This week on the pod we are going to delve into what we are calling Canberra’s Coachella - AKA the Productivity Summit, which is happening the week after next.
What is the point of it? And what is productivity anyway?
Here to discuss, we have Chief Political Correspondent, Paul Sakkal as usual, and special guest star and productivity king, Senior Economics Correspondent Shane Wright.
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S1 (00:01):
From the newsrooms of the Sydney Morning Herald and The Age.
This is inside politics. I'm Jacqueline Maley. It's Friday, August 8th.
This week on the pod, we are going to delve
into what we are calling Canberra's Coachella, aka the Productivity Summit,
which is happening the week after next. What is the
(00:24):
point of this summit and what is productivity anyway? Here
to discuss, we have our chief political correspondent, Paul Satchell,
as usual, and a special guest star and Productivity King,
senior economics correspondent Shane Reich. Welcome, gentlemen.
S2 (00:42):
Well, I'm just waiting for the Melrose Place music to
play for me. But, you know, I'm. Well. Thank you. Jacki.
S1 (00:49):
Um, see, we haven't even gotten five minutes into the podcast,
and already you were mentioning our favourite show from the
90s that Paul's never heard of.
S2 (00:56):
Well, it's about time, Paul. This is why Paul struggles
on struggles and productivity. He doesn't have that. Tapped in
to the Melrose Place.
S3 (01:03):
It's on my watch list.
S1 (01:04):
He doesn't have the deep experience. Okay, Shane, give it
to us straight. Why has the government called a productivity
summit and why should we care about it?
S2 (01:12):
Well, we can give you the positive or the cynical
answer to this one.
S1 (01:17):
Give me both.
S2 (01:17):
Give me both. Positive is after the war on inflation,
inflation's in a smoldering heap. Uh, the government says right.
Let's get focused on productivity. Or the cynical answer is
they were looking for a second term agenda. And uh,
Jim Chalmers spluttered out on the day after the election, oh,
we've got to look at productivity now. And the government
(01:38):
has been scrambling along in that space ever since, six
of one half dozen of the other as to what's
going on.
S1 (01:45):
Okay, so there's a lot of listeners who won't necessarily
be across productivity as an economic term because it does
have a specific meaning. Can you just tell us quickly
what it is and what what the problem with it
is in Australia? Because we do have a problem with
it in Australia.
S2 (01:58):
Well, I'll pull you up on that. It's a global problem.
This has been going on. It's not. It is. We
are not all alone on this one. Everyone has struggled,
especially since the global financial crisis. But and there's a
whole set of reasons that's really contested. But let's understand
what productivity is. It is not working harder, which is
where most people start thinking. I use the word productivity
(02:21):
and everyone's, oh, you want to make me work harder? No,
it is being working smarter, producing more with the same inputs,
the same level of inputs. It's the use of technology.
It's the use of education. And it is productivity explains
how the global economy has transformed since the Industrial Revolution.
S3 (02:46):
People often say productivity is the only way you grow
living standards. If you don't become more productive over time,
you don't increase real wages. Why is it such a
direct link?
S2 (02:58):
I think you're paraphrasing Nobel Laureate Paul Krugman, who says
in the long run, productivity. It may not be everything,
but it's just about everything.
S3 (03:07):
And to quote Keynes, in the long run, we're all dead.
S2 (03:09):
Thank you. We'll we'll be we'll be battling out on
quotations here shortly because put it this way. So pre-industrial
revolution technology didn't improve. And so the living standards of people, uh, from,
you know, the end of the Roman Empire through to
the 16th century was pretty crap. It didn't improve because
(03:31):
you didn't have the technological changes. So the estimate in
in this country is that since federation so 1901, I
am old, but I wasn't there. Um, is that about
60 to 70% of the productivity growth? The improvement in
living standards has been due to technology. And about 25% 5%
(03:55):
has been due to the fact that we've got smarter.
S1 (03:58):
Yes. And we talked I think we talked previously on this,
on this podcast, even about air conditioning in humid and
hot climates, how that has lifted productivity. Just tell us, though,
what productivity isn't going backwards in Australia, but it's slumped
or it's not growing very fast.
S2 (04:13):
Yeah. It's not. And this is what I'm saying. Like
globally there has been this slowdown. And so one of
the best examples of this is so I am old
enough to remember when everyone had a typewriter. And then
you had the advent of the PC, which is the
advent of computing power through the entire economy, actually contributed
(04:38):
to this huge surge in productivity that we saw in
the 1980s and 1990s and into the 2000. There were
other things going on, but the technological change was extraordinary,
driven by that. But you're saying you're saying, why is
it slowed There's a whole host of reasons, including the
fact that the economy itself is changing as. And we've
(05:01):
got people, more older, people who need care. We've got
more people in childcare than we ever had. These things
require lots of people.
S1 (05:11):
So the government is having a productivity summit to sort
of discuss all these issues on the agenda. We have resilience,
we have productivity, budget sustainability and also tax reform, which
we'll get onto later. The summit is happening the week
after next in Canberra. Paul, I imagine the guest list
for this summit has been curated pretty carefully. Who is
on the guest list?
S3 (05:29):
Yeah, it's how many people has it changed? 25, 24, 25.
On the list are heads of banks like Matt Coleman
from Commbank. Scott Farquhar from Atlassian, the man who's become
the kind of productivity guru, I'd say. Ken Henry, the
former Treasury secretary on the political front. There's very few MPs.
(05:50):
It's She is himself. The Prime Minister will be there,
I think, on day one and his economic team, Katie
Gallagher and Daniel Molina, the assistant treasurer, will be there
from opposition parties. There's Allegra Spender, the teal MP and
frequent tax reform advocate aficionado, perhaps, and there is an
opposition MP, the shadow treasurer, Ted O'Brien, will be there
(06:12):
and there'll be union leaders and heads of business, peak bodies,
the usual talking heads we hear a lot from.
S1 (06:17):
Okay. So there are very solid reasons why we need
this summit, why we need tax reform. Government spending has
basically blown out. It's increased by by about 2% of GDP.
Quoting from a story from Shane Risch. We have an
aging population. We have a sort of a blowout in
government services, particularly the NDIS, which is really, really blown
out and is not showing any signs of sort of
(06:38):
reversing that trend. Federal spending this year will hit the
highest share of the economy since 1986, according to a
Treasury forecast.
S2 (06:47):
Outside of Covid.
S1 (06:48):
Yeah, outside of Covid.
S2 (06:49):
Always.
S1 (06:50):
Yeah.
S2 (06:50):
Covid is, uh, sits there pretty large as a big
whack of cash.
S1 (06:54):
Yeah. Okay. But, Paul, I mean, I guess what I'm
wondering from both of you is if there is actually
any political appetite that you're sensing to address these very,
very real structural problems. Or does the Albanese government just
want to be seen to be addressing them and perhaps
need there in search of a second term agenda?
S3 (07:11):
Um, I think there's both both things are true. There
is a real appetite to tackle some of these big
structural issues now that the government has a bit more freedom,
as Shane said, because the inflation problem is not so stark.
But the big question on everyone's mind is how big
a fight is. The Albanese government, and particularly the treasurer,
Jim Chalmers, willing to take on and the prime minister.
Of course, there have been big hopes from some stakeholders
(07:35):
and economists and journalists and others who have been banging
the drum on economic reform for years. A lot of
the solutions or proposed solutions are well known and well ventilated,
but they require big political arguments, and the question is
whether the government is willing to have those. This week
we had some background briefings that we're not allowed to
(07:57):
really talk much about, so I'll be a bit vague.
S2 (07:59):
But he'll go ahead anyway.
S3 (08:01):
Yeah, I kind of wrote it in the newspaper today.
So the cat's out of the bag a little bit. Um,
we had some background briefings that were pretty clearly trying
to douse speculation that the government was going to radically
alter its economic agenda off the back of this roundtable.
The Prime Minister said on Monday, I think it was.
And the Prime Minister's courtyard that this roundtable is just that.
(08:23):
It's a roundtable for ideas. They might be sitting around
the cabinet table, but it is not the federal cabinet.
And the government will set its own policy course. But
the government would argue that by having this elongated debate,
where important ideas have been able to be thrown up,
even if they don't come out of this roundtable with
a shopping list of items that can be immediately ticked
(08:45):
off by the cabinet, they could still create momentum for
some big ideas, some of which can be executed quickly,
others which might be picked up later in the term.
S1 (08:55):
The Productivity Commission, which is sort of, I suppose, the
government's own think tank, has done a series of reports
in the lead up to this roundtable, Shane, which you've
been dutifully reporting on. The latest one was about artificial intelligence.
Now all of a sudden it seems like everyone is
talking about artificial intelligence. It really is obviously transformative. It's
going to be a huge disruption to the economy and
(09:16):
to the jobs market. This PC report found that it
could be a real productivity boon to the Australian economy
and grow productivity by 4.3%, which adds, I don't know,
$116 billion in economic output, according to your story. The
report also said that the government should not try to
regulate AI or to overregulate it. Does the government have
(09:39):
a position on its response to that? Is it going
to try to regulate AI, or does it have any
kind of a plan for the AI transition.
S2 (09:47):
It's interesting because there is a debate within the government
over this. Very much so at the moment. And because
you've got say that same report says, right, there will
be job losses as there is with all technology industries
come and go and technology often drives what happens to them. Um,
(10:11):
so in this case the the PC says, yes, there'll
be more new jobs offsetting the job losses, but says yes,
there will be job losses. So this has led to the, say,
the union movement so well fed through into the the
government saying we want tight restrictions effectively, the ACTU suggesting
we want to write the regulations around how AI is introduced,
(10:36):
whereas the PC is coming from it saying you start
overregulating or not even using the regulations that you have,
then you could kill the advantages and the benefits that
will flow. So yeah. And this is there is you
can see it. Jim Chalmers is more towards the PC view.
Let's use the existing laws that we have. Uh, and
(10:58):
there are others within the government saying, hey, hold on.
We've got to protect. We've got to protect our workers.
We have to protect our communities. We really need to
get on top of this.
S3 (11:08):
Um, it's interesting how the rhetoric has changed over the
past year or so. Ed Husic, the former minister for innovation,
when he was still in the job, about, I don't know, 12,
18 months ago at the time when we just learned
about ChatGPT, there was this global reckoning about this, these
new models that we were seeing. And there was a
lot of fear around what could be next and what
(11:28):
what effect it would have on the society. And at
that point, Ed Husic started floating the idea, and it
was his preference to do a new AI act, a
new piece of legislation that would put, you know, the
cliche term at the time was guardrails around AI to
prevent another cliche term, I harms. People in the government
are not really talking about an act anymore, it's shifting
in the other direction. But Ed Husic this week still
(11:49):
now not a minister dumped out of the cabinet, is
still arguing for an I act. So it's not settled.
And there are different views here.
S1 (11:57):
I mean, on the one hand you can see that
that's a mad it seems like a mad idea because
the technology's moving so fast anyway. How could legislation possibly
keep up with it? But on the other hand, it
is a big threat to jobs. And if you don't
manage that transition, then it could end up sort of
being socially very inequitable. And it seems like the government
sort of standing back and allowing the debate to unfold,
but it doesn't seem to have any particular ideas or
(12:17):
solutions at this point. Let's talk about tax, because that's
the other part of this.
S3 (12:22):
Well, just sorry to interrupt you, but that's just in
terms of what the government can do. That's one big question.
If the government can do anything, particularly a government of
a small nation like Australia, we are not the price
makers of AI regulation. If there is to be any
AI regulation that has any meaningful effect, it's probably going
to come out of the EU or the US, and
the US is moving in the other direction entirely. So
(12:44):
the Trump administration is, like, threatening the rest of the
world to not do any regulation on AI. The people,
there's people in the cabinet who think there's absolutely no
use in Australia even comprehending, uh, regulating AI except for
specific use cases like the creation of deepfakes to create
explicit images of people in schools, for example, which can
(13:04):
be dealt with by new criminal laws.
S1 (13:06):
That I mean that that is regulation, I suppose. Um,
that's what we're sort of talking about. At what level
will the government intervene and try to regulate this stuff?
Let's talk about tax, because, um, the Productivity Roundtable is
obviously an excuse for policy wonks and people like Shane
Reich to come out of the woodwork where they've been hiding.
S2 (13:25):
And I didn't I didn't know I was hiding in
the woodwork.
S1 (13:28):
No, I was going to say, this is a this
is a bit worrisome under a bushel at all.
S3 (13:31):
But he's been giddy, Jack.
S1 (13:33):
The.
S3 (13:33):
Last the last two weeks of Productivity Commission reports every day.
He just doesn't stop smiling.
S1 (13:37):
It's really delightful. Um, I guess it gives you an
even bigger platform on which to talk about tax. So
a lot of new ideas, or shall I say, a
lot of ideas for taxes and new taxes have been floated.
Broadening of the GST base, changes to capital gains tax exemptions,
negative gearing including the family home in the pension assets test.
(14:00):
All sorts of things. Questions about generational inequity. Questions about
superannuation taxes. Are we going to see any new ideas
for tax reform actually be adopted out of this, Shane.
And which in your view, are the sort of frontrunners.
S2 (14:13):
Look, whether they'll be adopted, I wouldn't want to put
your great capital gain approved home on the line for that, Jack,
because I am very circumspect whether this government will make
a big change in tax when they hadn't actually given
voters a head start on this before the last election.
And I think that goes to where Anthony Albanese is
in terms of like, I want to bring punters with me,
(14:37):
but I think what stands out like. Yes. What a
surprise that the business community wants a cut in the
company tax rate. Who wouldn't want to pay less tax?
Like Paul, highly paid scale here. Would love a cut
in their personal income tax stuff space, but somehow you
have to pay for it. So this has been one
of these things that, uh, Jim Chalmers has been upfront
(14:58):
ever since this whole thing started. If you're going to
come up with a tax reform, you've got to find
a way to pay for it. And outside of few
areas that that has been missing in terms of. Got
an idea? Yep. I'd like to pay less tax and
someone would also have to pay for it. Yeah, we
would all love that. That that world sounds fantastic, but
(15:18):
it's not the reality that we're going to see.
S1 (15:20):
Paul, what's your sense from within the government? Because Anthony
Albanese sort of official line is like, it's all good,
it's all good. We're talking about ideas. Nothing's, you know,
nothing is government policy. Government policy will be decided around
the cabinet table. Are they actually serious about tax reform?
I feel like this. This just gets raised repeatedly. repeatedly,
and no government of either stripe actually wants to do
anything real about tax reform to increase the revenue base.
S3 (15:44):
No it's not. It's not clear what appetite they have
on this kind of wholesale tax reform that some of
the economic purists argue for. On the productivity question a
question in Shane is, um, educated me on this over time.
Tax occupies a huge amount of space in the productivity debate,
(16:05):
particularly in sections of the media that are more laissez
faire and have greater emphasis on lower taxes and a
more deregulated, um, workforce. It is important for productivity, but
it's not everything. And Danielle Wood, the productivity commissioner, is
emphasizing a whole other set of productivity enhancing reforms, which
(16:25):
the government does seem to have more appetite to move
on quickly around, uh, quicker energy approvals around getting the
housing market to work better. and around deregulation, which has
become all the rage since the abundance book by US journalists,
which a lot of people say they have read and
probably some have actually read. I have read it. You
(16:48):
have read it. Change it. I read some of it.
I heard it in audiobook form.
S1 (16:51):
All you have to do is go to ChatGPT and
ask for the dot points. You don't need to read
books anymore.
S3 (16:56):
Yeah, exactly. So I think the government will disappoint many
of the commentators and economists who want the tax mix
shifted to have less income tax and more reliance on
indirect taxes like the GST. The government has indicated that
it will not touch the GST, despite widespread approval, that
(17:16):
changing that mix would be a good thing for the
economy because it would be a massive political fight and
they do not have a mandate for it. But it
doesn't mean they can't do other good things, which may
not be as headline grabbing.
S1 (17:26):
Shane, you might not get any tax reform out of
this summit, but what about cuts? I mean, that's the
other piece of the pie, right? If we can't grow
the revenue base through beautiful new taxes, then perhaps we
can trim the bottom line. Is anyone talking about that?
Is it even on the agenda? Are we likely to
see anyone talk about actually trimming government expenditure?
S2 (17:46):
The funny like budget sustainability is both tax and spending.
So the government has been talking about look at what
we're doing on the NDIS. It's not growing at 14%
a year.
S1 (17:57):
It's still growing at like eight.
S2 (17:58):
It's still growing at 8% a year.
S1 (17:59):
Yeah.
S2 (18:00):
So whether that is clearly not sustainable and then you've
got say the defence hawks saying we've got to spend
a hell of a lot more in the defence space. Um,
this is where you get into the argument, right. You
could actually you, you may not want to cut because
ultimately where you can cut to make huge savings are
(18:20):
the most politically sensitive areas. And where there are literally
millions of people dependent on some sort of assistance from
ignore unemployment benefits, aged pension, that's the single biggest welfare
payment in the budget. I'm not like apart from, say,
bringing the the family home into the pensions test. No
(18:44):
one's saying. Right. Yeah. Pensions have got to. Got it. Too. Good.
We better cut their their expenditure. It's how you actually, um,
provide support. Can you do it in a better way?
So you don't have to spend as much or the
growth slows. That's. I think that's where you end up. Yeah.
In that, in that space on that side of the budget.
(19:04):
But you're right. It hasn't been there's not a huge
amount of debate in that space. But you do have
people saying, oh, we've just got to cut spending. Of
course this is like tax cuts. I'll cut spending for
somebody else, but spending for on me or no, that's
really important.
S3 (19:19):
Allegra spender.
S2 (19:19):
Is.
S3 (19:20):
Doing well to set the terms of the debate on
spending in our newspaper on Thursday, talking about the care economy, NDIS,
uh uh, aged care. The government did some good work
last term to reform those areas and bring spending more
into check. But there's still massive they do. They're not
productivity enhancing areas. We need them for the society. They
do transform people's lives, these programs. But it's huge questions
(19:43):
about whether the budget can continue to afford these things.
This is spend. Spend has been brave in talking about them.
S2 (19:48):
I just want to come back like we talk about
trade offs all over, like economics is the the concept
of trade offs. So I go to someone says, all right,
we've got to do something about aged care. I say, well,
have you read the Aged Care Royal Commission report? And
they go, what are you talking about? I say, read
that and you go, the trade off is do you
want your your mother or your grandmother in care, which
(20:11):
is terrible, terrible food, bed sores.
S1 (20:14):
Yeah.
S2 (20:15):
A threat of violence. Or do we as a community,
we say, okay, we're going to say we're going to
have to spend more. There is a trade off there,
but mum or grandma is going to have a much
better quality of life. These are these are huge issues
that like I say, productivity. There we we get into
what's the trade.
S1 (20:35):
Off you're prepared to make? I mean these are all
trade offs that are worked out through the, you know,
through the democratic system, as they should be. Allegra Spender,
as you reported, Paul, makes the point that with something
like the NDIS, if it just keeps blowing out and
blowing out, then it does lose public support and the
social licence, even though it is obviously an incredibly important
reform and has transformed a lot of people's lives. Guys,
that's all we have time for. I'm sure that we
(20:56):
will come back to the Productivity Summit, and we always
enjoy having Shane, and this is such a good time
of year for you. This is like sort of a
career highlight surely?
S2 (21:05):
Well, just talking to you as a career highlight. So
come on. And being linked to Heather Locklear every time
we appear like that's no much better. But look, I
think we could do a daily like live stream, the, uh,
the Productivity Roundtable for three days, 24 hours, back to
back to.
S3 (21:22):
Back grand.
S1 (21:23):
Final. I'm thinking TikToks, I'm thinking YouTube videos.
S2 (21:27):
I think I think there's a there's a few answers
to that, but we don't have time for it, do we, Jackie?
S1 (21:32):
No, we certainly don't. But we will see you both
again soon, Paul. I'll see you next week. Thanks very much, guys.
S4 (21:37):
Thank you. Jackie.
S1 (21:43):
Today's episode was produced by Josh towers with technical assistance
from Kai Wong and Debbie Harrington. Our executive producer is
Tammy Mills, and Tom McKendrick is our head of audio.
To listen to our episodes as soon as they drop,
follow Inside Politics on Apple, Spotify or anywhere else you
listen to your podcasts. To stay up to date with
(22:04):
all the politics, news and exclusives, visit The Age and
The Sydney Morning Herald websites and to support our journalism,
subscribe to us by visiting the page or smh.com.au. I'm
Jacqueline Maley, thank you for listening.
From the newsrooms of the Sydney Morning Herald and The Age.
This is inside politics. I'm Jacqueline Maley. It's Friday, August 8th.
This week on the pod, we are going to delve
into what we are calling Canberra's Coachella, aka the Productivity Summit,
which is happening the week after next. What is the
(00:24):
point of this summit and what is productivity anyway? Here
to discuss, we have our chief political correspondent, Paul Satchell,
as usual, and a special guest star and Productivity King,
senior economics correspondent Shane Reich. Welcome, gentlemen.
S2 (00:42):
Well, I'm just waiting for the Melrose Place music to
play for me. But, you know, I'm. Well. Thank you. Jacki.
S1 (00:49):
Um, see, we haven't even gotten five minutes into the podcast,
and already you were mentioning our favourite show from the
90s that Paul's never heard of.
S2 (00:56):
Well, it's about time, Paul. This is why Paul struggles
on struggles and productivity. He doesn't have that. Tapped in
to the Melrose Place.
S3 (01:03):
It's on my watch list.
S1 (01:04):
He doesn't have the deep experience. Okay, Shane, give it
to us straight. Why has the government called a productivity
summit and why should we care about it?
S2 (01:12):
Well, we can give you the positive or the cynical
answer to this one.
S1 (01:17):
Give me both.
S2 (01:17):
Give me both. Positive is after the war on inflation,
inflation's in a smoldering heap. Uh, the government says right.
Let's get focused on productivity. Or the cynical answer is
they were looking for a second term agenda. And uh,
Jim Chalmers spluttered out on the day after the election, oh,
we've got to look at productivity now. And the government
(01:38):
has been scrambling along in that space ever since, six
of one half dozen of the other as to what's
going on.
S1 (01:45):
Okay, so there's a lot of listeners who won't necessarily
be across productivity as an economic term because it does
have a specific meaning. Can you just tell us quickly
what it is and what what the problem with it
is in Australia? Because we do have a problem with
it in Australia.
S2 (01:58):
Well, I'll pull you up on that. It's a global problem.
This has been going on. It's not. It is. We
are not all alone on this one. Everyone has struggled,
especially since the global financial crisis. But and there's a
whole set of reasons that's really contested. But let's understand
what productivity is. It is not working harder, which is
where most people start thinking. I use the word productivity
(02:21):
and everyone's, oh, you want to make me work harder? No,
it is being working smarter, producing more with the same inputs,
the same level of inputs. It's the use of technology.
It's the use of education. And it is productivity explains
how the global economy has transformed since the Industrial Revolution.
S3 (02:46):
People often say productivity is the only way you grow
living standards. If you don't become more productive over time,
you don't increase real wages. Why is it such a
direct link?
S2 (02:58):
I think you're paraphrasing Nobel Laureate Paul Krugman, who says
in the long run, productivity. It may not be everything,
but it's just about everything.
S3 (03:07):
And to quote Keynes, in the long run, we're all dead.
S2 (03:09):
Thank you. We'll we'll be we'll be battling out on
quotations here shortly because put it this way. So pre-industrial
revolution technology didn't improve. And so the living standards of people, uh, from,
you know, the end of the Roman Empire through to
the 16th century was pretty crap. It didn't improve because
(03:31):
you didn't have the technological changes. So the estimate in
in this country is that since federation so 1901, I
am old, but I wasn't there. Um, is that about
60 to 70% of the productivity growth? The improvement in
living standards has been due to technology. And about 25% 5%
(03:55):
has been due to the fact that we've got smarter.
S1 (03:58):
Yes. And we talked I think we talked previously on this,
on this podcast, even about air conditioning in humid and
hot climates, how that has lifted productivity. Just tell us, though,
what productivity isn't going backwards in Australia, but it's slumped
or it's not growing very fast.
S2 (04:13):
Yeah. It's not. And this is what I'm saying. Like
globally there has been this slowdown. And so one of
the best examples of this is so I am old
enough to remember when everyone had a typewriter. And then
you had the advent of the PC, which is the
advent of computing power through the entire economy, actually contributed
(04:38):
to this huge surge in productivity that we saw in
the 1980s and 1990s and into the 2000. There were
other things going on, but the technological change was extraordinary,
driven by that. But you're saying you're saying, why is
it slowed There's a whole host of reasons, including the
fact that the economy itself is changing as. And we've
(05:01):
got people, more older, people who need care. We've got
more people in childcare than we ever had. These things
require lots of people.
S1 (05:11):
So the government is having a productivity summit to sort
of discuss all these issues on the agenda. We have resilience,
we have productivity, budget sustainability and also tax reform, which
we'll get onto later. The summit is happening the week
after next in Canberra. Paul, I imagine the guest list
for this summit has been curated pretty carefully. Who is
on the guest list?
S3 (05:29):
Yeah, it's how many people has it changed? 25, 24, 25.
On the list are heads of banks like Matt Coleman
from Commbank. Scott Farquhar from Atlassian, the man who's become
the kind of productivity guru, I'd say. Ken Henry, the
former Treasury secretary on the political front. There's very few MPs.
(05:50):
It's She is himself. The Prime Minister will be there,
I think, on day one and his economic team, Katie
Gallagher and Daniel Molina, the assistant treasurer, will be there
from opposition parties. There's Allegra Spender, the teal MP and
frequent tax reform advocate aficionado, perhaps, and there is an
opposition MP, the shadow treasurer, Ted O'Brien, will be there
(06:12):
and there'll be union leaders and heads of business, peak bodies,
the usual talking heads we hear a lot from.
S1 (06:17):
Okay. So there are very solid reasons why we need
this summit, why we need tax reform. Government spending has
basically blown out. It's increased by by about 2% of GDP.
Quoting from a story from Shane Risch. We have an
aging population. We have a sort of a blowout in
government services, particularly the NDIS, which is really, really blown
out and is not showing any signs of sort of
(06:38):
reversing that trend. Federal spending this year will hit the
highest share of the economy since 1986, according to a
Treasury forecast.
S2 (06:47):
Outside of Covid.
S1 (06:48):
Yeah, outside of Covid.
S2 (06:49):
Always.
S1 (06:50):
Yeah.
S2 (06:50):
Covid is, uh, sits there pretty large as a big
whack of cash.
S1 (06:54):
Yeah. Okay. But, Paul, I mean, I guess what I'm
wondering from both of you is if there is actually
any political appetite that you're sensing to address these very,
very real structural problems. Or does the Albanese government just
want to be seen to be addressing them and perhaps
need there in search of a second term agenda?
S3 (07:11):
Um, I think there's both both things are true. There
is a real appetite to tackle some of these big
structural issues now that the government has a bit more freedom,
as Shane said, because the inflation problem is not so stark.
But the big question on everyone's mind is how big
a fight is. The Albanese government, and particularly the treasurer,
Jim Chalmers, willing to take on and the prime minister.
Of course, there have been big hopes from some stakeholders
(07:35):
and economists and journalists and others who have been banging
the drum on economic reform for years. A lot of
the solutions or proposed solutions are well known and well ventilated,
but they require big political arguments, and the question is
whether the government is willing to have those. This week
we had some background briefings that we're not allowed to
(07:57):
really talk much about, so I'll be a bit vague.
S2 (07:59):
But he'll go ahead anyway.
S3 (08:01):
Yeah, I kind of wrote it in the newspaper today.
So the cat's out of the bag a little bit. Um,
we had some background briefings that were pretty clearly trying
to douse speculation that the government was going to radically
alter its economic agenda off the back of this roundtable.
The Prime Minister said on Monday, I think it was.
And the Prime Minister's courtyard that this roundtable is just that.
(08:23):
It's a roundtable for ideas. They might be sitting around
the cabinet table, but it is not the federal cabinet.
And the government will set its own policy course. But
the government would argue that by having this elongated debate,
where important ideas have been able to be thrown up,
even if they don't come out of this roundtable with
a shopping list of items that can be immediately ticked
(08:45):
off by the cabinet, they could still create momentum for
some big ideas, some of which can be executed quickly,
others which might be picked up later in the term.
S1 (08:55):
The Productivity Commission, which is sort of, I suppose, the
government's own think tank, has done a series of reports
in the lead up to this roundtable, Shane, which you've
been dutifully reporting on. The latest one was about artificial intelligence.
Now all of a sudden it seems like everyone is
talking about artificial intelligence. It really is obviously transformative. It's
going to be a huge disruption to the economy and
(09:16):
to the jobs market. This PC report found that it
could be a real productivity boon to the Australian economy
and grow productivity by 4.3%, which adds, I don't know,
$116 billion in economic output, according to your story. The
report also said that the government should not try to
regulate AI or to overregulate it. Does the government have
(09:39):
a position on its response to that? Is it going
to try to regulate AI, or does it have any
kind of a plan for the AI transition.
S2 (09:47):
It's interesting because there is a debate within the government
over this. Very much so at the moment. And because
you've got say that same report says, right, there will
be job losses as there is with all technology industries
come and go and technology often drives what happens to them. Um,
(10:11):
so in this case the the PC says, yes, there'll
be more new jobs offsetting the job losses, but says yes,
there will be job losses. So this has led to the, say,
the union movement so well fed through into the the
government saying we want tight restrictions effectively, the ACTU suggesting
we want to write the regulations around how AI is introduced,
(10:36):
whereas the PC is coming from it saying you start
overregulating or not even using the regulations that you have,
then you could kill the advantages and the benefits that
will flow. So yeah. And this is there is you
can see it. Jim Chalmers is more towards the PC view.
Let's use the existing laws that we have. Uh, and
(10:58):
there are others within the government saying, hey, hold on.
We've got to protect. We've got to protect our workers.
We have to protect our communities. We really need to
get on top of this.
S3 (11:08):
Um, it's interesting how the rhetoric has changed over the
past year or so. Ed Husic, the former minister for innovation,
when he was still in the job, about, I don't know, 12,
18 months ago at the time when we just learned
about ChatGPT, there was this global reckoning about this, these
new models that we were seeing. And there was a
lot of fear around what could be next and what
(11:28):
what effect it would have on the society. And at
that point, Ed Husic started floating the idea, and it
was his preference to do a new AI act, a
new piece of legislation that would put, you know, the
cliche term at the time was guardrails around AI to
prevent another cliche term, I harms. People in the government
are not really talking about an act anymore, it's shifting
in the other direction. But Ed Husic this week still
(11:49):
now not a minister dumped out of the cabinet, is
still arguing for an I act. So it's not settled.
And there are different views here.
S1 (11:57):
I mean, on the one hand you can see that
that's a mad it seems like a mad idea because
the technology's moving so fast anyway. How could legislation possibly
keep up with it? But on the other hand, it
is a big threat to jobs. And if you don't
manage that transition, then it could end up sort of
being socially very inequitable. And it seems like the government
sort of standing back and allowing the debate to unfold,
but it doesn't seem to have any particular ideas or
(12:17):
solutions at this point. Let's talk about tax, because that's
the other part of this.
S3 (12:22):
Well, just sorry to interrupt you, but that's just in
terms of what the government can do. That's one big question.
If the government can do anything, particularly a government of
a small nation like Australia, we are not the price
makers of AI regulation. If there is to be any
AI regulation that has any meaningful effect, it's probably going
to come out of the EU or the US, and
the US is moving in the other direction entirely. So
(12:44):
the Trump administration is, like, threatening the rest of the
world to not do any regulation on AI. The people,
there's people in the cabinet who think there's absolutely no
use in Australia even comprehending, uh, regulating AI except for
specific use cases like the creation of deepfakes to create
explicit images of people in schools, for example, which can
(13:04):
be dealt with by new criminal laws.
S1 (13:06):
That I mean that that is regulation, I suppose. Um,
that's what we're sort of talking about. At what level
will the government intervene and try to regulate this stuff?
Let's talk about tax, because, um, the Productivity Roundtable is
obviously an excuse for policy wonks and people like Shane
Reich to come out of the woodwork where they've been hiding.
S2 (13:25):
And I didn't I didn't know I was hiding in
the woodwork.
S1 (13:28):
No, I was going to say, this is a this
is a bit worrisome under a bushel at all.
S3 (13:31):
But he's been giddy, Jack.
S1 (13:33):
The.
S3 (13:33):
Last the last two weeks of Productivity Commission reports every day.
He just doesn't stop smiling.
S1 (13:37):
It's really delightful. Um, I guess it gives you an
even bigger platform on which to talk about tax. So
a lot of new ideas, or shall I say, a
lot of ideas for taxes and new taxes have been floated.
Broadening of the GST base, changes to capital gains tax exemptions,
negative gearing including the family home in the pension assets test.
(14:00):
All sorts of things. Questions about generational inequity. Questions about
superannuation taxes. Are we going to see any new ideas
for tax reform actually be adopted out of this, Shane.
And which in your view, are the sort of frontrunners.
S2 (14:13):
Look, whether they'll be adopted, I wouldn't want to put
your great capital gain approved home on the line for that, Jack,
because I am very circumspect whether this government will make
a big change in tax when they hadn't actually given
voters a head start on this before the last election.
And I think that goes to where Anthony Albanese is
in terms of like, I want to bring punters with me,
(14:37):
but I think what stands out like. Yes. What a
surprise that the business community wants a cut in the
company tax rate. Who wouldn't want to pay less tax?
Like Paul, highly paid scale here. Would love a cut
in their personal income tax stuff space, but somehow you
have to pay for it. So this has been one
of these things that, uh, Jim Chalmers has been upfront
(14:58):
ever since this whole thing started. If you're going to
come up with a tax reform, you've got to find
a way to pay for it. And outside of few
areas that that has been missing in terms of. Got
an idea? Yep. I'd like to pay less tax and
someone would also have to pay for it. Yeah, we
would all love that. That that world sounds fantastic, but
(15:18):
it's not the reality that we're going to see.
S1 (15:20):
Paul, what's your sense from within the government? Because Anthony
Albanese sort of official line is like, it's all good,
it's all good. We're talking about ideas. Nothing's, you know,
nothing is government policy. Government policy will be decided around
the cabinet table. Are they actually serious about tax reform?
I feel like this. This just gets raised repeatedly. repeatedly,
and no government of either stripe actually wants to do
anything real about tax reform to increase the revenue base.
S3 (15:44):
No it's not. It's not clear what appetite they have
on this kind of wholesale tax reform that some of
the economic purists argue for. On the productivity question a
question in Shane is, um, educated me on this over time.
Tax occupies a huge amount of space in the productivity debate,
(16:05):
particularly in sections of the media that are more laissez
faire and have greater emphasis on lower taxes and a
more deregulated, um, workforce. It is important for productivity, but
it's not everything. And Danielle Wood, the productivity commissioner, is
emphasizing a whole other set of productivity enhancing reforms, which
(16:25):
the government does seem to have more appetite to move
on quickly around, uh, quicker energy approvals around getting the
housing market to work better. and around deregulation, which has
become all the rage since the abundance book by US journalists,
which a lot of people say they have read and
probably some have actually read. I have read it. You
(16:48):
have read it. Change it. I read some of it.
I heard it in audiobook form.
S1 (16:51):
All you have to do is go to ChatGPT and
ask for the dot points. You don't need to read
books anymore.
S3 (16:56):
Yeah, exactly. So I think the government will disappoint many
of the commentators and economists who want the tax mix
shifted to have less income tax and more reliance on
indirect taxes like the GST. The government has indicated that
it will not touch the GST, despite widespread approval, that
(17:16):
changing that mix would be a good thing for the
economy because it would be a massive political fight and
they do not have a mandate for it. But it
doesn't mean they can't do other good things, which may
not be as headline grabbing.
S1 (17:26):
Shane, you might not get any tax reform out of
this summit, but what about cuts? I mean, that's the
other piece of the pie, right? If we can't grow
the revenue base through beautiful new taxes, then perhaps we
can trim the bottom line. Is anyone talking about that?
Is it even on the agenda? Are we likely to
see anyone talk about actually trimming government expenditure?
S2 (17:46):
The funny like budget sustainability is both tax and spending.
So the government has been talking about look at what
we're doing on the NDIS. It's not growing at 14%
a year.
S1 (17:57):
It's still growing at like eight.
S2 (17:58):
It's still growing at 8% a year.
S1 (17:59):
Yeah.
S2 (18:00):
So whether that is clearly not sustainable and then you've
got say the defence hawks saying we've got to spend
a hell of a lot more in the defence space. Um,
this is where you get into the argument, right. You
could actually you, you may not want to cut because
ultimately where you can cut to make huge savings are
(18:20):
the most politically sensitive areas. And where there are literally
millions of people dependent on some sort of assistance from
ignore unemployment benefits, aged pension, that's the single biggest welfare
payment in the budget. I'm not like apart from, say,
bringing the the family home into the pensions test. No
(18:44):
one's saying. Right. Yeah. Pensions have got to. Got it. Too. Good.
We better cut their their expenditure. It's how you actually, um,
provide support. Can you do it in a better way?
So you don't have to spend as much or the
growth slows. That's. I think that's where you end up. Yeah.
In that, in that space on that side of the budget.
(19:04):
But you're right. It hasn't been there's not a huge
amount of debate in that space. But you do have
people saying, oh, we've just got to cut spending. Of
course this is like tax cuts. I'll cut spending for
somebody else, but spending for on me or no, that's
really important.
S3 (19:19):
Allegra spender.
S2 (19:19):
Is.
S3 (19:20):
Doing well to set the terms of the debate on
spending in our newspaper on Thursday, talking about the care economy, NDIS,
uh uh, aged care. The government did some good work
last term to reform those areas and bring spending more
into check. But there's still massive they do. They're not
productivity enhancing areas. We need them for the society. They
do transform people's lives, these programs. But it's huge questions
(19:43):
about whether the budget can continue to afford these things.
This is spend. Spend has been brave in talking about them.
S2 (19:48):
I just want to come back like we talk about
trade offs all over, like economics is the the concept
of trade offs. So I go to someone says, all right,
we've got to do something about aged care. I say, well,
have you read the Aged Care Royal Commission report? And
they go, what are you talking about? I say, read
that and you go, the trade off is do you
want your your mother or your grandmother in care, which
(20:11):
is terrible, terrible food, bed sores.
S1 (20:14):
Yeah.
S2 (20:15):
A threat of violence. Or do we as a community,
we say, okay, we're going to say we're going to
have to spend more. There is a trade off there,
but mum or grandma is going to have a much
better quality of life. These are these are huge issues
that like I say, productivity. There we we get into
what's the trade.
S1 (20:35):
Off you're prepared to make? I mean these are all
trade offs that are worked out through the, you know,
through the democratic system, as they should be. Allegra Spender,
as you reported, Paul, makes the point that with something
like the NDIS, if it just keeps blowing out and
blowing out, then it does lose public support and the
social licence, even though it is obviously an incredibly important
reform and has transformed a lot of people's lives. Guys,
that's all we have time for. I'm sure that we
(20:56):
will come back to the Productivity Summit, and we always
enjoy having Shane, and this is such a good time
of year for you. This is like sort of a
career highlight surely?
S2 (21:05):
Well, just talking to you as a career highlight. So
come on. And being linked to Heather Locklear every time
we appear like that's no much better. But look, I
think we could do a daily like live stream, the, uh,
the Productivity Roundtable for three days, 24 hours, back to
back to.
S3 (21:22):
Back grand.
S1 (21:23):
Final. I'm thinking TikToks, I'm thinking YouTube videos.
S2 (21:27):
I think I think there's a there's a few answers
to that, but we don't have time for it, do we, Jackie?
S1 (21:32):
No, we certainly don't. But we will see you both
again soon, Paul. I'll see you next week. Thanks very much, guys.
S4 (21:37):
Thank you. Jackie.
S1 (21:43):
Today's episode was produced by Josh towers with technical assistance
from Kai Wong and Debbie Harrington. Our executive producer is
Tammy Mills, and Tom McKendrick is our head of audio.
To listen to our episodes as soon as they drop,
follow Inside Politics on Apple, Spotify or anywhere else you
listen to your podcasts. To stay up to date with
(22:04):
all the politics, news and exclusives, visit The Age and
The Sydney Morning Herald websites and to support our journalism,
subscribe to us by visiting the page or smh.com.au. I'm
Jacqueline Maley, thank you for listening.
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