WAYNE SWAN MP
MEMBER FOR LILLEY
ABC PERTH – BREAKFAST WITH PETER BELL & PAULA KRUGER
THURSDAY, 15 MARCH 2018
SUBJECTS: Commonwealth Games; Global Financial Crisis; excessive CEO pay; Labor's fairer tax plan; Kim Beazley; political polarisation; Paul Keating; Business Council of Australia
PAULA KRUGER: Ten years on from the collapse of Bear Stearns, which kicked off the Global Financial Crisis, The Australia Institute has taken a look at executive pay and what it means for the rest of us. The former Treasurer Wayne Swan helped launch the report today. Mr Swan, thanks for joining us.
WAYNE SWAN, MEMBER FOR LILLEY: Oh, good morning. And I see you’re advertising the Commonwealth Games; they’re going to be terrific.
KRUGER: Oh, that’s great to hear. And you as a proud Queenslander will be wanting many of us to have a look.
SWAN: That’s right.
KRUGER: Mr Swan, can you take us back to your memories of the day Bear Stearns went under and how did the news get broken to you?
SWAN: Well that’s when the global financial system really started to shake, when Bear Stearns went down. It was in March. Of course, the really big one was Lehman Brothers which came the following September and that’s when the global economy fell off a cliff. But when Bear Stearns went down, it was alarming for people but of course, executive pay at Bear Stearns was through the roof. I think over five years their chief executive had taken home something like $100-plus million dollars $156 million in salary and bonuses. But that was really the beginning of people really thinking that something really serious was going to happen in the financial system. But of course those concerns went away, and they didn’t resurface until the second half of that year. We were always on the alert for this, because the Prime Minister Kevin Rudd and myself had been travelling extensively earlier that year and we had come to fear we might have a seismic event in the global financial system, which ultimately we did have. And we started to prepare for that eventuality.
KRUGER: Now CEO pay dropped after the financial crisis—
SWAN: It did, yeah.
KRUGER: —but it is creeping back up again. What do the warning signs indicate to you?
SWAN: I mean, it’s back up. It was $5.5 million before the GFC for a Top 100 company and it’s now back to 5.2. And of course, that 5.5 figure came about through a dramatic explosion, if you like, of CEO pay over the previous decade or so. We used to think that if a CEO was paid 20 times average weekly earnings they were paid pretty well; now of course, prior to the GFC it went up for many companies. At the moment the pay in Australia at an average top 100 company is $5.2 million, which is 63 times average weekly earnings. 63 times. So it’s getting back to pre-GFC levels. I think that’s alarming, because it displays a degree of arrogance across our top companies. Because I don’t think anyone out there could really imagine why a CEO ought to be getting 63 times average weekly earnings. And of course, if you’re a CEO of a big bank, you’re getting something like 100 times – 100 times – average weekly earnings. And of course, some of those people or their representatives appearing at the Royal Commission at the moment have executives that are getting 100 times average weekly earnings. And of course it doesn’t seem to indicate that that sort of pay means that the organisation is necessarily well run.
KRUGER: So some might say that there’s a bit of tall poppy syndrome here – why shouldn’t businesses pay CEOs a lot of money if they are in fact worth it?
SWAN: Well it’s a question of how much are they worth. I mean, they’re not the only wealth creators in an organisation. We used to live in a time when people used to think that everyone who worked for them was part of the wealth creation of a company. But in the last 20 or 30 years, with the advent of trickledown economics there’s a strain of thought out there that says it’s masters of the universe who run the organisations that create all the value and it’s just the peasants who work for them that should do as they’re told and don’t really count. The truth is that everyone who works for a company is part of the team, and they’re all worth something. Now of course, many of us are worth more than others because we have varying abilities. And some people have unique skills which justifies far higher pay. But I would say that there is nothing which justifies someone being paid 100 times more than average weekly earnings.
KRUGER: It’s nearly 12 minutes past nine and we’re talking with Wayne Swan, the former Federal Treasurer and the Member for the Queensland seat of Lilley. So Wayne Swan, Labor has had to defend its changes to franking credits. Are you surprised by the reaction to that? Some have interpreted it as an attack on low‑income pensioners.
SWAN: Well it’s not. There’s been plenty of information that’s been peddled that’s simply inaccurate. I note today that one of the national newspapers has an example of someone who says that they might be badly affected and you read the detail in the story and they’re not! The truth is that this loophole, if you like, should be removed, it is unfair, it cripples the budget, but it also brings our tax system into complete disrepute. Because most of the money and cost to the budget of this loophole goes to people who are very, very high-income earners. And notwithstanding some of the propaganda that’s out in the paper today, most of them – the overwhelming number of them – are very high‑income earners. These are people who have principally high incomes, but not high taxable incomes. So they’re receiving tax-free super and then they’re turning around and saying because their taxable income is low, they should therefore get a rebate for tax they haven’t paid.
KRUGER: So Wayne Swan, you’re going to retire from politics at the next federal election. And you might be the Labor Party’s next President. Kim Beazley, another proud West Australian, supports you on that, but Kevin Rudd says that you are too divisive because you were part of the leadership change under Julia Gillard. Now, why do you want this job?
SWAN: Well, first of all, we have very clear rules in the ALP about our Presidential ballot.
SWAN: And part of those very clear rules, which I support, is that we shouldn’t be supporting our candidature publicly in the media. So I intend to remain within those rules. I think they’re there for a good reason. It’s a discussion I’m having with members who will participate in the ballot. I respect my opponent in the ballot and I respect the rules under which we’re operating. So, sadly I’m not going to argue my case with you today, but I’ll let my record stand for itself.
KRUGER: So you’re obviously not comfortable with arguing your case but obviously it’s okay for—
SWAN: I’m very comfortable with arguing my case, but I’m going to—
KRUGER: Not do it publicly?
SWAN: I’m just not going to do it publicly because they’re the rules. And if other people want to ignore the rules, that’s up to them, but I’m certainly not going to – and I believe the other candidate in the ballot supports the rules as well and neither of us will be running around the country in the media canvassing our merits.
KRUGER: I guess more broadly speaking given that you’re just about to step out of the chamber and retire as an MP; things have really changed over the past few years as far as the way we conduct federal politics goes. Are you concerned about the change of tone in our federal politics—
SWAN: I am.
KRUGER: —and people losing faith in federal politicians?
SWAN: I am. And I made it clear when I announced I wouldn’t be a candidate at the next federal election, that although I was getting out of Parliament, I wasn’t going to get out of politics. And what I’m really concerned about is what is happening to our democracy. And so much of what is happening in our democracy and in our economy is driven by increasing levels of inequality in both wealth and income which is producing a political polarisation – not just here, but more severely in places like the United States and Great Britain. And these are the issues that I intend to keep talking about, even when I’m no longer a Member of Parliament, because they go to the very core of what we want Australia to be. And I want Australia to continue to be prosperous but fair. Increasingly, as we grow unfairly, then that makes it more difficult to be prosperous. It produces polarisation in our political system, and that’s not very healthy.
KRUGER: In this age of political polarisation, as you call it, it’s a time you really want the public to engage in politics and get interested and have a view—
SWAN: We do.
KRUGER: —but it can be said at the moment that public faith in our federal politicians is at a low point. How do we capture the public and how do we get them to be interested in politics when you have – it can be said that the politicians are misbehaving at the moment.
SWAN: Well I want to excite people through my ideas and we need a much better and informed policy debate through all forms of the media. And I have spent a lot of time since I’ve been on the backbench since 2013 becoming part of a broader discussion about what type of Australia we want and how we can achieve it. And irrespective of what happens with me, with Presidential ballots and the rest of it, I intend as a former Treasurer – I mean, when I finished I was the third‑longest serving Labor Treasurer in our history – I intend to use that experience to hopefully generate a better level of public debate. This paper today is part of a process that I’ve entered into with both The Australia Institute and Chifley, the Labor Party think tank, to try and elevate the debate about the economy so more people can have a discussion about how we can all have a stake in our prosperity and what sort of policies will produce that. And that’s what I’ve been doing for four or five years.
KRUGER: Wayne Swan, you chose to move from the front bench to the back bench. Unfortunately in recent events in federal politics, some people have had that choice taken away from them and have been forced to the backbench. How did that change you as a politician, having that different perspective, moving those few rows further back?
SWAN: Well, on Tuesday I celebrated the 25th anniversary of my election to Parliament in 1993. I was out for a term, ’96 to ’98, and I came back into the Parliament in ’98. I’ve spent all of that time since I’ve been on the backbench since 2013 helping to mentor new Members of Parliament – something that I’ve enjoyed doing, talking with lots of new members. And you’ve got lots of great new members in the federal Labor caucus now and I’ve enjoyed interacting with all of them. But I’ve also spent more time thinking about what my experiences mean and how that should affect policy for the future. So I’ve produced any number of reports. I’ve produced an international report on how we can get to much more inclusive economic growth with Larry Summers and Ed Balls, four years ago, and talked about that around the country. Interestingly enough, the first line in that report said that unless we did something about growing economic inequality, that it would threaten the very stability of democracy itself. And since then we’ve seen what’s occurred with Brexit, we’ve seen the election of Donald Trump, we’ve seen the rise of the fascist right in Europe. All of these things are going on, and they’re very disturbing. So I’ve been trying to think about what this means for our future policy settings and working with a variety of organisations out there to try and lift, if you like, the policy debate in our country. Last night, for example, I was at the launch of a book by Paul Keating – he launched a book by two academics on fairness and inequality in Australia and the policies we need to combat it. They’re the sort of things I want to keep doing even after I’m out of Parliament because they’re so important to the future of the country.
KRUGER: And just very quickly Wayne Swan, any great Keating quotes come out of last night’s event or was it fairly subdued?
SWAN: Oh no, there were a couple of good Keatingisms – he didn’t particularly have much nice to say about the Business Council of Australia, I think he said they suck! (laughter)
KRUGER: (laughter) Wayne Swan, thanks for joining us this morning. That’s Wayne Swan, he’s the former Treasurer and the Federal Member for Lilley. Peter called to say he often wonders whether the best‑paid CEOs are necessarily the best people at the job.
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