LAURA JAYES, PRESENTER: Joining me now is the Shadow Treasurer, Chris Bowen. Mr Bowen, thank you for your time. $50 billion wiped off the Australian share market this morning. This follows of course the biggest single day drop on the DOW Jones. How should we interpret this? Should we be concerned?
CHRIS BOWEN, SHADOW TREASURER: Thanks Laura. Well obviously they are very significant market movements, particularly the United States as you said. On the points basis, the biggest daily drop in history. And in Australian context its only part way through the day, but substantial and material drops in Australia, and of course Asian markets are opening and they are experiencing similar falls. Now I think we need to keep this in context. Obviously it will be very concerning, particularly to people reliant on their share portfolios, self-funded retirees, superannuants and people in the like, but of course this is a relatively short period of time. We will need to see what plays out over coming days and people, I think, understand that markets move up and down, the American market has been increasing and today it has suffered a very substantial fall. That is the nature of the stock market. Now of course while it is concerning to people, and Im sure people are keeping a very close eye on it, I do think its important to keep it in that context.
JAYES: In the context of the United States, we saw Donald Trump pass these company tax cuts to 21%. Now what is your take on whether these company tax cuts have actually been a victim of their own success because it seems there was a report out on Friday that saw that wages growth was about 2.9% and that was I think 2 points or 0.2% ahead of what the market expected, and its seemed to trigger this sell off. So wages growth has actually been higher than the market expected. Thats good news in a sense but the market didnt react as such.
BOWEN: Well Ive seen that link made by expert commentators in the United States. I dont think its particularly useful at this point to get in to that, we need to see what plays out over coming days and weeks, but days in particular. Therell be all sorts of commentary about what has brought this about. Theres no doubt that link has been made by commentators. Of course President Trump has been keen to claim credit for the increases in the stock market in recent months, thats a matter for domestic US politics that Im not going to get into. If I was a Democratic Congressman in the United States I would have plenty to say right now but I think in my responsibilities for Australia I think we just take a steady hand, a deep breath, recognise that the stock market does move up and down substantially. It doesnt necessarily mean that the real economy follows. There are links of course, between the exchange and the real economy but nevertheless the real economy is quite separate so I dont think we should be too alarmist at this point.
JAYES: Okay lets come back home then, and on wages growth in Australia is central to the political argument at the moment. Wages growth is flat at the moment but do you agree that historically real wages growth has risen alongside productivity pretty much since the beginning of the mining boom, the China boom.
BOWEN: Well going back further historically that is the case that theres a clear link but that has been less and less the case. Particularly, as Bill has pointed out, with company profits growing strongly and wages lagging. Some of those historic links, and we are seeing that around the world in particular, we have seen that in the United States, some of those historic links are falling down. Eminent economists have called it the rise of the jaws of the snake where productivity continues to continue to grow but wages arent keeping up for the first time in a long time.
JAYES: But in Australia Mr Bowen is there evidence that profits have roared ahead while workers have been left out, because when you look at the trajectory and the graphs that are presented by economists, they are still below the longer term average as a share of the national pie, wouldnt you agree?
BOWEN: I dont think theres any question Laura, that theres been a disconnect, that wages havent been keeping up, that profits have been growing more strongly, and that growth hasnt been shared. And thats exactly what we are talking about, Bill Shorten and I and the Labor Party. Thats exactly what we are pointing out.
Now the Government can deny that reality if they like, but we are more than happy to have that debate. We have different views, we have a different set of values but we have different views about the right answers here. Now the Government seems to think the answer to everything is to the $65 billion tax cut, dont worry, itll trickle down from the corporates into wages. We say hang on, when youre cutting penalty rates, when youve got wages growth very low, thats not the right answer, and certainly the right answer isnt to jack up income tax $300 a year for someone on $60,000. Thats the Governments approach. As well as standing by and watching penalty rates be cut. Theres a context in this debate that we are more than happy to have.
JAYES: Okay there is a context, let me inject some more context then. Because in your book and previously at the AFR Summit you have argued that in the right fiscal circumstances, there is a case for a company tax cut to 25 per cent. When the Budget was in a healthy position, and I take your point that it isnt at the moment. But when we look at the situation at the moment, and we look at the trends from the United States, is there a case here that it does actually work? So once upon a time, what Im trying to say is that once upon a time you did believe that there was a link between a cut in company tax and wages growth. So what has changed?
BOWEN: Well Laura thank you for making the argument for me, with respect. Youve pointed out, which Malcolm Turnbull doesnt point out, Malcolm Turnbull likes quoting one paragraph of my book. He doesnt like some of the other things in my book, he doesnt read those out but he quotes one paragraph. But he leaves out something very important. He leaves out the end of that paragraph where I say, this is not affordable at the moment and it will be a long time before its affordable. And guess what, its not affordable now. This is my point Laura, to be clear. The objection to the corporate tax cut is that this nation at this point cannot afford it. It is the biggest single hit on the Budget that either side will propose. We are not going to propose any hits on the Budget bigger than $65 billion, I certainly hope the Government doesnt propose any more hits on the Budget bigger than $65 billion. We talk about Budget repair, we talk about the need to get back to balance, the biggest single hit on the Budget is the Governments corporate tax cut. We cant afford it, as I pointed out in my book some time ago and at other points. Its not a philosophical objection, its that it cannot be afforded at this point.
JAYES: Okay but what about companies with a turnover of more than $50 million dollars, $59 million turn over, Haighs Chocolate in South Australia. Why dont they deserve a company tax cut? Theyd hire more people.
BOWEN: Well this is about priorities Laura. Now again as I said, if you accept that the Budget can afford $65 billion, which I dont accept, then there are all sorts of ways it can be spent, whether its expended by tax concessions, or expended on infrastructure spending or building schools to improve educational outcomes. Theres all sorts of things which add to economic growth. I mean the Government thinks that corporate tax cut is the only ticket to economic growth. I agree with the Productivity Commission. I agree with the Productivity Commission who said last year that we need more social investment in people to lift our skills. Thats the best way for long term productivity growth and economic growth. They didnt recommend a corporate tax cut, I agree with them. Thats the Labor approach. Now of course this debate is going to rage on until election time, the Government has said they are going to keep the corporate tax cuts on the book and take them to the election, okay well have that debate. The Australian people will be able to decide. Weve announced lots of economic policy already, weve got lots more to announce in coming weeks and months, and right up to the next election. It will be there for all to see the competing plans.
JAYES: Alright, just two more quick questions. Scott Morrison said this morning on the Treasury advice around negative gearing that he didnt agree with them at the time. You dont always agree with Treasury advice, whats wrong with that?
BOWEN: Well it was a particularly flummoxed press conference from the Treasurer this morning. He sort of said he knows better than the Treasury from his own experience. Well the fact of the matter is hes more than willing to selectively leak selected Treasury advice when it suits him. Sometimes its not even real Treasury advice we find out later. Hes always happy to quote the Treasury for political purposes. Hes politicised the Treasury which Im very concerned about, and now he says well I know better. He even resorted to saying theres a BIS Shrapnel report which shows certain things about Labors plans, which is a thoroughly discredited report. Hed rather have a thoroughly discredited report than rely on the advice of Treasury. And this actually goes to his honesty and credibility, hes been caught out. Hes been caught out, he didnt want this advice out, hes more than happy to leak other advice. He sat on this. It took a long time to get under FOI, he resisted it. It finally got out and he was utterly embarrassed by it.
JAYES: Let me ask you about the Adani project, do you want it to go ahead or not?
BOWEN: Well Laura, what weve said quite rightly, this is a very legitimate point of view for us to take and indeed wed be negligent if we didnt. There are significant reports out, allegations that Adani was not straight forward in its reporting of environmental consequences. Josh Frydenberg denied that that was a matter for him in Parliament yesterday. Well it is a Federal approval, of course theres state approvals as well, so theyre washing their hands of it. Its very legitimate for us to say, well hang on a second, this is a very substantial project. If it hasnt been based on the right information the Government should be taking that into account.
JAYES: To reverse such approvals though would be a dangerous precedent. Would you be nervous about that as Shadow Treasurer?
BOWEN: Were getting very far ahead of ourselves. What weve said is Josh Frydenberg should be asking these questions today. Thats what he should be doing today. Its the time to deal with this. He should be getting to the bottom of this today. Nobody believes in jobs in North Queensland more than Bill Shorten and I, weve both spent a lot of time in North Queensland, but we also believe in doing things the right way and ensuring that the environmental approvals are based on facts and not misleading evidence and thats something that Josh Frydenberg should be working through, he just seems to not care.
JAYES: Okay Mr Bowen we never have enough time on this program but thank you for your time today, weve got to let you go, I think youve got a large delegation waiting for you. Weve got to move onto Adam Creighton so thank you for your time.
BOWEN: Im welcoming an MP from India so Ive got to go and do that, hes travelled a long way. Ill go and do that now.
