Supporting Local Steel Does Not Jeopardise Trade Deals

Claims by Liberal Government Ministers that if Australia required the use of Australian made steel in government projects that this would tear up or invalidate existing Free Trade Agreements are without foundation and are simply scaremongering.

A court or tribunal MIGHT find that a particular contract or provision was not legal under the FTA. This would invalidate the contract, but have no impact on the FTA, which would continue as before.

Whether a court or tribunal WOULD find that a particular contract or provision was not legal under the FTA depends on the particular facts. While some of Australia's FTAs contain rules preventing discrimination in government contracts, others do not. Those that do – the US FTA, the Korea FTA, and the Japan Australia Economic Co-operation Agreement – contain exemptions, such as for defence contracts and for SMEs.

For a government procurement contract or provision to be invalid:

(1) a company in another country would want to obtain a contract for the supply of steel to the Australian Government,

(2) the company would need to be based in a country which had an FTA with Australia that contained rules preventing discrimination in the awarding of government contracts,

(3) the government contract would have to be for a purpose that was not specifically excluded from the government procurement rules, such as defence procurement, and

(4) the company would need to win a legal challenge against the contract. The government could argue that foreign firms were not being discriminated against; they could win the contract, all they were being required to do was to use Australian steel, as local companies were being required to do.

As I said earlier, even if these hurdles were all jumped, all that would happen is that the contract would be invalid – the FTA would continue as before.

I personally think it is unwise to agree to government procurement provisions in trade deals. They can fetter the capacity of governments to act in the best interests of their own industries and workers. I don't mind if other countries do it – why shouldn't they support their own industry and their own workforce? The China FTA contains no government purchasing rules because the Chinese Government itself wanted to make its own decisions about purchasing. And the US Australia FTA exempts the US steel industry from government purchasing rules, but not Australia's! Those Liberal Ministers who now say we are blocked by the US trade deal from helping the Australian steel industry should explain the negotiating genius of the Howard Government in achieving this outcome.

But to claim that we can't support local steel in government procurement contracts because they will invalidate existing Free Trade Agreements is scaremonging nonsense. The reason Liberal Ministers say we can't give local preference is because they basically don't want to.

Senate Education and Employment References Committee on the Exploitation of Temporary Resident Visa Holders

The recent report of the Senate Education and Employment References Committee on the exploitation of temporary resident visa holders, ‘A National Disgrace: The Exploitation of Temporary Work Visa Holders’, highlights the way in which current visa arrangements facilitate foreign worker exploitation and fail to protect the job opportunities of local workers. 

Including visa holders from New Zealand, the number of temporary visa holders in Australia has remained steady at around 1.8 million persons since 2013 (primary and accompanying visa holders combined). The majority of these visas have work entitlements attached to them.  The Committee’s report is valuable for its emphasis upon the broad range of such visas available and the scale of the associated flows. A major focus of the report deals with exploitation linked to the skilled temporary entry 457 visa.

The 457 visa category is demand driven, uncapped and virtually all occupations entering under the 457 visa program are exempt from labour market testing. A serious broadening and strengthening of labour market testing requirements for 457 skilled temporary entry visa holders, as recommended by the Committee, is essential. The flow of these workers has been slow to respond to worsening labour market conditions for local workers in many occupations. A factor explaining this is the pathway between 457 sponsorship and permanent residence, providing a back door to permanent migration for many workers who would not otherwise gain entry as independent applicants. About half of those sponsored on a 457 visa go on to acquire permanent residence. The link between skilled temporary entry and permanent residence needs to be reconsidered. With this motive in play, 457 visa holders are easily exploited because running foul of their sponsor jeopardises their prospects of permanent residence in Australia

457 visa holders, especially in the IT area, are paid at low rates compared with Australian industry norms. Further, as the report indicates, local training efforts are likely put at risk from easy access by Australian employers to relatively unchecked temporary resident flows. The recommendation to apply a training levy upon employers for each 457 entrant has merit, as does the recommendation to require employer sponsors of trade workers to demonstrate that 25% of their total trade workforce consists of apprentices. The recommendation that sponsors of 457 professionals be required to employ an Australian tertiary graduate is also sound.

Contrary to claims by government and business leaders that the 457 visa entry only consists of migrants with occupations that are in short supply in Australia, skills targeting under the program has been consistently poor. Only a relatively small proportion of skilled temporary entry workers arriving under the 457 program (around 36%) have had occupations listed on the Skilled Occupation List (SOL), which purports to identify occupations in short supply in the Australian labour market. Major anomalies have resulted. The SOL has included many occupations that were known to be in over supply. In recent years, for example, cooks have figured prominently in 457 visa arrivals even though cooks were not on the SOL.

 
457 temporary residents aside, the now massive temporary resident migrant flows include student visa holders (uncapped), working Holiday Makers (uncapped), and bridging visa holders. A factor which has had a severe impact on the job prospects of local workers is the ease with which temporary residents have been able to easily shift from one temporary resident visa type to another, enabling them to prolong their access to the Australian labour market irrespective of prevailing labour market conditions.

Current Tax Settings Lead to Empty Houses!

At the last census there were nearly 120,000 empty dwellings in the greater Sydney region. When combined with under-utilised dwellings, such as those let out as short-term accommodation, the total number reaches 230,000 in Sydney, and 238,000 in Melbourne. These empty dwellings could more than account for the present supply shortfall in housing!

The question is why are these homes are being left vacant when they could command the highest prices or rents, given they are concentrated in central parts of all our metropolitan areas? The answer is that dominant driver of negative gearing is where the capital gain is the main objective rather than the rental yield. On the urban fringe, where there is less expectation of capital gains, there are much lower rates of empty dwellings.

The current tax settings are driving a mismatch between the supply of housing and housing need. This is exacerbating inequalities experienced in our major cities, driving unaffordability in central, well connected and serviced parts of the city. This is not the fault of the planning system, as property developers would have us believe. The situation is likely to have worsened since the last census in 2011 as more housing is being delivered precisely in the locations where there appears to be a concentration of homes standing empty, where supply is being driven by a desire for capital gain not rental yield.

Labor’s policy, addressing this crucial issue of housing affordability will make speculative investment to obtain capital gains less lucrative by reducing the capital gains tax concession from 50% to 25% for all assets purchased after 1 July 2017. This will stem the speculative investment in property that has raised house prices and lowered more productive investment. Negative gearing and capital gains tax exemptions for investors have been a dead weight on the ability to create more housing affordability.

 
Despite the strong economic arguments behind this reform the Liberal Government has chosen to embark on a scare campaign embracing a Chicken Little approach. A far cry from Malcolm Turnbull saying in his 2005 tax paper, that the capital gains tax discount along with negative gearing was a “sheltering tax haven” that is “skewing national investment away from wealth-creating pursuits, towards housing”, and has caused a “property bubble”.

Report Indicates Pentridge Tower Should Be Scuttled

An independent research report released today by the Australian Population Research Institute (TAPRI), ‘Sydney and Melbourne Housing Affordability Crisis: No End in Sight’, has highlighted the flawed approach to housing development currently pursued in Wills, where the main preoccupation of urban planning in relation to the Pentridge Prison site and other activity centre locations is for high rise apartment development. The report finds that such high-rise apartments remain unaffordable to most people and they are unsuitable for younger persons establishing or raising families.

Urban planners have consistently underestimated the proportion of new households over the period to 2022 that will be family households. Not only are record high housing prices driving down levels of home ownership amongst younger persons, but years of ill-conceived housing policy assumptions have resulted in a supply of housing unsuited to raising families.

The report’s findings are particularly relevant to the federal electorate of Wills, in stressing that the “greatest need for additional dwellings is from new young households and recently-arrived migrant households”, not simply for ageing one and two person households as falsely assumed by professional planners to date. 

Official Victorian government population projections for the City of Moreland show that the municipality’s population is not expected to age dramatically. In light of this research, the 19 storey Pentridge tower and other high-rise apartment proposals for Moreland should be scuttled, and planners should turn their minds to retaining family friendly housing in Wills.

The report also vindicates Labor’s pledge to abolish negative gearing tax concessions on new housing. Based on an analysis of housing markets in Melbourne and Sydney, the researchers concluded that rampant house prices, together with continued high net overseas migration, over an extended period have disenfranchised a growing proportion of the younger generation from home ownership. The report’s authors specifically criticised Prime Minister Malcolm Turnbull’s opposition to Labor’s negative gearing reforms as “monumental insensitivity to the growing catastrophe flowing from record high housing prices for the next generation of home owners.”

20 Years in Federal Parliament

Today I clock up 20 years in this House. It is a great honour to serve here, and in an age of the 24/7 media cycle and a cultural tendency to chew politicians up and spit them out, a remarkable honour to serve for 20 years.

George Bernard Shaw said the reasonable man adapts himself to suit the world, while the unreasonable man insists on trying to change the world to suit him, therefore all progress depends on the unreasonable man. For much of my political career I have been in this sense unreasonable.

I couldn't have done this without support. I want to thank the voters of Wills who have stuck with me in good times and in bad. I want to thank my partner Kerry and my children Ben and Naomi, my father Allan and other family members.

I want to thank my office staff – Mimi Tamburrino, Tim Hamilton, Mark O'Brien, Julie Ryan, Cate Hall, Nosrat Hosseini, and many others who have served over the past two decades.

I want to thank the Labor Party members and volunteers in Wills – families like the Hosseini family, the Ouaida family, Angelo Koutouleas, Oscar and Alan Yildiz, Gino Iannazzo and Vic Guarino and so many others.

I want to thank the Trade Union Movement – Ged Kearney and Dave Oliver from the ACTU, Ben Davis and his team at the AWU, Tony Sheldon and his team at the TWU, Glenn Thompson and the Manufacturing Workers Union, Earl Setches at the Plumbers, Dave Noonan at the CFMEU, the Institute of Marine and Power Engineers and many more.

And I want to thank some business leaders too for their support and encouragement – Dick Smith, Graham Turner and Geoff Harris from Flight Centre, Robert Rio from Rio Industrial, Hugh Middendorp from Middendorp Electrical amongst others. To all of you thank you, for the chance to do this.

Rising Unemployment

Unemployment is back up to 6 per cent, off the back of a decrease in full time employment of over 40,000. The number of unemployed is over 760,000.

This number is way too high. This lingering and even rising unemployment number is a recipe for long-term unemployment, which in turn is a recipe for social disadvantage and the drugs, crime, homelessness and mental health problems that go with it. It is particularly not good enough when you realise that the developed countries that we did so much better than during the Global Financial Crisis have now improved and many of their jobless rates are lower than ours.

We are still running migrant worker programs as if the mining boom was in full swing, but it is not. It is high time we reduced those programs and gave our unemployed - our young people, our indigenous unemployed, and our older workers who have been thrown on the scrap heap prematurely – a decent chance to do the jobs that do become available.

If Australian workers lack the skills to do these jobs, this needs to be rectified, and our education and vocational training programs made to effectively prepare them for the world of work.

Intergenerational Equity – Intergenerational Report 2015

The real purpose of the Intergenerational Report 2015 was to try to justify the 2014 Budget cuts to pensions, education and health. The report made numerous misleading claims to try to convince us that we could not afford our present levels of commitment to older and younger people.

The first misleading claim is that labour force participation is going to fall and reduce per capita economic growth. The second misleading claim is that the costs of providing for an older population will increase significantly as a percentage of GDP over the next forty years. The third misleading claim is that in order to deal with these costs Australia must maintain high immigration, on the grounds that migrants tend to be younger than the average resident. The Intergenerational Report assumes Australia's population will rise from 23.8 as of mid-2015 to 40 million in 2055, a massive two-thirds increase in just 40 years. The Report is completely inadequate in dealing with the numerous economic, social, and environmental consequences of such an increase.

In fact an analysis of the Report by Bob Birrell and Katherine Betts shows there is NO net change in per capita economic growth over the next 40 years. There is a slight fall in real per capita economic growth from declining labour force participation of 0.1 percentage points a year. But this is totally offset by an increase of 0.1 percentage points a year because the proportion of the population who are children will fall relative to those aged 15 plus. Any decline in labour force participation of those aged 15 plus is offset by the rising share of the population in this broad age group. ("The 2015 intergenerational Report: Misleading findings and hidden agendas", Bob Birrell and Katherine Betts, The Australian Population Research Institute, Research Report, July 2015). It is regularly the case that the people who want to use a scare campaign about population and workforce ageing to attack social security "accidentally" forget to take into account the ways in which population ageing makes life easier for governments and communities.

The Report is also misleading about rising medical and hospital costs. It is true that health expenditure is rising and will continue to do so. But the vast majority of this extra cost is due to the higher costs of providing health care for everyone, including the implementation of new technology. While Commonwealth spending per person is projected to increase by $3700 by 2054-55, $3100, or 84 per cent of this, can be ascribed to non-demographic causes. Ageing is only a minor factor. (Ibid). I don't accept that our spending on health, welfare and pensions is unsustainable. We spend a lower proportion of GDP on government funded age pensions than most OECD countries.

And what of the third claim that we need high migration to slow down population ageing? Bob Birrell and Katherine Betts have calculated from the data in the report that every extra 70,000 migrants up to the year 2055 only increases economic growth by a mere 0.06 per cent. And yet an extra 70,000 net overseas migration adds over four million people, and the Report says nothing about the extra costs on the community that this imposes. Indeed the Report works on the basis of population growth between 2015 and 2055 of nearly 16 million!

The infrastructure costs of such an increase are glossed over with the claim, which Bob Birrell and Katherine Betts describe as bizarre, that infrastructure costs "are not linked explicitly to demographic factors".

The Report also is misleading about the issue of productivity. It says high levels of migration MIGHT increase productivity because migrants may, on average, be better educated than the average Australian. No evidence is advanced to support this optimism, and given the extent of the rorting of migrant worker and overseas student programs it seems to me to be doubtful. In any event Ross Gittins has reached the opposite conclusion - that high migration lowers national productivity. Rapid population growth, through its effects on congestion and land and housing prices, acts as a drag on productivity.

The Report also papers over the impacts of rapid population growth on the environment, saying the 'level of government spending on the environment is not directly linked with demographic factors". This is amateur hour. Population growth is a direct and indirect cause of environmental damage and should not be glossed over in this way. The fact that State and local governments have to do much of the heavy lifting in terms of maintaining water quality, and environmental repair, does not make these costs any less real.

The IGR finds that per capita income will be higher in real terms than it is today. Its modelling shows an increase, in constant dollars, from $64,400 to $117,300 by 2054-55. Bob Birrell and Katharine Betts say our descendants should he selves be able to comfortably deal with any extra costs that arise from providing for a larger cohort of older persons (Ibid, p.6). They say the IGR's own data show that the supposed ill-effects of ageing are trivial, and should be easily managed by future generations themselves. The IGR's lukewarm endorsement of massive immigration-driven population growth just about completely overlooks and fails to take into account the massive costs of such growth. (Ibid, p.v).

The problems which the Intergenerational Report 2015 says are looming are looming due to the policy failure of neo-classical economics, which has dominated economic policy-making since the 1970s. Its signature policies of economic growth, rapid population growth, globalisation, free trade, privatisation, and deregulation have progressively generated deficit and debt, de-industrialisation and unemployment, and a declining capacity to care for older Australians, younger Australians, and the environment.

After the war the Marshall Plan of 1947 paved the way for the re-industrialisation of Europe and a long period of economic prosperity. Lessons learned from the 1929 financial crash and the Great Depression saw an essentially tripartite political setting, with business, labour and government roughly in balance.

The free trade theory of comparative advantage espoused by David Ricardo in the 19th Century and the Washington Consensus in the 20th was not actually applied in western countries. Countries which actually applied the theory, for example Somalia with its comparative advantage in agriculture, continued to specialise in agriculture and remained poor. By contrast, Korea, through very heavy- handed industry policy, broke away from its comparative advantage in agriculture, and it's GDP per capita skyrocketed, whereas Somalia's remained static.

Other Asian nations which industrialised were also successful. As Eric Reinert says a nation with an inefficient manufacturing sector is much better off than a nation without any manufacturing sector at all.

But from the mid 1970s neo-liberal economic policies started de-industrialising countries both in the developed world and in the developing one. Free trade has undermined the manufacturing base of many western countries, including Australia. Neo-classical economics has failed to distinguish between the financial sector and real wealth creation. Where Roosevelt's New Deal reigned in the financial sector to become the servant rather than the master of capitalist development. Countries which did better during this period, such as Brazil, India, and China, did not embrace or implement neo-classical economics.

We need to return to the middle ground represented by initiatives such as the New Deal. Otherwise we will continue to de-industrialise, with the financial sector destroying value in the real economy, and business, labour and governments out of balance. Our debt and deficit will continue to grow, and we will be unable to meet the needs of older Australians and younger Australians, and we will continue to trash the environment in a futile quest for economic growth in the mistaken belief that this will solve our problems.