 I just wanted to make a few general observations, some issues about the principles of budgets, the principles of fiscal policy, and talk a little bit about the issue of forecasting because that underlies a lot of the assumptions in the budget. So in my view is that this is the budget that Australia deserves. It's not the budget that we should have, but when you look at the State of the Parliament, this is the budget you're going to get. You're going to get a populist budget that doesn't deal with the deep fundamental issues that we need to deal with as a society, but it does move in a tiny little step towards trying to get to where we need to be. So there's a lot of things you can criticise about the budget, and my colleagues will criticise as appropriate, and there's a lot of things you can discuss about the budget. There's a couple of things which I think I can say I like what's in the budget in a principal sense because I've been advocating it for a while, but generally I don't think this budget. There'd be no better budget than this in the current circumstances, but that doesn't say very much. So just on broad principles, the key thing to remember is that for every dollar the government spends, somebody has to pay a dollar in taxes, either today or the future. So the key question, the first question is what do you want the government to do? What do you want the government to spend on? Once you make that decision, then the question is how do you raise the revenue? Which taxes do you use? The more expensive taxes, which reduces economic output and changes incentives so you get bad economic and social outcomes, or non-distorting taxes? And that's the key question of who pays for it. Do you want the current generation to pay or the future generations to pay? And so if we don't have a clear vision of what the government should be doing, then it's going to be very hard to put together a budget that has any sort of long-term substantial contribution to Australia's well-being. So the problem I have with this budget is that none of the key issues have been addressed in terms of the size of government. I think at 25% of GDP, the government is too big, according to the way I think the government should work. It doesn't matter however what that government spending is on. And so you do need to dig down there. And the question is how do you pay for a government that big? And someone has to pay the taxes. And the question is what taxes do you use? So that's the first set of issues. So the second set of issues is one thing which I think is a good thing in the budget is that there is a difference between a government that spends on current spending and a government that provides long-term investment. And there is an attempt in the budget papers to distinguish between current spending and capital spending. It's done in a way which suits the presentation and the optics of the budget. I think there's some issues about where should defence be and a few other capital expenditures. But you're moving in a transparent direction in principle. The second set of issues which I'll finish with is the forecast in the budget. If you look at the budget forecast, they might be right. But if you look at the budget last year, the forecast, what's changed? Well, now Donald Trump is the President of the United States. Well, that makes life more certain. We have Kim Jong-un building up ballistic missiles in North Korea. Well, that helps with understanding how certain the world will be. So the uncertainty, if anything, has got worse. And we're producing forecasts which are very optimistic in this uncertain world. The forecast will be critical for the size of the revenue flows and therefore the size of debt the amount of the government will need to borrow. And the long-term commitments on the spending side that the government has undertaken. So I think it may be right, but it's really dangerous to form a budget which is in a world of what we currently face relies on a lot of optimism because I'm not that optimistic about the world. Okay, so just on that budget point, and we might come back to this question of how does one budget in uncertain times, and I guess all times are uncertain. You know, decades ago, I think possibly before I was born, but quite a long time ago, we only ever budgeted one year and then we moved to two years. There was a sense that there needed to be a little bit of forward planning. And then we established a medium term as expenditure framework for years in the charter of budget honesty and modelled it as a guiding light around the world. But it brings with it challenges about how do you actually forecast in any realistic way. So on the tax stuff, so one of the interesting things about the budget I think is that there are a lot of revenue measures. Last year there were revenue measures in corporate tax in the sense of anti-abuse rules, part of this ongoing set of rules about anti-abuse and a few other tightening up. But of course the corporate tax cuts were big on the agenda last year and are still there in the budget and we might come back to that. But we have this sort of set of revenue raising measures, but of course they're not core structural tax reform. So we've got revenue raising but not tax reform is my sort of summary there. And I guess that revenue raising is to fund this larger function of government that we're seeing and the question is what do you want government to do. I do think taxes are probably the best way to fund government, certainly the most transparent and certain. So we've got Medicare levy rises, you know, we've got these additional taxes on residents, foreigners. It's always good to tax foreigners if you can. Except of course when we'd like them to invest in Australia for we might want to reduce the tax. We've got higher education repayment happening earlier, a little bit of tightening up, but we've also got a bunch of relaxations as well. Some additional concessions in the superannuation tax area really dressed up as housing measures that I think in some ways just undo some of that tightening of superannuation tax concessions that we saw last year. So I guess from a tax perspective the question is we are raising some revenue but we can't bring this budget back into surplus based on Medicare levy. And just to give a sense of scale to set us up with a conversation about an unpopular tax from the very beginning and we can maybe come back to it in questions. So the Medicare levy increase does apply across the board. That 0.5%, one of the reasons it raises a reasonable amount of revenue is of course it's on everybody's entire taxable income. So it does raise quite a lot from high income earners, that extra 0.5%. But it's still only around about four billion a year is the estimate. If we were to raise the GST to 15%, just even on the current base, which is arguably too narrow, the estimate is at a minimum 25 billion a year in revenue. So just to give you that sense of scale about what we're talking about when we talk about big picture tax reform, more revenue from some taxes and possibly cutting others or adjusting the system in other ways, compared to the kind of tinkering we're doing around the edges with things like the Medicare levy. I might leave it there but we'll come back to it. And Sharon is about to speak. Before we do I'll just remind you that where we are on social media this evening on Twitter the hashtag is AMU budget. So please feel free to join us on social media tonight as well. Sharon. Hi everyone. I'm the token non-economist so I'm not going to talk about fiscal principles or in detail about some of the taxation measures. Although I would say generally that I think opening up the discussion or perhaps even lifting the taboo on raising revenue through taxation is not a bad thing to be able to be having this kind of conversation. And it does appear from some of the polling that people are prepared to pay for some things like health and education. So I think that's a significant part of the discourse around this budget. I think there are some really serious generational and issues around intergenerational quality that we're facing that haven't been addressed. I think Miranda's and Warwick and Joanna much more well a far better position than me to talk about the details of that but I think deferring debt to future generations is highly problematic. But I think the young people today we have a series of factors coming together around the cost of housing that increases that we've seen in university fees and lowering the HECS repayment which in itself is arguably quite modest but put together with the costs of childcare there are particular crunch points that young people face when all of those things come together that need to be thought through in terms of fundamental reforms. I do think that the shift towards needs based funding for schools is a positive thing. Perhaps we'll see a little bit more bipartisanship around the need to think about the way in which schools are funded and particularly the way in which we can reach the children who are in families and communities that are most in need. So I think there are some positive things around the budget but I think there are some real issues around this question that keeps being raised but is the budget fair. And I think we need to have a fundamental discussion about what we mean by fairness and by what measuring sticks we're trying to gauge fairness. From my perspective I think there are some really problematic aspects of this budget around fairness and I think in some elements of it there's quite a nasty edge to it to put it in the colloquial. So I think for the most vulnerable people in the community those people who are unemployed who are looking for work there are some real issues around the introduction of greater surveillance but also the stigmatisation of particular groups and I think we're increasingly moving towards ideas about the deserving and the undeserving poor and the idea that there are a group of people who deserve our attention but don't deserve our support or certainly our empathy. And I think while we should be thinking about incentives to get people into the workforce, to support people to engage in the community, doing that through stigmatisation is really problematic. And so the relationship verification, the liquid assets waiting period, the extension of that period, the idea of three strikes and you lose your benefits. We can talk more about these things but I think they're really problematic for some of the most vulnerable people. If we then think about the foreign aid budget, for those of us who are working in that space, we were probably pleased because it wasn't as bad as we thought it might have been. There's been a freeze on foreign aid and I think if we put ourselves into a global context, again we can ask what's fair. So back in 1970 there was a global consensus around countries trying to reach 0.7 of gross national income in terms of the foreign aid budget. Australia shifted that a few years ago to 0.5, only six countries in the world have achieved the 0.7, we're now tracking towards 0.2. So it's a global citizen, we're not looking great and in this budget we've maintained funding to humanitarian assistance, I think that's good but we've cut a whole range of UN agencies, the World Health Organization, UNICEF, UNFPA. So I think there are some real questions about that in terms of fairness. The other issue that I wouldn't comment on in detail, because I'm not an expert in this area but we just raised this around what I would see as something of a silence on indigenous issues, there's the extension of the cashless welfare card to two more communities that's been highly controversial. There's been no response to the Redfern statement having seen indigenous leaders heavily engaged in some of the discussions leading up to the budget. And my final area of concern is that there's no gender analysis whatsoever here but there are measures that are going to impact very differently on women and men. Australia has dropped from 15th on the gender global gap index in 2006, so 15th is not great but it's not 46th, which is where we are today. So in that 10 year period we've dropped 20 places on the global gender gap index, mainly because of the earnings gap. So I think there are some real issues around fairness there and the final point that I would make is in 1983, we led the world in introducing a women's budget so that we analyzed budget spending from a gender perspective that was lost in 2014 and hasn't yet been reinstated. So again, we don't have good analysis as a requirement in terms of budget spending. So I think that's enough from me. I agree with all of that, I've got three of them. No doubt about it, they've made all the key points I think. Look, the way I look at it is it's a very pragmatic political budget. It's not tricky politically, but it's very pragmatically political. But I think in economic terms it's a very risky document given what I perceive to be the most risky global environment in both economic terms and geopolitical terms that I can remember in my lifetime having been analyzing and forecasting economies since the late 60s. So I don't think it positions us well in the light of those risks. I think the way they did the politics was that they simply sat down in the ERC and said, let's compile a list of all the areas where the ALP's getting into us or where they could get into us or somebody else might get into us and then let's just go down the list and tick the boxes as best we can with what we can. I know that's a cynical view, but I've seen it done before and I think that's exactly what's been done. So you can do schools, yes, we'll go consky, we'll go consky, turn up at a press conference, that'll knock them dead, and then just go down the list of Medicare guarantee and so on. Okay, when they'd done all that and they had looked at the expenditure side, as has been said, they actually recognised that you're not going to get budget repaired by expenditure restraint alone. And I'm not saying that they've done enough in expenditure because there are areas of expenditure that really could do with a lot more work, whether it's better targeting of the age pension or whether it's stop ring fencing, defence and other areas, or other areas which are going to blow out like the national disability scheme. There's not much being done in some of those areas but they've focused on revenue and so I think the way they did that, they said, right, we've got to raise revenue, eat a bit of crow because we've been saying we can fix it all by expenditure. So let's pick two or three really soft revenue areas where we think we can get away with it. The Medicare levy, well, Gillard got away with that, she tick-linked it to the national disability scheme, went straight through. So we'll have a go at that. The banks, well, you know, the clients hate them. You know, and everyone wants the Royal Commission, we can hit the banks, we'll get away with that. And of course, those foreign workers, you know, we should start taxing that. Why not? We're all pulling back on four, five, seven visas. And basically, if you look at it, I'm gonna hit the multinational, hit the black economy, the standard sort of usual suspects and we get to a revenue number at the bottom. And so it broadly adds up. I agree with Warwick that the forecasts are optimistic. I mean, if you look at the forecasts over the last few years, in the last seven years, they have consistently overestimated tax revenue and by significant margins in some cases. For the last five years, they've consistently overestimated nominal GDP. And with that background, I go and say, are they doing much better this time? And I suspect not. I think we get a surplus in 2020, sorry, in 2020, 2021, simply because we assume it. And mostly because we assume very strong nominal income, but even more a wage explosion almost when unemployment's gonna stay reasonably flat. I mean, the orders of magnitude of wage increases are nearly double what they've been. Sort of the order of magnitude of what we saw in the resources boom. You know, I don't see how those numbers add up. But you need those numbers to get the revenue, numbers that give you the surplus. And if you take those numbers out, you go back to just take the 2% right through as the wage growth. I think you eliminate the surplus in the last year quite easily. So, you know, the numbers are rough. In two areas that I'm concerned about, one, the national disability scheme and the link with the Medicare levy. If you look at the numbers, the national disability scheme itself is to go from 3.5 billion to about 2021 billion over the four year period. That is nearly a 600% increase in that item. And we are yet to really know the eligibility for those benefits and so on. And you add to that other disability benefits and you get to a number that's about 50 billion at the end of the period per year, which is the second largest area of social security spending after the age pension. I fear those numbers are going to blow out. And we're told that the Medicare levy is going to fund a part of that. But the whole Medicare levy in 2021 would need to be covered to cover just the disability component, the NDIS component of the 50, the 20 billion of the 50. My second disappointment and final point is about climate. When I struggled to find a reference to climate, there is a section on climate. It talks about the way they're going to actually run down the expenditure in the direct action plan, the CFC and arena over the period. There's no new initiatives in relation to climate at all. And I'm very worried about that because I think that is the most significant intergenerational issue right now that's being ignored. So I think in intergenerational terms, we are going to leave a budget deficit to our children the way they're going. I think it's Craig Emerson that describes the surpluses that shimmering on the horizon that you never quite get to. And it's going that pretty much that way. And in intergenerational terms, leaving the climate problem as large as it is, year by year, I think, is a significant weakness. Thank you. Now just to explain, I've gone on the budget from the conversation website. So thank you very much for the conversation. And I think it informs a lot of what we're discussing here. So I'll be moving that through as we talk. Thank you to the panel. Now, John explained how he feels about the Medicare living in the NDIS. I think it's one of the really core things coming out of the budget, as is the bank tax. So I might quickly ask the panel to give your view. John, quickly, what's your view on the bank tax? Well, I don't like taxes that are on specific sectors or specific industries or specific events. And so I don't like tax hypothesization. So I think from a tax principle point of view, I don't like it. From a political point of view, I can see exactly where they did it. Sharon, one question. And it'll be very hard while the Labor Party's going to support it. It'll go straight through, despite Ken Henry's protestations in today's press. Sharon, on the NDIS, Medicare levy funding and the bank tax, what do you think? I think the banks are obviously an easy target. So that's an obvious place politically to try to raise revenue. On the NDIS, I mean, I think there is very strong support within the community for the NDIS. So there needs to be a conversation about how to actually fund it. But I would defer to my colleagues and I think there needs to be much deeper thought about how a scheme of that size can be funded. Miranda, how do you stand by it? Yeah, so it took me by surprise. It just shows how ignorant I am. It's very pragmatic, of course, as John said. It's pragmatic also in the sense that it can probably work to raise revenue. So in that sense, at least, that's a good tax design, is that actually it's going to work. And we know that because we've seen these kinds of levies operate in the UK and a number of other countries based on this, you know, some measure of the liability base of the bank. In the UK, the bank levy has been at a higher rate and on for a number of years and raising really quite a significant amount of revenue, applying to most of their banks, not just to the very large ones. The justification in the UK there was that it was imposed very soon after the GFC. And the UK government actually did bail out at least one of their banks. You know, there was a lot of instability. And they then, you know, put the case to the public. I guess that there was this really kind of explicit guarantee that the government was giving and they were going to require the banks to pay for that. So one justification for it is this idea of an implied guarantee. It's different from the ALP's proposal of a few years ago to have a sort of levy in relation to those savings deposits under 250,000 savings deposits, which was an explicit guarantee, which has now come to an end. So, you know, arguably they're too big to fail and that's a justification. I've been inclined to agree with John that hypothecation and this sort of thing is probably not the best. I mean, another way to think about it is that we probably do under tax financial services somewhat. In Australia, the GST under taxes financial services, partly because it's hard to distinguish between a financial service and an interest rate. And, you know, we find that hard to do. So if you think about it in that light, well, is it operating as some kind of de facto tax? Well, clearly it's not covering all financial services. It's only covering the big banks. And also it's not going to be able to be credited by business customers of banks. So it cascades through the system. So it's not really doing that job very well. One other possibility, so I'll pass on to it. One other possibility is this idea that banks are a highly regulated sector, a bit unique like the resources sector or the mining sector. And we've talked about mining and resource super profits taxes. They're potentially deriving economic rents. Should we be taxing those economic rents or super profits taxes with a special bank tax? So is it performing some role like that? Well, again, it's not very well designed to do that. It's not on profit. It's on this much different base. So look, in the end, I mean, you know, with a tax design hat on, you think, well, it's a tax that's going to work to do the job it's designed to do, which has raised money. So give it a tick there. So it's a yes, yes, yes, well, work. Well, I think John might have said no because I don't like taxes. He said no. He said no. I don't like taxes that are arbitrarily distorting in the economy. There's two reasons you tax. One is to get rid of something you don't want. Well, they're clearly not taxing the banks because they want to get rid of them. But you also tax because you want to change behavior and because you might have pollution. So you tax pollution and people will change their behavior. So because the market doesn't deliver it, the government can. I don't see either of those justifications for the bank tax except the banks do get a guarantee of lender of last resort in the too big to fail argument and there should be a price paid for that. So if I was going to put a tax on the banks, I would justify it not because everyone hates the banks and not because I need revenue. It's because I'm addressing a market failure, which is the fact that the funding costs of the banks is different to what the market would deliver because the government, the taxpayers, are guaranteeing it. So let's raise revenue that fixes that distortion and then that revenue probably should go into a fund that is used if there is a financial crisis. So that's sort of hypothesizing, but it's also making sure that the system itself you've affixed a problem in the system and that to me is a much better way of designing that sort of tax. So plenty to get started. It shows you how bold the politics is. They made no attempt to justify the increase on any of the good arguments that you've just heard. There are good reasons to do it, but they made absolutely no attempt because they figured why not. So that's one. Labour Party will back it and it will go through. All right, so we'll get ready with questions and while we're doing that, just put up your hand and we'll try and get around the room. We'll start at the back up the top there. We'll come to you. While we're doing that, I'll just let you know the little survey we did on your way in. Top topic people wanted to hear about tonight was tax, second health, third education, four foreign affairs, fifth housing. So we'll refer to that as well. Thanks very much for the panel. Oh, my name is Karen Dahl. I'm concerned about funding for the arts. I'm wondering, should we tax the arts or should we fund the arts? Thanks, Karen. All right, who wants to have a go at that one? Fund the arts. I think, well, I'd agree with that, but I mean, that's a political decision out of general revenue. Just on this, coming back to this, related to this hapothecation question to some extent, do you tax to fund a particular thing? Really, all taxes should be coming into, really legally they come into this consolidated revenue, and then we have appropriation decisions about funding according to what people want to spend the money on. I don't know who. No, I think... Well, I would fund the arts. Yeah, okay. So again, this comes back to the question of what do you want the government to do and what isn't being delivered for society of market type of incentives? Is there something that's not working? Well, can you design a system where the government performs a role in funding the arts and uses that to leverage incentives in the private sector to come to the party and to scale up what's needed? So to me, yes, we should fund the arts, but we should do it creatively in a way in which you don't create long-term vested interests that are going to sort of capture the institution or the funding line. I think we can do things much better. The second thing I think is important is... and it didn't come up, but I think the role of government is actually an important role, is to provide insurance when something goes wrong for citizens. And so too much of what the government is seen to do is to come in and pay for everything. For parental leave, for example, and I've used this for a few years now, I think the paid parental leave system should be done like a hex system where if people want to take paid parental leave, society contributes some of the costs through a discounted interest rate and the individual, the family, provides some of the costs, because they ultimately will get the benefit and you get a lot more paid parental leave in the system if you can provide the financing through a hex type system for parental leave. So I think the government there and droughts insurance, for example, we shouldn't bail out the farmers, we should provide a system where you help them get through the income reductions so when income is high they can pay it back. So I think there's a role for government there which the private sector, the banks aren't providing. Again, I think you ought to think about government somewhat differently than we do currently. Thanks, Graeme. Thanks, Karen. Great question. Well, here. Thank you for the contributions from all the speakers. I did disagree with a couple of you. I don't say this budget has been some sort of way a populist sort of budget which has got all sorts of problems. I say this budget is actually reflecting and responding to the demands out there from people for decent health and education services and support services for disabilities. And look, the consequence of maintaining the sort of neoliberal status quo in which all this wealth gets redistributed to the big end of town and we have a third of the population who is struggling is you end up with Trump. And that's what's happened in the United States. Well, in our case, we end up with one nation who I think are going to be the biggest losers out of this budget. I think that's a comment. That's good. That's all good. That's all good. I'm quite overtly explicitly challenging Warwick and John in terms of their view about the budget. The budget's about responding to democracy to people's wishes. That's what I said. I said the budget is what we deserve because this is what our society has elected to parliament is a group of individuals who are presumably reflecting society. I'm not saying it's right or wrong. I'm saying it's what we deserve. It's not what we need from an economic point of view because somebody has to pay. And then is who's going to pay? Well, hang on. My point was it's pragmatic. And they have recognised those forces that you've mentioned. And in some cases they've had to back off positions they've run for a period of years. And all of a sudden, a Gonski type redistribution of funding of schools on the basis of need makes a lot of sense and should be properly funded. And I think that's a good thing. And the Medicare levy, Medicare guarantee and so, given the beating they took in the last election campaign, I think they've decided they've got to do something about that. Whether it's the beginning of a sustainably new positioning of the government, we have to wait and see. But certainly in terms of this budget, they have responded and they are worried about Pauline Hansen. She was polling as much as Christensen was in his seat. It's going to have an impact, right? So let's see if we can at least at the edge of responding. I agree with the comment that the purpose of public spending in the budget is I think social cohesion is very important. So in that sense I agree with Warwick about insurance. Someone once described the US government as an insurance company with an army attached. It's not so far off. We're an insurance company with a couple of submarines maybe 10 years time. Or 30 years time. But I'm not sure that I agree with Warwick about the way we would do that. I actually see our kind of our annual system of taxing and spending as providing that insurance. So, you know, the way that actually the raising of revenue from current workers who have money and spending on those who in that current year require that including things like parental leave. I see that as a useful contribution to social cohesion. Sharon, do you see this budget or this general political time as a shift in emphasis? Well, to go back to the point that you make it to Warwick's point, I think there is no doubt that we have to pay for what we want and what we spend. I think the issue is what are we prepared to pay for. And I guess I would disagree some extent with you Warwick about, you know, the role of the government in terms of insurance. Is it to provide insurance in the worst case scenario a catastrophic drought or times when people simply can't support themselves at all? Or is it to build a broader based social protection system that prevent people from falling into those situations? Now, you can't prevent catastrophic drought except perhaps by seriously addressing climate change. But there are situations that people find themselves in around disability. There are issues around periods of dependency when a child is born that I think there is a role for the state to fund. Recognising that there is a public good not just in cohesion but in the racing of children in ensuring that education is equitable and ensuring that we don't have widespread homelessness. I think fundamentally there are some issues to be decided upon about the kind of society that we want to live in and what kind of society we're prepared to pay for. Question up here. Hello and thanks to the panel and to the organizers for holding the event. My name is Mitch and I'm very much looking forward to starting my study at ANU in July. However, after the budget last Tuesday I no longer know if I'm going to be able to afford it or to justify the cost. My wife is Australian and I'm Canadian and in the last five years that we've known each other we've had a cumulative seven different types of visas in our efforts to try and stay together. I had a big camera thinking that my wife Liza would be able to work at her dream job for a major consulting firm and that I would finally be able to finish my engineering degree which I started in Canada nearly six years ago. Regretfully, since the budget last Tuesday this has been called in to question again because those who become permanent residents after January 1st will no longer be eligible for Commonwealth funding or domestic tuition. Of course, permanent residents are Australian citizens so the narrative can go something like this. They should go home and study if they can't afford Australia's international tuition because they're likely to return home and not use their education to better Australia anyway. In reality, at least in our case, it's indeed detrimental to Australia as a society with a lack of support we will be far from the only ones considering taking our skills and tax dollars overseas. This is not a measure which affects the sounds innocuous in a three-and-a-half-year election cycle. However, it will contribute to a shortage in Australia of working-age citizens able to pay taxes and fund programs not too many years from now. It's a big issue, I think. We'll get to the panel if we can. If I could just, sorry. You've got one more sort of my question to the panel is first, as members of the university can you offer any support or comfort or advice to potential international students struggling to file them a student debt the size of a housing deposit and further to the panelist's agree with what I'm saying and what can we do to demonstrate to the government and to the voters the importance of immigration and international students. Thank you. And there are a lot of implications of these policies in general. We'll start to start. I think that's an important issue. There's an even bigger one and I know that's a personal issue but universities like the ANU rely on a lot of high quality people educated elsewhere in the world. The change in the four, five, seven visas and the increased cost of getting people at the school levels we need to keep the education system at the level we want it to be is a very enormous impulse on the university sector. And so even though this argument was a political argument it was targeted particular types of sectors the impact on high human capital sectors not just universities but IT, a whole range of these areas is far greater than anybody would have imagined who would have been putting together these policies. So there's the human dimension which you've raised and the human capital dimension is even more wide ranging. So I have nothing I can offer you but to accept it yes you've nailed an important question and it's a much bigger problem than the problem you've raised. Yes. It's a very compelling personal story. I think one of the things you've raised which is important for tax policy when we think beyond national borders when we think about the global society is people often feel that they're citizens in a way of the world. That's what globalisation kind of makes us feel and yet tax and benefit systems are nationally bounded. In fact higher education is one area where we could potentially cross borders and in fact using income contingent loan structures and cooperation between governments. You know you can see that there's potential for example for Canada and Australia to co-front our high school you know highly educated sector. But we're stuck at the moment with this if you like old architecture of the tax and benefit system which makes it tough. I think it's an issue we'll hear a lot more about. Thanks for the question. I think that idea of the national versus the international point here and the other dimension to this politically is we're seeing you know on the one hand globalisation but with the Trump effect some of the debates around the French elections we're also seeing de-globalisation and so more and more pushback so I think it's a really problematic space. But the other issue that I wanted to add to I guess the comment that you made is that I think for Australia the other benefit that we often don't take into account of international students is not just when they stay in Australia and contribute to the economy but when they move to other parts of the world and are often fantastic ambassadors for Australia, assuming the experience is a good one, but also strengthen economic political foreign policy networks and I think that's a really important dimension of international students that we don't always give enough credence to. And I just say that I think if I just take the base political imperative they had to back off the zombie measures from the 2013-14 budget on the basis that they'd never get them through the Senate but they still thought they should be taking some money out of higher education try and make the universities more accountable I think you fall into the category of collateral damage of decisions that haven't been thought through properly I mean there's also a global trend, an anti-immigration, anti-globalisation trend which to some extent they want to tap into because of the Hanson effect and what's likely to happen in the Queensland State election. So you get this complex mix of political considerations that end up with a decision which they haven't thought through the collateral damage of that decision and I think that's what you're going to see I mean I would rather see a government that was prepared to come out and say look immigration has been fundamentally important to this country one of the greatest assets we have is a genuine multicultural, very tolerant multi-racial, multi-cultural multi-ethnic society and they go on the front foot and start defending it, no no they're running back trying to minimise the damage but you watch what happens I mean they're being driven into positions they should never be going to if you're taking a medium to longer term view of what's good for this country. Thanks John now we'll try and take a few questions so we can get through everyone there was a microphone just here and then we'll ask the question and we'll get this fellow here or this one, two, three thanks. Hi over the last 10 years or so, particularly since the Abbott opposition discussion around budget making and the Commonwealth Government has really been dominated by the idea of getting the budget back to a surplus budget repair debt and deficit disaster etc this is despite the fact that our current debt to GDP ratio is sitting somewhere in the vicinity of 40% We'll just ask the question if we can just a lot of people want to and your name sorry is Thanks Sean Given that the GDP ratio is quite low compared to Australia's own history and also internationally and given the wider economic climate of record low wage growth very very low inflation despite record low interest rates high levels of labor underutilization particularly under employment do you think that it's possibly misguided that we have such a focus on achieving a budget surplus despite the wider conditions in the economy as a whole Thanks Sean, so surplus question we'll just hold that for a minute, next one we'll just put these together because mine's very similar This budget seems to be a lot about enabling people to get university NDIS all those things they're all about a good community but we're ignoring the big elephant in the room which seems to be employment where are all these educated people going to go and what is in this budget is actually going to make young people who perhaps don't go to university who haven't really got a plan for their future because to be really honest the workplace now is more different and is going to change in fact work itself is going to change as a concept more over the next 5 to 10 years than we've probably ever seen and it's going to leave an enormous number of people who are really unemployable before they've even finished school and I think we haven't got anything that I can see in any conversation that's saying well what are we going to do with all these people who are surplus to our requirements Thanks for the question, it's a big issue so move them over here jobs and surplus, let's start on this side If I were to take a medium term view which is what we should be taking medium to long term view we have to realise that one of the scenarios we should be thinking about is that wages actually do stay quite flat for a long period of time we have a continuation of the collapse of full time employment and a continuation in the rise of part time employment and with under employment now already more than double the measured unemployment rate and likely to go up are we going to ever have enough jobs to employ the people that are coming out of the system whether they are coming out from universities or coming out of immigration or whatever I think strategically that base case maybe you'd say it's worst case scenario should be factored in because I think if you're doing it seriously the risk is that you end up with a whole cohort of people that can't get work and the debate shifts to how do we give them a living wage can the welfare system cope with something like that now it sounds pretty defeatist to say that I'm going to be thinking about that as at least a downside possibility when I look forward in terms of the surplus you've been talking to my wife she's a non-economist she said surplus should never exist the government has a responsibility to spend them now but as an economist I've got to tell you that the debt issue it's not the magnitude of debt today it's the acceleration in the public sector debt that is the issue and the constraint that comes from the interest cost sort of very low interest rates is significant and on top of what is a very large problem that is private sector debt household debt today is more than double household disposable income more than 120% of GDP I think to put the total debt issue together we are at risk of a debt crisis in the medium term we'll get on to the rest of the panel just quickly add this question in as well okay this is a question just following on from an article by Ben Ethrick in the Australian this university along with Australian universities generally spend an enormous amount of money on their vice chancellors and one of the major functions of the vice chancellor is to lobby and act as advocates for the university but I struggle to see any indication that those vice chancellors have been in any way successful in their lobbying in this budget so the sort of question is do any of the panel members see some indication of success and if there isn't some very clear indication doesn't that really raise the requirement for the boards of universities to say are we spending this money well perhaps we could just elect vice chancellors and pay them a lot less and we'd be better off alright so we'll add that question in that's right so we've got surplus jobs and vice chancellors success, salary and policy outcomes take on the vice chancellor so I'll just comment on Brian's salary I actually wanted to pick up on the question around education particularly and I'll leave the salary for Miranda you said this is in many ways an enabling budget around disability education I actually don't think it is an enabling budget for the reasons that I kind of identified earlier on I think there's a very worrying disenabling element to this budget for those people who really are at the bottom end of society but on your question about education and employment and what children and young people are being trained for I think that's a really fundamental long-term question and I wanted it to come at this by suggesting first of all that I think this requires more not less investment in education but I think it requires deep reflection on the type of education that we provide to young people and I just wanted to briefly share with you some research that I've been involved with or was involved with in colleagues over a period of four years where we were working with children aged between seven and twelve about what's important in their life what makes a good community there's a lot about education so the children that were in year three and year five or going into those years talked a great deal about NAPLAN about the focus on tests and what they needed to learn to pass the test and their stress and nervousness so hearing a seven or eight year old talking about being stressed about a forthcoming exam I think is problematic but I think we also need to question testing and for standardised testing but I think we need to really ask about the nature of education if what young people are most likely to need is creativity and imagination and problem-solving abilities whether we're actually coming at it the right way now that's not to say testing isn't important but the impact that it's having on children's learning and their focus I think is really worrying Thanks, Miranda so job surplus and university policy promoting university policy university programs is a key issue I'm not going to take that on except I'm going to take it to a side thing which is bank executives so just to take us back to the bank levy for a minute the treasurer was talking about internal efficiencies in banks and you did get the impression that he would really like it if you could absorb the entire bank levy in the CEO's salary the numbers just don't work even a $13 million salary we've got a $1.2 billion tax we're talking about there so the numbers just don't add up so I'm going to leave the vice chancellor to one side on the surplus point there are a couple of interesting things we do usually say and even though I'm not sure about a current capital formal separate budget criteria which we sort of have seen as what it said nonetheless we should be funding on the whole our current expenditure with our current taxes I do think that's a pretty good principle what's not ever recorded in the budget though and why a government is different from a household is the capacity to tax so we come back to you what are you prepared to pay for and how can we design a tax system that will fund what the people want we do come back to that capacity to tax as a government asset more or less it's an asset of our democracy that we need to leverage in the best way possible the other thing about the surplus that's interesting is don't forget our federal structure so the chunk of federal government money goes to the states the states have not been in deficit they've been more or less in surplus recently and so you do have to sort of take account of those points a bit more complicated on the work question the thing that disappoints me I think about this budget and perhaps why I say it's not tax reform it is but it is a bunch of revenue measures is that there doesn't seem to be any vision in the budget about the future of work and the future also I would say of entrepreneurship and business in the context of an uncertain global economy and you know technological change and I would really like to see some evidence in our budgets of our government actually taking those challenges seriously like taking climate change seriously and trying to think creatively about how we might change the tax and the welfare system to actually support people moving in and out of uncertain work moving in and out of these institutions of sort of the work and the market and the home, caring in the home in ways that are much more fluid and flexible than we've seen before and you'll have strong views on the surplus one actually I wanted to tackle the vice chancellor excellent I mean I'm stunned that you would rather have a lobbyist run a university who's very good at lobbying governments and someone with a vision about where the university should be heading in the long term I don't mind if the vice chancellor isn't a lobbyist I don't think you can judge the quality of the vice chancellor based on how they lobby you judge them based on the direction they're heading and the performance of the university by a whole range of different metrics some numerical some not I understand the question where you're coming from but I think it's a really badly placed idea that we want lobbyists to run our universities we already have lobbyists running our political offices and that doesn't work very well so on the surplus I've always argued against surplus fetishness I don't think it's a healthy thing to worry about the surplus you worry about the resources that you have to give up to cover the debt that's in the system and you worry about the vulnerabilities that excessive public and private debt create in your economy by a really bad shock and you've got very high levels of debt to GDP most of it borrowed from foreigners you have to pay it back and you will shed a lot of jobs in the process 91 is an example so it's not that it's the longer term issue of what it means and John got that exactly right on the work question I think that is really the most important question I've been doing a lot of work on robots robots and economic welfare the impact of robots and artificial intelligence when you look out not very far it's the fundamentally transforming trend in the global system and it is already hitting countries it's not openness to foreign trade that's really damaging a lot of jobs in a lot of countries it's the technological displacement and so the question is education has to be part of the solution how you train from a very young age as Sharon says but also how do you deal with the transfer issue in a way which and I don't think fairness is the right way to judge an individual policy you judge the whole systems fairness but not any individual policies how do you transfer wealth from very very wealthy innovators to people who have been displaced because if you look at an aggregate lots of innovation is unambiguously good on aggregate the question then is but how do you share in that and to me you need to think about that and there's no thought about that in any of this discussion amongst politicians it's all about playing games on political wins and loses when in fact there's a total wage of transformation coming our way and nobody seems to be spending very much time worrying about it and that worries me a great deal because we know that we're getting close to some people believe we're about to head off to transition to singularity where artificial intelligence will dominate everything and that's a different world than the world we're currently living in I think if you look at I think that's very important and we have to be having a discussion in terms of our whole society as to how we transition to that sort of world what annoys me is you get somebody like a Trump who capitalises on it by arguing the opposite you know he wins the rust built states by basically creating the impression that they lost their jobs because of China's imports or Mexican imports or you know with those illegals that came across the border they lost their jobs or whatever the fact is they mostly lost them because of technology and robots and things like that and it doesn't matter what he does with infrastructure and tax I don't think it's going to make too much difference to those rust built states and the reality will take time to sink in but when the initial political reaction is a populist one I can fix it, I can reverse it rather than look at the reality of the medium structural change you get really bad policy responses thanks right now we are nearly out of time we are going to come back to that just with one sentence closure in the minute I just want to show you up here if you're looking at the 10 year change of basket of goods and you can't quite see it in the back the highest one is alcohol and tobacco second education third health fourth housing so interesting reflection in the budget there I think I'm going to ask each of the panel just in two sentences only I'm going to ask each of you tomorrow and say please come up to my office and give me some advice that I will take start with John Houston we'll go apart what would you say I'd like him to have a genuine commitment to policy reform and he loves being Prime Minister it is an exciting time to be Australian Prime Minister I think my most simplest piece of advice would probably be just to bring back a women's budget and do some analysis around the impact I think the other piece of advice that I would give to him which I'd be surprising would be to actually go out and listen to what children are saying about how they view the future and the issues that are concerning them because issues about education about employment, about climate change are worrying 7 and 8 year olds look I have to say tax reform I know it's hard I do think systemic reform I'm happy that he's thinking about revenue I'm not sure if he's a treasurer he's thinking about revenue but it doesn't seem sustainable to me to keep levies or changing them on the margins we need to think about the tax and welfare system together I think you've got to state what you believe in and you need to have a strong foundation to substantiate why you believe what you believe and you convince others that this is the right way forward and you've got to build consensus across the political spectrum if you don't get bipartisan agreement on most things you will not achieve what we need and that's investment investment in a whole range of things you don't get investment if you don't have a political core that supports it and that's why investments weak that's why wages are weak that's why we're not growing as an economy as fast as we could so you've got to get consensus across the political centre thank you and it's our final thoughts on the politics of all this and what's going to happen in the next 6 months we'll get more of the same Malcolm hasn't got a competitor within the party many of Dutton's he answered what's the question but that's not to be quoted I think that in terms of the impact on the budget on the most vulnerable people and some of the welfare reforms are really problematic and I think that's where there's going to be civil society organisations in right this side I'd like us to have a look at the states actually I think not the US the states in Australia actually I think there's quite a lot of interesting diverse things happening in those different democratic governments and perhaps politically we should just change our focus for a while let the federal budget work itself out and have a look at what's happening at the state level so I'm going to go to Washington on Friday to hang out the Brookings Institution so I can sit there and listen to them talk about Donald Trump and say okay I'll leave in Australia that's not too bad excellent excellent well thank you very much it's been an incredibly enlightening discussion some of the country's brightest minds please thank our panel very much John Miranda, Sharon, Andrew