E&OE…

DAVID LIPSON
G’day there, great to have your company this morning. Well, Bill Shorten would have slept soundly last night with the royal commission into unions effectively clearing him of any criminality or unlawful conduct for his part in deals done as head of the Victorian Branch of the Australian Workers Union. But lawyers for the $80 million inquiry have pointed the finger at Mr Shorten’s successor, Cesar Melhem who is now a Victorian Labor MP. Joining me now to discuss this and the rest of the day’s issues, Labor frontbencher Matt Thistlethwaite and Assistant Cabinet Secretary Scott Ryan, thank you both very much for your time. I’ll start with you Matt Thistlethwaite, this isn’t a finding as such, it is a submission by counsel assisting to the royal commission, but nonetheless good news for Bill Shorten?

MATT THISTLETHWAITE
I think it is a welcome development, David. Despite the political nature of the royal commission, Bill Shorten did cooperate he spent a day answering questions of the Special Counsel, some nine hundred questions, and he has been cleared of any wrongdoing. We would like to see something come out of this that would improve workplace relations in this country, and I just question whether or not you are going to get that from this royal commission? It seems to have been set up more for political purposes rather than to improve workplace relations in this country. I think that is evident in the fact that the allegations that were being levelled against Kathy Jackson weren’t tested in the royal commission; they were uncovered in another court. So, despite all of that it is pleasing that Bill has been cleared and that what he did as the secretary of the AWU was actually aimed at improving the productivity of the workplace, increasing the wages and conditions of workers, reducing industrial disputes, but also ensuring better outcomes; many of those projects, the employers supported.

LIPSON
What about Cesar Melhem though? He is now a Victorian Labor MP, the submission has alleged potential corrupt conduct: there is evidence of bogus invoices and inflated union memberships, the netting tens or hundreds of thousands of dollars through these secret deals. Is it appropriate that he is still standing as Victorian Labor MP?

THISTLETHWAITE
Well, I and my Labor colleagues do not have any tolerance for any wrongdoing. At this stage they are allegations and they still need to be tested, there have not been any findings yet and I think we have to wait for that.

LIPSON
So you don’t think he needs to stand down while we wait?

THISTLETHWAITE
If there are any findings of wrongdoing then the individuals concerned should be prosecuted in accordance with the law. That is my position, and that is the position of the Labor party.

LIPSON
There are, as I went through, very serious allegations here that would not have been uncovered had this royal commission not been set up. Yet, Labor keeps claiming that it is all about smearing the Liberal Party’s opponents, i.e. Labor and the unions. How else would have this evidence come out? And do you support, I suppose what I am asking, the broader royal commission itself?

THISTLETHWAITE
Well, if you look at the case of Kathy Jackson, now there has been found to have been wrongdoing…

(Interrupted)

LIPSON
But I am talking more about the case of Cesar Melhem and the specific evidence that we are reporting on today, rather than the case of Kathy Jackson. These are very serious allegations, very serious submissions that may lead to criminal charges.

THISTLETHWAITE
And if there is a finding of wrongdoing, and there has been evidence of criminal activity, then individuals should be prosecuted in accordance with Australian law and there are courts in which this can occur. And it does occur not only in unions but also in the wider community, in corporations and everyday life, and that is the appropriate mechanism that we have set up as a society to deal with those issues. So if there is any wrongdoing in any workplace, in any organisation, then people deserve to be prosecuted and found guilty and penalised.

LIPSON
Scott Ryan, I will bring you in. Do you consider Bill Shorten to be off the hook here?

SCOTT RYAN
I have never made a public judgement or commentary on individual cases before the royal commission; it is an independent process and should be respected. But to go to what Matt said there, the Labor Party did nothing about the Health Services Union for years until it blew up in a hung Parliament where it impacted on their ability to maintain power. What this royal commission has illustrated is that there are systemic failures in the laws and oversight of elements of the trade union movement. What we have seen in the statement released last night is yes, the statement you referred to about the Leader of the Opposition, but we have also heard submissions from counsel assisting the Royal Commissioner that there are some very significant issues, allegations around behaviour that may or may not lead to further investigation and charges and on top of what we have seen in the HSU; that is just an issue of legality. Then we have the issue of morality, and what we have also uncovered is tens of thousands of dollars being paid from businesses to unions, without their members knowing, while those unions are negotiating on behalf of their members with those businesses. And those sort of conflicts are not accepted in any part of the corporate world, they are not accepted in government, but the Labor Party accepts them in the union movement. And in the Parliament, the Labor Party is doing everything it can to stop the same standards that are applied to businesses be applied to unions. The same corporate governance standards that we expect of governments and businesses right around Australia, the Labor Party thinks they shouldn’t be applied to trade unions. The Labor Party protects this behaviour.

LIPSON
Do you think it is worse 80 million of tax payers’ dollars to uncover these allegations?

RYAN
I think what we are seeing, and when you add that to what we know of the rampant misbehaviour on building sites in Victoria from the CFMEU and the fact that court case after court case does not seem to change that behaviour, I think we are seeing evidence of a systemic failure in the law. And what we are seeing, and we have already had provisions in Parliament which the Labor Party is blocking with the Greens, simply to say: unions should be treated to the same governance standards as businesses.

(Interrupted)

LIPSON
Do you think it is worth it though? Do you think it has been worth the money? It is a huge amount of money at a time when we are trying to exercise fiscal restraint, and yes it has uncovered some serious things, but 80 million bucks?

RYAN
It is actually impacting every single major infrastructure project we do in this country. Infrastructure in Victoria is more expensive than in any other part of the country because of the influence of a few unions. We are hearing about secret payments being made by businesses to unions while they are negotiating contracts with governments to build roads. This sort of thing would not be tolerated anywhere else in the world and it isn’t tolerated in business to business relations, and it isn’t tolerated in how we work with governments. It shouldn’t be tolerated with the trade union movement.

LIPSON
Matt Thistlethwaite, a response to that but also the timing of the release of these submissions. Some questions have been asked by members of the opposition, but the Royal Commissioner has defended the fact that this came out so late in the week, on a Friday night, it missed some of the early editions of various papers, saying that that was the deadline, that is Friday was the deadline for these submissions to be out forward and that is when they were put forward.
THISTLETHWAITE
Well it is somewhat unusual to take submissions like this on a Friday afternoon, particularly when I understand that there is still further hearings to be undertaken. So, that is somewhat unusual but once again, there is a finding of no wrongdoing for Bill Shorten.

LIPSON
But you are not alleging that they were trying to bury these submissions late on a Friday night?

THISTLETHWAITE
No I am not saying that at all, but if you look at normal court practice, that is an unusual procedure to undertake. I haven’t followed the machinations of what is occurring in the royal commission closely, but the submissions have been made and we will have to wait and see what the findings of the Royal Commissioner are.

LIPSON
Let’s move on, I want to look at a story that suggests that revenue for the upcoming Budget next year has been hit substantially because growth is not going as well as forecast. That revenue hit is between three and eleven billion dollars, and that will blow a huge hole in the Budget, Scott Ryan.

RYAN
I have seen those reports, David. I think what it does is highlight the ongoing challenge of bringing the Budget back into balance. The simple point is that the Budget situation that we inherited from Labor, and that they have stopped us trying to fix, is actually not sustainable over the longer term for this country. It is important to remember that when we take these revenue write-down forecast that we keep in mind that revenue is still growing but it is growing more slowly. It is often growing more slowly than areas of fixed government expenditure such as pension payments, Medicare payments and it is a serious challenge.

LIPSON
So, how does Scott Morrison then say that there is a spending problem and no revenue problem?

RYAN
The spending problem is the fact that the same report also highlights that next year, because of the spending the Labor has locked in and that they have not been allowing the Government to address, we are looking at spending levels at the same level they were during the Global Financial Crisis.

LISPON
Sure, there may well be a sending problem. But how do you say there is no revenue problem?

RYAN
The thing is, I cut my cloth to the revenue I have; households and businesses around Australia spend what they earn. All of these borrowings and the deficits that Labor left us with weren’t used to fund infrastructure, they are not like buying a house as Labor wants to say, they are actually putting day-to-day expenses on the credit card. And so what we need to do as a Government is to cut our cloth to what we earn, to figure out a way to match our spending to what the Government levies in taxes. And when the rate of tax increase slows, then we need to actually bring spending back into line with that.

LIPSON
Matt Thistlethwaite, one of the most efficient ways to boost revenue, and it would bring in a huge amount of money, is of course increasing the GST. Now of course Labor is opposed to it and I have heard you talk a lot about the policies that Labor does have in place, but they don’t raise nearly as much money as would an increase in the GST.

THISTLETHWAITE
We have offered two policies David, which I have spoken of before. Clamping down on multinational profit shifting and the superannuation tax concessions; tackling those they will raise an additional $20 billion over a decade.

LIPSON
But it is $2 billion a year compared to $30 billion that you would get by increasing the rate to 15%?

THISTLETHWAITE
I understand that, and Labor is in the process of developing further policies. We have said we have an open mind when it comes to tax reform. We are looking at issues such a negative gearing and the capital gains discount and we will have more to say on those into the future, but the disadvantage of the GST increase is that it is unfair; it harms the most vulnerable in our society while letting off the most wealthy. Modelling this week proved that the lowest 20 per cent of taxpayers will pay the most.

LIPSON
So on negative gearing then, for example, does Labor believe that people need to be able to get tax concessions for negatively gearing a second, third, fourth, fifth property?

THISTLETHWAITE
We have said that we will have a look at all of these tax policies and their sustainability in the future, but we have been very clear that what we will do is, if we do make changes, that they will be grandfathered so anyone who is currently in the system won’t be affected by them, they will be prospective into the future and we will take those changes to an election to seek a mandate, so we have been very clear with the Australian public about that.

LIPSON
What do you think about negative gearing Scott Ryan? Do we need to be able to gear so many properties? Should it be cut off at maybe two investment properties, or three, or four?

RYAN
The point there that you highlighted, David, is that there is no rationale for any number. A few things: every issue that Matt mentioned there, every time he talked about tax reform, he talked about a tax increase. Now this Government is all for fairness, but fairness is also a two-edged sword, and the Prime Minister made clear that Australia always needed to protect its most vulnerable. But when the top two percent of taxpayers pay more than a quarter of all tax, when the top quarter of tax payers in Australia pay more than two-thirds of all tax, there is a second side to fairness which is how progressive can the system get before it gets punitive? And I might say, if Matt is talking about grandfathering people there, we must be careful that in order to meet a political objective that Matt wants to hide his tax increases. We don’t just simply say: if you have managed to lock away a tax gain you get to keep it forever. But for those people coming through and trying to build savings and build an income, they will get punished by being locked out of that particular avenue for saving. Fairness here is intergenerational, and that is what the Budget deficit is about. Fairness here is also about saying: while we protect our most vulnerable, how progressive can the system be? The top quarter of taxpayers in Australia pay more than two-thirds of all tax, the bottom quarter pay less than two per cent. I actually think progressivity has a good place in our system, but there do need to be limits on it.

LIPSON
Scott Ryan, Matt Thistlethwaite, I am sorry we are out of time. Great to have your company this morning, we will see you very soon. Thanks for that.

(ENDS)