8 April, 2013
Sky News AM Agenda
With David Lipson and Andrew Leigh MP
8 April 2013
8:30am
E & OE
Subjects: China-Australia relationship, Australian economy, National Broadband Network
DAVID LIPSON:
Joining me now on AM Agenda is the Parliamentary Secretary to the Prime Minister, Andrew Leigh, and the Shadow Disabilities Minister, Senator Mitch Fifield. Good morning to both of you gentlemen. First to you Andrew Leigh, Xi Jinping’s comments about a new level of ties between Australia and China. Are there any risks in those new levels of ties, for example with our relationship with the United States?
ANDREW LEIGH:
David, I think it’s a reality that Australia’s economic integration with China has been growing apace. I remember when I was first in politics working for the late Shadow Trade Minister, Senator Peter Cook, in the late 1990s, China was important but very much second fiddle to Japan. And that has just transformed as the economic relationship has blossomed. I was in Beijing last year for an Australia-China forum talking about the engagement, it is really important. I can understand that some Chinese would have been a little rattled by the sort of scaremongering over foreign investments that people like Barnaby Joyce were engaging in last year. And part of this is just reassuring China that Australia’s doors are open for business, that we are keen on having a relationship that stands foreign investment, trade, huge tourist flows there, two-thirds of a million Chinese coming to Australia, and it ensures that Australia gains as much as we can in the Asian century.
DAVID LIPSON:
So that won’t put off America?
ANDREW LEIGH:
I certainly think America has a deep commercial relationship with China as well, that will obviously coexist with robust discussions around for example, human rights. We have disagreements with China over issues such as Tibet for example, but we’re able to be firm friends, to be frank about where we disagree but also to find those many areas of commonality: the Australian architects that are helping to design projects in China, the Chinese students coming to study in Australia, both enriching each others countries.
DAVID LIPSON:
Mitch Fifield, it was a very positive message from Xi Jinping, the leader of our most important trading partner and it’s been backed by action as well. As I mentioned the trade fare and the currency deal too, do you support those elements and indeed the language coming from China?
MITCH FIFIELD:
We support the Prime Minister’s visit to China. It’s important for Australian prime ministers to be frequent visitors to China and we hope that the mission is a success and that the outcomes are achieved. But it’s well and good to go to China to say the right things, but a nation like China looks for certainty in its trading partners. And that certainty was damaged in relation to Australia as an investment destination by the mining tax, by the xenophobia that we’ve heard from this government in relation to 457 visas. Now that has not helped Australia’s reputation as a safe and predictable place for foreign investment. And on the other side of things, China looks to its trading partners, from whom it imports, to also be reliable. And what Minister Ludwig did in relation to live cattle exports to another of our trading partners could only have caused concern in China. It’s good to talk the talk and we wish the Prime Minister well on her venture in China but you’ve got to have the policies that back up that certainty that our trading partners are looking for.
DAVID LIPSON:
What about another round of free trade talks. We’ve heard Laura Jayes saying there that there’s been talk of this for quite a few years already, more than half a decade. Is a free trade deal Andrew Leigh, with the Chinese automatically a good thing when you consider that they can produce goods much cheaper than we can?
ANDREW LEIGH:
Well I’m an economist David, and it’s almost hallmark of entry to our profession that you have to believe that free trade raises incomes and I think empirically the evidence bears that out very strongly. Australia is better off for being engaged in the world, not only because we buy things at cheaper prices but also because we get the innovation, the know how from engaging in other countries. Practically how to bring down those trade barriers, well I tend to be a supporter of multilateral agreements where you can, but increasingly the World Trade Organisation has stultified. The Trans-Pacific Partnership which is a smaller sub-set of countries trying to strike a trade deal looks more promising but hasn’t yet delivered the goods. So then you begin to look at these bilateral relationships. They’re not ideal but if that’s the best we can do to bring down trade barriers to allow our exporters better access into Chinese markets then that’s something we may have to look at.
DAVID LIPSON:
Has it been a failure of this government and the previous Rudd Government as well that there’s been talk for so long about a free trade deal and we haven’t got really anywhere.
ANDREW LEIGH:
Well these negotiations are progressing but they progress on a number of fronts. There are typically an enormous number of things that need to be nailed down in a bilateral deal. Bilateral deals tend to be more complicated than the multilateral deals. Countries are more tempted to put new things on the table when they’re dealing one-on-one than they are when they’re sitting around the table with a hundred and eighty odd countries. So sometimes you get too many issues on the agenda and that becomes difficult to resolve. I’d be keenest I think to see China playing part of a really strong push to bring down trade barriers to the World Trade Organisation and the worldwide benefit to that are hundreds of billions of dollars. It’s good we didn’t see a big increase in tariffs in the Global Financial Crisis as some had feared. It would be better yet if we could bring down those tariffs further.
DAVID LIPSON:
Mitch Fifield, what’s the Coalition’s position on a free trade deal with China?
MITCH FIFIELD:
Unlike the Labor Party, we’ve always been strongly supportive of bilateral free trade agreements. The Australian Labor Party in government have always had a much stronger preference for working through multilateral agreements, particularly under Kevin Rudd. But we take a much more pragmatic approach. If you can get a good economic outcome for Australia, whether it be a multilateral or a bilateral agreement, you should pursue that. And if multilateral negotiations aren’t travelling too well, then the real opportunity is there in the form of bilateral trade agreements. And the way that you get those is by intensive, constant discussion and negotiation and probably Australia has suffered from a bit of a lack of that by having Craig Emerson as the trade minister. Because as you would know David, whenever Dr Emerson isn’t on Sky, he is on another network. He is doing a doorstop somewhere else. He is almost never focussed on or talking about his trade portfolio. He is always focussed on and talking about domestic Australian politics. And more than that, he’s almost always talking about internal Australian Labor Party politics in the media. So I think it would be a real boost to Australia’s negotiating position in bilateral free trade agreements if Dr Emerson did less media, spoke less about domestic politics, spoke less about internal Labor Party matters and focussed on his day job.
ANDREW LEIGH:
Well David, I should just say something on that. I mean Craig Emerson is a very strong advocate for Australia and the world and I reject the sort of nasty attacks on Minister Emerson, who has travelled extensively to the Middle East and America.
MITCH FIFIELD:
It wasn’t a nasty attack. It’s a statement of fact.
ANDREW LEIGH:
To Asia. He’s been a strong advocate for Australia’s interests around the world. He is deeply committed to an open Australia engaged in the councils of the world. I think that’s exactly the sort of trade minister we need, following very much in the traditions of people like Bob McMullin and Peter Cook.
DAVID LIPSON:
Well in China Julia Gillard couldn’t escape the superannuation debate that was going on back here in Australia. She was asked about comments made by the Opposition Leader Tony Abbott where he compared the Government’s superannuation changes to Cyprus and what the government is doing there. That resulted in Julia Gillard lashing out at the Opposition Leader as an “economic simpleton”. Let’s take a look, and his response.
JULIA GILLARD (file footage):
You know the kind of economic simpleton talk.
TONY ABBOTT (file footage):
The Prime Minister shouldn’t use an overseas trip to make domestic political comments. I think that the extreme language of the Prime Minister is unworthy of that great office.
DAVID LIPSON:
First to you Mitch Fifield, that comparison with Cyprus, that’s overblown isn’t it?
MITCH FIFIELD:
Tony Abbott wasn’t saying there was a direct parallel between Australia and the Labor Party’s policy and Cyprus. He was saying there were “shades of”. Clearly this Government is on a hunt for revenue and they’re looking to gouge some of the retirement savings of Australians who’ve worked hard and put money aside. That was the point that he was making. And I defy anyone to say that this Government is on anything other than a hunt for revenue to compensate for the fact that they continue to spend more money than they bring in in taxes despite the fact that their revenues have been increasing year on year.
DAVID LIPSON:
But even “shades of Cyprus”, I mean they’re too dramatically different economies, Australia and Cyprus.
MITCH FIFIELD:
They’re different. But as I say, Tony wasn’t doing a direct analogy. He was just saying that there were echoes of, shades of, a hint of, a touch of. I think the Prime Minister needs to take a big deep breath. There was certainly a very strong and inappropriate response to refer to Mr Abbott as a “simpleton”. I don’t think anyone who leads a major Australian political party is a simpleton. Tony Abbott has an economics degree and I’m sure he will continue to be attacked by this Prime Minister and this Government whenever he points out the fact that this Government is living beyond its means. That it is entirely unpredictable when it comes to policy. It thinks nothing of gouging money from people’s superannuation. And if re-elected, we know that this government would continue the gouging.
DAVID LIPSON:
Andrew Leigh, was that appropriate, that sort of commentary from overseas from a base like China?
ANDREW LEIGH:
I think it was a response to a question about domestic politics David, and it seemed perfectly accurate. I mean the sort of dooms day cult mantra we get from the Opposition talking the economy down, constantly exaggerating any difficult for the Australian economy, isn’t in the national interest. You know we saw again in the Telegraph today Andrew Robb suggesting that Labor hadn’t saved Australia from the Global Financial Crisis. Well against Andrew Robb I give you Nobel laureate Joseph Stiglitz, who has said very firmly that it was Labor’s intervention to prop up an ailing economy in 2008-09 which saved those hundreds of thousands of jobs. And every one of those jobs is a life not blighted by a spell of unemployment. A spell that sort of deep sense of powerlessness and hopelessness that comes from looking for work and being unable to find it. That’s the difference between the major parties. We chose to save jobs when the Global Financial Crisis hit. The Opposition are still walking around pretending as those the Global Financial Crisis didn’t happen, pretending as though somehow Australia could have skated through without taking on any debt, which I don’t know any serious economist who backs that position.
DAVID LIPSON:
Australia has indeed taken on a lot of debt.
ANDREW LEIGH:
Well not a lot. I disagree with that.
DAVID LIPSON:
The deficit, the promise of a surplus I should rephrase, has been thrown out and replaced with the likelihood of a deficit this year. And yesterday Penny Wong, the Finance Minister, on Sky News well she refused to confirm that Labor would deliver a surplus in the years ahead. She said that the fiscal strategy would be transparent to all. So does this mean that we’re going to have a deficit not just this year, but in the forward estimates as well?
ANDREW LEIGH:
Well we’ve been very clear that we will balance the budget over the economic cycle. But that is also something that needs to be balanced and taken into context of what’s happening to revenues. We’ve seen this sort of perfect storm with commodity prices coming off a little but the Australian dollar still staying high. And that means that we get this double whammy on prices, resource companies returning lower profits because the commodity prices are down but still challenges for other firms who are export-oriented as a result of the high Australian dollar. That makes it difficult for government revenues which is why government revenues are well down on their average over the last decade. You know, if we had the Howard Government’s tax to GDP share, we’d be comfortably in surplus. If they had ours, many of Peter Costello’s budgets would be in deficit. That’s just a simple economic fact.
DAVID LIPSON:
Mitch Fifield, a response?
MITCH FIFIELD:
David, we’ve got to nail once and for all this idea that the budget is in deficit because of revenue write-downs. There are some simple facts here. This Government is bringing in $70 billion a year more in revenue than in the last year of the Howard Government. Even this financial year to date, revenues are projected to be up five per cent on the previous financial year. The problem is that this Government, although revenues are up, is spending $100 billion a year more than in the last year of the Howard Government. So it is completely untrue to say that revenues are down. Revenues are up $70 billion up on the last year of the Howard Government. The problem is that spending is up by even more. The reason why this budget is in deficit and every single Labor budget has been in deficit is because they are spending more than they are bringing in in revenue despite the fact that revenue is up on the period of the Howard Government. That is the truth. When this Government says revenue write-downs, what they’re talking about is a reduction in the forecast of revenue. Now a revenue forecast is not a reduction in revenue.
DAVID LIPSON:
The Coalition also has some big spending promises. A more generous paid parental leave scheme, it’s on board with the NDIS, some pretty expensive commitments. One of the savings that the Coalition has identified is in the National Broadband Network and we may be seeing a Coalition policy sooner rather than later as Tony Abbott said yesterday. There’s a suggestion today though Mitch Fifield, that the Coalition estimates that the Government’s NBN could cost in the end $90 billion. That’s well more than double than what was suggested, it’s an extraordinary figure. How does the Coalition figure that?
MITCH FIFIELD:
There are some reports and some analysis that’s been done that indicate that this Government’s NBN program could cost double what the Government initially said it would cost. Now that’s not a huge surprise to us because this Government never produced a business case for the NBN. They didn’t do a cost benefit analysis. It was essentially back of the envelope stuff. Stephen Conroy deciding the fast broadband network would be a new telecom or for those old enough to remember, a new PMG…
DAVID LIPSON:
I’ve got interrupt, we need to give Andrew Leigh an opportunity to respond, we’ve just got about thirty seconds left.
ANDREW LEIGH:
The NBN will come in on budget, $37.4 billion completed by 2021. That’s because this is a very large infrastructure project, the largest in Australia’s history in fact of this kind. And the alternative to not doing the National Broadband Network is the Coalition’s suggestion that every household should have to pay $5000 to connect from the node to the home.
DAVID LIPSON:
Ok, I’ve got to interrupt you as well Andrew Leigh, Mitch Fifield we are out of time. Thanks for joining us on AM Agenda.