Andrew Giles (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That this House:

(1) notes with deep concern that:

  (a) income inequality in Australia is growing such that currently the top 20 per cent of households receive half of Australia’s income while the bottom 20 per cent receive just four per cent; and

  (b) in 2013 the top 1 per cent of Australian earners received 9 per cent of Australia’s income, and the top 0.1 per cent received 2.5 per cent, in both cases representing the highest proportion since the 1950s, and a proportion which continues to increase;

(2) notes rapidly increasing executive and, in particular, Chief Executive Officer (CEO) remuneration, for example between 1971 and 2008, real CEO pay grew by nearly five times, while the real average weekly earnings grew just over one and a half times despite:

  (a) research showing that executive pay increases are not closely related to company performance;

  (b) the belief that large disparities between executive pay and average earnings might actually demotivate a company’s employees and adversely affect priorities, as reported in the 2009 Productivity Commission inquiry into executive remuneration in Australia; and

  (c) the belief that poor remuneration arrangements can promote inappropriate, risky short term decision making, carrying wider economic ramifications including a negative impact on productivity growth;

(3) notes the positive effect of past legislative efforts on ensuring corporate executive remuneration is transparent, particularly the ‘two strikes’ legislation which came into effect in 2011, acknowledging that mandatory disclosure of CEO pay ratios, as required in the United Kingdom and more recently in the United States, would:

  (a) provide:

     (i) important information to shareholders voting on executive remuneration; and

     (ii) a more accurate measure of an important aspect of income inequality in Australia; and

  (b) improve the health of our democracy by making important information more accessible to the public; and

(4) calls on the government to consider following the lead of the United States in its Dodd-Frank Wall Street Reform and Consumer Protection Act in mandating that public companies disclose the ratio of a CEO’s annual total remuneration to the average annual total of all company employees.

How much is enough? As Australia becomes increasingly unequal, that is a pressing question for members of this place to consider.

Income inequality is at a post-Depression high in Australia, mirroring a disturbing trend around the developed world. We have seen some particularly troubling evidence of this, which this motion is intended to respond to directly, as the annual reporting season of public companies is underway. Members will have noted commentary in particular about the remuneration package of the former head of the ANZ, Mike Smith, as well as other proposed remuneration packages of public company CEOs which have attracted first and sometimes second strikes under legislation Labor introduced when they were in government.

This is a very significant issue—the gap between the haves and the have nots in Australia. It is a particularly important question when we consider what is happening with levels of executive remuneration. And so this motion is intended to draw the attention of the House and the wider Australian community to the steps that have been enacted to deal with these issues and also to call for further action on the part of the Turnbull government.

It is critical, when we think about what is happening in executive remuneration in Australia, that we look to the wider context. We have in Australia inequality at such heights that we have not seen since the Great Depression and a government which seems determined through its policy settings to exacerbate this inequality, not ameliorate it. At the same time as we are seeing these excessive wage and other remuneration packages for CEOs of our public companies, we found out last week about record low wages growth. We are seeing a twin track approach to remuneration in Australia, where ordinary Australian workers are not keeping up and a small number of people, the one per cent and the 0.1 per cent are doing very well indeed.

We also come to this debate with an increased understanding that this level of inequality is not simply bad in and of itself. It is not just a moral failing, going to the question of how much is enough for anyone; it also carries very significant instrumental consequences. We know now that inequality is a brake on growth. We also come to this debate understanding that one of the key problems facing Australia's efforts to boost productivity goes to our managerial performance. The conceit which has underpinned high remuneration packages for our CEOs and other executives at major companies has been the proposition that these levels of remuneration are necessary to attract great talent. The evidence suggests that that talent is not producing in accordance with its level of remuneration.

Labor when last in government saw this as a very significant economic issue and also as a significant issue of moral and political concern, and asked the Productivity Commission to have a detailed look at executive remuneration in Australia. The commission did so, and produced 17 recommendations. Those which called for direct government action were legislated through the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011. The critical aspect of this for present purposes was to institute a two-strikes provision to give shareholders—shareholder activists—and indeed the wider Australian community a better sense of control over how executives were being remunerated. This legislation since its enactment has demonstrated that there is a gap between executive sense of entitlement and community standards and company performance. It has also demonstrated there is a need for more.

In this motion we refer to recent legislative efforts in the UK and the US which will call for the mandatory disclosure of CEO pay, relative to the median wage of employees at that enterprise or business. Other jurisdictions have been showing the way. In the UK and in the US there has been a first-principles approach to this question of executive remuneration which recognises that the social licence that has been granted there is being eroded, that public faith and public trust have been undermined by these types of behaviour. But also, given the complex nature of many of these remuneration packages, it has proved very difficult for there to be informed debate about what precisely is contained within them.

In moving this motion I draw the attention of the House—and I am very pleased that the member for Lilley, who has done more than anyone else in Australia to put these issues on the proper framework, in government and since then through his work in opposition—to call on further action to make our CEOs and other executives accountable to the Australian public through shareholders.

Lucy Wicks (Robertson, Liberal Party) Share this | Link to this | Hansard source

Is the motion seconded?

Josh Wilson (Fremantle, Australian Labor Party) Share this | Link to this | Hansard source

I second the motion and I reserve my right to speak.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

Inequality, or lack thereof, is an important measure, though not the only one, of how successful your society is. It is an indicator that all have access to equality of opportunity and the choice of how they want to live their lives, respectful of the choices of others. The awful truth is that after nearly seven decades of government funded poverty programs we have hardly moved the needle. Many social programs during this time have done nothing more than entrench poverty from generation to generation.

Those opposite typically provide two solutions to alleviating inequality. The first is increase spending on social welfare programs; the second, a more distributive tax system. It is simply a fact that if you are solely reliant on the welfare system in today's Australia, it is highly likely that your health and education outcomes will be substantially lower than the rest of our community. You will have a shorter lifespan and higher rates of crime—both violent and non-violent—while at the same time lowering the probability that you will ever form a family. And, just for good measure, the likelihood of the system passing these outcomes to your children is incredibly high. This system costs currently $154 billion a year. But this is not about money; this is about saving lives. When we on this side talk about reforming welfare we are not talking about saving money; we are talking about saving people's lives.

Then we have the tax system, usually encapsulated in the slogan 'the rich are not paying their fair share'. But let's look at the facts. According to Ken Henry's review of Australia's tax system, we have the most progressive tax system in the world. It is 19 times more distributive than the OECD average, and its transfer payment system is 12 times higher than that of France's. The 2012 ABS figures tell us that the top 20 per cent of income earners in Australia are the only ones making a net positive contribution to the states' tax system. For every dollar they paid in, they got 30 cents back, compared to the $324 the lowest 20 per cent of income earners received in services—a thousand times greater.

Despite dedicating hundreds of billions of dollars to decreasing inequality, those opposite say things have gotten worse, and yet their only answer is to keep doing more of the same—not even worried by the fact that according to their very own motion here today it has not improved the problem that they claim to be worried about. Those opposite can talk ad nauseam about inequality, because they need people to feel that they are victims—supplicants to the state. Under no circumstances will they talk about the inequality of opportunity that their policies have created.

On this side of the House, we believe in standing up for hardworking Australians who aspire to a better future for their friends, their families and this great country: a modern and dynamic society that believes in helping people up, not dragging them down. Labor says they are worried about inequality. However, in the last month we have seen Labor propose a tax rate for backpackers that would make foreign workers more attractive to employers than Australians. We have a bill before this parliament to make office bearers of both employer groups and unions more accountable to their members, yet Labor currently supports laws that give millionaire shareholders greater rights to how their companies are run than workers such as hospital cleaners have on unions, and they have the temerity to come in here and lecture us on inequality.

Let's talk about that before talking about CEO remuneration that is already subject to disclosure laws, that even Warren Buffett believes has done little other than drive up CEO salaries. We would welcome your support for improving the quality and transparency of governance of billions of dollars of funds that belong to some of the lowest-paid people in Australia. Within equality, as with so much else, if you want real solutions you need to look at the facts.

Wayne Swan (Lilley, Australian Labor Party) Share this | Link to this | Hansard source

I thank the member for Scullin for moving this important motion, because inequality of wealth and income is the central challenge of our generation. There is no doubt it is casting a very dark shadow over the global economy and over national economies and societies. We see now that capitalist countries are increasingly dominated by a plutocratic family model of inherited privilege which is usually backed up by an overpowered and overpaid financial and corporate elite, which is why it was not surprising last week to see our Prime Minister out there doing a Napoleon. Not the emperor—no, the pig; the pig from George Orwell's Animal Farm, because our Prime Minister is as blind to the consequences of growing inequality as are his business backers in the Business Council of Australia. Both suffer from what I call a 'blindness of affluence'.

In a speech to the Business Council last Thursday he said:

… policy changes must be seen to be fair …

Wrong, Prime Minister! Policy changes must be fair. This Prime Minister has been so concerned about income inequality that in the past seven years, since he became Leader of the Opposition in 2008, a government minister and now Prime Minister, he has mentioned inequality just five times. That is five times in the last six months.

Last Thursday our multimillionaire Prime Minister told the annual BCA dinner that Australians will have to accept policies that create short-term winners and losers. This is the Prime Minister who went to the last election with a $50 billion handout to multinational companies and radical proposals to undermine the voice of working people—to attack their wages, their unions and their working conditions. He has done this in the full knowledge of IMF warnings about the unequal distributional impact of these policies and the peril they bring to global economies. The IMF says that a growing economy cannot be built on a shrinking share going to working people. Ignoring this advice, there he was at the BCA dinner last week—like Napoleon, the pig from Animal Farmspruiking the benefits of his trickle-down policies and preaching to those outside the room that the winners in the room did not even really like the milk and apples, they just took them for the good of society. In the room they must have grunted with enthusiasm when the Prime Minister told them over their abundance of milk and apple that inequality is something that must be viewed over a lifetime. Of course he left by getting up on his two legs and hopping on his VIP jet, and off he went to Peru.

For those who are familiar with Animal Farm, over the long term the seven commandments they operated by were reduced to one single law:

All animals are equal, but some animals are more equal than others.

That is the basis of trickle-down economics. This is not just about income and wealth, it is about political power exercised to entrench disproportionate influence over government.

Australia, over the years, has done a better job than most other countries in sharing the benefits of growth—especially better than the United States. But in recent years we have started to go backwards. The annual wages growth in September of 1.9 per cent was a new record low. The private sector has now seen wages grow by less than 0.5 per cent in seven consecutive quarters, and still the Prime Minister and his government seek to attack penalty rates and the minimum wage. The Prime Minister has frozen the wages of Medicare workers at $62,000 a year for over three years. Meanwhile, 85 per cent of the Australian Public Service have had their salaries frozen for around three years. In Australia over the last 30 years the proportion of the total income of the top 10 per cent has gone from 24 per cent to 30 per cent. In the United States it has gone from 31 per cent to an obscene 46 per cent. This change has been driven by obscene levels of executive pay.

Ordinary workers sit by and watch obscene executive pay increases. Only last week in Queensland we had the spectre of the former Minister Macfarlane, in breach of the Prime Minister's ministerial code of conduct, take up a position with the Queensland Resources Council, along with a board appointment to Woodside, in total bringing in a near seven-figure sum. How on earth does the mining industry think that its peak representative body will be taken seriously as an honest broker? Last week in LA the three Murdochs pulled in $84 million a year between them. Executive packages like these tell working people that the wealthy have captured policy-making— (Time expired)

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to speak on this motion, because it is highly misguided. Professor Steven Kates has talked about discussions on what he called the inequality business as a last refuge of the socialists, since everything else they have said has proven to be nonsense.

Where the mistake comes from is the misunderstanding that inequality is about one person taking wealth from someone else. The economic wealth pie is not something that is fixed in science. Wealth creation does not happen haphazardly. It does not happen by accident. We have a wealthy society as the result of individuals adding value to the economy by providing productive services. It is as simple as that. Take the example of the late Steve Jobs, someone who made millions, if not billions, from his innovations. The extra millions that he got did not take money away from the average citizen. They did not take food off the table of the so-called underprivileged. He made the pie bigger for all. Yes, he may have got a bigger slice of that pie, but everyone benefited from his innovations.

There is a fantastic painting just down the corridor. It is Tom Roberts's painting called the Big Picture, and it is a painting of the proclamation of the opening of the first parliament of this country on 9 May 1901 in the Royal Exhibition Building in Melbourne. At the time that was painted, Australia was the richest country in the world, Melbourne was the richest city in the richest country in the world, and the people in that painting were the richest people in the richest city in the richest country in the world. And yet the average citizen today enjoys wealth that is inconceivable to the people in that painting. Despite their wealth, none of them had a car, a computer, a radio or a TV. No-one flew on holidays to Bali. They never had antibiotics or painkillers. The enjoyment of the arts was nothing like what we enjoy today. The thing is that the wealth creation machine that we have—free market capitalism, which I know is a nasty word to you lot, and the reward for entrepreneurship—has been the greatest tool that we have that has alleviated poverty. It has lifted incomes and lifted our society's wealth to beyond what those in that painting could imagine.

But one of the inevitable by-products of that is inequality. But there has always been inequality in all societies. Where we go wrong is concentrating on trying to 'fix' the problem of inequality rather than concentrate on the alleviation of poverty and the growth of real wealth in this economy. Thank goodness those people in that painting back at the Federation of this country understood that. They were other economies, other people and other countries who believed that they should go out. Rather than growing the economy, they wanted to tackle inequality, and we know what happened to those countries. We saw the mistaken policies of the Soviet era, when they were all about inequality. The former Treasurer talks about Animal Farm. Animal Farm was all about, 'We have to lower and reduce inequality.' And always, whenever you try and set out to reduce inequality, all you do is destroy the wealth creation machine that we have. You will lower real living standards. And what do you do? Every society that has gone down that track has made the problem of inequality worse.

The other thing that is mistaken about this motion is that income is not the only thing that matters when considering inequality. You have to consider access to health, education, housing and community safety. Never before in the history of the world has there been so little difference between the lifestyles of the richest billionaires and the poorest people. Sure, people like Bill Gates may have a private plane and they may be able to fly to a tropical island, but the average Australian still has the wealth to do those things.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I am pleased to support this motion and I thank the member for Scullin for moving it, because it highlights a very important issue that is getting worse in an Australian society: the issue of income inequality. When I worked for Unions NSW, it was my role every year to prepare the state wage case. This was a case before the New South Wales Industrial Relations Commission by which basic award rates—the minimum wage—were adjusted in New South Wales each year. Each year we would submit to the commission evidence from low-paid workers.

Over the years, I determined that there were certain characteristics of low-paid workers in Australia. Unfortunately, they are predominantly women. They predominantly work in part-time and casual occupations. These are people that can never afford to have a holiday. They very rarely go out to the movies or have a night out for a meal with their families. When the car breaks down, they often cannot afford to fix it and do all that they can just to keep it roadworthy and registered. Their children never have the luxury of visiting a dentist or anything like that and often miss out on going to school excursions, because the family simply cannot afford it. These are the working poor, the people that rely on a strong award system to be able to participate in society.

Each year when we made an application to adjust the minimum wage so that these people could afford a living wage, it was opposed by the employer associations. You could write their submission every year. It was the same one every year: that by increasing the minimum wage we would harm employment prospects and reduce growth in our economy. This argument was always shot down by the Industrial Relations Commission for one simple reason: the employer associations could never present any credible economic evidence to back that assertion. The commission would always ask: 'Where is your evidence? Get us an expert economist that is willing to go on the record here at the commission and give evidence.' They could never do that.

Australia is becoming, unfortunately, more unequal in income distribution. The top 20 per cent now receive half of Australia's income; the bottom 20 per cent receive just four per cent. Life is getting harder for those people that are in the bottom 20 per cent. It has been made harder and more difficult by the Turnbull government through cuts to family payments, cuts to pensions, attacking Medicare, cutting paid parental leave, cutting funding for schools, deregulating universities and putting university beyond the reach of working-class kids, and cutting company taxes. All of these policies have increased the gap between the haves and the have-nots in Australia and made income inequality greater.

Labor in government attempted to arrest and attempted to reduce the growing income inequality in this country, and we were quite successful because we put in place the proper economic and social policies that did so. They included, firstly, a strong social safety net. Access to universal health care is fundamental to a strong safety net, and Medicare is something that Labor will always defend. They included a fair pension and fair levels of family payments; a fair industrial relations system with a livable minimum wage, with work value cases so that people—predominantly women, unfortunately—who have traditionally worked in low-income occupations like nursing and child care have the opportunity to demonstrate to an independent umpire the value of their work and have that work revalued in the marketplace as a minimum; and access to a fair unfair-dismissal regime and collective bargaining. These are all the fundamentals of reducing income inequality in our society. Access to education and education funding based on needs is principally important for reducing inequality. A higher education system promotes skill development so people who may come from disadvantaged backgrounds have an opportunity to get an education, to improve their skills and to improve their employability and their worth in the marketplace. A progressive taxation system encourages the poor to save for their retirement and encourages fair distribution of income.

We also took a number of measures to reduce outlandish executive remuneration. I have to say that they have worked. One of those was greater accountability on executive and director remuneration, requiring boards to stand for re-election where they do not adequately respond to shareholder concerns regarding remuneration. We also introduced tax transparency so that private companies were forced to report their earnings and the tax that they were paying. All of these were solid Labor measures that were aimed at reducing income inequality in our country.

Kevin Hogan (Page, National Party) Share this | Link to this | Hansard source

There being no further speakers, the debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.