GUARDIAN AUSTRALIAN POLITICS LIVE
SATURDAY, 16 MAY 2020
SUBJECTS: The economic impact of Coronavirus; JobKeeper wage subsidies; Economic policies for investment, productivity, growth and jobs; Debt; Intergenerational unemployment and disadvantage; Cheaper and cleaner energy; Longer term decision-making; Anthony Albanese’s vision statement; Josh Frydenberg.
KATHARINE MURPHY, THE GUARDIAN: Hello, good people of pods and welcome back to Australian Politics Live. If you're a regular listener, you will know that we've had a short COVID-induced hiatus, sadly. We've been worried about social distancing and other things, but we think it's safe enough now to try and resume the pod series, so I'm particularly delighted to be back of course. It's Katharine Murphy with you and in the studio with me this week is Jim Chalmers, Labor's Shadow Treasurer, so g'day Jim.
JIM CHALMERS, SHADOW TREASURER: Hi, Katharine and hi to all your listeners as well.
MURPHY: Okay. Jim is with me because it's a pretty important week in terms of the economic debate around what happens after the pandemic. Labor have put down some markers. Anthony Albanese made a speech at the beginning of this week, putting down some markers about what the post-COVID economy should look like, so we'll just start with the easy question, Jim; what does the post-COVID economy look like from Labor's perspective?
CHALMERS: Most likely we're going to see a pretty patchy recovery from this crisis. This is obviously a devastating economic crisis flowing from a set of diabolical health challenges. Most economists, certainly the Reserve Bank and others, think that it's going to have a relatively long tail. I think we're going to be dealing with some weakness particularly in the labour market for some time now. We need to be conscious of that. These sorts of crises come at you in waves. Your first responsibility is the immediate triage of the situation, to try and save as many jobs as you can. That's the phase that we're in now. But before long and in the next few months, we'll need to be thinking about things like what we do about construction when all the current work dries up - that sector is doing it tough. Beyond that we've got to care about getting businesses investing again, getting productivity going, and getting employment going most importantly. That will mean we'll have to look at things like energy policy, research and development, commercialisation, skills and training, and all of those sorts of things.
MURPHY: What about vulnerable people in the labour market? I would argue, I don't know what you think, but pandemics are like a mirror to societies, right? It's probably a cliché to say that, but I think it's kind of right. In America obviously we've seen the inequalities of American society magnified through this crisis. Now comparatively, Australia is a more equal society than America, so it's been a bit different here. But do you think at some level though, this crisis has exposed the vulnerability of gig economy workers, workers on contracts, all of that sort of stuff? To what extent can governments, either Labor or Liberal, make that better?
CHALMERS: You used the word 'magnified'. I think of it along similar lines, but I think about it ‘turbocharging’ some of the weaknesses that we had in our economy and in our society beforehand. People talk about this crisis as a transformative event, and in lots of ways it is but there were lots of things about the economy beforehand where this has just sped things up. Work was insecure before, it's more insecure now. Wages were stagnant before and I think we're up for a period of more stagnation. Work was precarious. Inequality, vulnerable people being left behind, and intergenerational immobility - which is the thing in politics that I care most about, the idea that inequality cascades through the generations - all of these challenges that we had have been in one way or another turbocharged by the current crisis. The responsibility of government is to recognise that we won't grow the economy strongly enough unless we grow it inclusively enough. We need to care about the most vulnerable people in our society because if we come out of this crisis even more vulnerable, even more insecure, even more precarious, even more unequal, and even more immobile, then we've really failed the Australian people.
This is an opportunity for us to rethink what we really care about in this country. If we really care about those things, and I believe that we do, then we have to do something about it. There are all kinds of opportunities for that. Obviously, this crisis means we have to care about the hotspots of insecurity in our country. We need what the academics and others call place-based approaches; we need to focus in on areas like the one I represent, frankly. That'll be part of what we need to consider. Clearly there are other policy levers in education and health, in early intervention. All of these things will matter even more after the crisis than they did before.
MURPHY: The main problem that governments right around the world will face on the other side of this crisis, assuming that there is another side which is a whole other conversation, is accumulated debt, right? We've had to have massive fiscal responses all around the world in order to cushion the economic shock of the pandemic, right? That's obvious. The conventional wisdom on how you reduce debt is that you raise revenue, you cut expenditure, or you grow your way out of trouble, right, which is the government's preferred methodology. I'm just reaching for - excuse me if we're crackling slightly - just a piece I read that was quite interesting about debt in The Economist recently. I'll just give you a little quote from it. They said,
"Rich-country politicians unwilling to shift away from spending and towards taxing… are likely to choose to grow their way out of hock. The secret to this is ensuring that the economy's combined level of real economic growth and inflation stays handily above the interest rate the government pays on its debt. That allows the debt-to-GDP ratio to shrink over time."
Now, I hope that's clear to everyone listening what that accounting fiddle is? The economy grows faster than the rate at which the debt grows. That's the simplest way I can put it. Is that the way out?
CHALMERS: It’s a big part of the story. But in reality, if you care about repaying this debt, and we should over time, we shouldn't be mad about it, we shouldn't try and repay it overnight. Some combination of all three of these things is probably going to be required. Ideally the first preference is to grow the economy in a meaningful way to get people into work; they're paying taxes, you're paying less social security, and all of those sorts of things. So the first priority is growth, but it should be the right kind of growth; inclusive and sustainable growth.
Beyond that, there will be obviously a conversation about what combination of spending cuts if they exist, tax changes if they exist. Most countries will be trying to work out what the appropriate mix is. One of the unfortunate things about debt, the way that we talk about it publicly, is it's become quite a polarised thing. There is a constituency that says debt doesn't matter whatsoever and there's a constituency that says debt is the most important thing at all times. The reality, as almost always, is somewhere in the middle.
Debt matters and we need to repay it. Even before this crisis net debt in this country had more than doubled over the seven years of this government and so even before the Coronavirus, Australia was going to pay something like $17 billion to service that debt in this year alone. I'm sure your listeners and I could certainly think of better uses for $17 billion than servicing that debt so we do need to care about it. But in crisis times the most important thing is supporting the community and keeping as many people in work as possible, because if you don't do that it makes the recovery that much harder.
Many people remember, not very fondly, the early 90s recession. The thing that petrifies me, petrifies people who are students of economic history, and those who lived through that period is the more people who become disconnected from the labour market in recessions, some of those people never come back, whether it's older workers or you might lose a generation of younger workers. That is an absolute tragedy which needs to be avoided at all costs. That's why we support a big fiscal intervention, even if that means more debt in the near-term but we also need to be conscious about how we pay that back.
MURPHY: Without being completely debt-phobic, without thinking that that is the single most important objective because I don't think that's the single most important objective, the bigger the debt is, the more constrained you are in your options for looking for more inclusive growth, because inclusive growth does require investments in skills, in education, in all sorts of other things, right? Obviously it gives dividends because growth is the dividend, right? But you've still got to come up with the cash up front. I'm putting this to you, because I guess that's a real Labor conundrum, isn't it? How are you thinking about this, Jim? How are you trying to process this?
CHALMERS: The way I think about it personally is it's about getting maximum bang for buck. The way that we in the Labor Party evaluate bang for buck is probably a bit different to our opponents. Historically, when budgets have been tight, they've put a higher premium on things like a headline company tax rate cut and we've put a higher premium on investing in human capital, whether it be schools, or skills, or universities or whatever it might be. It's always a question of priorities. There are always fiscal constraints of one kind or another. Yes, they will be acute going forward. We need to make sure that any commitments that we make are worth it in the context of all of this debt that the government is racking up.
MURPHY: One more point on growth before we move on; it seems slightly discordant to me to hear the government talking about growing our way back to recovery, given that we have been in a sustained period of low economic growth for quite some period of time. Pre-pandemic we were in a low-growth environment. The whole discussion amongst economic agencies around the world was how you reconfigure for a low-growth environment. Explain to me how this works. How do you move from a low-growth environment pre-pandemic, through the greatest economic shock since the Great Depression, to a high-growth environment afterwards? Now, you might say v-shaped recovery or something like that, but I don't get it. I genuinely don't get it. How does growth magically come back?
CHALMERS: Think about the big deficiencies in the economy before the virus. In my view, one of the things that you and I focus really heavily on is the fact that we've had all this energy policy uncertainty for so long. In my job I spend a heap of time in boardrooms; lately that's been in Zoom-rooms with board members. The only thing that comes up in almost every conversation I have is energy policy certainty. Think about it this way; business investment was going backwards before the crisis, it was the lowest it's been since the early 90s. Businesses are reluctant to invest in a set of arrangements when they don't know if they will change frequently. If you got that bedded down and came to an agreement about energy policy, then businesses would be more likely to invest. They'd get cheaper and cleaner energy, which is about their input costs. They'd be able to employ more people and expand, assuming you can get R&D right, and skills right, and all of those sort of things. There is an opportunity for growth after this crisis. I'm optimistic about it. But it requires us to do things that were not possible before. It also requires us to recognise that the recovery will be different in different parts of the economy, and for different kinds of workers. We need to be ready to play a role. Ideally, the private sector would come roaring back quite soon and they'd start employing and all of that sort of thing but I think the reality is going to be a bit different for a lot of people and so we need to be conscious of that too.
MURPHY: Do you think genuinely that there would be a deal to do, for want of a better word, with the Coalition about energy policy on the other side of this, given their record?
CHALMERS: Obviously it remains to be seen. But if they are serious about getting the economy going again, if they're serious about revisiting some of those things which they've rejected before - remembering as well that the last architect of an energy policy is now the Treasurer - I think it would be worth seeing if something's possible. Anybody who looks at our economy objectively and thinks about what the sources of growth after this crisis will be clearly thinking that our industry needs to have cheaper and cleaner energy, we need to get that skills mix and the R&D commercialisation right. All those sorts of things will be key to the future. If the Prime Minister and the Treasurer are serious about getting things going again, particularly getting business investment, productivity, and employment going again, then they'll need to look at energy again.
MURPHY: But is there a way to bridge the gap? Obviously, Labor in the past has had a higher level of ambition about abatement than the Government's had. That's been the rock on which many hopes have foundered. What are you thinking about Jim? Is there a way to triangulate that somehow?
CHALMERS: It came very close to being resolved in the last parliament. Anthony Albanese, Mark Butler and others have pointed out before that there were compromises that Labor was prepared to make to get some kind of certainty in the system so that business could invest with confidence and we could get this decade-long barney about energy policy ended. At some future point Labor could dial up the ambition, or the Coalition theoretically could dial down the ambition at some future point. We've said before that that should have been possible in the last parliament. I'm conscious that this is Mark's policy area and so he'll have well-considered, well-informed views about it. I'm relaying is what business says to me, that amongst all of the other issues and they are substantial now and turbocharged for all the reasons that we've already discussed, business just cannot understand why we can't get a resolution on energy. If you think about our challenges around growth, employment and wages then I think any serious objective observer would say energy has got to be part of it.
MURPHY: Okay, let's just think about JobKeeper for a minute because there's been lots of to-ing and fro-ing this week about who's in, who's out, who should be in and whether or not you taper that payment; basically, what repair job, for want of a better word, you do want on the JobKeeper payment?
Respond to this any way you fancy in terms of JobKeeper, but I actually have a bigger question than what happens to JobKeeper over the next month or two. The question that posed itself to me as a consequence of this crisis is whether or not we actually need a bigger conversation about whether or not we need to consider making permanent in some way some sort of insurance payment for workers who lose their jobs in an economic shock like this one where obviously the government had to shut down swathes of the economy in order to deal with a health crisis. Another one that springs to mind is a climate crisis. We saw the horrible destructive effects of that at the start of the year, obviously. When I think about government over the next couple of decades, I think more and more of government is going to be managing "co-joint" crises as it were. Not to be horrendously downbeat, but that's just what the future holds, right? Do you think that Labor needs to consider, I don't know, it could be a Universal Basic Income, or it could be an insurance scheme; I'm not being prescriptive, I'm genuinely interested in your thoughts.
CHALMERS: First of all, on JobKeeper, it's a very, very good idea being quite badly implemented. Wage subsidies are a good idea in crisis times like this, but we want to be smart about how that support is eventually withdrawn. We think there should be a conversation about better targeting it and better tapering it but we're not up for this "snap back" that the Prime Minister's into, where he pretends that everybody's going to wake up on that last Monday in September and everything all of a sudden is going to be fine and nobody needs support in the economy anymore.
CHALMERS: We talked before about how the recovery is going to be, in my view, in the Reserve Bank's view and others' view, long and patchy and that some people will do it tough and be left behind for longer. That's really the context for your broader question.
CHALMERS: In times which have been this extreme and extraordinary, people will think about more and more ambitious ideas for how we deal with it. People were already talking about some of the things that you've raised in the context of technology and work -
MURPHY: Exactly. Automation and - yes.
CHALMERS: I co-wrote some stuff with Mike Quigley about this a couple of years ago; that's a concern as well. I'm not red hot about a Universal Basic Income. I don't like the "U” part of the UBI. I don't think it makes a lot of sense to give money to people who don't need it, but at the same time, I do recognise that there's a problem with demand in the economy. There's a problem clearly with the unemployment benefit being so low. We do need to think about what the social safety net looks like. This has been a prompt, I think, for a lot of people even on the other side of politics to try and rethink whether or not the social safety net is stitched together robustly enough to deal with crises like this and the long aftermath of crises like this.
MURPHY: But is it a simple matter - I mean, you could obviously just increase the Newstart payment and that would be clean and working within existing systems or do you think that there's something more than that, that needs to be thought about?
CHALMERS: I think that needs to be thought about. I don't want to pre-empt the work of other colleagues, but I think the most fruitful area for the country to focus on is what, if any, specific labour market programs can deal with the fact that we will have hundreds of thousands of people unemployed for longer than the last Monday in September which is when JobKeeper disappears under the Government's current thinking. We've seen it before; Working Nation in the early 90s was an example of a labour market program. A lot of very well-informed people talk about things like job guarantees. Anthony Albanese on Monday talked about a new compact on skills and jobs so that we can think about making sure people don't fall through the cracks. That's the area that I think we should focus on; it's the area that Anthony, Brendan O'Connor, Tanya Plibersek and others have talked about in the past and I think that's where we should focus. I think that's more fruitful than thinking about a UBI, factoring in all of the other considerations we have.
MURPHY: Yes, UBI would in essence replace the welfare system and the downside of that is that we have one of the most tightly targeted welfare systems in the world. I get that. But tell me about this compact, right? Push me beyond the talking point. What does that mean? What is it?
CHALMERS: Monday was really the start of the conversation. Anthony has talked about it, and people have talked about it in different ways, but really I think there's an appetite for some kind of maybe place-based or very specific programs where we recognise that young people in particular might be unemployed for longer and so we need to think in innovative ways about how we employ those people. I don't want to get ahead of things or pre-empt other people's work, but of all the suggestions that we've been getting about how we deal with this, I'm just saying that that area is the most useful to focus on. From my point of view, the thing that matters most is avoiding the intergenerational carnage that comes from long-term unemployment. I see it in my electorate -
MURPHY: Just tell people about your electorate. Neither of us should assume that.
CHALMERS: Sure. I'm from a place called Logan City and it has its share of challenges but the main challenge in my view, and more-or-less the reason I'm involved in politics is because I think a first-world, first-rate, wealthy country like ours shouldn't have disadvantage cascade through the generations. I think that is a tragedy. What keeps me up at night about this crisis is the idea of 55-year-old workers who may never find their way back in the workforce, or young workers who are detached for long enough that it becomes very hard for them to get back into the labour market; the idea that what happens now could create intergenerational problems in specific areas like Logan City - that gets me really fired up. That's what we're trying to avoid. People say, what are we trying to avoid here? We're trying to avoid job losses. We're trying to avoid anaemic growth and all those sorts of things. But sitting above all of that is the idea that a country as good as ours, as wealthy as ours, and as intelligent as ours can do better than consign groups of people concentrated in geographic areas to disadvantage that doesn't just impact them, but impacts their kids and their grandkids and generations after that. That's what we're trying to avoid.
MURPHY: We could go on for about an hour about this stuff, seriously. We were talking about energy and climate a minute ago and one of the difficulties about getting people to vote for this transition is the job losses and the structural adjustment associated with it, right? You told me about compacts for intergenerational disadvantage; you could also start thinking about compacts for workers in carbon intensive industries through periods of structural adjustments. It's a logic you can apply in different circumstances but anyway, we are -
CHALMERS: But also we've shown that we can think in the near-term. Politics is quite good at dealing with challenges -
MURPHY: Right in front of us.
CHALMERS: We can do that. But collectively we've been hopeless at making the right long-term decisions and that's because politics isn't good at delaying gratification. In this building, probably on the other side, but certainly on our side there are a lot of newer MPs - I'm in political middle-age now so perhaps after me - who think that the main problem with our politics is we don't think long-term enough, that we don't delay gratification. Hopefully this crisis doesn't just teach us how to make good triage decisions in the near-term, but long-term decisions as well.
MURPHY: That is a very nice thought. That is a very nice thought if, somehow, we could reset that whole process. We're sort of in Labor's policy-making territory for this term. Obviously, you can't front-run processes that are currently in train and share with me decisions that haven't been made. Anthony Albanese has sent a fairly clear signal that not only has the program of the last election been set aside, something new will be built in its place; that in general terms we will see less taxing and spending than we saw in the last platform, is that broadly right? And so then, if it's less taxing and spending, what does it look like? We've just talked about a compact for workers in disadvantaged areas, for example. What does it look like beyond that in your portfolio?
CHALMERS: First of all, no political party ever has taken an identical agenda to one election that they took to the one before. In some respects, it's unremarkable that Anthony would rightly give that direction. We need to come up with a set of policies which suit the times and factor in this extraordinary circuit breaker in the economy that we're living through at the moment. I think the point that he is making is let's get good at prioritising what we care most about. It won't actually be possible to undo all of the damage of the last seven years, and it'll be eight or nine years by the time we get to the election. We can't undo all that damage overnight. We need to prioritise, we need to sequence, we need to work out what we care most about, and what's most urgent. That's how I see the situation that you've just described. Whatever program we take to the next election, it needs to be focused and clear enough that people can understand it. It needs to be a story where people see themselves as part of that story. For all of those reasons, we probably need to be focused on fewer but more impactful offerings.
MURPHY: Just picking up on that point briefly, it's funny to think about 2007. Jim's smiling at me, because we were both around in that period. Yes. Anyway, it's sort of striking really, when you look back at 2007 which was an election Labor won from opposition, obviously. I mean, how else do you win elections? You know what I mean. You made the case for a change of government at the end of four Coalition terms. But looking back then, how spare that offering was! It was sort of like, sign Kyoto, the education revolution, and these various things. Obviously, there was policy sitting underneath those things, but it wasn't massively detailed. Is that the blueprint for success? Is 2007 the blueprint? I don't know - what is it?
CHALMERS: I think, partly. I agree with what you're saying but that doesn't mean that the policy agenda wasn't ambitious.
MURPHY: No, no, no, no, no, no. Yeah. Sure.
CHALMERS: We wanted to make workplaces fair again; we wanted to make schools and education the engine room of growth; and we wanted to deal with climate change. 2007 was an extraordinary successful period because we did come up with an agenda which was clear but also ambitious. From time-to-time people talk about small targets, big targets, whatever. What matters is the level of ambition for the country in your policies, not the number of policies.
MURPHY: Yeah, I agree. If neither one of us have conveyed that point, clearly, that's really what I meant. It's conveying that level of ambition without tying yourself up in 38 pages of footnotes or whatever. I mean, look, I'm a policy person. I will mourn the fact that one of the casualties of the last election cycle is probably fleshed-out policy agendas for several years. I'm probably one of the few people in the country who will actually mourn that. Anyway, you've got a thought in your mind.
I'll just ask you one more question from sort-of that period; obviously you were a staffer before you were in public office yourself. You were in the engine room during the Global Financial Crisis working for Wayne Swan and around Kevin Rudd which there would be several books in, I'm sure. Having literally sat right in the engine room of what was for the GFC the biggest economic shock since the Great Depression, is it strange for you to be standing outside that process, not in government, distant from it, working out how to plot these pathways? Being opposition-ist but not too much, all those judgments that you're making, is it weird to be outside?
CHALMERS: Weird is one word for it. It's frustrating. Over the years a lot of people have said to me, was it difficult moving from being a senior advisor to being a politician, and my answer to that is no. The difficulty has been going from government to opposition. People literally stop us the street and say, geez, you must be pleased you lost that election given how things turned out -
MURPHY: Are you pleased? [LAUGHING]
CHALMERS: No. We are a funny lot. We are in this game to make a difference, to be influential, and to make the big decisions. So it's frustrating watching, particularly when the Government might be taking a step that we welcome and you can see that they could do it better, more effectively, more value for money, with more impact, and more jobs saved; that's when it is frustrating, particularly when you think that perhaps the Government might not be taking up a good idea because we've proposed it. Those times become incredibly, incredibly frustrating.
MURPHY: Was it difficult to see the government turn on the head of a dime on stimulus? I mean, I just -
CHALMERS: No, that's a good thing, genuinely.
MURPHY: You didn't throw any untethered objects in your home?
CHALMERS: No, I thought Anthony Albanese put it really well in his vision statement when he said, we kept a straight face when they talked about the importance of stimulus and government intervention. We think it's important they learn that lesson. Having learned the lesson of 2009, they now need to learn the lesson of 2014 which is don't have a big austerity budget that ruins the recovery as it's gathering pace. Don't ask the most vulnerable people to pay back all this debt that has accumulated. They need to learn that lesson too.
MURPHY: Josh Frydenberg, your opposite number, you've got a weird kind of big-dog little-dog thing going on.
CHALMERS: Which one’s which?
MURPHY: It switches. It is hard to keep up with who's big-dog and little-dog. You obviously have an adversarial relationship, but it doesn't seem to be a rancorous one.
CHALMERS: That's a good way of describing it.
MURPHY: How's he been in this crisis? Tell me all the tales within the bounds of what's appropriate. Have you been a touchstone at all or is it more transactional?
CHALMERS: I don't want to be flippant about this because I do think he is as you described; I think he's not a great Treasurer, but I don't think he's a bad person. He would never describe me as a touchstone.
MURPHY: Well, no, it's a stupid word. I'm trying to come up with the word. What is the word that I'm looking for?
CHALMERS: We've spoken and I'm grateful for the fact that there have been occasions where he's called me at night. In the difficult part of this crisis he's called, and we've had a really good discussion actually. Not a trivial one, and not a tick-a-box one. I'm grateful for that. My little daughter had to go to hospital a few weeks ago and he was the first to call me about it. When we thought that he might have the 'Ronas as the young people say, we had a text exchange then; even though we'd had a difficult day in the Parliament we had a friendly text exchange later. People like to hear about that sort of thing because I will do anything to replace him as the Treasurer of this country, or almost anything, but that doesn't mean necessarily that I think he's a bad person.
MURPHY: Again, without trading confidences, I know both of you very well so I can imagine how that goes down but, not specifics, is he looking for advice? Is he talking through ideas? What's he doing?
CHALMERS: He wouldn't see it as looking for advice. I do genuinely want to be careful about characterising something without him having the opportunity to characterise it. There's been a couple of occasions where we've had a proper conversation. It's more likely to be a good conversation if nobody else is involved.
CHALMERS: As I said, I've been grateful for that.
MURPHY: Yeah. All right. Understand and respect that. Well, thank you very much for coming on, Jim. Appreciate it.
Thank you to all of you for listening. Thank you to Miles Martignoni who is the executive producer of the show. Thank you to Hannah Izzard who has cut the show this week. Like I say, we're going to try and get back into the Corona, or post-Corona, or mid-Corona, or wherever-we-are groove with this show. We will try and bring it back more frequently. I'm not sure if we can do it every single week, but we will do our best. Until I'm with you again, take care.