Redistributive policy

Interview with MP Andrew Leigh — Economic Policy and Budget

As the Labor Party released its first budget late last month, a new set of assumptions, perspectives and priorities that guide the federal government’s role in economic policy have been revealed. To understand what this inflection point represents, Honi spoke with Andrew Leigh, a former Honi Let editor of ’93 and professor of economics at ANU, who is currently deputy minister for competition, charities and the treasury.

What direction does the new government want to give the Australian economy?

Leigh has spoken publicly about the need for a “zipped” economy, with more dynamism and productivity. At a recent lecture on Sydney Ideas at the University of Sydney, he praised the Keating government’s competition reforms of the early 1990s, which he says gave a huge boost to Australia’s economy by creating economic competition.

Leigh highlighted this problem by referring to the dominance of big business and the slow pace of innovation. “We’ve seen a decline in the number of startups in Australia, an increase in market concentration and profit margins,” he said. Honi.

Honi asked how the recent budget intended to reclaim Australia’s ‘zip’.

“The most recent budget invests in people, which is absolutely vital to achieving a stronger economy for individuals, in infrastructure and in institutions,” Leigh said.

Leigh pointed out that investments in new TAFE and university places, the development of transport infrastructure and the NBN, and institutional reforms to promote competition reflected the priorities of the budget.

The National Competition Policy, which was implemented in 1995, imposed a policy of “competitive neutrality” which meant that government-owned monopolies had to compete with private companies without special advantages. The Keating government has also launched a program to privatize state assets like the Commonwealth Bank, as part of a broader project of economic rationalization.

Honi asked Leigh if privatization would play a role in creating a more vibrant economy two decades later. He replied that the anti-competitive behavior of private companies is now a major concern, especially the mega-corporations that dominate the digital sphere.

He highlighted a number of challenges posed by an increasingly digital economy: the proliferation of fake reviews online, the lack of interoperability between search platforms, and the ability of online marketplace operators to favor their own products. .

“We need to think about how our competition laws should fit into a world in which there is massive social media market domination by Facebook, massive online retail domination by Amazon, massive online retail domination by mass search by Google, recognizing that we need to update laws in order to get a better result for consumers,” he said.

On whether new innovations should be concentrated in specific parts of the economy, such as green industries, Leigh instead suggested that competition should be an economy-wide feature.

“It goes through the whole economy. So, you know, baby food, beer, internet, service providers, health insurance, it’s not just about banks and supermarkets,” he said.

Leigh is a strong advocate for increasing Australia’s productivity, which he believes is key to rapidly improving living standards. Yet productivity has not been clearly correlated with wage increases in recent years – in fact, the past decade of productivity growth has been no real wage growth.

“We’re also keen to make sure workers get their fair share of any productivity increases that occur,” Leigh said.

Leigh pointed to the Secure Jobs, Better Pay Bill, which was passed by the Lower House Last week, as aimed at raising real wages. The bill involves a package of reforms aimed at increasing the bargaining power of unions, including allowing employees to bargain at multiple companies and scrapping the Australian Building and Construction Commission.

“We need to make sure we close the gender pay gap. Boosting real wages, restoring work flexibility for employees who want to balance work and family,” added Leigh.

Why a wellness budget?

A notable goal of the budget was the use of “well-being” as a macroeconomic indicator, broadening the measures pursued from mere economic growth.

When asked why the government is pursuing the ‘welfare budget’, Leigh told us: ‘It’s not enough for governments to just look at GDP. As important as this indicator is, we need to look at the number of years people live and the health status of those years. We need to look at the state of our natural environment and the strength of our community… So we are really updating the budget measures in a way that meets the standards of Australian society.

Leigh cited health as an example of the type of policy area that could be overlooked if the government focused solely on GDP growth, rather than quality of life.

“To take a simple example, investments in the health of those who have left the labor market do not have an immediate impact on GDP, but they have a huge impact on well-being,” he said. he declares.

However, according to Leigh, the welfare budget does not represent a move away from continued GDP growth. When Honi Asked about the role of redistribution, rather than growth, in improving well-being, he replied: “I care a lot about inequality… But we also need to increase total output.

Leigh, who has described himself as a pro-growth progressive, added: “Improving the standard of living for all is the goal of government…I think there is a notion that you have to choose between fairness and efficiency. You can have growth or equity, but you can’t have both.

“But an area like competition reform or expanding opportunities for entrepreneurs from disadvantaged backgrounds or increasing the number of university places, all those reforms that will be good for fairness and good for growth.”

Given Leigh’s belief in the compatibility of equity and growth, it remains to be seen how important a focus on ‘well-being’ will be in changing Australia’s economic approach.

More to do on mental health, wellbeing and education?

Despite the focus on well-being, change is lagging behind in some policy areas important to young people.

Leigh cited budget constraints as limiting government policy responses to several issues. Asked if the government will continue to increase subsidized mental health care sessions amid COVID-19, which is due to expire in December, Leigh said the government is prioritizing mental health through early intervention and acute care programs.

As for the mental health sessions, however, he said: “I don’t have a particular answer on the number of sessions…other than to say that’s definitely a question that’s been asked of me.” But with a trillion dollars in gross debt, we have the challenge of not being able to do everything we would like to do within the budget.

Leigh had a similar response when asked if welfare recipients could expect to see cost-of-living relief via increases to Youth Allowance and JobSeeker, saying that “It’s a challenge to get these things to pile up in the budget envelope… If you go back three years, the debt was free – now it has a pretty substantial cost.

He added that while college students may struggle to make ends meet in college, they can expect substantial returns through higher incomes in the long run.

A recent report by the National Union of Students (NUS) suggested that lowering the independence age to 18 could lift hundreds of thousands of students out of poverty. Honi asked whether this type of welfare reform could help students complete their university education and encourage more young people to pursue higher education, who otherwise might not have access to a degree.

Leigh argued that many people are currently facing financial hardship, including students, but the budget situation meant the government had to compromise on spending.

“What we face is a budget overburdened with liberal rorts, waste and debt reaching nearly a trillion dollars. So, on the face of it, we had to make a number of tough decisions. We will continue to review all of these payments and do what we can for the most vulnerable,” he said.

It should be noted that, despite the government’s desire to limit the national debt, it continues to enact the third stage tax cuts, which will cost the budget $254 billion over a decade.