Labor's Plan for Infrastructure

08 October 2015


SUBJECT/S: Labor’s plan to unlock the infrastructure that Australia needs; Penalty Rates; GST and Liberals admit to "magic pudding" approach to tax 

GILBERT: We’re going to kick on with our panel on AM Agenda. I’m joined by the Parliamentary Secretary to the Opposition Leader, Jim Chalmers, and also Liberal MP Angus Taylor here in the Canberra studio. Angus, first to you on what’s been announced this morning by Bill Shorten – does it make sense to you to use the Infrastructure Australia body as somewhat of a roads equivalent of the Clean Energy Finance Corporation?

TAYLOR: Well I think it’s terrific that we’re having discussion and debate about more infrastructure investment. I think we do need that. We’ve been doing a lot on this front but we do need to keep going. There’s no doubt about it. But at the moment this smells like something out of Utopia. There’s a long list of projects. There’s some story about a big pile of money that’s going to be thrown at them. But fundamentally, no one lends to these projects or finances these projects without a source of revenue somewhere, and I can only assume that Labor intends to stick toll roads everywhere. And if that’s right, they need to fess up to the Australian people and explain it. There’s a hell of a lot of questions here. Are the projects that have been proposed – have they gone through a cost-benefit analysis? Who has actually done that?

GILBERT: They’re saying that the projects they’re putting on is a wish list. They will go through the Infrastructure Australia process if they win the next election. They are promising that.

TAYLOR: And if the cost/benefit analysis is negative, or is not above one, do they not proceed with them? There’s a lot of questions here. But the fundamental one for me is where’s the money going to come from to finance these things. You can’t just have a bank, you’ve got to have a source of revenue for the lender. And I can only assume there’s going to be a lot of toll roads involved in this plan.

GILBERT: That’s the assumption from Angus Taylor this morning. Jim Chalmers, your reaction to that? Because obviously superannuation funds – the big investors – they’re not going to fork out the money if they’re not going to get some sort of return. And that’s the fundamental point that Mr Taylor is making this morning.

JIM CHALMERS, SHADOW PARLIAMENTARY SECRETARY TO THE LEADER OF THE OPPOSITION: Look, the difference between our view, Kieran, and the view that Angus has just put is that Angus and the Liberal Party think that business as usual is good enough when it comes to infrastructure. I mean, the sum total of their infrastructure plan is to send poor old Warren Truss around the country cutting ribbons on projects that Labor funded and announced when we were in Government. That’s not going to cut it any more. The old way is not good enough.

Infrastructure is such a key way to create growth and jobs into the future, beyond the mining boom. We need to be innovative and creative about how we go about that. The CEFC, as you say, is the model. It’s a terrific model because it leverages private money, leverages superannuation money, and it gets a return for the Government.

So I think the announcement today by Bill is a cracking announcement. It’s just what the country needs. It’s part of a really broad economic policy suite that he has already announced and it will go a long way to creating the growth and opportunity and jobs that we need into the future as we rebuild the economy after the mining boom.

GILBERT: In terms of the Clean Energy Finance Corporation that does make money as you say, but it makes money for the companies as well. There’s a model there to do that. Is it inevitable that you have toll roads in order to fund a revenue stream that investors will be looking for?

CHALMERS: Well we already have toll roads around the country. That’s just a fact of some of the infrastructure arrangements that are happening around the place. There are all kinds of different models. The point that we’re making is that Infrastructure Australia is best placed to turbocharge the infrastructure market, to leverage that private money, leverage that super money, to get the best outcomes for Australia and build the infrastructure we need in the 21st century.

GILBERT: And the other revenue stream, I guess, that the Government could leverage is the fuel excise, which once again is being indexed.

TAYLOR: But these are the questions that have got to be answered. At the end of the day, the only assumption I can make as someone who has looked at financing infrastructure many times in my career before politics is that Labor wants to whack commuters with new taxes and new charges because that’s the only way they’re going to be able to finance this –

CHALMERS: You say you want a conversation, Angus, then you just ramp up the scare campaign.

TAYLOR: Let me finish.

CHALMERS: Do you want a conversation about that or not?

TAYLOR: If they want to do that, they need to just be clear about it. Because this smells at the moment like a classic Labor throwing money around program without the thought that has to go in to get it right. We saw that with the NBN. We saw that with pink batts. We saw that with so many other programs.

CHALMERS: Angus is giving his best Tony Abbott impersonation at the moment.

TAYLOR: So this is absolutely critical that we have a sensible discussion about a model that will work and clarity about what it actually costs.

GILBERT: Let’s look at what actually would work in your view. You point out that in your career prior to politics you’ve looked at these issues. What would work then, as opposed to just a flat out toll?

TAYLOR: The Productivity Commission has put a whole series of proposals up about how this might work. And we need to have a sensible debate about that. But to just say we’re going to have a big bank and we’re going to have a list of projects is truly something out of Utopia. There has to be a more nuanced, more sophisticated debate than just that.

GILBERT: But it is nuanced in the sense that as Jim and Bill Shorten have pointed out, they’re going to have this expert body, Infrastructure Australia, arbitrate, decide what gets up, what doesn’t,  what’s going to make money, what won’t.

TAYLOR: The rubber hits the road here with who actually pays for it. There’s no magic money. The superannuation industry is not a big pot of money that the Government can tap into for nothing. Someone has to pay for it. This is the really important debate and it’s the one we have to have. I actually welcome the fact that we’re talking about this and that Labor wants to talk about it. It’s great. But ultimately someone has to pay for it and there’s no big pot of money somewhere that does it without anyone having to stump up.

GILBERT: Jim Chalmers, your thoughts on that before we move on – a couple of other issues that we should get to this morning.

CHALMERS: Well it’s hardly a stunning point to say that Australians in some way or form pay for the infrastructure that they use. That’s true of the tax system, it’s true of other more private models. That’s a no-brainer.

GILBERT: Okay, let’s look at some other matters. I know that Angus Taylor has also made some points about the issue of penalty rates. This is something that is simmering away. It looks like the Government is going to take some action on this, Angus Taylor. How pivotal is it? And the point that Malcolm Turnbull made about ensuring that people aren’t worse off on a net basis across the week, is that doable?

TAYLOR: Yeah, I think this is what we’ve got to look at. The starting point for me here is that we want higher wages, not lower wages. But when wages get ahead of the market, you get unemployment. And what we’ve got at the moment is very high levels – and rising levels – or at least high levels that aren’t getting better – of youth unemployment and we have to fix it. And we know in hospitality and retail where this is most severe – I see it out in my electorate – we do have a problem with youth unemployment and there’s no doubt in my mind that the high penalty rates on a Sunday contribute to that. So we have to think right through the options as to how we fix that but it is a problem that needs to be fixed.

GILBERT: Jim Chalmers, is Labor willing to budge at all on this? If you have a situation where Fair Work Australia might not have enough flexibility to enable people to negotiate lower penalty rates for a higher wage across the week, that does seem to make sense.

CHALMERS: Look, there are all kinds of fancy ways that the Government is trying to spin this. But at the end of the day, it’s a straight wage cut for people who are on low incomes. So I don’t support that at all. The thing that Angus didn’t mention before is that wages growth right now is at historic lows. We do have high youth unemployment. We do have a higher general unemployment rate than we would like. And at the same time, we have wage growth at historic lows. So, I don’t support it – a straight cut out of the pockets of people. Even Scott Morrison conceded in a roundabout way that people would be worse off when he started talking about tax credits. How he’d give a tax credit for a Sunday but not a Monday is beyond me, and probably beyond him. But this is an important conversation. The Liberals are gearing up to cut people’s penalty rates and we oppose them on that.

TAYLOR: Let’s be clear about this. The issue here isn’t penalty rates, it’s unemployment. That is the fundamental issue and particularly youth unemployment. And until people like Jim are prepared to have a serious debate – without this rule in, rule out stuff –  about how we’re going to fix this youth unemployment problem, we’re going to continue to see young people in electorates like mine who are underemployed or unemployed and quite frankly, that has to be fixed.

GILBERT: Let’s look at some other issues. Jim Chalmers, the Productivity Commission report that suggests the impact of the GST would not be as regressive as many has made out in the past and, in fact, makes it pretty clear that a decent compensation package would make that quite a viable option and indeed potentially have people on low to middle income brackets better off if there was a change.

CHALMERS: Look I saw that report of the Productivity Commission research as well and that confirmed that a GST hike would be regressive. The numbers were very clear and said that people on low- and middle-incomes would be worse off proportionately than people on higher incomes. You can argue about the degree of which that is the case, but it is the fact that a GST hike would be regressive. The thing about compensation –

GILBERT: Can’t you compensate them?

CHALMERS: We’ve talked about compensation before, Kieran, on your show. The thing that troubles me about the compensation is that right now already, as Chris Bowen has pointed out, this GST hike is supposed to magically pay to replace state taxes, fix the bottom line, repair the hospital system, give a company rate cut. And I just don’t believe this Government, in the form they’ve had in the first two budgets would really, genuinely look to adequately compensate people on middle- and low- incomes in Australia.

GILBERT: Angus Taylor, Jim Chalmers points out that there’s a lot of people lobbying and arguing for the extra revenue of this hypothetical rise or broadening of the GST?

TAYLOR: When you’re saying higher revenue, you mean looking for more tax revenue to spend on things?

GILBERT: Indeed, well the GST increase that people are talking about?

TAYLOR: We need to take a step back from this. What Jim is doing is playing this rule in, rule out game on one tax. It’s ridiculous really. I mean what matters to Australians is the overall tax and welfare outcomes for them. That’s what matters. And it is clearly possible to construct a package here with a change in tax rates – including potentially a higher GST – where people are better off. And that involves the tax system across GST, personal income tax and company tax, and the welfare system. And if Labor isn’t prepared to actually have a sensible discussion about the broader package –

GILBERT: Why does that appeal to you though, in the sense that if you’re just shifting around tax dollars, why does that matter?

TAYLOR: Because you’re changing behaviour. Because if you’re creating incentives for people to work more, or save more, or invest more, then we are all better off. We are all better off as a result. So it is possible to construct – we know it’s possible to construct a tax package with changes in rates and a lower overall tax burden, and yet we are all better off. There is actually a magic pudding in tax reform, but it has to be thought about across the broad range of taxes.

CHALMERS: Did you say there is a magic pudding here?

GILBERT: I guess the point that Angus Taylor is making is something that Rod McLeod – the gentleman who did the review for the New Zealand Government before their increase in the GST – and that was if there’s appropriate compensation for at that low and middle end, Jim, that in some ways it becomes a luxury tax because those that aren’t receiving the compensation are spending more dollars, and it’s harder to have tax avoidance when you’re talking about consumption tax like that.

CHALMERS: It is true that it’s harder to avoid a consumption tax. That’s because people on middle and low incomes can’t afford fancy and tricky ways to avoid it which can happen at the top end. But Angus just said that there is a magic pudding when it comes to tax reform. I find that extraordinary. That’s how we get this sense that a 15 per cent GST which Morrison and Turnbull and Angus all want to put in place, they think it can be spent over and over again on these multiple purposes. I just think that’s a complete fraud. They want to jack up taxes –

TAYLOR: Jim the fact of the matter is that there’s more efficient taxes and less efficient taxes. If you shift the burden to the ones that encourage people to work, that encourage people to save and invest, then the economy grows faster and the overall tax burden on the average Australian worker will be lower. Now that can be done. Any economist will tell you that can be done. So getting on an individual tax like GST and say I’m going to rule out any change is really ridiculous.

GILBERT: Jim, just quickly. We’re almost out of time.

CHALMERS: I don’t know where to begin with that Kieran. Angus obviously thinks you can jack up the GST and do all of those five things that I talked about with some sort of magic pudding approach to tax. This is the Liberal’s new approach to tax – that there’s a magic pudding. It’s absurd.

GILBERT: Okay, we’re out of time. Jim Chalmers, Angus Taylor, thanks for your time this morning.

CHALMERS: Thanks guys.

GILBERT: A quick break on AM Agenda, back in a moment.