Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to speak in support of the Productivity Commission Amendment (Addressing Inequality) Bill 2017. In opening my comments I want to congratulate my colleague Senator McAllister for bringing on a debate on such an important matter. For those of us on this side of the chamber the recent decision of the Productivity Commission to recommend a reduction in penalty rates makes the case very, very strongly that this reform is long overdue. The Productivity Commission is the brainchild of the former Howard government, and, while, I must confess, sometimes its reports have been useful—and I will come back to that—its most recent recommendation in respect of penalty rates in the retail, hospitality and fast-food sectors has given cover for the industrial commission to follow through with devastating cuts, which are going to further entrench inequality.

On this side of the chamber we know that equality of opportunity is core business for people in political life. If we are here for nothing else, we should be here to ensure that all Australians have equal opportunities. We know that it has become mainstream economic thought that inequality is inextricably linked with economic growth, so we really need to tailor our institutions to focus on this issue and ensure that it is an important consideration. But it is not just economic linkage. We know if there is a sustained perception of inequality in a society then that will have political consequences. I would argue that the rise of President Trump and the events in the UK with Brexit are all symptoms of people's perception that they are not adequately benefiting from the growth of the economy, and that is therefore leading to dissatisfaction, disaffection, dislocation and disengagement. This is something that, as a body politic, we need to nip in the bud, and I think Senator McAllister's proposal for the Productivity Commission is a good starting point for focusing one of our key institutions on the issue of inequality—amongst other things, of course. They will always need to address other criteria, but inequality should be up there, of equal importance, with those other issues.

We know that Australia's inequality level is the challenge of our time. Even the Treasurer, Mr Morrison, has indicated that low wages growth is probably the single most important economic issue that we confront. Having said that, the government will not do anything to prevent the cuts to penalty rates and prevent the take-home pay of many low-wage employees being further affected. It is a very hollow observation on the part of the Treasurer. We know that wealth is growing more quickly at the top of the spectrum, and over the past four decades real earnings for the top 10 per cent have risen nearly four times faster than they have for the bottom 10 per cent. That is a huge concern. Unless we do something about this trend of increasing inequality then, as sure as night follows day, we are going to see a continuation of it and things will get a lot worse before they get any better.

I was somewhat heartened, and a bit surprised, to see the new Governor of the Reserve Bank come out in support of workers demanding a greater share of the economy's profits to drive up record low wages growth. The Governor of the Reserve Bank is not normally seen as a champion of workers' rights, though to be fair to the governor he has made a number of other comments as well—but this was a central tenet of one of his recent speeches. He identified that there is a real need to address this issue of demand in the economy, and we need a sustained pick-up in wages to enable us to move out of the abnormally low interest rate settings that we are currently in. It is surprising to see the Governor of the Reserve Bank make those comments.

We have also seen comments from the Business Council of Australia's chief executive, Jennifer Westacott, who has written that the sense of resentment in the community over the changing economic outlook is real and it must be understood. She has said:

Economic liberalisation is a social compact. In exchange for rising incomes to help them look after their local needs, people are asked to accept an ever-changing economy with industries that rise and fall with the tide of global progress.

After a decade of phenomenal income growth, built on the back of a deregulated economy that reaped the benefits of increased global trade, business investment has now slowed and wages growth has fallen flat.

She says that the crisis really is in real wage growth. This is coming from an unusual quarter—even people on the business side of our society are saying that enough is enough, that we have seen surprising income growth in certain quarters but the people who most need the benefit of the growth in our economy are not seeing that.

Almost three-quarters of Australians agree that differences in incomes are too high. We do not have the sorts of levels of income inequality that you might see in the US, for example, but that is because of many of the institutions that we now take for granted in our country. I am very proud to be a Labor politician and to be able to point to many of those institutions as having been initiated, created or sustained and protected by the Labor Party in the course of 100 years, whether it comes to forms of welfare which were absolutely necessary—payments to mothers, in the first instance, going back 100 years or so; along the way, through Medicare and our occupational superannuation system; and, as we go forward, the NDIS. There are many other initiatives that the Labor Party has taken which form part of the fabric of the safety net we have in this country that has been so effective in the past in ensuring that the benefits of economic growth do flow through to those people that really need it.

It is of continuing concern to me that, despite the fact that many credible economists identify this as one of the reasons why Australia does have this relatively low level of inequality, we continue to see from the other side of politics continued attacks on these institutions and concepts. Really, if there is one area that should have bipartisan support, it is buttressing the institutions which prevent levels of inequality such as we see in the United States. I call on colleagues opposite to get on board with that.

The tide is turning and there is a need for us to adjust our thinking, out of the Thatcherite and Reaganist era, if we are going to lift economic growth out of the doldrums it is currently in. Although we have had a sustained period of economic growth, and there are a number of reasons for that, it is low growth and it is growth that is not flowing through in benefits to low-income workers. When we talk about this safety net, we are also talking about the trade union movement, as it is an integral part of it. We should get our heads out of the Thatcherite and Reaganist era, when there was a hard Right attack on the union movement because they interfered with the free market. That type of thinking, trickle-down economics, should be confined to the dustbin of history, and we should be adopting a more enlightened approach, one that is more in line with the facts and with the empirical evidence.

It is not just Labor saying this. For example, the International Monetary Fund has made the comment and has actually quantified the extent to which inequality is an inhibitor of economic growth. So as a former trade union official I join with Senator Cameron in saying that, rather than continuously attacking the trade union movement—which is at a low ebb at the moment, and we should be frank about that; levels of union membership in this country are quite low, historically speaking, and I would put that down to the fact that there is a lot of emphasis given to sensationalist media reporting—it should be considered, and it is, as I said in my first speech in this place, an integral part of the system of transmitting the proceeds and the benefits of economic growth through to ordinary working people. That is where I stand and that is what I support.

As I said, while we do not have those extremes of inequality that we see in other countries, we are below the OECD average, and the Gini coefficient, which is a well-respected metric in this area. Whereas the OECD average is 0.32, Australia's is 0.33. We are not doing as well as we should and as well as we have done in the past. We know that 2½ million Australians live below the poverty line. I have indicated that inequality is a drag on economic growth and a destabilising force in society. I have touched on that point. The OECD has estimated that from 1985 to 2005 inequality reduced growth among member states by almost 5 per cent. That is an extraordinary figure. The IMF's chief, Christine Lagarde, has warned leaders as the World Economic Forum recently that economic growth can only be sustained if it is equitable. It comes back to the need for an institution like the Productivity Commission to focus on this particular issue. I started by talking about the penalty rates decision, which I think is the most egregious example of the Productivity Commission looking at a set of facts and coming up with a conclusion that is unhelpful to our economy and our society. We know that the McKell Institute has done work in respect of what happens when you cut penalty rates. They have identified that the retail and hospitality trade is a particularly important trade for rural Australia. We know that the retail trade, as far as the workforce was concerned, was 11 per cent in the 2011 survey, and we had accommodation and food services at seven per cent. That is a significant part of the rural workforce.

We know that when you cut penalty rates, you take that spending power that exists in those regional communities out of regional communities and repatriate it back to the head offices of companies, so that that money is used someone else rather than in the local community. We know that regional and rural communities are already struggling, so we are going to see significant impacts from 1 July. When we should be doing all that we can to support our regional communities and we see this coming forward, this is going to be a devastating new impact on regional communities.

We should do a number of things when talking about inequality. We should establish measures for economic inequality. We should be looking at things like geography, gender and age in respect of inequality. We know that governments do not work effectively if they cannot measure and quantify the problem so we can prioritise our efforts in dealing with these types of issues in a policy setting. Unless you do that sort of thing, the community remains unaware of the extent to which inequality is connected to social and other outcomes.

This is a significant concern for me as a Labor politician. I want to highlight the concern that I have in respect of cuts to penalty rates and the impact that that is going to have on future economic growth. We know that households are under extraordinary pressure at the moment. There are 700,000 households across Australia that are going to be directly impacted by the penalty rate cut. Albeit the cuts will be phased in over a period of time, the failure of people's incomes to keep up with other increasing prices is going to be a significant problem for economic growth into the future. It will make it so much harder.

Of course, we also know that households are suffering under a huge amount of debt. Australia is something like third in the world when it comes to household debt as a percentage of GDP, which I think is something in the order of 125 per cent. That is already causing the consumer side of our economy to languish. If we want to see people loosening up their purses and wallets to spend in the economy, we need to provide better wage growth for them. That can only be done if we have lower levels of inequality, so that people can start to enjoy the benefits of economic growth. If we do not do that, it is a very serious issue. We do not want to see the instability in our society that we have seen across the world. Australia has a great track record but it is under pressure, and measures such as those in the bill will go some way to addressing that concern. (Time expired)