6 May, 2013
Sky News AM Agenda
With Kieran Gilbert and Andrew Leigh MP
6 May 2013
8:40am
E & OE
Subjects: Paid Parental Leave, the economy
KIERAN GILBERT:
With me now Liberal frontbencher, Senator Mitch Fifield joining in Melbourne, and in the Canberra studio Labor MP Andrew Leigh. You’ve heard the discussion with Christopher Pyne this morning, Andrew Leigh. It’s healthy for parties to have internal debate about the merits or otherwise of policies, but from the frontbench a very clear message, isn’t it?
ANDREW LEIGH:
Well Kieran I am very different ideologically from Alex Hawke but I do appreciate the fact that he enjoys a good intellectual argument. And what he’s been saying here over paid parental leave, this isn’t just an inequitable scheme, as Labor has been arguing. Someone on $200,000 gets $100,000 government support. But it’s also an illiberal scheme and Alex is concerned that it represents a slide into illiberalism from the Coalition. It’s a Coles and Woolies tax funding a scheme which is much more European style.
KIERAN GILBERT:
Most of the OECD does have more generous paid parental leave schemes. As an economist, don’t you think that it is a productivity measure to get women back in, to provide the encouragement to get back into the workforce?
ANDREW LEIGH:
Well I think you should always look internationally Kieran but the thing that marks out the Australian social safety net is that traditionally it has been much more targeted to those most in need. This is the opposite. This is a scheme which is at its most generous for someone on a six or seven figure income.
KIERAN GILBERT:
But does that make sense as a productivity measure, to encourage those women back into the workforce? You don’t see the merits of that?
ANDREW LEIGH:
I don’t think there’s going to be any tangible productivity lift compared to Labor’s paid parental leave, which is a much more equitable scheme and I think a much more economically liberal scheme. If Tony Abbott is concerned about gender equity, he might think about the fact that he’s raising of superannuation taxes on low income earners which will disproportionately hit low income women. He might think about the fact that his IR policy will take away penalty rates disproportionately from women. They’re the kinds of gender issues that matter.
KIERAN GILBERT:
To be honest, we don’t know what the policy, workplace policy is yet so that’s a bit presumptuous. Let me go to Senator Fifield and ask you about this. Alex Hawke, I get the sense hasn’t done this, well he’s written this piece on his own but he reflects a broader sentiment within the Coalition.
MITCH FIFIELD:
Kieran, Alex is a good guy. He’s a friend of mine and he’s a thoughtful contributor to public policy debate. He has put forward the view that the PPL should be reviewed. It’s not a view that I share. We have a good paid parental leave scheme policy. We will take it to the next election. And should we be fortunate to form government, we will legislate it in the parliament. And if I’m Manager of Government Business it will be my job to see that that gets through. That will be a good thing for women in Australia. It’s twenty-six weeks at your own salary, up to a maximum of $150,000. And as anyone who’s had kids knows, it’s when you have kids that you can least afford to lose that money. So this will be important for Australian families. And I’m a strong supporter of Tony Abbott’s policy.
KIERAN GILBERT:
Is this a battle over where the Liberal Party is headed, a presumption that you will win in September and the economic dries are trying to pre-empt or preclude a tax and spend, a big tax and spend policy like this?
MITCH FIFIELD:
I don’t think so Kieran. I think it just reflects the fact that we, unlike the Labor Party, have a vigorous party room that is used to having debates. That is used to having discussions. We don’t shy away from individual members of our party room having views and expressing them. Alex doesn’t have shadow executive responsibilities so he is perfectly at liberty to put his views. They’re not ones that I share. I think that we should take to the next election the policy that we have which will make a real difference to many families when they have kids.
KIERAN GILBERT:
Just finally to you on this Senator Fifield, you’ve heard what Christopher Pyne had to say, reminding colleagues that there are only 131 days left until the election. I suppose it was a pretty clear warning to them to pull their heads in. He didn’t say it in those words but discipline has been strong to this point. Do your colleagues need to avoid complacency or hubris?
MITCH FIFIELD:
The Australian Labor Party can win this election. Australian federal elections are always competitive and every member of the party room is very much aware of that. But that’s not at odds with colleagues having views and expressing them. But it’s incumbent upon all of us to recognise that this election could go either way Kieran.
KIERAN GILBERT:
Let’s move on. The Financial Review is reporting today Andrew Leigh that Treasury’s now working on the basis that economic growth this financial year and next is at 2.75%. That’s down a quarter of a per cent on the mid-year budget uptake. Does that make sense to you given where the broader parameters are at?
ANDREW LEIGH:
It struck me as an odd story to be honest, Kieran. I find that, you know as we know economic growth is one of those parameters that you want to estimate based on all the available data. We’ve got a number of data releases coming out this week. We’ve got the RBA decision. I’d actually be pretty surprised if that forecast has been locked down at this stage. You know, the fact that Australia is talking about growth somewhere around three percent would to many countries in the world be an extraordinary luxury. We’ve grown thirteen percent since 2007. Europe has shrunk. The US has enjoyed only a couple of percentage points of growth.
KIERAN GILBERT:
But things are looking a bit more sluggish now and there is a sense that the outlook is not as good as it has been. Do you think that the RBA is being too cautious? Because many economists do – Ross Garnaut, Bob Gregory, John Hewson.
ANDREW LEIGH:
The RBA makes its own decisions and I don’t think there’s an advantage in me putting my oar in on that, Kieran. We’ve got a cash rate now sitting at three percent. There’s certainly, again compared to other countries who’ve hit that lower bound and then need to engage in more unconventional practices like quantitative easing, that’s an advantage. Yes the high dollar has posed challenges for some sectors of the economy. The Prime Minister talked about that from the revenue stand point last week. But let’s look around the world and let’s realise that most economic policymakers would love to have the set of numbers that Australia has today.
KIERAN GILBERT:
Despite the criticism, Senator Fifield that the Coalition has had on government spending, of course it’s a very contestable space whether the Government has spent too much or just enough to keep jobs and growth going. What’s your view though when you look at the broader picture as Andrew Leigh put it there? Global growth has been sluggish. We’re doing very well compared to other nations, aren’t we?
MITCH FIFIELD:
Kieran, this Government present themselves as hapless victims of circumstances beyond their control. The budget is something that just happens in complete isolation to them, apparently. The problem here is that every budget this Government has delivered has been predicated on everything going right. Predicated on the most optimistic revenue forecasts. Predicated on the most optimistic growth forecast. And predicated on the most unrealistic assumption of all and that is that the Australian Labor Party could exercise some self-discipline and some restraint when it comes to spending. So Kieran, Labor will point to, they will grab on to, reduced growth forecasts like a lifeline as another excuse for why their budget is in such an appalling situation. But we’ve got to keep coming back to the fact that this Government has about $70 billion a year more in revenue than in the last year of the Howard Government. Revenue, even this financial year, will be $25 billion up on the previous financial year. But the big problem is that despite the fact that there are growth in revenues, spending is growing by even more. Spending $100 billion a year more than in the last year of the Howard Government. That’s the problem. We don’t have a growth problem. We don’t have a revenue problem. We have a spending problem.
KIERAN GILBERT:
We will have this debate no doubt many times over the next couple of weeks in the lead up to May the 14th and after Wayne Swan’s sixth budget. I do want to look now to some analysis that you’ve done, Andrew Leigh. You’ve got an upcoming book called Battlers and Billionaires. It’s a follow up from your research at university as a professor in economics. Looking at wage levels, who is in the top 1 percent, who is in the top 0.1 percent, and looking at inequity in the wake of the Global Financial Crisis. What have you found?
ANDREW LEIGH:
Well Kieran, the big story of the last generation is rising incomes at the very top and incomes at the top outpacing the middle. The top 1 percent share has doubled over the past generation; the top 0.1 percent share has tripled. In order to get into those groups now. $210,000 takes you in the top 1 percent. Nearly $700,000 in the top 0.1 percent. And so it’s important I think to engage in a national discussion around how much inequality Australia wants and whether too much inequality is threatening to strain our social fabric.
KIERAN GILBERT:
Do you think that this is a short-term phenomenon after the financial crisis which has exacerbated this or do you see any sign that things were becoming more equitable?
ANDREW LEIGH:
We actually saw a small drop in top incomes as a result of the financial crisis Kieran, and now we’re seeing a rise again in the post-GFC years, getting nearly up to the point where top incomes were. It’s a challenge.
KIERAN GILBERT:
Do you go to a Scandinavian system where people cap, companies cap executives?
ANDREW LEIGH:
I don’t think that would make a lot of sense in the Australian context because then you have the loss of talent as well. Really what Battlers and Billionaires is seeking to do is to spark a debate much more in the spirit of my old job as a professor than in my new job as a policymaker. I do think a national conversation about the gap between rich and poor is important. I know Mitch will have views on that and they’ll be different from mine. What I’m keen to do is just to have more of a conversation about these matters.
KIERAN GILBERT:
You’ve heard what Andrew Leigh’s had to say, Senator Fifield. Any thoughts on that this morning?
MITCH FIFIELD:
It’s good to be part of the Andrew Leigh Book Club this morning, Kieran. Andrew makes observations about the gap between rich and poor. As important, if not more important, is the absolute level of income that people have rather than the relative gaps between the incomes that individuals have. We want to see the economy grow. We want to see incomes grow for everyone. We don’t want to be in the situation where you’re looking at what someone a bit above you may earn. That’s always the definition of a wealthy man is someone who earns more than you do. What we want to do is make sure that everyone is earning more.
ANDREW LEIGH:
I certainly agree with that point Kieran, and I guess the ideal low is growth with equity rather than having to choose between growth and equality. And certainly in Australia we’re fortunate that incomes have grown at the bottom as well as at the top. That’s not something they see, for the example, in the United States where once you adjust for inflation, incomes in the bottom 10 percent have barely budged in four decades. So we’ve done well in Australia. I guess what I’m flagging up is a concern that the great Australian tradition of egalitarianism might be under threat.
KIERAN GILBERT:
Senator Fifield, thanks for being with us on AM Agenda and the Andrew Leigh Book Club. Appreciate it. Andrew, thank you for your time. Appreciate it.