The Harvard-educated economist and MP tapped to help Jim Chalmers lift Australia out of its productivity funk says the nation is a generation away from “US-style inequality”. Amid the drama ofLabor’s factional bloodlettingthat saw two senior ministers toppled after the resounding election win, the responsibilities of assistant minister Andrew Leigh were quietly expanded.
Anthony Albanese reappointed Leigh as the assistant minister for competition, charities, treasury and now, productivity. Alongside housing, it is the economic issue dominating the national economic debate.
TheProductivity Commissionrevealed overnight that reforming corporate tax and speeding up clean energy infrastructure approvals were among 15 priority reforms it considered ripe for “further exploration” through its five inquiries into reinvigorating productivity.
Chalmers late last year tasked the commission with providing a practical roadmap for reform by the end of 2025, with the interim reports expected by late July and early August.
Amid growing calls for a more ambitious policy agenda aimed at securing Australia’s long-term prosperity, it’s no surprise that the addition of productivity to Leigh’s junior treasury portfolio has caught the attention of the media.
“I think it’s an indication of the importance the government places on productivity,” Leigh tells Guardian Australia in his office in Parliament House.
“As Jim said, the first term was inflation first and a focus on productivity second. Now it’s that, reversed.”
Leigh has held the safe seat of Fenner (formerly known as Fraser) in the Australian Capital Territory since 2010. He received a doctorate in public policy from Harvard University, where his thesis was titled “Essays in poverty and inequality”. He has written about a dozen books on economics and social policy issues over the past two decades, and many more academic articles.
Productivity growth is the key driver of higher living standards over time, which is why economists and policymakers are vexed that it is no higher today than five years ago.
During the 2010s, productivity slumped to its weakest growth rate in six decades. And after a brief pandemic-affected jump, we are back to those levels.
In fact, Australia today is barely more productive than a decade ago.
The Productivity Commission estimates that if we had been able to maintain the high levels of productivity growth experienced in the 1990s, then the average worker’s real income would be $25,000 higher today.
“Competition was probably our biggest part of the productivity agenda in the first term. The overhaul of the merger laws, increasing penalties for anticompetitive conduct, banning unfair contract terms,” Leigh says.
“And then the other big competition thing that we announced at the end of the last term, but we haven’t done yet, is banning non-competes for lower- and middle-income workers.”
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The ban on non-competes for workers earning under $175,000 a year is supposed to start by 2027, and Leigh is hopeful to have the legislation in front of parliament at the end of this year or early in the next.
Labor argues that employers have beenabusing non-compete clauses, which stop employees from leaving and competing with their employer for a certain time. The clauses have long been used for high-level executives or key employees as a way to protect trade secrets and intellectual property.
But they have increasingly crept into the contracts of hairdressers, aged care and childcare workers, and relatively junior retail sector employees, to the point where an estimated one in five Australian workers are affected.
“We know that there are big wage gains for workers in shifting firms, but also that there are huge efficiency gains for firms in being able to access the best workers,” Leigh says.
Research by the E61 Institute estimates firms that use non-compete clauses extensively pay about 4% less on average than other employers – suggesting an annual wage penalty of about $2,700 a year for these workers.
“That’s big in terms of the efficiency gains, and also the equity benefits for people like early childhood workers not being stopped from moving to a better job,” Leigh says.
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While businesses have urged the Coalition to oppose the ban, this month’s huge election win means Labor has a large majority in the House and an easier passage through the Senate – where the government only needs the support of the Greens.
While growing the economic pie is critical, Leigh is equally focused on how the dividends of reform are distributed. He says the income share of Australia’s affluent class – the top 1% – has nearly doubled since 1980, from 5% to 8%, while in the US it has increased from 10% to 21%.
“So we’re now as unequal as the US was in 1980,” he says. “Track that [trend] through another generation and suddenly … things start to look much much more like US-style inequality.”
Leigh continues: “We’re certainly more unequal than we were.
“I’d be concerned about consumption inequality, wealth inequality and income inequality. All of those measures have risen over the last generation.
“And also social mobility … Think about inequality as being the gaps between the rungs in the ladder, and social mobility as being how easy it is to climb up or down it in a generation. It becomes harder to class-jump in a really unequal place.”
Leigh also points to a “landmark” agreement between the commonwealth and the states and territories in November last year as part of a 10-year drive to reform national competition policy.
The approach is modelled on a highly successful series of competition reforms during the 1990s. The Productivity Commission has estimated that a revitalised national competition policy could lift Australia’s GDP by as much as $45bn a year.
The proposed changes include the adoption of trusted international product safety standards, developing a general right to repair, streamlining commercial planning and zoning, and removing barriers to the uptake of modern construction methods.
The Albanese government has backed up the agreement with a $900m national productivity fund to help states implement reforms.
If the long-term rewards or reforms aimed at making the economy more efficient and dynamic are high, the path to success is long and uncertain. The challenge extends beyond this term and into the next, Chalmers recently cautioned, and certainly is hard to do justice in a 24-hour news cycle.
Characteristically, Leigh is optimistic that Labor’s reforms will begin to bear fruit by the time the next election rolls around in 2028.
“I would hope to see some of the green shoots of productivity” by then, he says. “But we know productivity is quite a considerably lagging measure.
“I think artificial intelligence has huge potential to be better used. There are lots of jobs in which you can see AI making people more efficient.