HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
L-20 SUMMIT KEYNOTE ADDRESS
"If We Don't Grow Together We Grow Apart"
WEDNESDAY, 12 NOVEMBER 2014
BRISBANE
***CHECK AGAINST DELIVERY***
I'd like to begin tonight by paying tribute to Gough Whitlam and Wayne Goss, two of Labor's greats. Both have sadly left us now, but they left us better, prouder, wiser and with our heads held high.
So, I stand here tonight as a proud union member who had the privilege of serving my country for almost six years as Treasurer and also serving as a finance minister in the G20, from its inception as a leaders' meeting at the end of 2008.
Like Gough & Wayne, and like all of you gathered here tonight, I've always had a fundamental belief that we create prosperity to spread opportunity; that economic growth is not an end in itself but it is most certainly a pre-condition for the prosperity we must create to lift people out of poverty, to spread opportunity and to give everybody a chance in life.
That's our end.
Our means come from not just good, fair government, but from a strong and innovative business community and from a healthy and vibrant trade union movement.
Spreading opportunity from prosperity is at the heart of the labour movement.
This is why I say to you tonight, that the role of organized labour has never been as important as it is today.
This weekend, world leaders will consider committing to an additional 2 per cent growth target. In itself that is an honourable aim. But we in this room know that conservative governments like the Abbott Government will want to take the easy road to that 2 per cent.
In their narrow view the fastest route to achieving that target is through cutting wages and conditions. It's the wrong way to go about achieving growth, but it is the conservative way.
So you, the labour unions, will be the last hope for millions of workers.
You have a critical role in how we reach that 2 per cent.
I want to say loudly and proudly tonight that the union movement has a critical role in our economy. And you also have a critical role in our great Australian Labor Party.
Make no mistake; the government will be looking to cut you off at the knees to stop you defending workers' wages and entitlements. But it's a battle we must win in an economic arena that has lurched dangerously to the right.
We have much to protect. Already, conservative voices here are echoing those in the US calling for lower minimum wages and abolition of penalty rates. That's the wrong road to growth, and it will fail.
We are proudly from a country that has done a much better job at matching strong growth with social equity than just about any other developed country over the past century, but particularly in the aftermath of the Great Recession over the last five years of the Rudd/Gillard Government.
Ours is a country where the overwhelming majority can gain a good education, valuable skills, experience the dignity of employment, feel that they have a stake in the character and direction of our national community, and have the resources to provide an even better life for their children.
This is a goal we aspire to for all of our global community.
In government, over six years, we protected and enhanced this achievement and in particular, in our response to the Great Recession, we were guided by a determination not to repeat the mistakes of the Great Depression, when the economic orthodoxy was for harsh austerity.
There is now, as there was in the Great Depression, an ideological battle taking place in the global community between those who see government as a positive force for wealth creation in a market economy and those who would wish to shrink its role and move towards laissez-faire.
We must acknowledge this debate as we go about seeking the community's endorsement for the structural reforms required to increase the productivity of both workers and capital to secure the 2 per cent growth target by 2018.
In the last few months we have seen landmark contributions from three of the most prominent global thinkers and economic policy-makers - Christine Lagarde, Janet Yellen and Mark Carney. All calling for a more inclusive capitalism. In Carney's words: "Unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself."
In other words "for markets to sustain their legitimacy, they need to be not only effective, but also fair."
As the trade unionists in this room know, if governments retreat and don't play an active role in securing growth with fairness, then you are the last bastion defending working people against the powerful vested interests that strangle fairness in market economies.
Standing for inclusive growth is what the G20 should be all about and that is why it is important that we in this room work within the framework, to achieve opportunity for all.
Creation of the G20
Prior to the creation of the G20, global economic co-ordination and decision-making was in the hands of the few, to the great detriment of the many.
Australia was an enthusiastic advocate for the establishment of the G20 as a leaders' meeting.
For me there are lots of reasons to celebrate this, be it the natural pride we can take in hosting a globally important gathering, or the quieter pride I take as a Queenslander in Brisbane prevailing over Sydney and Melbourne in the hosting stakes.
That we arrived at the G20, more particularly, that we got to 20, so that the developing world and Australia were in the room and not with our noses pressed against the glass outside, is a great achievement.
This week's Leaders' meeting will take place six years to the day since the G20 first met at a leaders' level in the National Building Museum in Washington.
No policy maker who went through the Global Financial Crisis doubts its potential effectiveness and the need for a body like the G20 to remain as part of our global economic architecture and as a forum to marshal political drive for inclusive reform.
As a Finance Minister participant in almost every one of its meetings over five years, I know there are concerns about its effectiveness, but particularly about its long term endurance.
From the collapse of Lehman Brothers in September 2008, the global economy experienced a very uncertain time, grappling with the fear that there could have been another Great Depression.
It conclusively proved its worth as a crisis response body, from November 2008 right through to the Pittsburgh Summit of November 2009.
Its fiscal stimulus coordination during the GFC was effective, off the back of strong leadership from the US, Britain, Canada and yes, Australia, and saved millions of jobs.
Secondly, it has done a very effective job in driving reform of global financial regulation through the combination of G20 meetings, Financial Stability Board processes and other relevant international financial regulators.
On its own, this achievement more than justifies the need for the G20.
But most importantly, while it will continue to be a political clearing house, more than ever it needs to be the bully pulpit for global economic conversation and debate, both public and private. And that debate is more fractious than ever.
Now more than ever the active decisions made during the GFC are being challenged by the right wing in global politics.
Active Government or Laissez-Faire
For this week's meeting the Australian Government has continued with the previous Labor Government's decision to focus the G20 Agenda on growth.
The 2 per cent global growth target put on the table by the Australian presidency is one way to try to bridge a great divide that exists about how to further stimulate demand.
The use of extraordinary monetary policy by central banks in the developed world has come in for some stinging criticism in recent times. Yet this policy combined with the stimulus put in place by countries throughout 2009 saved the global economy from a Great Depression Mark II. As the Financial Times has commented: "levelling income and wealth with a colossal recession is no way to address growth or inequality."
These central bank governors rightly put jobs at the centre of their agenda. But there is now a rear-guard action to demonise these strategies and argue for government to withdraw from the economic playing field.
If we accept this conservative narrative - a fundamentally and demonstrably false narrative that laissez-faire would have seen us through the crisis - then the next economic crisis (and there is always a next economic crisis) will result in mass bankruptcies, mass unemployment and mass human misery.
At their last Finance Ministers' Meeting in Washington last month, the Australian presidency invited prominent American businessman, Rupert Murdoch, to address the meeting. He lauded the virtues of austerity and bizarrely claimed that global inequality was caused by the super-rich paying too much tax and central bank monetary policy. He was putting forward the not uncommon view you find in business circles that if you want to fix an ailing economy leave it to big business.
This may well please the plutocrats around the world, who are looking towards more unregulated markets, ripping out social safety nets and lowering taxes as their elixir for global growth.
What Mr Murdoch and those who share his views are doing is demonizing the concept of government acting to intervene in the economy to protect its people.
They forget or don't care that without central bank action, millions would have lost their jobs and overwhelmingly those people would have been low skilled workers.
What they don't understand however, is that a country isn't an investment bank and policy makers shouldn't try to run it like one.
We live in a country not a corporation.
So many of the policy prescriptions put forward by the laissez-faire brigade aren't about wealth creation and maximizing jobs growth, they are about wealth concentration.
Inclusive Growth and Job Creation
Jobs growth and higher living standards are driven by policies that lift productivity growth. By fostering gains in broad based productivity we lay the foundations for the long term prosperity we need to spread opportunity. The most fundamental means any government can take to protect its people is to support job creation.
When Labor joined the G20 troika at the end of 2012 we indicated clearly our intention to centre our deliberations around job creation. Sadly, the communique from the Finance Ministers' Meeting in Cairns dismisses the importance of jobs, and neglects entirely the deliberations of the recent G20 Labour Ministers' Meeting.
Yet if the current combination of low interest rates, weak growth and spare capacity in the global economy continues, we will continue to see unacceptably high levels of unemployment around the world, most particularly youth unemployment.
The ILO tells us global unemployment currently stands at 200 million people, and has risen by 30 million since the crisis began. The average jobless rate in developed economies stands at 8.5 per cent, compared with 5.8 per cent before the crisis. Global youth unemployment stands at 13 per cent.
There is no greater driver of growing inequality than high and prolonged levels of unemployment. And of course high youth unemployment exacerbates its intergenerational impact.
So bold action on demand and structural reform to create jobs is required.
Which brings us back to the 2 per cent target.
This Week's Agenda
To achieve additional growth of 2 per cent and the necessary job creation needed to reduce unemployment through to 2018, will require moves to boost global demand as well as putting in place long term structural reforms. The IMF and the OECD are sifting through more than 900 proposals in order to achieve this.
The bigger challenge though, is hitting those growth targets in a sustainable and inclusive way. If structural reforms are not done right, the Brisbane summit will come to be regarded as a failure.
There are two key requirements for a successful reform program: first people must understand the linkage between reform and the jobs that flow from it; and second the population generally must be convinced that the gains will be fairly distributed across the entire population and not concentrated in a few hands.
That is why I'm puzzled that the Australian Government has included cuts to welfare benefits as one of the key structural reforms that will increase economic activity by 2 per cent.
It will be interesting to read the professional advice that backs up such a bizarre claim, because cuts to welfare payments, family tax benefits and the pension will suppress growth. This sort of political positioning devalues what is an important debate about reform and job creation by including measures which don't promote growth and make our society less equal.
Of the 60-plus official meetings that have taken place under Australia's 2014 G20 presidency, a grand total of one has managed to produce a final communique or meeting report that mentions the word ‘inequality'.
I look forward to seeing the independent analysis from the IMF and the OECD that could justify this decision as it flies in the face of the IMF's definitive statements of a robust relationship between inequality in aggregate and persistently low and unsustainable growth.
Unions
All of this is a reminder of how important unions are.
The last line of defence against inequality, when government policies and private interests seek to push the profit share unreasonably higher at the expense of labour, are trade unions. They are an even more important organization when governments retreat from legislating fair frameworks for minimum wages and bargaining, and begin to withdraw from a civilized social safety net.
Unions are the feet in the street, the champions for fairness, the voice of the powerless, the organisers of labour, the rope that forms the safety net.
We in this room know that when trade union membership declines, inequality increases. There are numerous international studies which support what we know in our hearts. The widening income differences now evident internationally are a reflection of top incomes growing faster than other income levels in society.
It's clear that the combination of active unions within a fair bargaining framework has given the Australian workforce good income growth over the last 30 years. Add to this, high quality and affordable health and education services have made us one of the most socially mobile developed countries in the world.
Much of this was born in the 1980s Accord. We should not forget as conservative governments crave to unravel the safety net that is Medicare and affordable education, that Australians went without wage increases in return for these critical elements of Australia's social contract.
Our challenge is to destroy the growing myth that somehow business will fill the void as government withdraws, and that services and living standards will somehow survive. Our challenge is to expose the small government ideology for what it is; vested interests trying to get their greedy hands on more of the taxpayers' dollars and slashing universal services and the social safety net. We have seen Big Society in the UK and we don't like it.
The dismantling of Medicare, uncapping university fees, massive cuts to the State and Federal public sectors, outsourcing of public services will simply increase inequality and lower living standards. This is not reform.
Attacking penalty rates, lowering working wages and conditions, cutting safety net payments, cutting age pension increases all in the name of an imaginary economic crisis are all manifestations of the same ideology.
That road saps demand, diminishes opportunity and hurts our poorest citizens. It is up to us to block that road.
Infrastructure
The single most important initiative that can provide a strong boost to global demand in the near term is a dramatic expansion of infrastructure investment across the developed and developing world.
I welcome the announcement of a global infrastructure centre for Sydney but this doesn't go to the core of the issue. There needs to be an expansion of public infrastructure.
The Abbott Government's ideological bent is denying the G20 the opportunity to form a consensus around the IMF recommendations for public debt financing where appropriate. I know there will be many people in the room this weekend who will be disappointed by the lack of progress on this issue.
Base Erosion and Profit Shifting
I'm encouraged to see the BEPS agenda being carried forward after being agreed to by the previous Labor Government after the meeting last year. As highlighted by the furor surrounding the recently published analysis of Luxembourg's tax arrangements, some jurisdictions are actively complicit in making the arrangements necessary to keep multinational corporations dodging tax legal.
Tax havens like Luxembourg have turned tax competition into a race to the bottom, depleting the contributions of major corporations and leaving workers to pick up the tab.
This reinforces the importance and urgency for action to rectify this problem. But it troubles me that Australia under a Coalition government is not leading on this. Rather than building on the tax package we put together when in government, the Coalition took that package and chipped away at it.
Given their actions rather than their words, a further concern I have - and I sincerely hope I will be proven wrong on this - is that the Coalition will continue to water down our ability to tax big business as soon as the spotlight shone on this by the G20 agenda fades.
Climate Change
From the very beginning of the G20 Leaders' Meeting, climate change sat at the core of the agenda, not just as an environmental issue, but as a core issue of sustainable economic growth.
As an energy intensive nation, Australia has been recognised around the world as taking seriously its international obligations in reducing carbon emissions.
Mr Abbott will undoubtedly list the fig leaf of energy efficiency on the agenda as a means to camouflage the anger and dismay within the international community at Australia's stance as the first nation to go backwards.
In the corridors of Washington, Berlin and elsewhere, there is genuine dismay about the lack of attention to climate change in the G20 agenda.
I know there will be an all court press from officials to expel climate change language from any communications out of the Leaders' meeting.
That will just be good officials following orders, even if it horrifies and embarrasses them.
But leaders can't be cowed in this way, and I for one hope they are not.
At best, Australia has gone from leader to laggard on climate change.
At worst, it's gone from ‘lifter' to ‘leaner'.
The text of the Summit's communique this weekend will be closely read, particularly its reference to climate change [or lack thereof].
Sadly, whatever the outcome of the G20 on any of the other substantive issues before it, history will recall that in 2014 Australia used its privileged position to slow progress on what President Obama has called a ‘growing and urgent threat'.
Conclusion
So, two days out from the leaders' meeting we have the G20 avoiding the two most significant threats to the global economy.
The spinners will say that climate change was discussed within the framework of energy efficiency and some will argue that inequality has been dealt with because of attention to the BEPS agenda, the 2 per cent growth target and anti-corruption policies.
Inequality and climate change aren't fringe issues they're central to economic growth and political stability.
Picking morsels out of each policy silo, doesn't add up to an agenda to spread the benefits of growth more fairly to make our global economy more inclusive.
Critical for successful reform is an inclusive agenda where the benefits of growth flow through to the wider community in the form of jobs, decent incomes, and a fair social safety net.
Brisbane will therefore be a missed opportunity in fundamentally advancing the economic inclusion agenda, an agenda that three of the leading policy makers around the table Lagarde, Carney and Yellen, have argued forcefully for.
Some time ago, I took the opportunity to walk the highline through New York and on the side of an old brick building was a large advertisement which read "the French Aristocracy never saw it coming either". This is another reminder of the groundswell of support for new inclusive prosperity.
As Lagarde observed earlier this year, the 85 richest people in the world control as much wealth as the poorest half of the world - that is 3.5 billion people and it is casting a dark shadow across the global economy.
Our challenge is clear. Globally inequality and wealth concentration are now at levels not seen since the Great Depression.
We know that when unions are strong the economy is stronger. Unions work to ensure fair wages which increases workers purchasing power which drives the economy. Yet today we see record corporate profits, but declining real wages. That's a big challenge.
But we start to face that challenge by reminding capital that a worker is not a cost. A worker is a consumer, a client, a customer, an investor, a driver of economic growth.
The issue is not going away, it can be ignored and traduced, the wealthy and the powerful can tell us it is unnecessary or the fault of governments or central bankers but the anger and the alienation are real.
There are powerful vested interests who will fight to the end to expand their wealth and their privileges as we've seen in recent years in their opposition to economic stimulus, quantitative easing, progressive taxation, carbon pricing, and quality universal services for ordinary people.
What we do to stem the growing tide of inequality is the central economic and political challenge of our age.
Along with climate change, economic inclusion will be on the agenda of the Turkish presidency.
This weekend provides an opportunity for concerned citizens; unionists; business leaders to pick up the global megaphone and speak out loudly for subsequent generations on inequality and climate change.
Your role has never been more crucial to ongoing economic development, to navigating the road to growth, to fighting the good fight and making sure we grow together and not apart.
