Thursday, 22 June 2017
Productivity Commission Amendment (Addressing Inequality) Bill 2017; Second Reading
I rise to speak on the Productivity Commission Amendment (Reducing Inequality) Bill 2017. This bill places inequality firmly on the agenda of one of our country's most influential economic policy institutions. We consider the bill at a time when inequality in Australia is at a 75-year high, and when global leaders are warning that inequality threatens the global economy.
The Productivity Commission is tasked with providing research and policy advice on industry, industry development and productivity. Its scope is broad; it encompasses both specific industries and the productivity performance of the economy as a whole. Its influence is significant. Most people in this chamber could easily identify economic debates in the last 30 years where the commission's intervention has been decisive, and on many of these occasions its advice has, of course, been hotly contested. What is uncontroversial is that its advice has been central to government decision making, and we can no longer afford to allow this advice to be developed insensibly to the significance of economic inequality. The commission is already required to consider a range of considerations—everything from ecological sustainability to regional development is listed in its enabling legislation. Inequality should be on this list.
We can also no longer afford to starve our government of credible, focused research on inequality. The Productivity Commission is well placed to apply its substantial resources to generating just this type of analysis. The bill would require the commission to do just this: tabling an inequality report every five years, aligned with the production of the Intergenerational report. Doing so would bring valuable analysis into a debate that is already raging.
There has been growing discussion of economic inequality in the media and in these corridors in the last 12 months, and it is not just because people have got around to reading a couple more chapters of Thomas Piketty's book. There is a palpable fear that inequality has bred populism in Australia and overseas, and that it threatens the economic consensus that has held sway since the 1990s. Just this week we heard the governor of the Reserve Bank calling on workers to demand higher wages and the head of the Business Council of Australia writing that, rather than being allowed to pool in certain cities or among certain citizens, the business community must ensure that the benefits of growth are felt by all.
I am heartened by those sentiments but, in the flurry of sudden interest, we cannot forget that inequality is not, in fact, new; nor is the imperative to address it. Inequality was important before Brexit and it was important before Trump. Inequality affected ordinary people's lives well before it affected our political systems. Inequality threatened families' security and their stability well before it threatened business's access to global markets. We should not have to look to shock election results to find an imperative to address inequality, because the imperative lies in basic fairness—in families who are working harder for less, sandwiched between one generation that fears it may never be able to afford to buy a house and another generation that fears it may never be able to afford to retire. The imperative has always been there, and I am glad we are starting to get the momentum to address it.
Australians like to think that we are removed from the stark inequality that we see in America and the United Kingdom—and in some ways we are. Income and asset concentration in Australia is a fraction of what it is in the United States. The GFC did not hit us hard, as we entered it with significantly less inequality than other nations and, during the 2000s, Australia's middle incomes grew strongly—unlike other countries in the OECD that experienced slow growth or falling middle incomes. A Labor government responded to the GFC with a strong stimulus that prevented widespread joblessness and the inequality that comes with it. We should be proud of that intervention, but it has not insulated us from the broader trends that have been in play since the 1980s. Over the past four decades incomes for the top 10 per cent have risen nearly four times as fast as they have for the bottom 10 per cent, and this is not just the result of high-income earners being able to negotiate better pay packages. It reflects broad changes in the way our shared prosperity is divided.
During the 1990s wages decoupled from productivity growth, and even though Australian workers are more efficient and productive than ever before they are not being rewarded for it in wages. The labour share of national income in Australia has dropped from 75 per cent in the 1970s to just 53 per cent in 2016. The share for business, on the converse, is increasing. Let us be very, very clear about what this means: it means that investment pays better, much better, than work. But only—and this is critical—for those who can afford to invest. These dynamics are starting to weigh on our social structures and on our economy. Wealth is far more unevenly distributed than income. In 2003 the wealthiest 20 per cent were worth 57 times more than the poorest 20 per cent. Ten years later that figure has risen substantially: they are now worth 71 times more. The three richest Australians own more than the million poorest Australians put together. Today inequality is at a 75-year high. Australia now sits in the bottom half of the OECD's rankings for economic inequality.
We may live in a time of deepening economic inequality; however, it is worth reflecting that for most of our history since Federation we have actually experienced falling levels of inequality. At the start of Federation, we were a very unequal nation. When the Anzacs headed to Gallipoli, inequality was at its peak—one per cent of Australians owned one-third of all wealth and earned one-eighth of all income—but for the next 60-odd years inequality steadily fell, reaching a low point in the 1970s. The point I want to make is this: what happened over those six decades was not an accident, it was not a quirk of trickle-down economics; it was a direct function of the progressives' project to make Australia a fairer place for everyone. The labour movement and its political representatives have fought and won policies that shared Australia's growing prosperity much more fairly over those 120 years, and those policies became part of Australia's social contract. They evolved into institutions that were able to survive changes of government. This social contract drove down inequality in the postwar period and, to the extent that it survived changes in the 1980s and 1990s, it helped Australia avoid the excesses of inequality that we see today in the US and the UK, and there are a few aspects of it I want to briefly touch on, because they go to role of Labor governments in navigating the transformation of our economy to become more open and yet still fundamentally fair.
The first element, of course, is having a targeted welfare net. Between the health care provided by Medicare, and now the NDIS, the payments and the income support available, we seek to protect our poorest from the very worst effects of inequality. We do that very efficiently. The second element is having a progressive taxation system, reflecting the principle that those who earn more can afford to contribute more. The third element is publicly available universal education, a system of public schooling and the wide availability of tertiary education. But perhaps the most important element is our protection for wages and workplace conditions. In 1904, the world's first Labor national government started to put in place systems to manage workplace conciliation and arbitration. The systems developed by the labour movement in those early years were uniquely Australian. It was a solution that shaped dramatically the relationship between the labour movement and the state, and it formed the basis for decades of industrial outcomes that lifted the living conditions of millions of Australians.
But, like so many of the other bulwarks against equality, this has been eroded by continuing conservative calls for deregulation. And it starts to have consequences. Earlier this week, as I mentioned, the Reserve Bank governor said he would like to see workers asking for more pay increases. I agree. But it is not timidity or a lack of ambition that is holding Australian workers back; our industrial relations system has been reshaped to limit the bargaining power of workers in their workplaces. It shows in the level of unionisation today, dropping to only around 10 per cent of the private sector workforce. We need to be careful about this. The Australian social contract lifted living conditions and reduced inequality for Australians for much of the last century, and Labor has been a proud part of that story. But under conservative governments, as welfare payments are cut, workplace protection slashed and penalty rates removed, inequality has started to increase. Australia is the most unequal it has been in 75 years.
There are some people who might say, 'So what?' They say we should be focused on prosperity, not inequality; that as long as the pie is growing, it does not matter if some people are taking bigger and bigger pieces. I do not agree, and neither do most Australians. When surveyed, almost three-quarters of Australians agree that differences in income are too high. Inequality is not just about money; inequality shuts the door to opportunities, and Australians are not happy for wealth to decide the quality of someone's education or their health care. We do not think that your wage should depend on what your parents earned.
What has also become increasingly obvious in recent years is that the dichotomy between prosperity and fairness is false. More equal societies grow more quickly. That is not just wishful thinking from those on the Left. It is the considered view of hard-headed economists in institutions like the IMF. On a microeconomic level inequality creates barriers to people starting a business or going to university or being able to participate fully in the economy. It is a drag on growth. More broadly, income inequality affects the way an economy operates. Increasing the pay of low- and average-income earners boosts growth more, much more, than increasing the return to the well-off. These households spend more of their extra incomes, stimulating the economy. The OECD estimated that income inequality between 1985 and 2005 reduced economic growth among its member states by almost five per cent. As the head of the IMF, Christine Lagarde, explained: the benefits of higher incomes are trickling up not down.
Why this bill then? Whatever excuses there may once have been for ignoring economic inequality, they have dropped away. All the signs demand action: economics, political pragmatism, not to mention basic fairness. I do want to be clear that I do not believe that passing this bill will solve inequality. We need concerted action to level access to education, to strengthen workplace rights, to make our tax system more progressive and to make our welfare system fairer and stronger. This bill does not tackle those specifics. Instead, it is a step in building the policy infrastructure to make sure we do these things. It aims to fire up the Public Service institutions and to build the expertise that we need to look at inequality and properly address it. It aims to build a wealth of expertise and knowledge within an eminent public policy institution through establishing a requirement for a five-yearly inequality report produced by the Productivity Commission. It seeks to use that capability to bring these issues before the parliament regularly for our consideration and response.
I am from the political Left, and I am conscious that over the years there have been regular calls from within that tradition to dismantle the Productivity Commission. I understand the hesitation that some may have in tasking it instead to look at economic inequality. My own view is that nearly always we are best to build on and transform the institutions we already have.
Australia has a proud tradition of innovative public mechanisms to deliver on public policy. Medicare remains an extraordinary achievement. Globally, our superannuation system is much admired. We have also proven skilful at recasting older institutions to meet new challenges. In the 1980s and the 1990s under Labor, we transformed Australia's political and economic institutions to respond to a more open world. To provide just one example, the Reserve Bank's role changed profoundly in the eighties, reorienting its activities to deliver effective monetary policy in a newly opened financial system.
Today we need to retool all our institutions once more to address the challenge of our times: the growing disparity in wealth and income. The Productivity Commission has changed direction and purpose before, and it will have to again. From the Tariff Board of the twenties through to the Industry Assistance Commission of the seventies up until its present form, this institution has been repurposed to respond to contemporary policy imperatives. But, institutions matter. They have a rhythm of their own and they develop momentum that survives changes of government.
The great Nugget Coombs, arguably one of our most celebrated public servants, understood this. He played an incredible role shaping the institutions of the postwar period. Reflecting on that he said, 'I was not a fan of revolution.' He said there is:
… only reform—the creation of new institutions, the recasting of those already existing, the revitalisation of the moral and social imperatives which lend them vigour.
This bill seeks to ensure that the Productivity Commission is alive to one of the most significant moral and social imperatives of today: economic inequality.
I listened with great interest to the contribution from Senator McAllister, my valued colleague on the Finance and Public Administration Committee. It was thoughtful and measured, as her contributions typically are. But I was listening very carefully for one particular point in her speech, which did not come, and it is an important one in the debate about inequality. The particular question that advocates of action on inequality must answer is: how much inequality is too much inequality and how much inequality is an acceptable level of inequality? That might sound like a strange thing to ask. One might assume, if one agrees that inequality is a terrible thing, which most people do, that there should be no inequality. But if there were no inequality then that would mean complete equality of outcomes, and I do not think anyone in this chamber advocates that. I do not think Senator McAllister advocates that. I do not think Senator Whish-Wilson, who I understand is speaking next, advocates that; although perhaps his colleague Senator Rhiannon would advocate that. I do not know how much her thinking has evolved on these issues.
It is an important question to answer, because if we agree that complete equality is not a good idea and that complete inequality is not a good idea, where do we draw the line between complete equality and complete inequality as to an acceptable level of inequality? I have not yet heard in this debate, nor in dozens of debates on this issue by economists, academics and others who take an interest, anyone nominate an acceptable or tolerable level of inequality. I think that is an important thing to nominate, because if we are seeking to address a problem then we have to know how to define it in an empirical way, know when we are making progress on it and know when we are falling behind. I look forward to later contributions in this debate and seeing whether anyone will rise to that challenge.
Inequality is a problem and is something which government has a role to tackle in some ways, but it is a much less serious problem than poverty. Poverty is something which demands much greater attention from all of us than inequality. I make that point very deliberately and will expand on it. Many of the measures of inequality and poverty sometimes are deliberately or perhaps accidentally confused. Senator McAllister in her contribution referred to a number of facts and figures about how the top 10 people in Australia have more wealth than the bottom 50 per cent. All these sorts of figures get thrown around in this debate in Australia and also internationally. They typically come from reports which are deeply flawed and which overlook the much more important human imperative, which is to abolish poverty and to lift people out of poverty. Sometimes lifting people out of poverty and reducing inequality are in fact competing and contrasting imperatives that do not always move in the same direction at the same time. There is a specific example I will come to later.
One of the reports that purports to be about poverty is an annual report produced by ACOSS, the Australian Council of Social Service. It purports to measure of poverty in Australia, but what it in fact measures is inequality. It defines poverty as anyone being below 50 per cent of the average wage. If you define poverty as a proportion of the average wage then it does not matter how much the average wage increases: you will never eradicate poverty. That is a disturbing thing, because we know that poverty has been largely or substantially eradicated in the wealthy Western world and we have made great gains towards eradicating it around the world, particularly in the latter half of the 20th century.
Oxfam International annually publishes another report on inequality, which advocates often rely upon. It sometimes has seemingly alarming statistics about the top five wealthiest people in the world and their share of global wealth compared to the bottom half of the population, but it has some fundamental flaws. One of the flaws is that it accepts as a premise that capturing someone's wealth at a single point in time is a good proxy or a good measure for their standard of living. But we know that that is not the case. It is often a very bad measure of their standard of living and within the Oxfam report we have a very good example of why that is the case. When measuring someone's wealth, for the purposes of comparing them for inequality, they of course take into account, as may be appropriate, any debts that a person may hold. Obviously, a person who has debts—particularly a young person who is perhaps a university student—has the potential to have negative wealth. So a young Australian university student or a university student at Harvard will be measured by Oxfam as having negative wealth.
In many parts of the world you cannot get a loan. In the developing world it is sometimes very difficult to get a loan. So a subsistence farmer in Africa may not have any debts, they may even have a few assets to their name. Maybe, for the purposes of Oxfam's inequality report, they may be listed as having small net positive assets, even if only a few hundred dollars. If you listen to Oxfam and you take them at their word, a privileged student in the Western world studying at university who has a HECS debt is poorer than a subsistence farmer in sub-Saharan Africa. That highlights I think very powerfully the lack of quality research in this area and the way in which statistics can be abused to give you a very misleading impression. If you took Oxfam at their word, you would believe that a substantial number of those people who are suffering severe inequality are in fact in the Western world when clearly the reverse is the case—by any standard we are the wealthiest people in the world.
If we really care about poverty and poverty is what we seek to alleviate then economic growth is the best way to do that. Sometimes economic growth does come at the cost of inequality. The best example of this is the economic growth that China has experienced over the last 40 years. It has been, in my view, one of the most positive developments of the second half of the 20th century and the first decade of the 21st century. Over 600 million people have been lifted above the poverty line—the absolute measure of poverty. Their lives have been transformed in a fundamental and wonderful way. People who did not have access to electricity now have access to electricity. People who did not have access to refrigeration now have access to refrigeration. People who did not have access to education now have access to education. The standard of their food, clothing and technology has improved in a profound way. While this magnificent reduction in poverty has taken place within China in the span of 40 years—one of the greatest reductions in human poverty in history—inequality has increased.
If you listen to those opposite and their concerns about inequality, and if you read Thomas Piketty, then you would think that inequality must be fought at all costs. I understand where they are coming from and it is a good place to come from—inequality on its own, as a premise, sounds like a bad thing. But what do you think the people in China who have been lifted out of poverty would have rathered? Would they have rather been lifted out of poverty as they have been while, at the same time, some people in China have accumulated great wealth—billions of dollars of wealth—or would they have rather stayed, as they were for most of their history, in real poverty? I think, if I was someone living in China and I could choose to remain in my station in life, in relative poverty, in order to keep others in poverty at the same time so that we could be relatively equal, or I could choose that my wealth would increase modestly and my living standards would increase modestly while others' standards of living increased spectacularly—far more than mine—I would accept the latter. I would accept an increase in inequality for me and for my society in order to have a decrease in poverty. Poverty is a far more important thing to fight than inequality.
I think we had a really wonderful contribution to this debate, in a general way, in the maiden speech last night by Senator Gichuhi from South Australia. She spoke very powerfully of her own journey from Kenya to Australia and about her experience of the welfare state in Australia and the effect it had on her and her family. The observations she made were very powerful. I think we should always bear in mind, as Senator Gichuhi said, that the best path out of poverty is employment and jobs. That has been and always will be a priority of my side politics and of this government.
Finally I want to turn to the Productivity Commission Amendment (Addressing Inequality) Bill 2017 itself, which was proposed by Senator McAllister. While I, like her, respect the Productivity Commission as an important institution and, I like her, respect its work, it is for that reason that I am concerned about this specific proposal. I think it seeks to politicise the Productivity Commission in an inappropriate way. As Senator McAllister admitted, she is the person of the Left and she wants to see the Productivity Commission produce reports that align with, and address, her political priorities.
I do not think that is an appropriate thing to do with an independent economic agency like the Productivity Commission, which has provided such important reports and advice to government. I think it is best that, as far as possible, it be kept at arm's length from government and not dictated to by the politics of the day, so that it has the greatest potential to provide independent, dispassionate advice to the government. I think it is unwise to try and seek to direct the Productivity Commission to address the political priorities or philosophy of any party in this place. There are certainly changes we could make to the Productivity Commission's charter to address the priorities and concerns that I might have and ensure that the Productivity Commission's reports in the future more closely match the political priorities I have; but I recognise that I am a member of a political party and that I have my own views and preconceptions, and it would not be a good idea to ask the Productivity Commission to take those on and reflect those.
I appreciate the concern of Senator McAllister and all senators in this place about inequality. But I would finish on the note that, while inequality can be and is important, poverty is far more important. If we ever have to choose between the two, as some people have, including in China, the best one to choose is to alleviate poverty. The best way to alleviate poverty is through free markets and economic freedom. Every country that has gone from relative poverty to relative prosperity has gone through a period of inequality as a result. It is the advanced capitalist countries of the world, like Australia, that are relatively equal by world standards, and it is through a state of far reaching and complete capitalism that inequality is best tackled, rather than through government intervention.
I commend Senator McAllister for bringing forward the Productivity Commission Amendment (Addressing Inequality) Bill 2017. The Greens would support, in principle, any enhancement or refocusing of our attention on what is arguably one of the greatest issues of our time. My party talks a lot about climate change. But economic inequality, while it is tied to issues like poverty, as Senator Patterson outlined, and issues like climate change, is all-encompassing and one of the biggest challenges that we face—and not just here in Australia but right around the world. What we can do here is put a lens over every piece of legislation we look at and ask ourselves: is it making economic inequality worse in this country? When we deal with foreign aid or participate in overseas conflicts, international treaties and international trade deals, we should ask ourselves: are we making inequality worse around the world? These are the questions we should ask ourselves every chance we get.
Having said that, I have spent nearly every round of estimates since I became a senator asking the same question to our agencies here in Australia, especially to Treasury officials: what holistic approach do you take to tackle the issue of economic inequality in Australia? The answers have always been a source of disappointment. Whether it is the Reserve Bank, focusing on inflation and interest rate targets, and everything else will fall into place, or APRA focusing on financial stability, or ASIC investigating matters in relation to the Corporations Act—the one thread that is missing is a holistic approach to one of the greatest challenges of our time.
Whether the Productivity Commission itself is the right body—and I am happy to be advised on that, and on what kinds of legislative implications that might have—I would be interested to hear more and I would certainly be interested to hear from the Productivity Commission itself about this amendment. It is independent—fiercely independent. It has produced some good work. I do not say that lightly. We do not always agree with some of its recommendations; nevertheless, we respect the fact that it should be independent.
Recently I met with the economics committee, with the Reserve Bank governor, in a private meeting. I will not go into any details of that private meeting. The Reserve Bank governor in Australia has been playing a very interesting role in public debate. He has been commenting on issues like economic inequality, lack of infrastructure spending, housing risks, and pressures to the financial system. He sees himself as having an interesting role in at least informing public debate. That is probably the closest thing I could say. And of course the Reserve Bank produces occasional papers which allow them to do research projects. So, the governor has played a very important role; nevertheless, I would like to see a much more holistic approach to this issue in Australia.
So who does tie together the threads on economic inequality in Australia? It is left to the not-for-profit sector or the private sector, and here I have an excellent report called Inequality in Australia 2015which I am not using as a prop; I am just having a look at it. It is produced by ACOSS, who tie together the threads and do their own research. It is very well respected. While these kinds of things are critical for the public debate—and I am about to summarise some of the key findings in a minute—it would be good to see the government taking a holistic policy approach to economic inequality.
What we often overlook when we think about economic inequality is that it is very closely tied to the politics we are seeing around the world at the moment—the backlash we saw in the US, which allowed Donald Trump to get elected. Many commentators have, I think rightly, pointed out that one of the key underlying reasons he was elected was that there was discontent related directly to economic inequality in the US—not poverty, as Senator Paterson alluded to as the critical problem, but economic inequality. And with Brexit— the reaction we saw in the UK—it was economic inequality. I would say— and I know you would be very interested in this, Acting Deputy President Bernardi—that the outcome of the recent UK elections, with the rise of Jeremy Corbyn, is another sign that economic inequality is being taken very seriously by voters and citizens, who have a considerable amount of frustration.
We have seen all these issues rise to the surface following the GFC, during which the financial system around the world was shaken up. We are seeing retaliation against globalism building all around the world, including I suppose Mr Trump himself, reflecting the views of his voters—cancelling the Trans-Pacific Partnership Agreement and other policy initiatives. And we are seeing it in this country. Let's not hide our head in the sand; economic inequality is a very significant issue here, and I will go through some statistics in a minute. Obviously it is not anywhere near what we are seeing in other countries. Nevertheless, it is an issue that should be addressed. In fact, I might go to some of those issues right now, because they tell a very important story and paint a very stark picture of how we should be responding to these issues in the legislation and the policies we look at in this place.
Inequality in Australia is higher than the OECD average, which I think is a recommendation and a conclusion that people would be surprised by. A person in Australia who is in the top 25 per cent income group has around five times as much income as someone who is in the bottom 20 per cent. Strong employment growth over the past 17 years has helped to reduce inequality, and I think Senator McAllister alluded to this, as those at the bottom end of the income distribution had greater access to the workforce and more workforce related hours. However, wages growth was very unequal over the period and acted to increase inequality. Over the 25 years to 2010 real wages increased by 50 per cent on average but by 14 per cent for those in the bottom 10 per cent of workers, compared with 72 per cent increases for those in the top 10 per cent of income earners in this country. In other words, the wealthier you are—the more money you earn—the better you have done over this period.
When we look at an average of 50 per cent increase across the board, let's break that down: if you are poor in this country, or a low-income earner, you have hardly any of that 50 per cent increase. That is nearly all gone to the top 10 per cent income earners in this country. It is no wonder the Reserve Bank governor this week, once again contributing to public debate, has called on workers to stand up for their wage increases. And I will acknowledge Senator McAllister and her colleagues, who have been in the Productivity Commission estimates and have continually raised this issue around penalty rates and cuts to penalty rates and why these things were not considered by an institution such as the Productivity Commission in relation to inequality—what kinds of impacts that is going to have on the economy—because it is actually an accepted fact that economic inequality, particularly when it becomes more acute, is a drag on economic growth and the economy. That is why wage rises themselves can be very useful for stimulating economic activity, because of course with the circular flow of income that money, that pay, gets reinvested back into the economy.
Increases in investment income, for those at the very top of the distribution, increase inequality, with investment income for the top 10 per cent doubling between 2004 and 2010. This increase is responsible for most of the increase in inequality over this period, despite forming only a small component of income. Looking at the demographics of this, people who are more likely to be found in the bottom of the income distribution are those over 65, sole parents, people from non-English-speaking countries and those reliant on government benefits as their main source of income. And may I say that since I have been in the Senate—for five years—they have been the target of policy in this place, especially by the Liberal government, to raise revenue to balance budgets. The most vulnerable people in this country have been targeted.
Remember the zombie budget cuts of 2013, and how the Greens and mostly Labor and other people in this place stood up to Joe Hockey's and Mr Tony Abbott's cruel budget? That is taking action on inequality; that is running the inequality lens over every piece of legislation that we consider in this place. So, why is it that these demographics are clear yet have been the target of our economic policy and legislation in this place? It is exactly the opposite of what we should be doing. And I want to see more of what we saw in this chamber this week: taking $6 billion off the big banks—$6 billion of tax that will pay for schools and hospitals from some of the wealthiest companies in the world. People who are more likely to be found in the bottom income distributions are the ones at whom we should be targeting our policies towards tackling inequality.
Income is not evenly distributed across the states and territories. We all know that. For example, people in my home state of Tasmania are more likely to be in the bottom 20 per cent, whereas people in Western Australia are more likely to be in the top 20 per cent. So, why do Western Australian senators come in here, Senator Bushby—through you, Chair—and ask for more money from my state of Tasmania, when we have a GST system in this country, horizontal fiscal equalisation, that is designed to transfer wealth from the wealthier states to help the poorer states? We are a federation. That is what this was set up to do. There are those states that, through an accident of geography, for example, do not find themselves sitting on some of the biggest mineral deposits in the world, but those states that do should be sharing that income with other states. Yet we constantly hear in this place that Western Australia should be getting more money and Tasmania should be getting less.
Let's talk about the distribution of wealth in Australia today. Wealth is far more unequally distributed than income—that is the really bad news. The average wealth of a household in the top 20 per cent wealth group in Australia, so the top 20 per cent of richest people in this country, is around 70 times the average wealth of a household in the bottom 20 per cent in this country—70 times. Who wants to get a jelly bean for guessing what the key reason for that is? I will tell you: it nearly all comes down to land prices and real estate. The top 10 per cent of households own 45 per cent of all the wealth in this country, so the richest 10 per cent of Australians own nearly half of the wealth in this country. Most of the remaining wealth is owned by the next 50 per cent of households, while the bottom 40 per cent of households—get this—nearly the bottom half of households in Australia own just five per cent of this country's wealth.
Home ownership is the particular asset I just referred to. Australia is one of the most concentrated places in the world for home ownership. Let me tell you why: the group with the top 20 per cent of wealth distribution owns over 80 per cent of all wealth in investment properties, and shares over 60 per cent of all superannuation wealth. Wealth held in the home is relatively evenly distributed across income groups, largely due to the high levels of home ownership of older retirees, who are more likely to be in low-income groups. One positive is that wealth inequality has declined since the global financial crisis because, obviously, we have seen a fall in asset prices, particularly in financial markets. That has now recovered, but it has increased over the longer term, Senator Seselja, between 2004 and 2012.
These statistics are stark, so why wouldn't a logical, rational person—a senator in this place who is fortunate enough and privileged enough to not only have the pedestal to raise these issues in debates like this today, but to put up legislation, as Senator McAllister has, that could try and hone our focus on tackling these issues—do just that? Why aren't we doing that? What kind of legislation should we be looking at? In my last few minutes I would say that, given these very black-and-white statistics on wealth ownership in this country, why do we still have perverse incentives that give property investors the opportunity to corner the housing market? That, by the way, is not just increasing economic inequality in this country, but is adding very severe risks to our financial system that have been recognised by international investors and, very recently, by the ratings agencies, who have basically said that we are close to a crisis in the housing market.
Why don't we kill two birds with one stone and remove these investment incentives—these perverse incentives like negative gearing and capital gains tax concessions? They are taking revenue out of the tax system that could be used to pay for schools, hospitals, pensions for retiring people and unemployment benefits, social safety nets and health care. That money is contributing to inequality and instability in our financial system. It is an absolute no-brainer, but no-one has the political courage in this place to tackle this. We have been banging on about this for nearly 10 years. Labor has a version of a policy to at least ratchet back some of those investment incentives, but we should actually remove them. Then we will have tens of billions of dollars that we can allocate to where it is most needed.
What other things could we be doing? We could be taking government money—debt, long-term capital issuances are at record low interest rates—and investing in the future of this country. The government could be playing an active role in our life by investing in productive infrastructure that would also tackle economic inequality, create jobs and growth—if I can use that term, as much as it makes me cringe—and, of course, reduce housing bubbles. The Reserve Bank governor has also said that investing in long-term infrastructure, especially public transport, is one of the best ways to reduce housing inequality in this country.
What else could we do? We could invest money in a federal housing trust to build accommodation for the many homeless in this country and those who cannot afford their own home. My colleagues Senator Rhiannon and Senator Ludlam over the years have done some fantastic work in setting up what a federal housing trust would look like. We have nearly half a million people in this country who cannot afford to buy a home. Where is the role of government? Where is the provision of low-income housing that we see in overseas countries, especially in Europe? It is almost non-existent. There is so much we could do; there are so many positive, proactive things I could talk about here today to reduce inequality. But, to go back to Senator McAllister's bill, unless we focus on economic inequality we are never going to fix it. We are always going to be burying our head in the sand. We are always going to be dealing with the short-term political issues of the day—which leadership struggle gets the most eyeballs on social media, in the papers or on TV sets? It is personality politics.
We are fortunate and privileged in this place to be able to tackle these issues. Other governments around the world are moving to tackle these issues—and they are not just economic issues or social issues. I would argue that economic inequality is one of the biggest sources of political instability around the world. I have read Thomas Piketty's Capital in the Twenty-First Century. It is difficult reading—I must confess that it took me a long time to read it, but I did finish it. There is a lot of empirical data there, and the conclusions are stark: we are entering a period of unprecedented economic inequality all around the world and it is creating political instability. We owe it to our democracy, which is the best system we have, to tackle this issue because it is, all around the world, undermining our democratic institutions. People are fed up. They do not believe in trickle-down economics. It has failed. The neoliberal experiment has failed. We need to find a new business model that looks after people and puts people before profit and has an increased role of government in our lives. That is what the Greens propose.
I want to put on the record comments that take a perspective different from the remarks of Senator Whish-Wilson. I am a WA Labor senator and I have spoken in this place about the need for Western Australia to receive more GST but never have I suggested, for a minute, that it should be at the expense of Tasmania. I do not think any Labor senator or MP in the other place has suggested that. We want to see a fairer distribution—we have never suggested taking from one state or territory and giving to another. I do remind the Greens party that poverty exists across this country, and to somehow claim that Tasmania has a greater need than Western Australia is to ignore the state of poverty in Australia and indeed in my home state.
The other point I would make, and this Productivity Commission Amendment (Addressing Inequality) Bill goes some way to addressing it, is that Senator Whish-Wilson said that somehow the Greens have been banging on about this for 10 years. That is the problem—we have had words but not actions. I do remind senators in this place, and particularly the Greens senators, that it is Labor that has put in place a whole range of reforms—superannuation, Medicare, parental leave. We had policies in government that did tackle homelessness and affordable housing. We had a bill in the other place, which the government knocked off, to try to protect penalty rates. We have put those actions in place but sadly they have not gone far enough. Also, every time the conservatives come into power, whether as state governments or federal governments, we see the situation eroded. This bill says let us start tackling and reporting on economic inequality. That is at least a start.
Recently I attended the Women's Forum in New York, which looked at women's economic empowerment across the world. It is shocking—wherever you look across the world, Australia is no different. We might be a little better off than our sisters in some Third World countries, but, nevertheless, women are not treated equally in this country—despite the reforms that Labor governments have put in place. And, certainly, that equality is absolutely under attack from the Turnbull government. It has been under attack since the day that they were elected.
With issues such as penalty rates, who on earth thinks that penalty rates will somehow magically lead to greater employment? It is an absolute nonsense. It takes pay out of the pockets of, particularly, low-paid workers—of women workers. We know that in Australia we have one of the most highly gender segregated workforces in the world. Men work in traditional male occupations; women are clustered in low-paid jobs and they rely on penalty rates. Yet, the Turnbull government, come 1 July, are going to take money out of the pockets of those women. It is an absolute disgrace and, quite frankly, I cannot believe that they think it is somehow going to create more employment. Of course it will not. So we will see women who work in hospitality and retail, come 1 July, get less money in their pay packets to support their families, to go to university or to do whatever else they rely on. The reason women and men work on weekends is to supplement low income. I do not get which bit of that those opposite just cannot understand. It is an absolute disgrace that on 1 July we will see people in this country lose income, and they will do so at the hands of the Turnbull government. I will never let the Turnbull government forget that. Labor has said that we will address this. We will put it back. We will make the changes to the Fair Work Commission to make sure that low-paid workers cannot be attacked by the Turnbull government.
On 1 July what else will happen? Millionaires will get a tax cut. On the very day the Turnbull government is taking money out of the pockets of low-paid workers—particularly women stuck in those areas of low pay—they will be giving their millionaire mates a tax cut. What a disgrace. They still believe, in this day and age, that somehow this trickle down will work. It will not. In the same way as when they cut superannuation, they refused to pass on the next percentage increase. That damages long-term retirement incomes, but they boasted that somehow that would create employment. Well, it has not, because we have seen record unemployment under the Abbott and Turnbull regime as prime ministers of this country. That is actually what we have seen. And the jobs that have been created are low-paid jobs, casual jobs—jobs in areas where workers will lose penalty rates. So this bill will actually start to hold up a light. It will start to say, 'We need to report on inequality in this country.' That would be a first step.
Using the Productivity Commission will take the political spin out of it. It will look at the impacts of inequality on the Australian economy, and it will produce a report—like Closing the Gap—that we will have to address as lawmakers in this country. We did see evidence during the inquiry—I was fortunate enough to be able to attend one of the hearings in Sydney—that inequality is stark, particularly for women. Women around this country, quite frankly, are a bit sick of just keeping on talking about it. We have known this for a very long time. We know we have a highly gender segregated workforce. Yet, despite some effort, we are not getting women into those STEM areas. We really need to do much more than we are currently doing to encourage the break-up of the gender segregation that we see. On the other side, in the caring industries and in retail and hospitality, men are never going to work in those industries in large numbers. Why? Because the pay is appalling. It is poverty wages.
For an educator working in the early education field, it is one of the most important jobs you could do in our society, because we know that for young children the vast majority of brain development happens between one and three years of age. What are we paying those workers? We are paying them poverty wages—about $21 an hour. That is what we are paying low-paid educators. Those wages are so bad. In an industry predominantly funded—almost 100 per cent—by those opposite in the federal government, the wages remain at poverty levels. It is not that educators do not love their jobs. It is incredibly rewarding working with young children, particularly young children between the ages of one and five. But they are forced out because they cannot afford to stay, or, alternatively, they are working two and three other jobs and that means that when they come to work in the morning to work with young Australians—our future leaders—they are tired and that automatically puts them at a disadvantage. But if they want to stay in the job that they love they have to work elsewhere, or they have to rely on another wage in their family. That is disgraceful.
At the other end of the spectrum we have aged care workers who, again, care for some of the most vulnerable in our society—senior Australians who have worked and have contributed to our economy, have paid their taxes, have raised families, have built homes and have led decent lives. Yet, at the end of their lives they are cared for by workers who are very low paid and part-time, who also have to work at least one other job to make ends meet. What is the key feature of these two sectors? Women. Women are clustered in aged care and early childhood, and an aged care worker earns about the same as an early childhood worker—about $21 an hour—but they rely on penalty rates, because the caring industry is seven days a week, 24 hours a day. But you can bet your bottom dollar that now that the Turnbull government has simply closed its eyes to the attack on penalty rates in retail and hospitality they will come for the aged care workers—the first they came for. We all know that sequence of events.
But it will not stop at hospitality and retail. What we have seen from the Turnbull government is that they are doing nothing to stop the attack on workers wages. In fact, many in the Turnbull government applaud the loss of penalty rates. They think it is a good thing for our economy. What is less money in our economy a good thing? Why is taking money out of the pay of low-paid workers a good thing? Why is giving someone less money to spend each fortnight when they get their pay packet good for our economy? No-one believes that. But somehow those opposite in the Turnbull government think there is going to be this magic proliferation of jobs.
Even if there were more jobs created as a result of this—I do not believe that, but let us assume for a minute that we will create a few more jobs—what will they be? More low-paying jobs—not good for our economy, not good for our tax system, and not good for individuals' prosperity. Yet, those opposite will champion it.
So, education and early childhood education—low-paid workers—women; aged care workers—low-paid women. Than there is the disability sector. How proud am I to be a Labor senator and to have been part of the government that introduced the NDIS? It is a revolutionary reform. Like Medicare, it will become a very important part of our economy. The NDIS is there. From the work that Labor did, we know that we need a massive increase in the workforce into the future.
What are the key features of the disability services sector? Low pay, and guess what the gender is—female. It is a feminised, low-paid workforce. Yet those opposite have done absolutely nothing to address the needs of that workforce into the future. You cannot have choice and control, which is a key part of the NDIS, if you do not have the workforce to match. We will not be able to attract the workforce we need unless we do something about the pay. Again, we see that those workers are on about $21 an hour. They want to look after and support people with disability to be able to manage in their own homes. They do an incredible job and they are unsung heroes, as are early childhood educators and aged care workers. But there will be a shortage into the future if we do not act on the pay. I think that those opposite think that the answer to that is to just import workers. Of course that contributes noting to our economy either.
So not only do we have to encourage women into STEM areas and traditional male areas of our workforce; we need to fix the pay and working conditions in low-paid areas so that we attract a different workforce. We want diversity in our workforce. We recognise that male workers bring a different perspective to these sectors, particularly early childhood workers. We want to encourage males in, but we will never get them unless we address this shocking poverty pay that exists in these areas. So having Senator McAllister's bill here, which is going to force us to report on a whole raft of things in relation to social injustice and economic inequality in our country, is a really positive issue.
The other issue we have to address as a society, as a community and as legislators is that we really have to start speaking about the unpaid work that women do. We know that, despite many men being much more enlightened than perhaps my father and men that went before him, we do need to share the family work that is traditionally done by women, because that prohibits women from going out and finding higher-paid jobs. If you have to be there to do school pick-up or to care for an aged parent, you cannot take a job that requires you to work from 3 pm to 5 pm. You are prohibited from doing that. We know that in our country the unpaid work is traditionally still done by women. We need to start to talk about that.
But of course we have a government that is characterised by those famous comments by former Prime Minister Abbott, when he talked to the women who apparently do all the ironing in the country. If you have MPs and senators opposite with a view that somehow it is our normal destiny as women to take on this unpaid caring role, we are in trouble. It is time that we started to challenge that and to measure the sorts of unpaid work that women do in our community and really start to change that. For that to happen we need flexible workplaces. We need to actively encourage men to take time to care for children, to take days off when their children are sick, to take time to go to school assemblies and all of the things that traditionally in our community we rely on women to do. We need our workplaces to be much more flexible to the needs of men when they have family commitments.
This is not some utopian socialist dream. This is actually good for our economy. It is good for our economy when we have workforce flexibility for men and women, when we encourage employers and hold up private employers to role model where flexible work actually works, where men are taking a share of what happens in family life. Until we start to address the unpaid work done by women, we will still be talking about inequality in 20 years. It is a major impediment to women fully participating in the workforce.
Gone are the days in our country when the male worked full time and the woman worked part time. That is no longer acceptable. If that is an arrangement people choose, good on them, but let us make a real choice for men and for women. Across your career in the paid workforce there might be times when both of you work part time and times when both of you full time, and that unpaid component of family life is shared equally between men and women. We are a long way from that, unfortunately, but that is something we need to consider as a community, and to role model best practice when we see it.
At the inquiry the Australian Industry Group talked about barriers for flexible workplace issues, so it is not just the Labor side of politics talking about this, but the Australian Industry Group, too. They indicated to us that flexibility was something most employers wanted to offer to staff and they felt that inflexibility made it very difficult for employers to implement alternative working arrangements for workers who desire or require more-flexible working arrangements. I think all of this in this place and many Australians struggle when our children start school. That is probably a time when it is very hard to manage full-time work and also pick children up from school and make sure they are properly cared for. If we had that flexibility, particularly across the early years, we would create more-productive workplaces.
With regard to the gender pay gap, despite Labor making great inroads on pay inequality in the famous cases that were run in the industrial commissions in this country, wage inequality still exists. It is 16 per cent and has been stubbornly stuck there for 20 years—that is generations of workers—and in my state of Western Australia it has been stubbornly stuck at 24 per cent. These are issues that need urgent attention from the government and indeed this parliament, yet they simply get overlooked. It is not acceptable in this day and age to have such inequity in pay continue on and on without being addressed.
Listening to this debate, and particularly the previous two speakers, with their socialist rhetoric, brings to my mind some maxims that were first mentioned in the 19th century by the philosopher Reverend Bottger, sometimes attributed to Abraham Lincoln and elaborated upon by Winston Churchill. I think it is always important to remind ourselves of those 10 maxims, which are as important and evident now as they were when they were first uttered. I notice some schoolchildren in the gallery. I love to see them here. It is good to see them watching parliament in action in the cause of democracy. They too might be interested in these 10 maxims. I am going to repeat them because they are so germane to the debate we are having today. The first one is: you cannot strengthen the week by weakening the strong. Winston Churchill elaborated on that by saying you cannot make the poor rich by making the rich poorer. You cannot bring about prosperity by discouraging thrift. You cannot help little men by tearing down big men. You cannot lift the wage earner by pulling down the wage payer. You cannot help keep the poor by destroying the pitch. You cannot establish sound security on borrowed money. You cannot further the brotherhood of man by inciting class hatred. You cannot keep out of trouble by spending more than you earn. You cannot build character and courage by destroying men's initiative and independence. And you cannot help men permanently by doing for them what they can and should do for themselves.
Those maxims are self-evident, and they are what made America great, a little before Australia was made great by people following those principles. They are a series of thoughts that I was delighted to hear our newest senator, Senator Gichuhi, mention, not in those words but in the themes that she addressed yesterday in her maiden speech to this chamber. Of course, they are the principles upon which the Liberal Party of Australia is based. It is a tenet of the party that I belong to that you must look after those who are disadvantaged and those who are not as fortunate as we are. Through the majority of the Commonwealth, when we have had Liberal governments, those principles have been put in place.
This Productivity Commission Amendment (Addressing Inequality) Bill 2017 is a private member's bill from a Labor senator, and I congratulate Senator McAllister for bringing forward for debate a sensible policy proposal—not one that I necessarily agree with, but I appreciate the fact that it is an attempt to have a sensible policy discussion in this place and does not, as with many of Senator McAllister's colleagues, simply to make some very base political point or attack members of the Senate who are not members of their party. So I am pleased that this debate is before us. I should point out to Senator McAllister that the Intergenerational report, which she mentioned both in her second reading speech and in the explanatory memorandum, is produced not by the Parliamentary Budget Office, as she said, but by the Treasury. I do not think that error in your second reading speech makes a great deal of difference to the bill before us, but it is important to make sure we all understand these things.
The Labor Party want the Productivity Commission to do another investigation and another report. If you have plenty of money and plenty of time, that is sometimes a useful way to go. Rather than doing reports, investigations or studies, the Turnbull government is actually addressing inequality with policies to boost economic growth that generates greater employment and income for hardworking Australians whilst targeting assistance to those who need it most. Again quoting our newest senator, Senator Gichuhi, yesterday in her first speech, the best form of welfare is a job. The best form of welfare is a job, and that is what our government are attempting to do.
The previous, Labor speaker, Senator Lines, mentioned that the current government has presided over record unemployment. Clearly, the previous speaker has not been here long. I am proud to say I have been here 27 years and am currently the longest serving parliamentarian, and I have seen it all before. I happened to be here when, under the Keating Labor government, unemployment across Australia was at almost 13 per cent. Youth unemployment in the Keating years across Australia was upwards of 35 per cent. Yet Labor speakers come in here and try to suggest with non-factual comments that unemployment under this government is at record levels. It clearly is not. I can tell you, though, Mr Acting Deputy President Bernardi, that it is at record levels in the city where I have my office, the city of Townsville. We are, regrettably, a state with a Labor government which has done little on the economy. In fact, it has done little on anything. It is adopting the principle that if you do not make a decision and you do not do anything, then you are not going to offend anyone, so your chances of getting re-elected at the next election are better, because you have not put anyone off side. More than that, they have employed another 12,000 public servants, most of whom are not needed in Queensland but who, I guess, are grateful for their job and will show their gratitude in the upcoming state election in Queensland.
But in my home city of Townsville, unfortunately, unemployment is at very high levels. Why? Because of the mining downturn and because the state government, who control the local economy, have done nothing. The federal government has tried to help in Townsville, with commitments to the Eastern Access Rail Corridor project, to the Townsville Stadium, to the ring road around Townsville, to beef roads and to regional roads. The money from the Commonwealth for dams and for water studies has really flooded into the north, but, unfortunately, whilst the Commonwealth government provides the money, with the way our Constitution is set out, the work has to be done by the state government, who own the roads and who own the rivers. We, federally, can only provide the money, and we have done that. Regrettably, the state government have not used that money for the benefit of the people of North Queensland.
Credit where credit is due, I will give the Labor Premier of Queensland credit for staring down the opponents in her own party, including her Deputy Premier, by—reluctantly, I think—eventually supporting the Adani project to build a long railway line in Queensland to go from the central Queensland coalfields to the Abbot Point port near Bowen. For young people who might have heard of this debate, can I say to you: please do not believe the rhetoric of the Greens and GetUp, who tell you that opening a coalmine about 500 or 600 kilometres inland, behind the Great Dividing Range, is somehow going to destroy the Great Barrier Reef. I live on the Great Barrier Reef. All of the people of that part of Queensland, who are represented by members of the Liberal-National Party—not of the Labor Party—know that the reef is carefully managed. It has ups and downs, but, generally speaking, it is a resilient organism that will continue to flourish, because it is well managed by, principally, the federal government, in conjunction with the Queensland government.
I have diverted a fraction from saying that the Queensland Premier, against opposition from within her own party, did in fact supports the Adani railway and mine project, which will also, as an adjunct, help the South Australian steel industry, because all of the steel for the railway will be sourced from Whyalla. That project will provide real jobs, will provide some sustenance to small businesses who are struggling in that area and will, consequently, help with the equity of those who are less fortunate in the North Queensland region at the moment.
The previous speaker also made some reference to the abolition of penalty rates on 1 July. Somehow this is the fault of the Turnbull government, even though it was a decision made by the Fair Work Commission, whose members are principally ex-union workers and ex-union bosses appointed by the Labor Party.
Under a Labor piece of legislation—that is quite right, Senator Seselja. This independent commission, made up of mates of Senator Cameron who his government appointed to the job, took evidence and looked at it all. They understood the facts and figures, and they—not the Turnbull government—made a decision to adjust penalty rates for Saturday and Sunday work. Why? It is because the evidence clearly showed that penalty rates discourage employment opportunities. I know, without a study by the Productivity Commission or the Fair Work Commission or anyone else, just from my contact with my constituents, that there are so many small businesses who will not open on Saturday and Sunday because they cannot afford to pay the penalty rates. They cannot afford to compete in wages, because they have to pay huge penalty rates, whereas the big chains—like Maccas, Kentucky Fried and those fast-food chains; Myers and David Jones; Woolworths and Coles—thanks to a union deal, do not have to pay those same rates.
Why? It is because Mr Shorten, when he was a union leader, did these deals with that sector of the industry and said, 'You don't have to pay these huge penalty rates,' but the small businessmen, the mums and dads trying to compete with these multinational chains, 'Sorry you've got to pay these prohibitive penalty rates,' which means that most of them do not open. With a more realistic approach to penalty rates these small businesses, the mums and dads, will say, 'Yes, we will open on Saturday and Sunday, because we can afford to employ people.' That means more people will be employed, and that sort of thing will address the critical unemployment situation in my home city of Townsville. Fortunately, this is not shared by most of the rest of Australia at the present time, but it will make a difference there and right across Australia.
As I said before, it is my party's vision—it is in our DNA and it is certainly in the DNA of coalition governments federally—to look after those who cannot look after themselves, the more disadvantaged in our society. I will give just one example: the National Disability Insurance Scheme. I concede this originated in the term of the Labor government, but it was a proposal that was fully supported by the then opposition, which was our party, something you do not see today in this parliament. Anything that comes to this parliament, whether it be good, bad or indifferent, is automatically opposed by Labor and the Greens, just because we brought it forward. The Liberal Party in opposition thought that the NDIS was a good idea. It is part, as I say, of our DNA to look after those not as advantaged as the rest of us.
It was a good idea, but at the time we warned, 'Is this being paid for?' As I mentioned before in one of those important maxims, 'You can't keep out of trouble by spending more than you earn.' That is what Labor governments do all the time. That is what they did with the NDIS. That is what they do with everything: 'Yeah, good idea, it will get a few votes: let's promise we'll have a national disability insurance scheme. How's it going to be paid for? Don't worry about that; let's get the credit for setting this up and we'll worry about that later.' Of course, the Labor Party never provided money for the NDIS. It has been left to this government to actually fund the National Disability Insurance Scheme.
We are asking Australians to contribute, with the Medicare levy to be increased by half a percentage point from two to 2.5 per cent of taxable income. This means that one-fifth of the revenue raised by the Medicare levy, along with underspends within NDIS, will be directed to an NDIS savings fund to ensure that this good scheme can continue and be fully funded into the future—a proposition, an arrangement that the Labor Party had neither the wit nor the courage nor the understanding to introduce.
This is a measure because we do have those hated rich people that Senator Lines spoke about. Fortunately they are rich, because 2.5 per cent of their income will mean a huge boost to looking after those who need the NDIS. I repeat that maxim: you cannot establish sound security—social security in this instance—on borrowed money. Because we do have people who earn a lot, they contribute more—and thank goodness we do have them.
Similarly, this government understands inequality in education. That is why Senator Birmingham is bringing in a scheme that is equal across the board. It makes sure that people, no matter which category they are in, have money to be properly educated. As a state school veteran—all my school years were at a state school; I could not afford to go to university; I did my tertiary studies externally—I understand how important it is that all students should be helped by the federal government and the state governments. People say to me: why is the federal government giving Catholic and private schools so much money and state schools so little? The reason is that the state governments in our Federation give the state schools all the money and the Catholic and private schools very little at all. So what the Commonwealth has always done, since the Menzies days, is try and equalise that. We do not care where kids go to school; as long as they are getting a good education, they should all be treated relatively equally.
Across the board, coalition governments, since time immemorial, have tried to lessen the inequalities within Australia by sensible policies that work and that do achieve results;. That is why every serious social reform, and indeed environmental reform, that has ever come before the Australian parliament has been a product of Liberal governments over the decades.
I am pleased to have the opportunity to participate in the debate on the Productivity Commission Amendment (Addressing Inequality) Bill 2017. I support this bill and congratulate my friend and colleague Senator McAllister on her initiative in bringing this bill before the Senate and commencing a debate on inequality, one of the great social and economic issues facing the nation. The bill amends the Productivity Commission Act 1998 to expand the general policy guidelines for the exercise of the Productivity Commission's functions to require consideration of inequality. The bill establishes a framework for the Productivity Commission to regularly report on economic inequality.
I have been a long-time critic of the Productivity Commission since appearing before the commission and former Commissioner Banks on the future of the vehicle and component industry many years ago. I appeared in my role as the national secretary of the Australian Manufacturing Workers' Union. Arising from that hearing, the commission set the stage for the destruction of the vehicle and component industry in this country. It did not do a lot for equality and it did not do a lot for working people. The commission, in my view, is far too dominated by economists. Worse still, these economists are predominantly advocates of neoliberal economics who argue that the economy will reach equilibrium, in which all resources will be fully employed, if only government is minimised.
These people in the Productivity Commission are the acolytes of the Austrian school of economics, influenced by Friedrich Hayek, and the Chicago school of economics, influenced by Milton Friedman. It is my view that, unless there is an injection of economists who understand the role of the state and Keynesian economic principles, the majority of the reports will be guided by an increasingly discredited economic theory that increases poverty and inequality. There must be an injection of economists who are not bogged down by their ideological presumptions, such as, 'Markets are always efficient,' or, 'Government is always inefficient.'
The Productivity Commission can always be relied on to minimise the role of government and maximise the role of the so-called free market. We therefore need a renewed debate on the role of government in reducing inequality while moving away from the sterile and unrealistic slogans of the coalition, such as 'jobs and growth' and 'innovation agenda' and the empty rhetoric of trickle-down economics, of which we heard so much about from the previous senator in this debate, Senator Macdonald.
As the renowned Nobel economics laureate Joseph Stiglitz stated in his book Freefall: America, Free Markets, and the Sinking of the Global Economy:
Economics had moved—more than economists would like to think—from being a scientific discipline into becoming free market capitalism's biggest cheerleader.
The Productivity Commission is an example of this. The economists in the Productivity Commission, who can pontificate on any issue that the government brings before them, were missing in action and failed to analyse or understand the problems being created by greed and corruption in the US finance sector which led to the great recession. Where were all the alarm bells from these right-wing economists in the Productivity Commission that there was something happening in the US that would lead this country into what almost became a recession?
We would have been in a recession if we had not had a Labor government in place to actually use Keynesian economic principles to keep people at work, keep communities operating and keep businesses and corporations going. Labor in government, in my view, should not solely rely on advice from the Productivity Commission, unless the dominance within the commission of free market economists is balanced by economists who understand the importance of the role of government in the economy. Unless we do this, the good aspiration contained in this bill that the Productivity Commission consider inequality and establish a framework to regularly report on inequality will be frustrated by the dominance of the Chicago school of economics thinking of the economic staff in the Productivity Commission.
What are the drivers of inequality? The drivers of inequality are the neoliberal economics we just heard from Senator Macdonald. Again, he just used the same tired, old, regurgitated rhetoric that the coalition have been using for years about trickle-down economics. They think that, if they give a $65 billion tax cut to big business who do not pay their fair share of tax now, there will be economic growth and jobs will be created. What a load of tosh from Senator Macdonald and the coalition on this issue. They argue about too much tax and small government. Small government means that you end up not having the capacity to provide the health services, the education services and the infrastructure that this country needs to continue to compete at an international level.
They do not deal with multinational tax avoidance, which is a great driver of inequality. They constantly attack the union movement. We heard from Senator Macdonald. He is full of rhetoric about the trade union movement without understanding the benefits that the trade union movement brings to working class people in this country through decent wages and decent conditions and how that flows on to small businesses across the country because workers have a dollar in their pocket to spend in those small businesses.
Another driver of inequality is the budgetary decisions of the coalition. No-one should ever forget the 2014 budget. It was the epitome of inequality created by government policy. If you ever want to look at what would drive inequality, go back to the 2014-15 budget of this government: changes to welfare for young people; reductions in hospital funding and health expenditure, including new patient contributions to the cost of medical services; and reductions in school funding. That is where they really are. The only reason they are trying to put up a smokescreen that they are interested in education is that they were being killed out there, day in day out, in the political debate on education and school funding. That is the only reason they have actually been dragged kicking and screaming to any semblance—and a pale imitation—of what Gonski is really about. They actually reduced family tax benefits in that budget. They reduced the indexation of the age and disability pensions. Cuts to pensioners was their DNA in their policy and their budget. And these cuts, including reduced funding to higher education and increased student contributions, mainly affected low- and middle-income households.
I will not be lectured by any of that mob, that rabble of a government across there, on inequality—absolutely no way. They all, like lemmings, supported these cuts when they first came to government and argued that this was good for the economy. Well, they destroyed people's lives! I will not accept any criticism of Labor policies from a mob who just do not understand inequality. In that budget, young people under 30 were denied access to income support for six months of every year, losing up to $255 a week. Young kids were supposed to starve if they did not have their family looking after them! What an obnoxious policy to bring in a country like Australia—which had an international reputation for egalitarianism. Young people aged 22 to 23 were transferred from Newstart allowance to the lower youth allowance. Young people with disabilities were reassessed, with income reductions of up to $214 a week in the disability support pension.
Indexation changes were put in place that would erode the real value of payments over the long term with the loss of $80 a week in a decade. They abolished the pensioner education supplement. And they tightened access to family payments, impacting mainly on low-income families with children—in particular, sole parents. They made changes to family tax benefit B. Sole parents with a youngest child aged between six and 12 lost $37 a week and those with a youngest child aged over 12 years would lose $58 a week. This is their understanding of inequality. This is how they behave when they think they can get away with it.
Do not listen to any coalition member who ever stands up here and talks about looking after working class people in this country, because it is not in their DNA. They do not care about working people. They care more about the big businesses that put the dollars into their election funds, whether that is done legally or in the back seat of a Bentley with a property developer up in Newcastle handing over $10,000 in a brown paper bag to the coalition. They do not care about working class people in this country.
The coalition want us to change the payment indexation for pensions. They have changed it from the CPI to wages. That would erode the value of the pension by $80 a week over 10 years. That is how much they care about pensioners. They extended the qualifying age for the age pension without any increase in the Newstart payment, reducing income for those unable to work up to 70 by between $64 and $166 a week. This was the coalition in action. Boilermakers, fitters, builders and labourers are being told, 'You've got to work until you're 70.' What a nonsense!
Then look at the group of Australians who are suffering most from inequality—Aboriginal and Torres Strait Islanders. One hundred and fifty programs were consolidated into five. The government cut $493.7 million from Aboriginal and Torres Strait Islander support, and $160 million of the cut was from a reduction of expenditure on Indigenous health programs. So no wonder the government cannot deal with inequality. It is because they just do not know what it means. There are cuts to Indigenous language support programs of $9.5 million. They reduced funding to the National Rental Affordability Scheme, which was putting low-income people into houses, with the loss of round 5 incentives and 12,000 dwellings that should have been in there for low-income households.
They cut funding to homelessness services and they did not give any indication that they would continue funding. They have defunded housing help for seniors and defunded the first home saver account scheme. That was when they first came into government. Now in the most recent budget they have put it back in. They do not know if they are Arthur or Martha, this mob. They will just do anything to try to save their necks, because they are such a rabble of a government. They are so divided internally. They do not want to deal properly with the issue of inequality. They do not want to deal with the issues that really go to ensuring that there is a fair and egalitarian society in this country.
Who could ever forget the sight of former Treasurer Hockey, who was telling everyone there were 'lifters' and 'leaners', becoming the 'leaner-in-chief' over in New York? Who will ever forget him and the current Minister for Finance, Minister Cormann, celebrating the imposition of all this inequality on Australians with a fat Havana cigar. It probably cost more for one cigar than they expected an Australian in trouble to survive on for a day. It was absolute nonsense. The current Prime Minister, Malcolm Turnbull, in an interview said he supported every aspect of that horrendous budget. So the coalition cannot criticise anyone in relation to what we are doing to try to deal with inequality.
Inequality comes at a cost to the whole economy. There is a vicious spiral when inequality is not dealt with. Look at what has happened under this government—record underemployment, record-low wages growth and record-low share of national wealth, down from 75 per cent in the 1970s to 53 per cent now. There is the highest level of income inequality in 75 years and yet the government still support cuts to penalty rates for 700,000 of the most vulnerable, low-paid workers in this country. They are an absolute disgrace.
Thankfully, in more and more countries around the world they are getting rid of these policies of globalisation, privatisation, competition policy and austerity. Thatcherism is dead—it is just that these people do not understand that. Even the International Monetary Fund has identified that reductions in the number of trade unionists and the taking away of the rights of trade unions results in more inequality. That is the speciality of this mob—they know that if they can destroy the trade union movement, weaken the trade union movement, working class people will suffer more and more inequality. When the International Monetary Fund is saying that, then we should all be very concerned about what they are about. Deunionisation weakens earnings for middle- and low-income workers. That is what they are about—giving $65 billion of tax cuts to big business on the theory of trickle-down economics and, while they give tax cuts to millionaires, increasing taxes on ordinary working families. That is their view of inequality. That is how they try and deal with inequality. They do not have a clue.
The trade union movement is absolutely essential to dealing with inequality. We have seen a position where every time this government gets an opportunity they try and weaken the rights of workers who belong to trade unions. They try and diminish the capacity of workers to enterprise bargain effectively. And the push to enterprise bargaining has created a position where multinational corporations can use all of their resources against workers and their unions, but the unions cannot take any coordinated action across that company. I think it is a disgrace. That should be changed. The right of entry for union officials should be liberalised so that we can actually get in there and talk to workers about the problems they have on the job. But this government is so busy with its ideological obsession, with destroying the trade union movement, cutting rates for pensioners and getting rid of decent funding for education and health, that they do not care. They are an absolute rabble and a disgrace of a government. (Time expired)
I rise to oppose Labor's Productivity Commission Amendment (Addressing Inequality) Bill 2017. This bill would require the Productivity Commission to prepare five-yearly reports on the effects of inequality. A saving grace of this is that this requirement is not loaded with an assumption that inequality is bad and the government should counter inequality. The Productivity Commission would hopefully measure the things that matter to people, how equally these things are distributed and the effect of this distribution.
Some people want more money, more goods and services and more assets, so the commission would measure inequality in these things and assess the effects of such inequality. But consumption is not all that matters to people. Inequality is found in many areas of life. Some people at death's door just want to survive, while others with poor health just want to be able to enjoy everyday life. The lonely among us long for friends, meaningful relationships and family. Many yearn to have children. Some people long to find meaningful employment and have fulfilling careers. Some people are tired of carrying the tax burden for others. Some just want a bit of respect. Some people have a spiritual gap in their lives and some people wish they were better looking or still had hair on their heads. Good luck to the Productivity Commission if it has to measure and assess inequality with respect to all of this. Given the problems confronting the governments of Australia, this exercise does not strike me as the best use of the Productivity Commission's time.
However, the critical component of the bill before the Senate today is a requirement on the Productivity Commission, in performance of all its functions, to have regard to the need 'to mitigate the negative effects of inequality on the Australian economy and the Australian community.' This requires the commission to accept, before it has done any investigation, that inequality has negative effects that should be mitigated. This undermines the usefulness of having an organisation where staff are tasked to gather evidence and come to their own conclusions.
As it happens, inequality does have negative effects, namely: envy. But the moral thing for the government in response to this envy is to do nothing. The role of government should not be to do whatever the median voter wants, which could very well be to seize the property of the minority. The role of government is to protect life, liberty and property and, more broadly, to do other beneficial things that businesses cannot profitably provide due to free riding. In other words, liberty should trump democracy. This is in the long-term interests of Australians, including the median voter.
Currently the bipartisan obsession with spending other people's money has us on a slow path to self-destruction. I urge parliamentarians, whenever they are thinking about spending more of other people's money, to consider what Australia will look like in decades ahead if such behaviour were to continue. Equality in poverty is not something we should aspire to.
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)
The Productivity Commission Amendment bill 2017 amends the Productivity Commission Act 1998 to expand the general policy guidelines for the exercise of the Productivity Commission's functions to include consideration of inequality, and establishes a framework for the Productivity Commission to regularly report on economic inequality.
The purpose of this bill is to improve the quality of information and analysis available about economic inequality in Australia and to ensure that proper consideration is given to inequality in the public debate about economic policy. We firstly compliment Senator McAllister and the ALP for putting forward this bill, even if we have some reservations, as expressed quite well by Senator Leyonhjelm.
I will firstly discuss inequality. Inequality of wealth is an important economic phenomenon that should be properly and independently measured and analysed; however, it is a result, not a cause. A significant level of inequality is not in itself an economic issue. It is whether someone has sufficient and growing wealth to pay the bills, not whether someone else has even more sufficient and growing wealth. So, provided this is used correctly, and not politically for pushing a philosophy, it will be a valuable addition to the debate in this country.
Inequality only makes economic sense as one possible indicator that something may be askew with the levels and trend of real net wealth. Real net wealth is driven not by inequality but by factors such as real income and wages versus the real cost of living. The latter, cost of living, is partially and imperfectly measured by the CPI, which nevertheless clearly shows why poor and middle-class Aussies continue to struggle. The poor in fact get hammered by regulations, which seem to be the solution to many of the problems or challenges that the ALP see. The ALP, along with their Greens allies, quite often put forward an increase in regulation. Regulations bring with them an increase in cost, a decrease in quality and a decrease in production, which hurt the poor most of all. Regulations are an indiscriminate and regressive impost on the poor.
The Productivity Commission has been a bastion of sound economics and common sense for decades. The Productivity Commission will be aware of the primary role that too many government interventions, such as in the form of regulation, tax and money supply, have in reducing real net wealth as possibly indicated by significant levels of inequality. Thus, no government agency is in a better position to be tasked with assessing inequality than is the Productivity Commission.
Inequality can be very difficult to define. Senator Ketter has already attempted to discuss some of those aspects. Is it gender inequality? Is it geographical inequality? Is it inequality of tax? Is it inequality of wealth? As I said, regardless, when it comes to economic considerations, inequality is a result, not a cause.
Senator Ketter raises the question of declining union membership. That is no secret. A lot of people are aware of this. And then he raises the point about penalty rates. It is all too clear that the people who have pushed the decrease in weekend penalty rates, for example, are the very union bosses that have complained no about the Fair Work case result. Some in the media are referring to the Leader of the Opposition as Electricity Bill. That is not something I would do in this chamber, but that highlights two things. That is what people are seeing, and that gets to the heart of Senator Ketter's comments: these are open, everyday things. The penalty rates decision was preceded by the union bosses doing deals with the big end of town to strip penalty rates out of enterprise agreements. The decrease in penalty rates has been led by union bosses.
We then see energy policies—electricity especially. As the famous saying goes, the road to hell is paved with good intentions. Some work by our staff indicated that single pensioners pay 11 per cent of their income, which is not discretionary, on energy. It is now a highly regressive tax to increase energy prices, which is at the core of Labor Party policy with its 50 per cent renewable energy target and its now support for the disgraceful Finkel report, which has no sound economic merit at its base. (Time expired)