that situation that’s really hard. And I guess free TAFE helps and the childcare helps as well. But that’s a hard road to have to walk?
Leigh:
It certainly is. So in one of the things we’ve done with construction apprentices is to put in place these apprenticeship bonuses – $2,500 coming at 4 points through your apprenticeship as a way of encouraging people to stick at it.
Fanning:
Andrew Leigh is the Assistant Minister for Productivity, Competition, Charities and Treasury. All of this brings us to productivity. That’s the portfolio that’s been added to your responsibilities. What do you reckon is the role of productivity in boosting living standards in this country?
Leigh:
Well, it’s really fundamental. In the end, productivity is the main driver of living standards. If you look back historically, Australian workers now produce 4 times as much per hour in real terms as workers in the 1960s. And that’s why we live at much higher levels of affluence than people did in the 1960s. Part of that is better education, longer periods at school, TAFE, university. Part of it too is better technology, and we see computerisation and now artificial intelligence potentially providing huge benefits to the productive capacity of Australian workers.
Fanning:
Let’s look at construction. It’s a key issue, and if you have a look at productivity in the construction sector – since 1995 the number of homes built per hour worked has actually halved. So, while labour productivity has gone forwards in the broader economy, it’s actually gone backwards in housing construction. It’s really problematic, isn’t it?
Leigh:
Absolutely. Now the Productivity Commission points to that halving as you mentioned Ellen. It says if you adjust for the fact that today’s houses tend to be better than the houses of the mid‑1990s there’s about a 12 per cent drop in construction sector productivity.
If you built cars the way you build houses, then you’d order a new car and one day the engine would arrive on your front lawn. The next day the bonnet would arrive, the next day the wheels would arrive, and then a team of people would turn up and start putting them together. You can only imagine how much a car would cost if that’s how we built it. So, thinking about how we can get more factory‑made homes while maintaining high quality builds is a big challenge for the sector.
Fanning:
And how do you get business to do that? I mean, outside of mining; very low rates of on‑the‑job education. Private sector investment has declined by about 3 percentage points of GDP since 2009, and the concern is always that we don’t confuse productivity with profit. Because you often hear business lobbyists say, ‘well, you just reform industrial relations and you make pay and conditions more flexible’, which is sometimes code for paying less.
Leigh:
We don’t think we can cut our way to prosperity. We’re strongly of the view that we need to work with business in order to find those sweet spot reforms.
Fanning:
That’s Andrew Leigh. He is a former Economics Professor, now Assistant Minister for Productivity, Competition, Charities and Treasury.