Chris Smith:
He’s the senior fellow and chief economist with the Institute of Public Affairs and columnist with the Australian newspaper as well. Adam Creighton, welcome to the programme.
Adam Creighton:
Good morning, Chris. Great to be here.
Chris Smith:
To your column in the Australian Today, and you’re very supportive of what the Shadow Treasurer Tim Wilson said this week about realigning the top tax rate, in other words, bringing it down, it’s interesting, yesterday we did some homework on top tax rates elsewhere, and correct me if I’m wrong, but in Australia we have the highest in the world?
Adam Creighton:
Well, that’s more or less the case. Look, there are some higher rates in Europe, Luxembourg, Belgium, France. But the reality is in our region, in Asia Pacific, it is certainly the highest. And most embarrassingly, Chris, it’s even higher than communist China’s, which is 45%. Ours of course is 47%. And actually it’s a little bit higher than that because high rate payers are forced to buy private health insurance, as I’m sure you are. And that adds actually a few percentage points. So it’s a very high rate. And as I described in the column, it doesn’t raise much money, it distorts the economy, and it doesn’t even really affect the wealthy. It’s only the wage earners, the salary earners who can’t arrange their taxation affairs, they’re the ones that pay the 47 cents, not the super wealthy who can rearrange their affairs.
Chris Smith:
So if we put it down to 42 or 38 in line with some of the countries that may be considered similar to our economy, what would happen?
Adam Creighton:
Well, one of the points I make that not many people make is that the U.S. is the richest, most important economy in the world, and huge companies wanting to expand overseas, thinking about where to locate their regional headquarters. When they discover that in Australia you are going to be paying, their staff would be paying, 47 cents in the dollar, they’re not going to locate here. So you’re not going to get regional headquarters.
But the reality is also we have this massive tax avoidance industry in Australia. We use more accountants per capita than practically any country in the world. So there’s this huge industry, this kind of wasteful industry, which is just about avoiding tax and not actually doing anything productive. So if we lowered the rate, there’d be less incentive to cheat and to evade, et cetera. And it’s actually not even true the government would lose that much money. I mean, there’s a lot of studies that show if you lower it, people just won’t bother evading as much, and so you don’t lose as much revenue.
Chris Smith:
That’s interesting. Now, is the former RBA governor Phil Lowe right about the government and spending, or is it sour grapes as the treasurer intimated?
Adam Creighton:
Look, I don’t think it’s sour grapes. I mean, most sensible economists say, including myself, that government spending, federal spending is growing at the fastest rate since the 1970s and it needs to be slowed. I mean, we have inflation almost 4%. That’s practically the highest in the Western world right now that’s being driven largely by federal government spending. So I think he’s spot on. I don’t think it’s sour grapes. I mean, he’s had seven years as governor of the Reserve Bank and he’s on a great pension, so I think he’s fine. He’s just calling a spade a spade finally, which he could not do when he was governor.
Chris Smith:
Adam, are we heading towards being a partial Banana Republic?
Adam Creighton:
Well, it’s interesting that we don’t talk about recession because the technical definition is two consecutive quarters of GDP shrinking. But in a country like Australia where the government floods the economy with hundreds of thousands of new people every single year, you just don’t get a decline. But you do get a per capita decline, a per person decline. And we’ve shrunk for 10 of the last 13 quarters. I mean, that’s a recession. That’s a huge recession in practise and probably the biggest decline in living standards we’ve seen. I mean, a real wages came out this week, I don’t know if you saw. And they’re only at 2011 levels, so they’re falling, but real wages are just where they were 15 years ago. So people are much poorer. And of course the inflation stats, as you know, Chris, don’t even include house prices. They don’t include home loan rates, they don’t include taxation. So the real burden is much higher than the official stats suggest.
Chris Smith:
Yeah, exactly. All right. Will Trump go to war against Iran on Sunday? I noticed that he’s had something to say at this Peace Initiative gathering in the last 24 hours, and he said, “Oh, we’ll be making a decision in the next 10 days.” That tells me it could come on Sunday.
Adam Creighton:
Well, it could honestly. Who knows with Trump? He changes his mind a lot. But it’s a very fraught situation. I mean, it’s not like last year where it’s a pincer bombing campaign, which was of course a great success, as you know. I think it’s a very scary situation. I know the U.S. has sent a lot of military there. They’ve sent aircraft carriers. It’s the biggest force I believe there since 2003. But the regime in Tehran has kind of cornered. I mean, he’s made demands of them that I think are too much for them to accept. I mean, they’re very humiliating. I mean, he’s basically said they’ve got to limit their missiles. They can’t have nuclear, fair enough. And they can’t fund various organisations. But this is a country of 80 million people, which is thousands of years old. They don’t like being told that. So I do worry that this time they may react a lot more viciously than they did last time.
Chris Smith:
Yeah. Now, these ISIS brides, I keep getting endless calls on this issue. They have clearly been assisted by our government. We now know that from these emails, despite denials from Tony Burke and the Prime Minister. Liberal Senator Michaelia Cash has added her to Bob’s worth into this.
Michaelia Cash:
I’m going to do something really unparliamentary, and I’m going to call bullshit on this prime minister. You are lying to the Australian people. You are assisting these women and their children who turned their back on Australia to come back here. Do not treat Australians as mugs.
Chris Smith:
And as a previous listener reminded us only 15 minutes ago when they left and they were warned not to go, they were told by the government of the day, you won’t be welcome back.
Adam Creighton:
Yeah. Look, it’s an obvious answer to me. They should not be allowed back in, and the government has the legal power to do so. I mean, they’re kind of implying that they can’t stop them. They can only give them two year blocks, temporary exclusion, visas, et cetera. But they do have the power under the passport legislation to refuse passports, and I think they should. It’s so sad that we dwell on the situation in our country. I mean, basically multiculturalism has just gone crazy where you’ve got people going over the Middle East signing up in effect to these death cults who hate our way of life. It’s very depressing. I know it’s only a few dozen people, but they should not be allowed in and it serves them right for going.
Chris Smith:
Yeah. The only thing that I would counter if they were to be allowed in is I hope someone does a little bit of homework on whether they contributed or played a role in any terrorist act in Syria when they were there. Now, always difficult to work those things out when the territory is blown to smithereens, but if they had any role in what occurred during that period of time, we should be charging them and locking them up.
Adam Creighton:
Yeah, that’s right. We should be prosecuting them. And at least if they were given temporary exclusion visas for two years, the Commonwealth, the authorities could make their case and research the situation. But frankly, I don’t want to house them in jails. I don’t even want them back at all. I mean, I don’t want to pay for them being jails for 20 years. It’s very expensive. Taxpayers have got to pay for that. I hope they just stay over there and don’t come back.
Chris Smith:
Yeah. Meanwhile, NewsPoll has painted a very sad scenario for the Liberals in South Australia. It’s worse than when we had the WA wipeout.
Adam Creighton:
Look, it’s extraordinary, and it’s going to be one of the most interesting elections for quite some time. If one nation polls better than the Libs, there’ll be a lot of very nervous Liberals around the country. But of course, you’ve got the bigger Victorian election in November, which is very consequential. And there was a Roy Morgan poll this week actually that put Labour, sorry, that put one nation ahead of Labour for the first time, which is just extraordinary high primary vote. So there’s been an earthquake in Australian politics, biggest maybe since the Labour split of the ’50s. We are seeing that now.
And look, I mean, it might peter out as One Nation did in Queensland in ’98, you might remember. They won some seats, then they vanished. But I don’t think that’s going to be the case this time. I think it’s going to be sustained. People are furious about immigration. And they know quite well that Labour and Liberal, they’re jointly responsible for the mess we’re currently in.
Chris Smith:
Yeah, very true. Well said. Enjoy your weekend, Adam. Thank you for your time.
Adam Creighton:
Thanks, Chris. Thank you.
Chris Smith:
All right. Senior fellow at the Institute of Public Affairs, Adam Creighton. And read that column in the Australian newspaper. Politically, and I didn’t canvass this with Adam, but politically it is not something that a party usually tries to sell, which is a reduction in the highest tier of tax rate. But for many, many reasons, it makes a great deal of sense for a country that right now is zero productivity.
