ABC RN DRIVE
THURSDAY, 25 JULY 2019
SUBJECTS: Reserve Bank Governors Speech;Superannuation Guarantee Levy;national security legislation.
PATRICIA KARVELAS: After years without an interest rate cut, Australia has had two in quick succession. Taking the cash rate to a new record low of 1 per cent and while the Reserve Bank acknowledges the fundamentals of the economy is strong, they're clearly not satisfied with the current state of play. Today, RBA Governor Philip Lowe signalled the bank could cut rates even further if infrastructure spending and tax cuts don't do enough to stimulate the economy. With wages still stagnant, it's unclear how much difference even lower interest rates might make. Stephen Jones is the Shadow Assistant Treasurer and Shadow Minister for Financial Services and he joins us this evening. The Reserve Bank is clearly concerned that inflation is still so low. What do you make of Philip Lowes comments today?
STEPHEN JONES: This is just the last in a series of comments in which the Reserve Bank Governor has said that he believes that we've just about reached the end of the capacity of monetary policy to stimulate the economy. It's a not-too-subtle call to the Government that we need to be pulling down on some fiscal levers. That means initiatives which are going to get more money into the economy, more money into people's pockets, infrastructure spending and looking at other ways that we can stimulate spending through the household sector.
KARVELAS: Interest rates are almost zero. Would another interest rate cut make much of a difference?
JONES: I think what the Reserve Bank Governor is saying over the short term is that he doesn't believe that another interest rate cut is going to get the sort of stimulus which is going to make much of a difference around employment, or much of a difference around household spending. Over the longer term, it might, but over the short term, if you read between the lines of the Reserve Bank Governors speech and previous statements, he doesn't believe that you're going to get a big boost, the same sort of that you might have got in years past.
KARVELAS: You say what the Government has done so far isn't working, isnt it just too early to make that call? These tax cuts were only legislated a couple of weeks ago and infrastructure spending is starting to flow into the economy. Isn't there a sort of wait-and-see period?
JONES: We have have tried the wait-and-see approach before. If you look at some of the criticisms we did ourselves in the late 1990s. We waited too long before we put fiscal stimulus into the economy. We saw unemployment grow at unacceptable rates. When you look back on it, when economic historians look back on it, they say if wed have gone earlier, if wed have gone harder we probably could have avoided hundreds of thousands of people being out of work. It was that approach which informed the very successful, almost uniquely successful, approach that the Rudd and Gillard Government's took to fighting the GFC in the early parts of 2007 to 2010. I don't think there is an argument for waiting and I think we should have all things on the table to look at how we can stimulate household expanding and get more money into the economy. It's why, for example, this week we've said there is a case to be made for increasing the rate of Newstart, there is a case to be made for bringing forward spending in infrastructure, where we can get some stimulus into particularly regional economies. All things should be on the table, there's two ideas.
KARVELAS: Today, the outgoing Secretary of the Department of Prime Minister and Cabinet, Martin Parkinson, said low productivity was essentially holding Australia back and business agrees. Does that mean that there is a case for industrial relations reform here, too?
JONES: Martin Parkinson, congratulations on a stellar career. Why do we always jump to industrial relations when we're looking at the need for productivity reform?
KARVELAS: How would you improve productivity?
JONES: In my experience when you get a lot of the employer associations behind closed doors, some of the first things they point to is the quality of middle management. It's about the quality of management and the expertise of management in this country and some of the best yields that you're going to get are not through further tax reform, not through industrial relations changes, it's about improving the quality of management and management decision-making, particularly at that middle level. I think that's where we're floundering and that's where much more attention needs to be put. I agree with Martin Parkinson. We've got a terrible problem with productivity. We tried, and Australia tried, the low road by attacking workers wages and conditions throughout the WorkChoices era. You didn't get the sort of yield that you're expecting.
KARVELAS: No one's talking necessarily about those reforms. It doesn't have to be industrial relations in the same way as WorkChoices. It's a very extreme example and the electorate made a judgment on that.
JONES: Let's go to the sorts of areas where we think we are going to get a big yield and I think it's definitely through improving the quality of middle management. I say to those calling for industrial relations reform, what is it that you really want to do now that you can't do already? We've got one of the most casualised workforces in the world. We've got wage growth at record lows. We've got an unacceptable level of reserve labour, where despite the efforts of the Reserve Bank Governor, despite the efforts of many others, employment growth is just not there at sufficient levels and what we're seeing is the spare capacity within the labour market is not being filled necessarily by new jobs being created. Its being filled by people going from very part-time jobs to slightly less part-time jobs. A lot of people working less hours than they actually want to work. I think we've got to be pulling down on different levers. Fiscal policy has a role to play, looking at the quality of management and middle management, and education and training in that area has a role to play as well.
KARVELAS: The Prime Minister has ordered a review of the superannuation system before the next scheduled increase in the compulsory contribution. What would you like to see come out of that?
JONES: We welcome an analysis of superannuation. One thing I've got to say we're very concerned of and that is that this is going to be a stalking horse for the campaign that has been waged within the Liberal Party to cut the planned increases in the Superannuation Guarantee Levy, currently at 9.5 per cent and was supposed to be a 12 per cent by now. The decisions of the Abbott Government to freeze the SGL level at 9.5 percent left many workers thousands and thousands of dollars out of pocket already. We're concerned that if this review is simply about axing future increases in the Superannuation Guarantee Levy, a worker on average wages at the moment, say somebody in their 30s today who's on a wage of $80,000 a year by the time they retire they will be $90,000 worse off in their retirement savings. That's not acceptable, particularly when the people championing these changes are on superannuation benefits of 15 per cent. Surely the people who clean their officers are entitled to something that approaches the percentage of superannuation that they're enjoying themselves.
KARVELAS: NSW Liberal Senator, Andrew Bragg, says super should not be compulsory for people earning less than $50,000. I know you've been very critical of this proposal. At the heart of it is a critique also of the fact that a lot of these people end up on the aged pension anyway. Isn't it worth considering a proposal that allows someone to buy a house, or to build their assets, or to do something else with their money when they're on low incomes?
JONES: We shouldn't make one being the enemy of the other. We've tried this experiment in the past, when superannuation was voluntary or when it was produced at the discretion of an employer. Men had it, managers had it, senior employees had it, women rarely did and low paid workers mostly never did. We've tried the voluntary experiment before and what it has led to is low paid workers having a very dire set of circumstances when they retire. What is often dangled in front of workers when this argument is run is, if you don't take the money as superannuation, you might take it as wages and frankly that's disingenuous. The scheduled increases in superannuation are set to take place at 0.5 percent per annum increments from 2021 through 2025. Over that entire period there will be increase of 2.5 percent. That is less than one year's increase on the Government's own estimate in wages increases if we were to return to trend in average wage increases. 2.5% not kicking in for another two-and-a-half years and yet we're supposed to make this trade-off today. It really is disingenuous. There's no way the Government can say if you don't take it as super, you'll get it as a wage rise, that never happens. Workers will see no increase in their wages and no increase in the superannuation as well. We just don't think that's right.
KARVELAS: Scott Morrison's foreign fighters bill has become law, passing the Senate this afternoon, after Labor expressed doubts. You ended up voting for it. I ask you this, I know its not your portfolio area, but as a Labor leftie, you've passed a bill that you've said gives too much power to Peter Dutton to exclude citizens suspected of aiding terrorists overseas. Are you entirely comfortable with this?
JONES: I'm not entirely comfortable with the powers that have been given to the Minister.
KARVELAS: But you helped give them the to the Minister.
JONES: At the end of the day the bill was going to go through the Senate and the crossbenchers were supporting the Government. We made quite clear the sorts of amendments, or changes, to these laws that a Labor Government would make if we are successful at the next election, but the fact of the matter is we're not in government. It is our job as the Opposition to point out the shortfalls in the legislation. We've generally taken the view, except in the most extreme circumstances, that we don't try and politicise or take a partisan approach to national security legislation. One thing I can be certain of is if Labor wins at the next election, there will be a requirement for a judicial warrant for the sorts of powers that are currently proposed to be exercised by the Minister