Stephen Cenatiempo:
Alright, time to talk federal politics with the Member for Fenner and Assistant Minister for Productivity, Competition, Charities and Treasury, Dr Andrew Leigh. Andrew, good morning.
Andrew Leigh:
Good morning Stephen, great to be with you.
Cenatiempo:
You too. Productivity is a new one in your title, is that right?
Leigh:
It is indeed. It’s a big priority for the government. I’m really pleased to have that title and to be helping out Jim Chalmers and the economic team on turning around Australia’s big productivity challenge. That decade to 2020 was the worst productivity decade in 60 years and we know that productivity is at the heart of living standards, so we’ve got to do better.
Cenatiempo:
But it hasn’t been a focus over the last 3 years. And one of the criticisms that a lot of industry groups have made of this government is the focus on increasing wages without focusing on productivity. And nobody begrudges lower paid workers getting you few more quid here, but there’s got to be some quid pro quo, pardon the pun.
Leigh:
We might not have used the word as much but certainly productivity was at the heart of our thinking around competition policy, around what we did in investing in schools, TAFE and early childhood. It’s at the heart of what we’re thinking about when we’re doing infrastructure policy.
Now that’s so central to Labor’s vision of investing in individuals, in institutions and in infrastructure in order to raise living standards. But it’s a big job and we’re not going to turn around a decade long slump in productivity in just a term or 2.
Cenatiempo:
Yeah, all right. Now I do want to talk about the productivity issue from the perspective of you’ve made the comment that we’re one step away from US‑style inequality, what do you mean by that?
Leigh:
Yeah, if you look at the period since 1980 Australia and the US have doubled their top one per cent income share. We’ve ended up where they started off. So if you then project that forward for another 50 years, then we get to a US style level of inequality which I think many Australians would be troubled by.
We’re a much more egalitarian country. We have a much stronger sense of a fair go. And so, making sure that we’ve got benefits fairly shared really matters. One of the nice things about some of our reforms, like getting rid of non‑compete clauses for low and middle‑income workers is that it’s good for growth and good for fairness.
Cenatiempo:
Yeah, I mean but there’s got to be – you can’t discourage people from wanting to achieve though either. It’s got to be a balancing act, doesn’t it?
Leigh:
You’ve got to encourage people to achieve, and I think one of the things we need to focus on more in Australia is providing the same opportunities to become an entrepreneur to kids growing up in poor backgrounds as we do to more affluent kids.
The Start‑Up Muster Survey which surveys people who started tech businesses finds they’re disproportionately drawn from more advantaged backgrounds, which makes sense. They’re the kids that have access to the mentors and the money. But if we can spread those benefits we get more entrepreneurs and more growth at the same time.
Cenatiempo:
Yeah. Look, I don’t disagree with any of that. Now I want to talk about these super tax changes. There’s not a single person outside the government that thinks these are a good idea. Now, I want to preface this by saying I’ve got no problem with increasing the tax rate from 15 per cent to 30 per cent for people with balances over $3 million. But the concept of taxing unrealised gains is just absolutely ludicrous. There is no justification for it whatsoever.
Leigh:
Well, Stephen, this has been through 3 rounds of consultation. This is the approach that has been recommended to us, and I think it’s really important to remember…
Cenatiempo:
By who?
Leigh:
By the experts in Treasury. It’s really important to recognise that this is a change which applies to just 0.5 per cent of people. So 99.5 per cent of Australians…
Cenatiempo:
Yeah, but that’s, that’s now.
Leigh:
99.5 per cent of Australians are going to be unaffected by this change. Their lives will continue as usual and it responds to a concern that I think people have had for many years that superannuation tax breaks weren’t fair and too much benefit was going to those with multi‑million dollar superannuation accounts...
Cenatiempo:
Okay, fine, but…
Leigh:
A very tiny share of Australians who have those balances.
Cenatiempo:
This argument doesn’t hold up Andrew, that bad policy is okay because it only affects a small amount of people.
Leigh:
Well the way we’re proceeding is consistent with the way in which the former Coalition government made changes to superannuation.
Cenatiempo:
Well they never made changes – they never wanted to tax unrealised gains.
Leigh:
They made some changes to curtail the top end superannuation tax concessions.
Cenatiempo:
Yes, but never by taxing money that people haven’t actually got.
Leigh:
But our changes are very modest Stephen. They’re simply going to apply a concessional tax rate. You will still be paying a lower tax rate on super than you would if this was money just invested in the share market.
Cenatiempo:
Yeah, Andrew you’re missing the point. You’re missing the point of what I’m making here. I said at the very beginning of this, I’m okay with changing that tax rate. What I’m talking about here is, and there’s nothing modest about taxing people on money they haven’t got. We are taxing unrealised capital gain. I mean that is just ludicrous and I can’t believe anybody recommended that to the government.
Leigh:
Well this is the recommendation that’s come out. I mean these are…
Cenatiempo:
To tax money people haven’t got?
Leigh:
These are proposals that have been in the parliament for the better part of 2 years. We’ve taken them to an election. I’ve got to say I don’t get stopped in the street by people saying, ‘Well the real problem is that Labor’s trying to increase the tax rate on people with more than $3 million’.
Cenatiempo:
No, no, no, no. Again Andrew, stop, stop. See, you keep trying to put words in my mouth. I’m not talking about increasing the tax rate, I’m talking about taxing unrealised gains. Let’s focus on the issue here. Taxing money that people haven’t got.
Leigh:
Stephen, the approach we’re taking is consistent with the former government. It is a measured approach.
Cenatiempo:
No, no, no. The former government – the former government never, ever said they were going to tax unrealised gains on anything ever.
Leigh:
They made other changes to superannuation…
Cenatiempo:
But they didn’t say they were going to tax unrealised gains.
Leigh:
I understand the point you’re making Stephen, but this is something where it has been an issue for many years to deal with the tax concessions going to high income earners.
Cenatiempo:
Okay, so why not do that without taxing unrealised gains?
Leigh:
Well, when you get into the detail of it, this is the way which has been recommended to us as the best approach going forward. It is an approach which is going to leave 99.5 per cent of people unaffected. The vast majority of your listeners I suspect would be saying to themselves, ‘I’d love to have $3 million in super’. And so really this is a modest approach which is about ensuring the sustainability of the super system.
Cenatiempo:
All right Andrew, at the risk of doing exactly what I accused you of doing – putting words in your mouth. You’re an economics lecturer – a former economics professor so Andrew, your unwillingness to address the unrealised capital gains issue says to me you don’t believe in this either.
Leigh:
Stephen, we have looked at a range of alternative approaches. Those alternative approaches are incredibly expensive. They would come at the expense of all members, not just those with high balances. So this is the simplest approach…
Cenatiempo:
Well not if you say it’s just for people over $3 million.
Leigh:
The alternative approaches would require a rejigging of the super system which would be expensive for all members. Our aim is to ensure that those top 0.5 per cent of people pay a slightly higher rate of tax. They’re currently paying a 15 per cent tax rate, which will go to a 30 per cent tax rate. Still below what they would earn elsewhere.
So I don’t think people need to be concerned that they will be paying a higher rate of tax than they would outside the super system. Super will still be concessionally taxed and we’re doing it the way in which Treasury has recommended because that’s the simplest path forward and the lowest cost path forward.
Cenatiempo:
Again, we haven’t addressed the core point of this but Andrew we do have to move on. I appreciate your time, we’ll catch up in a couple of weeks.
Leigh:
Lovely, thanks Stephen.
Cenatiempo:
Dr Andrew Leigh, the Member for Fenner, Assistant Minister for Productivity, Competition, Charities and Treasury. Still, it’s that issue that they don’t want to touch; unrealised gains, taxing people on money that they don’t actually have.