Patricia Karvelas:
With all the Liberal Party turmoil, the building story around the economy and inflation has been a little drowned out but we think it’s very important, so the Assistant Productivity Minister, Andrew Leigh joins me now. Welcome to the program.
Andrew Leigh:
Thanks, Patricia, great to be with you.
Karvelas:
You’d have to agree that it might be fun for you to watch your opponents fall apart at the moment. But at the moment, Australians really just care that they’re paying more in interest rates and on their mortgages, right?
Leigh:
Well, it is with a sense of sorrow that I look at what’s happened with a three‑ring circus on the other side of the parliament. I think Australia does benefit from a strong Opposition. I think it’s a pity that the Liberals and Nationals are so focused on themselves rather than on their constituents.
In terms of the economy we’ve got very strong unemployment, we’ve had consistently unemployment sitting around 4 per cent. That is incredibly important for the opportunities for Australians. We do have a cost-of-living challenge, and that’s why the government is so focused on getting inflation down and making the contribution that we can on that.
Karvelas:
Question Time, you know this – you were there, was absolutely dominated by quoting Michele Bullock, who’s the Reserve Bank Governor, and her confirmation that government spending is part of aggregate demand, which she said is contributing to inflationary pressures and that’s why they’ve decided also to raise interest rates. That is not quite what the government was saying. Do you see that there is a distinction between the way that she raised it?
Leigh:
Well, government spending is a little over a quarter of aggregate demand, and last year was growing more slowly than private demand. And so, the comments that the Reserve Bank Governor has made is that principally the challenges we’re facing are around bottlenecks and things like housing supply; they’re the principal drivers of why inflation has gone higher than the Reserve Bank Board anticipated last year, and why they’ve ended up having to change course.
Karvelas:
There’s almost – you know, I’ve studied economics. I’m not comparing myself to you Dr Andrew Leigh, but I know something about the way it works.
Leigh:
You know a lot Patricia.
Karvelas:
Something, let’s just go with something. And you can’t have the demand that the taxpayer essentially funds not affect private demand. You’d agree with that right? You can’t delink the 2?
Leigh:
But public demand was growing more slowly than private demand last year. We saw the withdrawal of the state and federal energy subsidies, in that sense that’s making a contribution to what’s bringing inflationary pressures down.
Karvelas:
But that money that’s being expended by the Commonwealth in all sorts of ways. We’re not going to go through all the line items but it has been growing, that is incontestable. That is fuelling private demand too, isn’t it?
Leigh:
But Patricia, growing at a slower rate than private demand. So private demand is the principal challenge that the economy faces, the principal challenge which has contributed towards inflation. We see pressures in all kinds of areas, such as travel and some of the inputs into housing that we talked about before. Getting rid of some of those skills shortages are important, so the work that we’re doing in free TAFE and construction apprenticeship bonuses are critical in terms of dealing with some of those supply bottlenecks in the economy, and of course, boosting productivity, which I know is something you flagged in your opening there.
Karvelas:
We are going to talk about productivity, because the Treasurer talks about inflation, productivity, all these issues as being essentially the issues to tackle in the Budget, including intergenerational fairness which we’ll get to in a moment – my favourite pet topic. But let’s talk just on that issue if we can. How do you intend to deal with productivity in the budget? There was a big roundtable – things went rather silent post the roundtable, but there is kind of a manifesto of ideas; many are just sitting there?
Leigh:
We’ve got a big, bold, ambitious agenda on productivity Patricia. We saw our competition reforms in the first term, the historic overhaul of the merger laws, the announcement of scrapping non compete clauses for 9 out of 10 workers to make it easier for people to move to a better job. We’ve revamped national competition policy, which really was an engine of productivity growth in the 1990s with a big productivity fund collaborating with the states on things like occupational licensing.
The work we’re doing in order to create a more dynamic and competitive economy really stands in contrast to that couple of decades where we saw increased market concentration, increased mark ups, a slowing down in the small business creation rate, which worried many economists and caused a sort of sclerosis in the economy.
Karvelas:
Do you believe in bold tax reform being part of the Budget?
Leigh:
Well, of course we have a deliberate bold tax reform, we’ve revamped those Stage 3 tax cuts so they were fairer – delivered income tax cuts for Australians.
Karvelas:
Sure.
Leigh:
We’ve been very bold on multinational tax. I think our last term of multinational tax reform stacks up against any government around the world in terms of what we did around thin capitalisation and other measures. Our transparency measures are world‑leading, the country by country reporting that will soon kick in. So yes, we’re ambitious on tax reform and we’re delivering.
Karvelas:
Okay. That’s what you’ve already done. You know that I’m more interested in what you might do next. Do you think property taxes – capital gains tax, for instance and the discount that comes with that needs to be looked at?
Leigh:
Obviously, that conversation was a part of the Economic Reform Roundtable. People focused on the intergenerational equity, and that is something that I hear an awful lot. It’s not just young people frustrated about getting a leg up in the housing market, it’s also parents and grandparents saying, ‘We need a system that is fairer for young Australians’. Principally, that’s always going to be about housing supply Patricia, you know, as a student of economics.
Karvelas:
I know that’s the agenda, but do you accept – and it feels to me like many are accepting this increasingly that you can’t only talk about supply, you have to talk about the tax settings as well?
Leigh:
Yeah. I mean, we’ve had that conversation through the Economic Reform Roundtable. But the work we’re doing around tax settings to encourage supply is really important. And so, the build to rent reforms, the work that we’ve done in order to get some of those blockages unblocked; the ‘Abundance agenda,’ to use the term of that Ezra Klein and Derek Thompson book, which means dealing with some of the regulatory thicket that has impeded building at a state and local level. All of that’s really at the heart of what we’re doing around housing accessibility, and that plays into intergenerational fairness.
Karvelas:
Yeah. But there are more measures, do you think, that need to be looked at including, what? Negative gearing? Do you support looking at negative gearing again?
Leigh:
Every budget we look at the tax settings. But I’ve told you about our tax agenda, which we have announced, our housing agenda, which we’ve announced – they’re the principal measures that we’re running with hard right now in order to make it easier for young Australians to get a home of their own.
Karvelas:
Let me ask the question differently – do you think there’s an appetite for changes to negative gearing and capital gains tax discount, particularly from lots of young voters?
Leigh:
Look, I’d really commend the way in which the Treasurer has allowed this conversation to unfold. Shortly after the election when he spoke at the National Press Club, being very clear that he wasn’t playing a rule‑in, rule‑out game but was welcoming that tax equity conversation.
I’ve done research on intergenerational mobility in Australia. I wrote the first study on intergenerational mobility. It’s been a passion of mine, and I’m concerned about the role that housing plays in that.
Karvelas:
And therefore, you know, the current agenda needs to be widened then?
Leigh:
The Budget will obviously have reform measures, and they will deal with cost of living, with productivity, raising the speed limit of the economy and raising the opportunities for young Australians. That’s a passion of this government. You’d expect nothing less from a Prime Minister who grew up in public housing and understands the importance of housing to opportunity.
Karvelas:
Sure. But he’s also shut down some of these debates in the past. Is some of that ambition changing? Is there a change in the sort of appetite for these reforms?
Leigh:
Look, I think the Prime Minister is an ambitious reformer Patricia. You see this right across the board in terms of what we’ve done with bringing bulk‑billing back, with a historic education deal for the states, with those important HECS rebates.
He understands the issues that young people are facing right now, not just because he listens to their music, but because he understands their issues and the challenges they face in Australia where want to have more mobility, we want a little bit more fluidity, and not the sort of stultified societies that we look back to in the sort of Jane Austen era.
Karvelas:
Yeah, we’re past that – the Jane Austen era, although it looked fun.
The National Anti Corruption Commission and its Chief Commissioner, Paul Brereton, will be formally investigated over his continued consulting work for the Australian Defence Force. But this is the second time there’s been an investigation. We spoke to David Shoebridge for the Greens before. He says the government should move him on because the NACC’s reputation is being damaged.
Leigh:
I think it’s really important Patricia, that when you set up anti corruption bodies that they are entirely at arm’s length from governments, and that includes any inquiries into them. This is a historic Labor reform, credit to Mark Dreyfus, who really drove it through and who’s seen Australia leading on the issue of anti corruption. If there are any issues about the Commission itself, they should be investigated in the usual way at arm’s length from government.
Karvelas:
Are you worried though, that this National Anti‑Corruption Commission, which was really a centrepiece of Labor’s promise for integrity, may be losing some of its independence and the perception of its strength? That matters too doesn’t it? Community perceptions?
Leigh:
Patricia, I think institutions transcend particular personalities. I think it is important that this institution has integrity and if it’s to be investigated, if members are to be investigated, that that’s done at arm’s length from government.
We understand the separation of powers. The Prime Minister and the Attorney General are strongly committed to those principles, and they’re crucial as we look to have institutions that are fit for purpose and which stamp out corruption wherever it rears its ugly head.
Karvelas:
Andrew Leigh, thank you.
Leigh:
Thanks Patricia.