Here’s the transcript of the Treasurer’s Press Club address this afternoon. Pretty clear now where he’s taking his assault upon the billionaires, straight to Tony Abbott’s door and, to be honest, Abbott is going to struggle against this attack. Opposing the carbon tax may be a political winner. Opposing the mining tax isn’t. This is a nice wedge to Tony’s “high taxing Labor” rhetoric.
Thanks Laurie (Wilson) for the introduction; thanks to the Press Club for organising such a good turnout; and thanks for the warm welcome.
As most of you would appreciate the job of Treasurer is an all-consuming one, especially so when you combine it with the job of Deputy Prime Minister. So when last Christmas rolled around I was really looking forward to the prospect of some family time, and the opportunity to tackle some of my own reading, beyond the usual offering of briefings and memos.
For reasons that are pretty well-known – from global meltdowns to tax reviews to natural disasters – there hasn’t been time in recent years to make much of a dent in my summer reading. But this year was different. I had a bit more time for family, for friends, and to really immerse myself in a debate that is raging around the world – one that President Obama calls the ‘defining issue of our time’.
It’s a topic that drew me to the Labor Party four decades ago; one that spurred me into the parliament 19 years ago; that inspired me to write a book seven years ago; that motivated me to publish an essay over the weekend; that got me up this morning; and that brings me here today.
In the international debate, they describe this issue as equality, or as social mobility, but here in Australia we’re used to calling it the fair go. The idea of a fair day’s work for a fair day’s pay, opportunities for our kids irrespective of where they were born or who their parents are, and a decent safety net for the most vulnerable. And given my lifelong passion, I was pleased to find available over the summer so much thoughtful writing and reflection on the gap between rich and poor and what it means for the economies of the world.
I was heartened to see this issue capture the attention of some of the world’s finest economists and thinkers; names like Roubini and Krugman and others – some of the absolute greats. But the most telling indication of the urgency and intensity of the debate was the fact the Financial Times, a flag carrier for freer markets, opened its pages to the debate with its compelling Capitalism in Crisis series. If you can only read two things on all this, read that series and read the Fukuyama contribution in Foreign Affairs, about the impact of the declining Western middle class on the very foundations of capitalism.
Surveying the wreckage of the GFC, Fukuyama argues the idea of the middle class society is under mortal threat in the West, even as a growing middle class is lifting hundreds of millions out of poverty in the East. It was this argument that prompted me to write the Monthly essay and come here today, really to make four main points about: why this debate about inequality matters in Australia; the role of our contemporary policy mix in advancing the fair go in this country; why productivity, competitiveness and wealth creation is so crucial to providing opportunities to more people; and the risk posed by vested interests who’d rather see the benefits of the Asian Century flow disproportionately to a fortunate few.
So my first point is that the global debate about rising inequality is genuinely relevant to Australia today. Although this issue is being hotly contested overseas in the media, in parliaments, in universities, and on campaign trails around the world, the volume of the conversation here has been a lot lower. And although the Occupy movement that began on Wall Street also reached our shores, its local incarnations on the streets of Brisbane, Sydney, Melbourne and even Canberra were not really comparable.
You often hear commentators say our local debate is isolated or complain that we’re not talking about what’s being talked about in the great centres of the world. In this case though, I suspect our debate is different because our reality is different. Simply put: we actually are fairer than much of the world.
Australians have done much better matching strong growth with social equity than almost anyone over the past century, and particularly in the aftermath of the global financial crisis. One of Australia’s great achievements in the twentieth century was the creation of a truly middle class society. One where the overwhelming majority can get a good education, gain valuable skills, experience the dignity of employment, feel they have a stake in the character and direction of the national community, and have the resources to provide an even better life for their children. In Government, over the past four years, we protected this achievement and we built on it.
The social upheaval and disillusionment that’s occurred in so many other parts of the world has not been the Australian experience. So as you follow the debate overseas, you can’t help feel a sense of appreciation for what we’ve achieved in Australia. In the essay, I detail some of the indicators that show how well we stack up: Like the fact that incomes for the poorest 10 per cent of Australians have grown at more than double the average for developed economies in recent decades. Like the fact that shortly after the Second World War, Australia and the U.S. were roughly equal in the percentage of total income going to the top 1 per cent, while today the gap in Australia between the richest and the rest is less than half that of the U.S. And like the fact that Australia has done a better job than most other countries at preserving economic mobility – at making sure that success can be determined by hard work and effort and not simply where you were born or who your parents are.
So across 17 OECD economies, Australians that are in the bottom 20 per cent of income earners are the equal third most likely to lift themselves out of that situation within three years. We’re at the top of the ladder when it comes to letting people climb the ladder. But with pride comes the sense that without constant attention these achievements and the egalitarian social contract upon which they rely is also somehow fragile, and at risk.
As the Prime Minister said last week, this didn’t happen by accident, this took leadership, not luck. And it’ll continue to take leadership to protect the fairness we value for the future. This brings me to my second main point: that there is nothing accidental about our record of social and economic mobility – it’s a product of our history; a reflection on our people; and a tribute to our policy successes.
You see, the fair go was never pre-ordained or guaranteed; we’ve always had to fight for it. And I’m proud the labour movement has always been there, guarding it, advancing it, extending its reach. I’m talking here of things like the aged pension or superannuation; or Medicare; or paid parental leave; or the defeat of WorkChoices – all proud Labor achievements underpinning the fair go. Same goes for the Education Tax Refund we introduced; or more money for parents of teenagers, or the boost to the childcare rebate. Or laying the foundations for a National Disability Insurance Scheme; or better schools for our kids; or tripling the tax free threshold to benefit workers.
Or the Labor values that make sure government payments are sustainable and targeted to where they are needed most, with practical steps like pausing indexation on some payments and means-testing the private health insurance rebate. These policies are all guided by deeply held values. They are guided by sound economic thinking as well.
Inequality isn’t just unfair – it’s inefficient. It makes no moral sense for the battler to subsidise his boss’s private health insurance. It makes no financial sense either. That’s why we’ve struck a balance between strong fiscal discipline and continuing to support job creation and growth.
And these important savings which double as fairness measures show that our determination to return the budget to surplus in 2012-13 doesn’t come at the expense of our determination to keep providing a helping hand to those that need it most. Because ensuring more Australians feel the benefits of a growing economy is core business for the Labor Party and we’ve got a very proud record of dedicating these policies to nourishing the fair go.
But we also know it’s not possible to give everyone a bigger piece of a smaller pie – they need a bigger piece of a bigger pie. And this is what brings us to the productivity challenge, our wealth creation agenda, and my third main point today:
That even with our successes to date, the big opportunities for Australian workers and businesses in the global economy can only be maximised into the future if we find ways to boost productivity, so we can create more wealth.
As you know, our future is being shaped by the relentless shift of global economic weight towards Asia. And as the global economy changes, this will inevitably change the structure of our own economy. The Asian Century can be as much the Australian Century if we make the right decisions and adopt the right policies.
In the 1950s, only 15 per cent of global GDP was created within 10,000 km of Australia’s shores. Today, that share has doubled to around 30 per cent – and it could double again to almost two-thirds by 2050. This is already making an enormous imprint on our own economy, as Asia’s enormous appetite for our mineral commodities drives an investment pipeline in the resources sector worth $456 billion. But the demand for resources is just the first taste of the economic transformation that’s underway in the Asian Century.
In just eight years from now, there’ll be more middle class consumers on our doorstep in Asia than in the rest of the world combined. These new ranks of middle-class consumers will increase demand for more than just our mineral wealth. It will also benefit Australia’s tourism operators, education providers and manufacturers of high-end goods. But while the opportunities are immense, so are the challenges.
While industries in the fast lanes compete for better infrastructure and skilled workers, manufacturers, tourist operators and other sectors are coming under immense competitive pressure from the high dollar and weaker global demand. Many workers and businesses are understandably apprehensive about what the future has in store. This is despite our economy’s solid growth, low unemployment, contained inflation and strong public finances – a considerably more accommodating backdrop compared to past periods of structural change.
You only have to look back to the early ‘90s, where workers and businesses adjusted to the dismantling of the tariff wall at a time of recession and double-digit unemployment. That gives us grounds for confidence – but not complacency. Because our success has never been an accident of our geography nor our geology – and it never will.
At the end of the day, the key ingredient to higher living standards of all Australians is productivity growth. Only greater productivity can help sectors of our economy make a sustainable adjustment to the pressures of a high dollar. And only greater productivity will make us the winner in the Asian Century, only greater productivity will build the manufacturing, agricultural and service sectors of the future which can compete for the business of the rising global middle class.
It’s why we’re investing in education, skills training and apprenticeships, delivering faster and more widely available broadband, and improving the delivery of services such as health care and public administration. It’s why we’re reforming the tax system, improving the competitiveness of businesses through cuts to the tax rate, and driving innovation in areas like clean energy technologies by pricing carbon. All to lift productivity. By fostering gains in broad-based productivity, we will lay the foundations for the long-term prosperity we need to spread opportunity right through our land.
Over the decades, I have come to appreciate this basic equation: productivity equals growth equals opportunity. And I’ve come to appreciate just how much business understands this equation too.
The overwhelming majority of businesspeople in this country are a force for good in our society; I have tremendous respect for them. I know they want to work constructively to ensure we make the most of the opportunities of the Asian Century. And I know that 99 per cent of Aussie businesses know how critical it is that we simultaneously prepare for the challenges ahead and retain the fair go.
For every Andrew Forrest who complains about high company taxes and then admits to not paying any, there are a hundred more that go about employing Australians and creating wealth in a constructive way. Like those who held on to their employees and worked with government to keep the doors of business open during the dark days of the GFC.
But despite the best efforts of government and the vast majority of businesspeople, I still feel that our prospects in the Asian Century and our proud egalitarian tradition are in grave danger. This is my fourth main point for today and I want to take some time to explain it.
As I wrote in the essay, the idea that an economy exists to serve society has always been one of the legitimising pillars of capitalism. We can all agree that rewards should be proportionate to effort and enterprise, recognising the hard work and entrepreneurship that create wealth and employment.
While pure equality is obviously not the answer, we do need to combat the types of disparities in opportunity that damage our society. But in recent years, we’ve seen the emergence of a tiny handful of people – in fact, theMonthly calls them ‘The 0.01 Percent’ – who mobilise their considerable wealth against policies designed to benefit the majority.
The combination of deep pockets, conservative political support and the ranting of the shock jocks has more and more brazenly sought to defend and promote the interests of very narrow section of the economy. I reckon whether or not you think that $180 000 a year is rich, we can all probably agree that $180 million a year is rich. Even in Sydney.
Of course, the wealthy have always exercised an influence over public affairs in Australia as they have elsewhere. And I welcome the involvement of everyone of good heart in the discussion of public policy whether I agree with them or not. But there has been a perceptible shift in this country over the past few years towards a stronger and stronger influence, being wielded by a smaller and smaller minority, and more and more plainly expressed in their own private interests. We see this most obviously in the ferocious attacks bankrolled by the likes of Gina Rinehart and Clive Palmer against the mining tax and a price on carbon pollution.
The billionaires’ protest against the mining tax would have been laughed out of town in the Australia I grew up in yet two years ago it got a wide and favourable reception in the media. We’re also seeing the vested interests wielding their power in campaigns being waged against a range of other good public policies like the plan for the plain packaging of cigarettes and the means-testing of the private health insurance rebate. Advertising, armies of lobbyists, and dodgy modelling are all being used to stymie critical reforms that benefit all Australians.
Just as worrying to us is Ms Rinehart’s foray into at least two media companies, reportedly to influence public opinion and further her commercial interests. You would have been just as worried as I was to read John Singleton let the cat out of the bag when he admitted to employing journalists to overtly and covertly attack governments they don’t agree with. And that’s before you even consider the havoc that these hyper-rich activists have wrought on poetry or soccer!
So the debate over the future of our country is at risk of being distorted and decided not by the strength of ideas, but the strength of influence. This is a deeply disturbing development that we must understand properly so that we can resist it forcefully. We can’t afford to let the market system or the political conversation be undermined by the greed of a wildly irresponsible few.
It is a defining issue for our economy and our community. I believe it is also now the major dividing line in our politics. I’ve had plenty of disagreements with the conservative leaders of the past – from Menzies to Howard and everyone in between. But what you could never contest was that ever since the creation of the Australian Labor Party – in fact, because of it – the non-Labor leaders have been in a vigorous contest with us for the middle ground of Australian politics.
Today, we are witnessing the Americanisation of the Right in this country – obsessed with defending the advantages of the most-advantaged in our society. That has become their primary cause and all else is the search for a political strategy to sell that to the public at large.
Mr Abbott’s opposition to spreading the benefits of the mining boom or preparing our economy for a clean energy future is about more than his reflex for negativity. He is of course singing for his supper – we can see that in the donations from the likes of Clive Palmer that have flooded into the Coalition’s coffers in recent years.
In choosing to kneel down at the feet of the vested interests, rather than stand up for the interests of Australian workers, Mr Abbott has encouraged them at every turn. That’s what explains the Coalition’s plans to give a tax cut to the immensely wealthy while opposing tax breaks for small business and more retirement savings for Australians workers.
Reading the opinion pieces in the newspapers this morning from Mr Hockey and Mr Robb, I see my essay has done the impossible – making the Liberal Party’s economic stooges finally agree on something. I don’t remember these guys spending their weekends to rush out breathless op-eds defending more super for workers or tax breaks for small business But there they are, rushing out to defend the vested interests – and that proves my point about who we represent and who they do.
So let me finish on this general point. When you stand up to the vested interests, you’re invariably accused of being anti-business or engaging in the politics of envy – these are the convenient phrases used by the champions of privilege.
My essay has been wrongly described as an attack on the rich when it is an attack on an imbalance in influence and opportunity. In a way the criticism of the essay from some quarters proves my point.
There was a time, when I was establishing myself in the office and part of a new Government, where I was probably concerned about this sort of criticism. To be honest, now I welcome it. Our economic credentials, and our credentials for working with serious business people in the national interests, are well established. And if talking straight and having the argument helps shine the light on something that matters so much, it’s worth being the target of a few predictable phrases from a few predictable quarters.
With the resolution of the leadership issue on our side of the House, I for one am pleased we can turn to what really matters in federal politics. We can return to a straight comparison between our economic record and plans versus our opponents’.
We will be asking Australians to determine whether the benefits of a strong economy in the Asian Century flow to more Australians in our community, or just to the fortunate few. Whether we should choose shrinking inequality and growing middle class; or a shrinking middle class and growing inequality. These are the questions I tried to answer in the essay because I think they are the crucial ones for the economy and for our political system.
A strong economy is not an end in itself. What matters is what we do with our nation’s prosperity. Who benefits. It’s not just about putting dollars in people’s pockets, but about building a better society; a society that provides opportunity to more people, a society that lifts up the worst-off, and gives everyone a decent shot at a decent life.
Economic success spreading in widening ripples to the very edges of our society. Not trickling down from the well-fed at the top. Because simply, if we don’t keep growing together economically, our community will grow apart.
What’s at stake here is the Australian egalitarian tradition and the prospects of so many Australians who we want to be the biggest winners out of the Asian Century and not just a fortunate few.
I look forward to your questions.