Leon Delaney:
First up today, the federal Member for Fenner and Assistant Minister for Productivity, Competition, Charities and Treasury, Andrew Leigh. Good afternoon.
Andrew Leigh:
Good afternoon Leon, great to be with you.
Delaney:
Well thanks for joining us today. You’ve travelled a long way out of your electorate today to Fyshwick. Why was that?
Leigh:
All the way to Fyshwick to catch up with Anthony Costello Automotive – one of our terrific independent mechanics here in Canberra. We’re bringing down a report that benchmarks the benefits of Labor’s Motor Vehicle Information Sharing Scheme, which we put in place 3 and a half years ago.
Leon, as you know, modern cars are computers on wheels, and without the ability to tap into those computers, independent mechanics really were trying to do the job with their hands tied behind their back. So, we put in place the Motor Vehicle Information Sharing Scheme that required manufacturers to share that data on fair and reasonable terms with independent mechanics. The new report I released today found that that benefited independent mechanics and to the tune of more than $2 billion, and of course it benefits consumers, because independent mechanics tend to be cheaper.
Delaney:
This is part of a broader concern about something called right to repair, and it applies not only to motor vehicles, but to all kinds of consumer goods, doesn’t it?
Leigh:
Yeah, that’s right. And so right to repair now allows you to get your screen of your iPhone or your other smartphone fixed without voiding the warranty. We’re looking at other places where it might be extended. One issue we’ve been talking about a lot with farmers is about the right to repair agricultural machinery.
Right now, those machines can be pretty complicated and have some of the same sort of characteristics as cars, with the manufacturers insisting that they’re the only ones that can fix them. And that can be really tough for farmers who are often a long way away from an authorised dealer and face real‑time pressures. For example, if a harvester breaks down mid harvest.
Delaney:
Yeah, it’s certainly part of the Australian farming tradition to do your own repairs. And you know, I came from a farming family. It was quite common for farmers to be very adept at all sorts of mechanical skills; welding, all sorts of things. And if you can fix it, then obviously you get back to work a whole lot more quickly.
I was accused yesterday of being the sort of bloke who would try to repair a toaster rather than buying a new one. And I said, well yes of course I am. Why if you can fix it? Why not fix it even though a new toaster is probably only 10 bucks? We throw too much stuff away, don’t we?
Leigh:
Absolutely. My parents were very much influenced by their parents’ experience of the Great Depression and the way in which that really shaped them to be frugal and always try and fix something rather than throw it away. I guess a bit of that’s passed on to me as well. I’d always rather tinker with something and see if you can get it going again rather than just chuck it out. Even if maybe that doesn’t pass a strict economic cost‑benefit test.
So, allowing people to fix their own things really is very much in that Australian tradition of having a go as well as being good for the environment, because less of it ends up in the landfill.
Delaney:
Well, in the words of the great John Williamson, ‘Tie it up with wire and keep the show on the road’.
Leigh:
Exactly, exactly. And you know, if you’re talking about tractors these days, you’re probably not talking about an old Massey Ferguson. You’re talking about a sophisticated, perhaps hundred‑thousand‑dollar John Deere piece of kit. And so you need that access to the computer information in order to make a modern repair.
Delaney:
Yeah, I knew it had to be something important to get you to travel all the way from Fenner to Fyshwick, because you know what Canberra’s like. People on the north side, they don’t go south of the water unless there’s a very good reason.
Leigh:
Oh look, I reckon everyone goes to Fyshwick for something or other. It’s a gold mine of stores down there and we’re really quite lucky in Canberra to have these areas like Mitchell and Fyshwick, which have so many tradies who are just experts in their particular areas.
Delaney:
Absolutely. Yes, Fyshwick is a destination in and of itself, not only for the shopping but believe it or not, in amongst all the shops, there’s actually some cafes and things in there as well that make it worthwhile.
Now, on other matters, there’s a lot of pressure on the federal government at the moment, with fingers being pointed at the Treasurer and the government more broadly – passing blame, so to speak, for the higher‑than‑expected inflation figures and the resulting increase in interest rates. Is government spending to blame?
Leigh:
No, and the Reserve Bank has made that very clear. The Reserve Bank Governor had a press conference this week. What we’ve done since we came to office is to find over $100 billion in savings. The most recent update found another $20 billion. We have real spending growth averaging 1.7 per cent compared to 4.1 per cent under the Coalition.
Now, the highest spending government in Australia was Scott Morrison’s and the highest taxing was John Howard’s. So the Liberals suggesting that Labor is spending too much is really a case of the pot calling the kettle black.
Delaney:
Nevertheless as a broad economic principle, if a government spends less, that does take heat out of the economy doesn’t it
Leigh:
One of the reasons that we’ve sought to find those savings, one of the reasons we’ve delivered 2 surpluses where our predecessors delivered none is because we’ve made those hard decisions on rationalising savings; curtailing some of that expenditure on consultants and contractors that happened under our predecessors.
The sports rorts, the car park rorts, the other wastes of money, in order to make sure that government spending is delivering as much for the community as we can.
Delaney:
As we head towards this year’s May federal Budget, there seems to be a great deal of speculation about possible changes to tax arrangements and in particular the generous discount for capital gains tax, which was originally introduced by Peter Costello in 1999. Now, obviously you can’t announce what’s going to be in the Budget, but this has become quite a big topic of discussion at the moment. Is that going to be addressed, do you think?
Leigh:
Yeah. I mean, I’ve noticed that conversation going on this week Leon. I guess I’d say 2 things about it. First of all, is that we’ve been very clear that our focus with housing is on the supply side, on getting more houses built through the Housing Australia Future Fund and working with the states and territories ‑‑ and the ACT has been terrific on this ‑‑ in order to get rid of unnecessary regulation that are slowing down housing.
The other is that on tax, a big priority has been multinational tax: the thin capitalisation reforms, which I helped the Treasurer on, the reforms that we put in place on multinational tax transparency really have been the big corporate tax focus for us over the last term.
Delaney:
Nevertheless, there seems to be growing momentum behind the idea of introducing some sort of reform to that capital gains tax discount. And when you divorce it from things like negative gearing and other measures that were taken to previous elections, there seems to be more willingness in the community to consider that one particular reform.
Now, there’s a lot of speculation that the proposal is to reduce the 50 per cent discount down to something a little more modest, like perhaps 33 per cent or even 25 per cent. Now, that would certainly have an impact. It would help to reduce the government outlays and therefore help to balance the Budget.
There are modelling examples that suggest that that would help to reduce the price of housing maybe a little, but probably not a lot if we are to reform capital gains tax. Here’s my proposal Andrew, and I want you to be patient with me because I’m not as well…
Leigh:
I’m listening.
Delaney:
I’m not as well educated as you, but I’ve been trying to tell people for the last couple of years and anybody who will listen. Yes, Peter Costello’s reform in 1999 was overly generous. It was a blunt instrument and the discrepancy there is that you can invest in an asset and hold it for just 12 months and then you qualify for the whole 50 per cent discount.
The reason for the discount in the first place was to compensate for the effects of inflation over time. Now, inflation does not erode your value by 50 per cent over 12 months. So, it was excessively generous and it clearly distorted the market. You only need to look at the graphs to see the impact that it had on the housing market.
But instead of just reducing the discount to a lower level, that’s still a single size to fit all circumstances. The previous arrangement was indexation. So, if you had held an asset for a period of time, you indexed the cost base according to inflation. First of all, why was that considered so complicated when all you need to do is go to the RBA website and use the inflation calculator? It’s really easy. A school student could do it.
But secondly, here’s my proposal. If we want to make that a little bit more targeted, we can make it 5 per cent discount per year that you’ve held the asset up to a cap of 10 years. If you hold the asset long enough, you still get your 50 per cent discount, but you just can’t get it straight away. Wouldn’t that be better?
Leigh:
Well Leon, certainly I really admire the thoughtful way in which you’ve gone through that and the way in which you and others have made suggestions to the government on this. I do need to say though, our tax policies haven’t changed. We’ve got the priorities of delivering those 2 additional tax cuts from the standard deduction, legislating better targeted super concessions, boosting the low‑income tax offset, and that work that I mentioned before around multinationals.
So, they’ve been our tax priorities. But the Treasurer in putting in place that Economic Reform Roundtable last year was very clear that we need to have some of these debates and the community and that the ‘rule in, rule out’ game has been damaging for the quality of public debate and for thoughtful contributions such as yours.
Delaney:
So, dodging the question. I assume you don’t really like the idea that much?
Leigh:
Look, we have tax policies, we have housing policies. Those policies haven’t changed.
Delaney:
Alright, thanks very much for chatting today.
Leigh:
Thanks so much Leon.
Delaney:
Dr Andrew Leigh – the federal Member for Fenner and Assistant Minister for Productivity, Competition, Charities and Treasury on 2CC.