Andrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

It is quite extraordinary that the coalition has decided that they are going to go to the wall for the 0.5 per cent of Australian superannuants who have more than $3 million in their accounts. We know that the measure that was announced last week was a carefully calibrated one which ensures that those who have more than $3 million in their superannuation accounts still get to enjoy a concessional rate of tax, but just not as concessional a rate as they would have enjoyed previously. Indeed, the shadow Treasurer has previously said that he believes that it's appropriate to consider the tax arrangements for those with multimillion-dollar superannuation accounts. Yet we have a situation in which we have 17 Australians with more than $100 million in their superannuation accounts. These are the 'forgotten people' that the Liberal Party of Australia has decided to go into bat for.

In the context of the current measure, it is more extraordinary still to discover the coalition now arguing against a measure that was originally announced by then treasurer Scott Morrison in the 2016-17 MYEFO but never legislated by the coalition. That measure will prevent companies from making franked dividends funded by capital raising for no commercial purpose at a cost to the budget. It will help improve the integrity of the tax system, and it will save around $10 million per year. The activity covered by the proposal largely stopped when the previous government announced it, and so legislating it now would have a minimal impact on the market.

We have also announced, as part of this bill, the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023, a measure which aligns the tax treatment of off-market share buybacks with the tax treatment for on-market share buybacks for listed public companies. It makes tax sense that we should align those two arrangements, that off-market and on-market share buybacks should receive the same tax treatment. But, currently, listed public companies offering an off-market share buyback can use tax rules to buy back their shares at below market prices by attaching franking credits to those trades. That is impossible with regular on-market trades. The benefits go predominantly to large businesses, who can use them and save money on their share buybacks. This will not affect the overwhelming majority of shareholders, who will continue to receive franked dividends. Off-market share buybacks represent less than two per cent of total franked distributions. The measure will save some $550 million.

Let's look at some of the firms that have undertaken notable off-market share buybacks. Westpac last year did an off-market share buyback of $3.5 billion, garnering $1.6 billion in franking credits. JB Hi-Fi did a $250 million off-market share buyback, garnering $94 million of franking credits. Commonwealth Bank in 2021 did a $6 billion off-market share buyback, garnering nearly $2 billion of franking credits. So, again, the coalition are choosing to go to the wall for the few, not for the many, choosing to fight for the rights of some of Australia's largest firms to continue to conduct off-market share buybacks and receive concessional tax treatment that would not be available if they were to do an on-market share buyback.

We on this side of the House are concerned with ensuring that Australia has a more dynamic economy. We are committed to action on climate change, as embodied in schedule 2 to the bill, which enacts sustainability standards, implementing the Australian government's election commitment to ensure a standardised, internationally aligned reporting of climate related plans, risks and opportunities by large businesses.

We're committed to ensuring that Australia has a more dynamic economy. Over recent decades, we've seen an increase in market concentration and an increase in mark-ups, the gap between costs and prices. We've seen a fall in the startup rate and a decline in the share of Australians starting a new job. It's very clear that the Australian economy is becoming less dynamic. After the lousiest decade of productivity growth in Australia's postwar history, it is vital that we look at the benefits that could be garnered from competition reform. In the 1990s Australia saw a productivity surge, and a good part of that had to do with the reforms to competition initiated by Fred Hilmer and Paul Keating at the beginning of that decade. Those Hilmer-Keating competition reforms garnered some $5,000 a year in benefits for the typical Australian household.

We need to consider today whether competition reform can help deliver a more dynamic economy. Since coming to government, the Albanese government has increased the penalties for anticompetitive conduct. We have banned unfair contract terms. We've received an important report from the Australian Competition and Consumer Commission into digital platform services. And we are currently consulting on platform-specific regulation and a ban on unfair trading practices. Around the world, we can see the thinking on competition shifting. The Biden White House has quite a different approach to competition issues than the Obama White House did. There is a greater awareness that big is not necessarily beautiful and that large firms can affect the entire ecosystem. The impact of monopsony power, the way in which large firms can squeeze their suppliers, is coming into sharp focus. Take Apple, for example. Apple is able to occupy a dominant position in the smartphone market, charging more to consumers than it would be able to do if it had a smaller market share.

But Apple can also squeeze its suppliers. There's only one way of getting an app onto the Apple app store, and that is by going through Apple. That's why the typical cost of an in-app purchase is 30 per cent. So monopsony power can hurt suppliers, just as monopoly power hurts consumers.

One of the groups that potentially stand to lose from monopsony power is workers. If workers have fewer choices as to where to work then their wages will tend to be lower than the productivity gains they're delivering for the firm. You can see this most starkly in the examples of company towns where there's just a single employer and workers are unable to bargain effectively.

In Australia, work by Jonathan Hambur has shown that monopsony power is growing in the Australian labour market, at the very time when union membership is shrinking—it's now at 12 per cent, at the lowest level it has been since 1901. We used to talk about workers united will never be defeated, but increasingly now it's employer power that is growing and worker power that's shrinking. This may be a key factor in explaining why wage growth has been so lousy in recent decades.

We on this side of the House believe in the benefits of competition and are concerned at the way in which large platforms are occupying increasingly powerful roles in the economy. Cory Doctorow and Rebecca Giblin's book Chokepoint Capitalism highlights some of the ways this can operate in the digital space. It has examples from Spotify to Amazon to Live Nation and looks at large entities that occupy chokepoints and potentially use technology not to drive down prices and to democratise capitalism but to concentrate power in too few hands.

We on this side of the House are watching closely developments in the United States and moves by Lina Khan, who heads up the Federal Trade Commission, to ban non-compete clauses across the US economy. Non-compete clauses now exist in one-fifth of American employment agreements. That proposed ban would have significant impacts on the ability of American workers to shift firms and—I should say on International Women's Day—on reducing the gender pay gap. The FTC's estimate is that banning non-compete clauses could narrow the gender pay gap by up to nine per cent and deliver some US$300 billion into the pockets of American workers.

We're alive in Australia to the dangers that can arise in having too few startups in the economy. That's why we're moving towards encouraging a startup culture across Australian universities. Our move towards a startup year—and here I acknowledge the work of the Minister for Industry and Science and the Minister for Education—will create more opportunities for young Australians to be part of a startup and, hopefully, will turn around the drop in the startup rate that we've seen over recent years. But that only works if those businesses are being started in an environment in which new firms have ready access to capital and young entrepreneurs have access to mentors.

I've been too concerned in recent years about trends that have seen young firms starved of the capital they need to grow. The collapse of a number of neobanks is potentially a move that could ripple across other sectors of the economy. We need to ensure that, if you want to start a business that takes on an established firm, you have the competitive ecosystem that you need to survive and thrive. We want the ambition of young entrepreneurs not to be to make a firm that's big enough to be bought up by a behemoth but to actually challenge the establishment insiders themselves.

If you look at the top five firms in the Australian share market now, four of those five were in the top five in the mid-1980s. If you look at the top 10 firms in the Australian stock market in 1917, five of those firms are still in the top 10 today. That's not true in the United States, which has turned over its largest firms to a much greater degree and which on some dimensions enjoys a healthier competitive ecosystem than does Australia.

Competition reform is fundamental to engendering the productivity surge which will ultimately drive living standards. In the long run, productivity is the key to ensuring that Australians enjoy better living standards at home and are able to be more generous to the vulnerable here and overseas. Productivity growth ensures that we can build the physical infrastructure and invest in the human capital we need, and the drop in productivity which occurred under the former coalition government may be tightly related to the drop in competitive dynamics that we saw in the Australian economy during the period of the former coalition government.

I want to acknowledge the important work that's being done in Treasury and the Reserve Bank on these issues. This is an issue which needs to be heavily scrutinised. At a time when economists overseas are taking a fresh look at the so-called Chicago school approach to competition and acknowledging that greater competitive dynamics may be an important part of building growth in the future, Australia needs more research and more policy heft focused on that area of competition.

We want to build a more dynamic economy. We want an economy that allows businesses to survive and thrive. We recognise that that productivity growth will drive the profits that will ultimately allow long-term wage growth in Australia. That's the vision of this government and that's the vision that is very much embodied by the bill, which I commend to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

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