Q&A - It's the economy, stupid!

good evening and welcome to Q&A I'm Tony Jones answering your questions tonight for professors of economics the director of the center for contemporary Chinese Studies Christine Wong Nobel Prize winning American economist Joseph Stiglitz who's in Australia as the guest of the economic society and the Anu author and former prime ministerial economics adviser Ross garnet and businesswoman academic economists and Judith Sloan please welcome our panel thank you QA is symulast on ABC News 24 news radio and you could join the Twitter conversation by going to the quando hashtag and remember if you have a live question ad @ quando to help us find it well politics is usually the main topic on Q&A but it's often just economics in disguise as politicians debate how to manage the economy and divide our national wealth well tonight on Q&A we're cutting out the middle men and women to question four distinguished economist our first question comes from you Wayne thank you very much my question is this if I'm not mistaken professor Stiglitz has called the government budget or at least some components of the budget as a crime because it is going to hurt some of the most vulnerable in our society while others have argued leaving the problem of debt to future generations will be monolayer irresponsible so my question is the panel murmurs think we do have a real budgetary emergency Joseph Stiglitz we'll start with you because you are the person who said the budget was a crime yeah there is no budget emergency you know if if Australia was facing a budget emergency the rest of the world is in freefall the the fact of the matter is the Dec GDP ratio of Australia is 14% it's really one of the best in the advanced countries the real risk for the future is a lack of investment in your people you are rich country you have a lot of natural resources you're using up you're taking out those natural resources if you don't reinvest those resources and people and education and technology you will become a poorer country there's so many natural rich natural resource countries around the world which are characterized as rich countries with poor people and I don't think Australia wants to be one of those countries now the crime that you referred to I think in The Sydney Morning Herald was related to the attempts in Australia to regulate the university sector the tertiary sector to make it a little bit more like what's happening in the United States why would that be a crime well the United States has some very good universities including Columbia but the average performance of our education system is nothing to crow about the the fact is on standardized scores Americans you pour more poorly than the average of the OECD which is the advanced countries Australia does better the basic thing we I think some people don't understand is that education is not like an ordinary market commodity like steel or it's it's an area where the price system doesn't work there is not a single for-profit University in United States that actually is making a real contribution to our education system our private universities excel in two areas exploiting poor people and in lobbying and lobbying to make sure that they don't get regulated regulated so that they actually provide educational services you know provide a real education for those who go to the schools instead of taking advantage of those who don't really understand what they're where they're buying in a way this is very much related to the area where I got my got the Nobel Prize because the fundamental problem in education is those who are being educated can't know exactly what they're buying because that they knew what we were telling them they wouldn't go paying this they already would do it by definition they can't know what we are going to teach them before they buy it so they have to rely on mechanisms like educative like reputation and those are very imperfect mechanisms and that's why it's absolutely essential to have some kind of regulation now you don't want to have over-regulation but you have to have some kind of okay let's say from Judas like oh well of course we're not getting rid of the regulation we still will have all sorts of quality filters and the like and the thing is that there's just such a lot of misinformation and including I think being peddled by you professor secrets about the suppose it cuts in this budget in fact if you look at what's happened with school education there'll be real increases of 6% every year over the forward estimates so that's a tick isn't it and if we look at the allocation to the university sector sure there's a shift of the burden onto higher student contribution but because it's being opened up particularly to the sub degree programs say at the moment they're all closed programs fixed budgets we're going to allow more disadvantaged students to enter through the soak the subject area programs the actual Commonwealth expenditure on higher education also goes up so you know we've got to get the characterization of this budget accurate it doesn't cut back on those important investment elements but it does try and make and I think you know Ross should come in here a pretty pathetic attempt initially at least of trying to consolidate the physical position and start to lead us in the way of small the deficits eventually to start paying off the debt but it's a very modest er Rosko know you can start in fact you've already been invited to go from ghin Sloane but you can start with the question that it was asked was there a budget emergency that required the sort of budget measures that the government is taken well we don't have a budget emergency but we do have some big budget issues and in the current circumstances of Australia with commodity prices still above where they'll be in future resources investment much higher than where they'll be in future I'd rather have a tighter budget that we're going to end up with there's a lot of stimulus in this budget what's wrong with this budget it's not is not that it's too tight but that what tightening there is and there's actually not much is mainly the result of reworking who pays what an increase in the on relatively low income and has no lightening the burden on on rents in business and this is a much bigger feature of this budget than than any overall cutbacks the other thing this budget does is begins the process of structural reform in a number of areas that are in need of reform and I think our university system is too rigid Joe but structural reform is complicated it's hard it means changing institutions you've got to bring a lot of people along with them and the way you don't do that is drop it on everyone in a budget and especially if you're cutting the budget at the same time that really kills the prospect of thoughtful reform so it's not that the budgets too tight it's who pays what through the budget and the way that it actually gets in the road of spectral reform that we need briefly on the question of cuts though are you saying they didn't go far enough in cutting the budget well if by cutting you mean increasing taxes as well as as cutting expenditure I think we needed more of it in fact some of the the cuts in taxes moved completely in the opposite direction the what the government is saying getting rid of the carbon carbon price hugely increases the burden that everyone else has to pay in this budget that's an issue become what this is once a and it distorts the economy because carbon yeah you know it makes so much more sense to tax bad things than good things taxing pollution makes so much more sense than taxing labor or savings so if you thought that there was a budget problem why cut taxes on a bad thing I will come back to that issue later I promise you Christine well back to the question he asked was there real budget emergency well I want to come back to what Joe started out with which was about making investments for the future in I remember in I was working in China for the World Bank and Joe was my boss and he said go back and tell the government's that they shouldn't be cutting budgets during a in crisis financial crisis this was the Asian financial crisis in the late 1990s and the Ministry of Finance had come in at that time to ask us you know what should we do to stem the falling in growth rate shouldn't we be running it definitely to stimulate the economy and we said absolutely yes go do it and they did they after much thought they issued 100 billion in additional state that in in form of bonds and they use this money actually to begin the redistribution effort and they put the money to use in the western regions in the poorer inland regions to build roads and infrastructure and began this long program or a long process whereby China has now invested in an impressive array of infrastructure that puts it put it in very competitive position over the last 10 years and into the future and I think that that's a good use of a budget deficit to stimulate the economy when you're facing a slowdown and it was very important in China at that time because it was a time when capital foreign capital with was withdrawing from other Asian countries losing confidence in the future and China managed through this program to hang on and to build confidence in foreign investment and their FDI continued to grow johor keys is because this was an infrastructure budget that was the investment we don't face a crisis and I mean we come back to this point I think Russ and I do agree on this point is that we have faced the biggest boom in our export prices relative our import prices in our entire history and not only if they've been higher they've also persisted and yet at the end of that there's an issue that we're still running very significant deficits we've racked up a sort of gold medal rate relatively speaking to the rest of the world we we came from zero debt to having 14 percent GDP in a rapid time and this was all in the context of basically a situation where it was manna from heaven so I think there's a really important discussion we've had is that have we bet built up a set of policies which are basically unsustainable going forward particularly in the context now of the terms of trade likely to come down but also in aging Society so okay well that's another issue that we'll come back to thank you Judith our next question is from Terry Farrell thank you for taking my question my question is for professor sorry excuse me what gives you the right as an American to come to Australia and criticize our budget especially the $7 co-contribution payment which is capped at $70 per year the COPE Constitution payment is being introduced to sustain the viability of our medical system wealth respect professor with respect professor wouldn't it be better if you were back in your own country try and G influence them to bring in a Medicare study the similar to Medicare Australia welcome to Q&A well I do come at a great deal on our Medicare system but what I find absolutely remarkable what I hear statements of people saying in in Australia saying they want to move towards the American model I happen to know what the American bomb okay you can come back to that but we'd still like to hear his answer okay so so the point is people should know what a private health care system is like and should know how bad the American model is as they think about alternative models there are many other models around the world now the particular question it goes to the role of co-payments and and and what is involved in that one of the real problems in America's health care system is that people don't get adequate preventive care and poor people even a small amount of money can be and a very important impediment and remember it's not just $7 going to the doctor once if you go to a doctor you're you have to then get a prescription you're likely to have to go a second and third time you know so we're talking about significant amounts of money for people who are very poor who are living on the edge who will therefore be induced not to get adequate preventive care and the the big warning that I would say that comes from America is that you have a very efficient healthcare system that is the envy of the rest of the world that you've succeeded in providing more equal access to healthcare than most other countries the United States is at the other extreme where we use the market mechanism and it's a disaster and so there's all the obviously going to be important debates about about what are we know whether you should have any fees or how you should design the fees but I think that any discussion of moving towards a market model like the United States wants to be warned away okay I question it has yes I just wanted to say I have personal experience with someone that seriously over my family and I'm quite happy to pay that seventy dollars if that helps other Australians to be able to access the level of care that we do and I actually I don't know if you understood my question at the end I was wondering why you aren't in Australia trying to get them to adopt a similar sick farm system as a Medicare restaurant I think he has in the United States trying to get them to adopt a different Medicare system but we're just hear from due to slow you know I guess the thing is it is hard to master the system and we have a private system here job in a primary health care in this country is private okay there are co-payments all over the place at the moment right so you know there are quite a high proportion of GPS who don't pay who don't charge co-payments there are plenty that do the system doesn't actually collapse in the context of co-payments you have to pay a co-payment for the government subsidized pharmaceutical scheme you almost inevitably pay a co-payment if you have to go and see a specialist doctor remind you of your own recent article in which you said that the co-payments should not be charged to concession holders in other words you think they have actually made it to targeted on poorer people yeah I mean look I and I agree with Ross here I think there were too many moving parts in this budget and it's kind of I think put the progress the structural form slightly back I would have taken the university stuff completely out of the budget but even with this there are a whole lot of moving parts with the co-payment what I would have done initially and there are some very good socialized medical systems around the world New Zealand France Sweden they all have co-payments and they don't implode but what I would have done it made it much simpler and impose co-payments initially on those who don't hold concession cards admittedly a large portion of the population does but let's see how we go and the real for that is because you think that poorer people will suffer as a result but also as a sort of experiment to see whether it is actually true that the demand for accessing primary healthcare does fall off dramatically I think you'll find it doesn't and then there could be some tweaking down the road I think the thing is the car thief Economist's are pretty boring people they always say cuz they're mainly men that economist is someone who'd marry or Macpherson for her money look you know we really are into experiments and to trial things and so I think particularly with structural form particularly where there are always distributional impacts where there are often unintended consequences I think it's better to kind of you know trial these things at the margin before you go in to reflect because I did read your article also believe the government made a fundamental error in saying the money was going to go to a fund rather than back into the budget well I guess that's one of my bigger points about the budget too is that there's too many mixed messages I actually think people will sign up to the fact that we have to tighten our belt we have to reduce the deficit but when the co-payment was going into what look there I say the term some sort of big medical research slush fund I think people kind of got a mixed message and and I think you see that also with the 22 million dollars that they're allocating over the four years to the paid parental leave scheme you know so they're kind of pulling back on welfare payments in other areas and yet they're going for the rolls-royce of the paid parental leave scape so I think it's not just that I disagree with some of those message measures it's also I think the messaging and Ross is an expert in this and how you kind of sell let's quickly hear from Ross Connor and Baker Hansen briefly it's got quite a lot of questions yeah the big thing missing from our health system is more focus on preventive investment to stop people getting really sick and and obviously the budget measures have to go back to the drawing board and look like getting through the Senate when you're looking at structural reform a second time I think the government should be looking at how you you get real investment in preventive medicine to reduce the costs in the longer-term future okay let's move on to a broader question on a similar topic but it's from Caroline Franks hi I'm really glad that you're here professor Stiglitz because I'm always happy to learn from a Nobel Prize laureate no matter what your nationality I I'm I'm a new and I'm a unemployed new graduate nurse I'm a mother of three and have a severely disabled child and in your book you mentioned that if we don't take do something about uh about the inequity of the Australian system then then both democracy and productivity will will be dirty seriously affected I'd like to know what your solution is if you could elaborate on that in terms of the local Australian context and globally and especially in relation to myself and my young adult children who are starting at University and and my disabled child Thank You Joseph well first let me pick up the the the important point that there's been a major shift in our thinking about the relationship between inequality and growth it used to be thought that yeah yes inequality is bad but if you did anything about it it would slow growth increase in a fish inefficiency distort the economy now the the broad understanding is that in fact inequality is bad for economic growth bad for economic stability and this is not just a view that you might say the left-wing the IMF has put this at the center of their of their program so you know if the IMF is not a left-wing organization for those of your don't they so it's you know the the broad thrust of economic research over the last 10 years this is say it's really important to try to reduce inequality especially inequalities that arise from market distortions like monopolies but also inequalities that that arise from a failure to invest in young people a failure to provide adequate health care for all citizens a failure they have adequate preventive care you know all these failures now one of the important areas of investment are in families the you know some people say well that's just welfare the fact is is again I I know talk about United States but let me I know the numbers there okay one one out of four young Americans lives in a family in poverty and that means the likelihood is that they won't get adequate nutrition adequate health care and their life prospects will be diminished it's therefore in my mind very important to make sure that you provide all these things for all Australian families and these are not you know these are really investments in the future if you don't do that you'll have greater inequality in the next generation and lower economic growth but Joe we do do just before I just like to hear from Christine first cuz she's sitting out on the edge here is inequality and issue for the Chinese authorities is that something the Central Command economy of a once left-wing government deals with yes actually China is dealing with very serious issues of inequality the you know in 35 years of reform to install a market economy inequality has been growing so if you measure with the Gini coefficient the Gini coefficient in China is now 0.49 which is at the high end among countries could you explain to the audience who probably doesn't know what that is though at once so you don't know what that is what that actually means well the Gini coefficient measures the proportion of people how how wealth is distributed so when you have a perfectly equal distribution in the economy you have a Gini coefficient of zero if you have an economy where a single person holds all the wealth you have a Gini coefficient of one and so everybody is in between between zero and one and I think in the OECD the average the rich countries the average is around 0.3 you know plus or minus and in Latin America when you have some of the more unequal societies you have 0.4 to 0.5 China is now at almost point five it's 0.5 so it's it's really very high levels is that because of nepotism in the party system because the the few who make the decisions also control a lot of the capital and the means for getting capital well there's certainly that happening but the the big driver of inequality in China is the the inequality between rural and urban areas in the countryside people are much poorer they enjoy much lower quality public services they have lower life expectancy I think the last time UNDP went into measure I think rural average life expectancy was almost five years lower than in in the cities so these are the kinds of things that the government is very worried about but China is very worried about whether it makes this climb you know steadily from low income country to middle income country to join the rich of countries in the world and economist in China have been doing a lot of studies you know how success successful countries bridge this gap you know to to leave the middle income trap because many actually the vast majority of countries that reach middle income never graduate to high income and China doesn't want to be stuck with the argentina's and Brazil's of the world they want to be you know with the Japan and South Korea other rich countries just before thank you Chris Dana just before we go to the rest of the panel got another question on this subject and will bring that question is Christian stodgy an auskey and Christian has a question for us where's Christian I disagree with the notion that inequality is associated with economic stagnation I mean since the seventeen and eighteen hundreds you've had people who were on three dollars a day jump up to over a hundred dollars and a lot of Western countries and that has come with inequality I the question I asked is when you agree that increasing absolute wealth for everyone at the expense of a little inequality wouldn't you think that that's better than chasing the quixotic dream of you know reducing relative inequality amongst the world let's hear from Judas load on that first well what a magical downthere okay well what do we know about inequality in Australia we're kind of around the average maybe slightly above there has been a slide drift up in keeping with pretty much every developed country in the world including Sweden Finland Denmark Malay but here is the kicker here's a really important point the impact of our tax and transfer system reduces the Gini coefficient by thirty percent in other words we have a highly redistributed tax and welfare system which is doing what you think of course we don't want monopolies we don't want rent seeking and when those things contribute to inequality they are very damaging to economic growth but here's the thing we've had 22 going on 23 years of solid economic growth so in some ways we should be going to America to tell you what to do Joe rather than the other way and and the thing is if you look at what's happened so the bottom quintile of the income distribution has gone up by 27 percent over that period that's terrific in real terms okay the top quintile has gone up by 33 percent I can live with that that's kind of seems to be happening it's actually seems to be about of a higher rate of return two very specialized University qualifications some of that stuff up at the top that's not a bad thing and here's another kicker you know if Bill Gates came to came to live in Australia I'm not sure we'd let him in through the immigration screening process inequality would increase dramatically but would we be a worse place so in fact we've got to kind of think of those people that those wealth earners is actually also being the ones who generate jobs and just let me finish with another little factoid because economists love a little factoid if you look at the 200 wealthiest Australians it came out recently in the brw less than a third of those the wealthiest 200 came from families with money okay so in other words two-thirds are self-made people you know so they've had a good idea they've invested they've worked hard and they've struck struck gold good on it I say Ross gonna yeah inequality in Australia is much more moderate than in the United States because we've run things pretty well policy has a big effect Judith mentioned that the registry effects of tax and Social Security that has a big effect we've had a good public education system that means that kids from poor backgrounds still lots of disadvantage but they but they could in historically they've been able to go to a reasonable school basic health standards have been alright for everyone that makes us very different from the United States very different from China although the Chinese government wants to move in those directions how well they'll do that we'll have to wait and see it would be a terrible shame if Australia went backwards on the things that have made us less unequal and not only do do you get poorer economic performance with great extremes of inequality as Joe has mentioned you also get poorer economic policy because you had greater tension and society this is not such a worry for China with an authoritarian government but it's a big issue in a democratic government with an inner democracy unless you're bringing the the great majority of the people along you're not going to get government able to do the hard things that are necessary from time to time to make the economic system work justice I think you do understand yeah make a couple points first of all well Australia does much better than the United States the United States is at one extreme one of the debates one of the issues that really is that debate is preserving the things that you've done very well then preserving your education in your health care system and so that's one of the things that I hear a lot during my visit that people are concerned whether what will be happening to those important institutions secondly one of the striking things about Australia's success is you know it's not the best performing in the OECD as far as from that and given that so much of your wealth is associated with natural resources you really should be towards the best performing you know the really best performing is Norway that took its natural resources and reinvested them in their people including in woman and and they've created the most equal and the highest income Society among the advanced industrial countries now you have a lot of resources the the fact that those resources really should belong to all the people and when you tax natural resources they don't disappear you know they can't get angry in the iron ore say I'm gonna go over to some other country because you're taxing me too much they're there underneath your ground they're there yes they might go to another country and say will you do it cheap let's buy your products like you have to have a good option to sell them to make that what we call the rent associated with those goes to the Australian people and then that's a huge fund that you can use to bring up the people at the bottom and to create the opportunity for everybody in society it was a chance to do something like that here it's about to the last remaining vestiges of the mining tax won't last very long it's about to be voted out in the Senate well we we failed I mean and the thing is it's not true to say that our resources are not taxed first of all all the states because actually it's not the whole country that owns the minerals it's the state governments that own the minerals there there are very substantial flow of royalty payments and the okay it but they're taxed at a lower rate than they ought to be because these are resources that belong to the people of the state believe what the country you can straighten out yourself about about simplified and then of course they may company takes on top of that so I mean we have some companies paying the company tax on top of that there's a big hunk of Queensland coal that seems to be exported go and look at the tax paid by Rio Tinto and BHP Billiton you realize what disproportionate share of the tax room you are coming from those two big country companies but the thing is we tried it it failed we're not going back there so we knows we'll move the debate on to something else well let's actually move on to another question we've got a question that is related to the previous questions from Cassandra Judy Joe thank you Tony my question to the panel is about the relationship between the price of labour and the level of unemployment those in favour of labour market deregulation argue that if you reduce the price of labour you're able to employ more people and reduce unemployment whereas those in favor of higher wage rates argue that increasing wages will increase demand and increase employment which is more true what's going there is a relationship between the price of labour if you if your government's regulating it and the amount of employment here it's a matter of where you sit in in a range of things in the United States where we've got very low labor rate from skilled labor minimum wage is very low then then it may very well be that increase in the minimum wage don't have a significant effect on employment in Australia we're towards the upper end of minimum wages so at least for unskilled people there be more jobs in Australia with the lower minimum wages low minimum wages don't have two main lower incomes and living standards for the people receiving them and and we've got an example of that in the 80s where at the same time as you had wage restraint for quite a long period a very strong employment growth from 83 to 89 the strongest employment growth in our history and moderation in wages was accompanied by improvements in Social Security that was when family payments were first introduced Medicare was introduced during their period so for the household it's the total living standard that matters and not the not only the the wage that's paid in the labour market Joe Stiglitz well yeah I think exactly right it depends on the circumstances in the United States the evidence is overwhelming that increasing the minimum wage would be good for workers and would be good for our economy the I also want a second is when there are a number of other instruments that one can use one of the ones that we've used in the Clinton administration was the Earned Income Tax Credit so what we did is we said if you worked we would top-up your salary so that we provided incentives for employers to hire workers and at the same time we try to make sure that there they were receiving a livable income and Judis loan you can bring in industrial relations into the equation too if you like a good Bob day the new senators suggesting only a couple of days ago that actually young people should be given the option as to whether they work for lower rates of pay I mean it was one of the reasons I'm actually opposed to the one of the budget measures which is to refuse income support for the under 30s down employed under 30s for a six-month period because that's way too harsh when we're putting barriers in the way of young people entering the workforce and getting the kind of hours they need to sustain themselves so I'm with Bob day on that unless you try and unshackle the labor market and in the case of Australia it's not just a matter of the hourly rate of pay we've also got sort of the penalty rates in particular which is an issue and the thing is if you look at youth unemployment in this country it's about 12% now that it's bad it's about double the the overall rate which is kind of common but we seem to have this really peculiarly high rate of just inactivity amongst young people and and a Deborah Cobb Clark at the University of Melbourne is looking at this so basically these are young people who are not training they're not in education and they're not working and that I think is a real worry because what happens to them so I I think we should have a discussion about what are the impediments to these people contracting into the labour market because it's always better to have a job we can't afford to be you know job snobs because once you get on that that the the escalator of the labor market sure some people fall back but many will then progress and you know people might have wondered why the audit Commission looked at minimum wages for example and it was for that reason that they thought you can't go off reforming the welfare system and making life very tough for people on the welfare system if at the same time you don't give them a reasonable chance of getting work yeah I want to also emphasize the importance of make sure making sure you have a macroeconomic management that one the problem say in the United States is inadequate overall aggregate demand inadequate demand because we've had excessive austerity and that has meant the overall economic performance is weak cutting wages wouldn't do any good because it doesn't there are no jobs at any wage so the real problem here in the real problem United States and in many other countries is an inadequate stimulus to the economy Roscoe am i right in saying that in dog-days you were basically counseling that we will have to lower expectations and possibly even lower living standards in Australia well that's already happening we're in the dog days the resource boom reached its peak of boost to the Australian economy in in September 2011 since then because of population growth labor force growth the the labour force number of work aged people is increased by more than 4% aggregate monthly hours work then I'm totally number of hours worked by people in Australia hasn't increased at all so that's pretty pretty sick labour market much harder to get a job now and much harder to get the number of hours of work that you want there was two years ago well one year ago and then and in the last year that's been reflected in something that's very unusual in Australia we've been keeping statistics on wages like we keep them now since 1998 in the last year for the very first time the year up till May this year wages rose less rapidly than inflation real wages fell so that's that's the dog days so it's already here but that is that's the labor market working and for those people who say that there's something terribly wrong with our industrial relations and the labor market I think they need to reflect on that the the labour market is actually delivering wage moderation in response to what has been a pretty weak labor market again I want to emphasize it's also evidence that the real underlying problem is lack of overall demand because it's not the wages that are restraining employment except lack of demand because wages as you say are declining and and adjusted wages suggested for inflation and continue with my book dog dies I think that but the thing that's missing is an improvement in competitiveness through depreciation the real exchange rate boosting demand in other ways they won't do the job in today's circumstances missing was you holding it up for the camera thank God you're watching Q&A driving interactive and tonight we're asking you to help choose a question for our panel if you're on Twitter check the last two at quanta tweets each is a potential question retweet the one you prefer will put the most popular question to our panel first let's take our next question is from Jennifer suit so my question is to what extent is Australia's engagement and dependence on China affected the Australian Government's capacity to focus and develop sectors of the economy that are not related to the extractive industries christine one the question is what to what extent is our dependence on China in a way distorting the way we behave in our own market well the the first distortive effect is that the resource boom has pushed up wages other prices in the economy and the real exchange rate so the Australian dollar is very strong which makes it very hard for our manufacturing to compete against manufacturing products from elsewhere in the world and so you see a decline in manufacturing in Australia it's a strange downside of a boom isn't it it's actually affected a whole section of manufacturing is dying in Australia well partly dying as a result of that that's yes that's a very common thing for natural resource countries in fact there's a name called natural resource curse that this problem of large exporters of natural resources have their exchange rates increase and make it very difficult to either export order to compete against imports the boom in China the booming resources demand in China is a good thing for us and the right thing to do is to take advantage of it but not to spend all the money to save a lot of it because the boom won't last forever well the the bit that's not forever is now if we desert if we'd saved more of the money from two thousand three two thousand four five six seven eight till things started to fall we'd be in a much better position to manage things now who was spending that money as it came in from China that drove up the real exchange rate and made us competitive the Joe's mentioned the Norwegians they didn't do that they tax the the resource income put it in a fund and now it's available to to keep the economy growing now Ross you say it's a good thing but I might add that Hillary Clinton who may in the at some point in the future possibly be the President of the United States she says we're two-timing the United States with China she's warned that more trade with China makes us dependent undermines Australia's economic and political sovereignty well well I don't mind Americans saying what they think about Australian policy Hilary's so welcome to her views but it's a very dangerous view for Australia Australia that the starting point of strategic thinking is to put yourself in the position of of the of the other party and what a China is going to think of Chinese government with Australia's ally the United States a possible future president a past Secretary of State saying hey you think about withdrawing some of that trade now the Chinese are relying on our energy relying on our iron ore if they start thinking oh a stray Lian's might listen to Hillary Clinton then they will pull back and this big 30 percent fall we've had since the beginning of January and iron ore and coal prices will become 50 and 60 percent in a minute Christine Wong is do you think that's a reasonable suggestion that the Chinese would walk away from the trade if they feared that we might listen to Hillary Clinton well I think I haven't heard anything in China about the trade issue but this is this is a very sensitive time where when the Australian government says Japan's our best friend in in Asia and the United States is our closest ally in a time when China is a rising power in the region and it's it's a certain itself in many respects this could have a knock-on effect gradually on trade can I say one of the things then I think Australia ought to be focusing on though is moving away out of natural resources I mean you still will sell of natural resources but realizing that if you don't invest the proceeds into as I said before people technology and put yourself in the position of exporting services education services health services lots of other services tourism that will be in the long run one of your competitive advantages or agricultural products I mean that's I mean it's actually a good news story we didn't blow up the mining boom you know in the past when it arose had mining booms we just managed to blow them up sounds like Hillary Clinton might blow it up for us well I don't think so I think it's all just political noise that I mean I mean what happened was that mining investment would normally maybe below 2 percent of GDP we got to a peak of 10% this has increased the capital stock enormous ly forever really and I mean basically we are going to enjoy the benefits of much stronger export from the mining sector now you know the peak is behind us and we are moving with some difficulty I agree I'm not sure i'm calling them dog days they're difficult perhaps a transition and and those are the things tourism health services wealth management agribusiness and the like but they are made very difficult by the persistence of our high dollar and that I think you know is a complicated story to figure out what's happening with the dollar and it's actually got a lot to do with what's happening overseas and overseas countries need to fiscally consolidate and us being a safe haven for asset accumulation and the like but there's no doubt that having such a high value to the dollar makes the process of economic transition without the cost much much harder ok a quick chain we'll come back to the economy but our next question has actually been chosen by votes from our Twitter audience it comes from Jacoby Matthews yes Scott Morrison has just confirmed that Australia has handed back the sri lankan asylum seekers to the very government they were fleeing an absolute appalling policy is this not in clear breach of our international legal obligations as far as refugees asylum seekers are concerned and is it not a king - essentially what happened in the Second World War and just prior to the Second World War was handing the Jews back over to the Nazis rasgueardo will bear in mind that what's happened this evening is that there's been a high court injunction on the handing back of 153 sri lankan asylum seekers we don't know where that court case will go but there's been an injunction nonetheless and and word this evening - that the Sri Lankan police are suggesting that they will in fact jail for several years rigorously as they put it some of the people have already been sent back well I don't know what the international law says but the the humanitarian dimensions pretty awful and it's pretty bad if questions are being raised about whether we are obeying our own laws and international law up to the High Court and others to form judgments on that but a country like Australia needs to be in good standing by the International Rules because there's lots of issues on which we need them Christine will Australia be judged by the way issues like this are treated by other countries I mean I don't I don't think China will carrying too much return bag yes what do you think personally I think it's appalling I think this this is a violation of international norms of behavior to send asylum seekers back to the countries where they're fleeing just eaglets I agree yeah I mean there could be the high court has a very important case to judge on this tomorrow we have no idea where they're gonna go that clearly there is a legal question mark over whether this was legally legal under international law or not and but I think the the point X been made that it made is that it's a moral issue as well and to send them back to the people who are perfect persecuting them and you know their government has had a long record on this so this is not the first you know indication there there are some cases where people some countries where people are fleeing mainly for economic reasons this is one case where there are good reasons for people to leave Judis let well I think you know we have to wait and see what the High Court says tomorrow I mean I guess the bird up to a personal opinion on how this has been handled well you know the thing that's wired me all along about the debate about the asylum seeker issue is that it's rather diverted attention from the fact that we have a really really successful immigration program and in fact our immigration program has been one of the cadets abroad question though specifically about a number of people who are on the verge of well sent back to Sri Lanka no but its Ross's point that sometimes these issues which I think you know obviously creates some terrible moral dilemmas and and important reactions can kind of actually end up having some very negative spillover effects to some other policy areas but I think we still have to wait and see what the High Court says tomorrow okay look we're gonna move back to economics sorry to those people got their hands up the next question is from Adrian about turn thank you two weeks ago Clive Palmer proposed an emissions trading scheme under which Australia would only fully participate or fully signup to that scheme if our major trading partners so did the same and pursued the same course as us so I'm interested to know from the panel if you think that China and our other major trading partners would seriously look at pursuing a similar path to Australia taking similar climate action as US and more generally if you think Mr Palmer's proposal strikes a good balance between economic competitiveness and leadership on climate action like this let's not thinking list that with Christine what do you think the Chinese government intends to do is it possible there will be a national version of an emissions trading scheme at some time in the near future yes I think China I think Ross has done a lot of work on this actually but the Chinese government has is now pursuing a very aggressive program to incur up emissions and to cut back on these these climate change issues is that I mean is that part of the large structural justice obviously we're gonna see a slowing of Chinese growth which will have an impact on emissions but what about the possibility of an international emissions trading scene which is in a way the condition that mr. Palmer yes has put on Australia having one in his view the the natural the central government is on record with a very very tough program to cut back on emissions the question in China always is whether it will be implemented by local governments who want to protect jobs protect industries protect tax revenues and so on but the program is there on paper and as part of the 12th five-year plan and it's part of the the big reform program that the season paying the concerned government Christine is absolutely right and they've been talking about this for an for a number of years they take climate change very seriously partly because they're they've they've been forced to deal with the reality of environmental issues air pollution is a real problem and although you know carbon is only one aspect of the overall environmental problem the fact that air pollution is so bad has given a credibility to this issue of pollution and their water pollution and science that's really very center in central to the government policy there is actually talk even of imposing a carbon tax and the the other part of the question was is Australia losing leadership it seems to me that you had a leadership in trying to having a carbon tax putting a price in carbon is absolutely essential there are different ways of doing it but you basically what I see going on right now is is it a step backward we're all scared oh do you think it is backward in the sense that even if in a Parma's Stalinist reading scheme was put in place there'd be no price on carbon yeah well I've had a couple of chats with Clive Palmer a long one in front of you Tony yeah about climate change and that's when he didn't believe in climate change two months ago no I think it's much better off now that he does and that he wants an emissions trading scheme we've got a very good emissions trading scheme in place now so be much easier to keep the current one than scrap it and build another one but it's not the not just the way in which you reduce emissions so China I'd go further than Joe it's not not that China may have a carbon tax it will have a carbon tax and probably an emissions trading scheme as well they've already got emissions trading scheme working in five cities and two provinces a couple hundred million people and and they've got a myriad of regulatory interventions exactly if you're if you were running a coal power station like they do down in the Latrobe Valley in Victoria or the Hunter Valley you'd be told to close well you would have been given a few months to get emissions down to a certain standard or close it and they were so it's not it's not just the emissions trading scheme that we should look at about two years ago - and turnover half years ago the Clinton the Obama administration in United States was in the position that Australia is in now you had wanted to introduce an emission trading scheme and and it it didn't have it didn't have the support of of the Congress went through the House of Representatives but it was filibustered in the Senate and then after the 2010 congressional election that wasn't going to happen I had a long yarn to Obama's Minister for energy sector for Energy Steven Chu and there's a bit about these things Clinton appointed him as safer energy because he had a Nobel Prize in Physics and knew all about climate change and and I said to Steven Chu doesn't the the the fate of the emissions trading scheme mean that you're going to be battling to to meet the president's commitment to reduce emissions by seventeen percent by 2020 he said look don't worry Russ said we wanted to reach our ambitious that emissions reduction targets in a low-cost way that did a minimum business minimum damage to business and American households but the Congress has stopped us doing that we'll reach our target but we'll do it in a way that does more damage to our business and by regulation i regulation that's what the United States is doing in the last two years the president's made three separate announcements that have one-by-one implemented all of the measures that in that long conversation Steven Chu told me they were going to do we've had a bit of luck and they've engaged in a dramatic exploration program the fracking program to exploit the shale gas and as a result of that the price of domestic gas in America which has lower emissions than coal has declined dramatically and that's principally how America will reach its emissions the problem with that view Judith is that proportionally we've had a much bigger expansion of gas reserves in the United States in eastern Australia our gas prices have been increasing the carbon tax will go but gas prices will rise much more in the next year than they ever did when the carbon price was a great at America because in the United States they discovered a lot more reserved and of restricted exports so prices fell in Australia we discovered we discovered in Australia we discover a lot more gas encouraged export capacity which i think is a good thing increase prices by several tiny briefly briefly because we're running out of time are you saying this should be a strategic reserve kept in Australia no I'm saying that prices are low in the United States because of differences in trade policy you're saying that we shouldn't do the same thing as America and hold a certain percentage of the guest that we we dig out of the ground hold it I don't want restriction but that's right but the restriction is why we have high gas prices but but I just do one emphasize that the EPA the Environmental Protection Agency regulations on coal will make a very big difference very ambitious just actually hear what he has to say whatever say you it would have been far better to have an emissions trading scheme or to have a carbon tax they couldn't get it through because of resistance from the gold can I interrupt you here except to expand on the point and that is that isn't it the case that state by state they're having to figure out how to deal with these regulations and many of the states are actually building their own emissions trading schemes because that's right so so the look in both the east coast in the west coast are actually a lot of state action to create efficient systems for dealing with carbon it's only a small fraction of the United States that that still doesn't believe in global climate change but we have to get it through Congress and and we're having problems probably because we have a jury man for Congress I'm afraid that is all we have time for tonight please panel christine wong joseph stiglitz rasgueado and Judas land next week thank you next week on Q&A we will let the politicians back in with the former Immigration Minister Phillip Braddock the deputy leader of the Opposition Tanya Plibersek principal of the King's School in Sydney Tim Hawkes Cape York indigenous leader tania major and the former host of the project comedian Charlie Pickering until next week's Q&A goodnight you

Channel: abcqanda

Views: 6,026

Rating: 4.7037039 out of 5

Keywords: Q&A (TV Program), Joseph Stiglitz (Academic), Ross Garnaut (Author), Christine Wong, Judith Sloan

Id: qRb-SVCansw

Length: 62min 5sec (3725 seconds)

Published: Mon Jul 07 2014