Interview with Mark Kenny and Liz Allen, Democracy Sausage, Australian National University podcast

Subjects: the Intergenerational Report, population, migration, global economy, housing, UN Security Council Mark Kenny: In the spirit of ANU’s motto, first to know the nature of things, we acknowledge the traditional custodians of country throughout Australia and their connections to land, sea and waterways which were never ceded. We pay our respects to their elders, past and present, and extend our respect to Aboriginal and Torres Strait Islander peoples listening today. [Podcast introduction] G’day there and welcome to another Democracy Sausage.

I’m Mark Kenny, director of the Australian Studies Institute at ANU. And I’m Dr Liz Allen, demographer at the ANU Centre for Social Policy Research. And you left out, Liz, that you’re the only person who’s actually succeeded in having this podcast temporarily renamed.

When we’ve had you on before, we’ve called it Demography Sausage because that is your great specialty. I do feel like I need a shirt for that, Mark. Yeah, that’s – well, I can get you a Democracy Sausage shirt – – and I’ll accept it. – T‑shirt.

But the demography one, we’ll have to – that’s a work in progress. Anyway, look, let’s get to the business here today, because the business here is that we’re talking about the Intergenerational Report with none other than the Treasurer of Australia, Dr Jim Chalmers. Jim, welcome back to Democracy Sausage.

Jim Chalmers: Thanks, Mark, and thanks, Liz. Am I the only person to get a Democracy Sausage mug on national TV? You are, so far.

So, far, yes. The day ain’t over yet. That’s true, that’s true.

But we’re thinking in much longer terms than a day, aren’t we, with this Intergenerational Report? We’ve just come from your Australia and the World lecture, which is something the Australian Studies Institute does each year, an annual lecture. We have had all kinds of really prominent Australians do those lectures in the past.

So, we’re really grateful that you were able to do this and to sort of meld it with the release of the Intergenerational Report. I wonder if I could be so bold as to ask you to give a very sort of thumbnail sketch of what this Intergenerational Report – because there’ll be people who don’t know what the IGR is. Yeah.

First of all, thanks, Mark, for putting on the big event today so we could release the Intergenerational Report. I ran into Mark at a charity event a few months ago and we thought maybe this was a good place to do it here at the ANU. So, I’m very grateful to you, mate, for hosting us today.

The Intergenerational Report is something that governments put out every 3 years or every few years. And it tries to say what will the economy and society look like in 40 years’ time, which is obviously a very difficult task. Liz thinks about this all day, every day, and she knows how hard it is, how uncertain it is to predict the future.

But it’s a worthwhile exercise because when you’re the Treasurer or when you’re a government, or indeed in the private sector, or any walk of life, the challenge is to deal with the things that are coming at you from day to day at the same time as you try and plan for the future. And the IGR helps us plan for the future and this one is really about 5 big shifts in our society and our economy.

So, artificial intelligence, the energy transition, the changing nature of our industrial base, the ageing of our population and the fracturing of the global environment are the 5 big influences. And so, the IGR tries to predict what that means for our budget and our economy and our society more broadly. And really, the key takeout from the whole thing for people who aren’t going to pour through these couple of hundred, 300 and something pages is we’ve got very serious economic risks coming at us from around the world.

We’ve got very significant pressures on the budget, but Australia’s got some very substantial advantages as well. And so, in some respects it’s a confronting document, but it’s not a pessimistic document because it recognises, as I do, that we’ve got a lot going for us as well. Now, I’ll come to you just very shortly, Liz, but one way of looking at this, right, is to, is to imagine, I mean, the challenge of imagining 40 years into the future.

Of course, it’s not just about 40 years, it’s about all those intervening years. That’s an important point to make, right. So, trends that are happening, things that will mature and develop and new challenges that will arise and so forth, and you can only know so much.

But a guide might be to look back 40 years right from where we are at the moment and we’re talking about what, 1986. It’s a dramatically different country in 1986 than it is now. If we think about the way we work, the technology, the communications, the digital revolution, what you might say is the sort of realignments that are going on, in politics, economics, the global situation, dramatically different.

So, that does underscore, in a sense, and there’s a sense that not just is it changing, but it’s changing faster. Changing faster. Yeah.

I mean, on almost every page of this report is this sense of that the pace of change is accelerating. Certainly, technological change is accelerating much quicker than we even anticipated a few years ago. And so that really is one of the big influences.

And what we’re trying to do is to say, well, with the accelerating pace of change must come the accelerating pace of reform and opportunity to catch up and keep up and be beneficiaries of this change rather than victims of this change. That’s really the motivation that sits underneath it. And if you look at all the things we’re doing, including some contentious things that you and I have spoken about on this podcast before.

Reforming the tax system, reforming the housing market, all our efforts to strengthen super and manage the risks in artificial intelligence – all of that is in one way or another justified by the conclusions of this IGR, validated by, I think, in time, vindicated by this change we’re seeing in our economy and our society. Which necessitates us not just to acknowledge or to observe this pace of change which is accelerating, but to do more to deal with it so that we can benefit from it rather than fall victim to it.

Yeah, look, I think what strikes me is that, as you say, there’s a lot of change since the 80s, but there’s not a lot of change in the assumptions and the troubling pattern and the challenges on the horizon from the first IGR. And the government is now – So, that’s 2002, right? That’s right.

Well, yeah. And so, the government is now in the unenviable situation of having to fix or intervene in a process where the can has been kicked down the road long enough that we’re now at crisis point and uncertainty is definitely embedded in fear and a loss of hope among Australians. So, I guess my question is, how do we restore and what role does the government play in restoring certainty, particularly for young Australians, and that enabling hope for the future?

I’m not sure that we can restore certainty, but I do think we can play a helpful role in restoring confidence. A lot of these big intergenerational forces are disconnecting people from, you know, faith in democratic institutions. As you know, and have looked at, you know, this idea that if the accelerating pace of change is designed to benefit somebody else, then the risks of somebody feeling disconnected, disregarded from our economy and from our democracy becomes that much greater.

And I think one of the reasons why there is so much political discontent right now, obviously in the near term, it’s about cost‑of‑living pressures, which we’re responding to. But more fundamentally, I think there is this sense that accelerating change is putting more pressure on people, that is making them feel disconnected from the benefits of a growing economy and therefore lose faith in democratic institutions.

And so that’s the kind of social and political overlay. And you don’t get a lot of that commentary in the IGR itself because it’s, you know, essentially a Treasury document released by the government. But certainly, in my speech here at the ANU, I tried to say this is what’s happening here.

This is why either people have already given up on the system or they’re at risk of giving up on the system because this accelerating pace of change is putting more pressure on them. And it risks this idea that the future will be better than the past. And so for us, that is confronting and that is the motivation behind some pretty difficult stuff I did in the Budget only a few months ago.

In housing in particular, I think for young people, the housing market is really the defining intergenerational issue. And so, yeah, we could have left it exactly as it was and kicked the can down the road, I think, as you just said, we decided not to do that. People will have a view about that.

That’ll be contested and contentious, but I think it’s the right thing to do for the reasons that underpin your question. I suppose unfortunately, that decision itself, though, kind of covers both hemispheres of what we’ve just been talking about, which is it involved having to break a commitment at the election. It had its policy merits.

Right. Which we’ve discussed, and I think those are obvious. And we want our governments to be dynamic and to do reform, but it did so at the expense, and certainly your political opponents will be, have been making this point and will intend, you know, intend to continue doing so, that it’s done so at the expense of the sort of faith in the system, faith in this government.

I think you restore trust in democracy by taking good, well‑informed decisions that pay off over time, even when that invites an element of political criticism. And I think the last time we spoke, or perhaps the time before, I mean, I’ve acknowledged that we had to weigh up changing our position with doing something that we increasingly saw as the right thing to do.

And, you know, the whole IGR is not about housing, but it’s a good way to think about these intergenerational obligations that we have. Because an option available to our government and to every government is to see the way that these intergenerational pressures are mounting and to decide whether we just talk about them or whether we try and do something about it.

And we’re trying to do something about it. And not just in housing, but in the income tax system, cutting taxes for workers, making superannuation stronger, dealing with the risks of AI. All of these things are about not just acknowledging this accelerating pace of change, but trying to do something about it.

So, we’re positioning our people to be beneficiaries from it all. One of the things, it seems to me, that arises from the report is, and your discussion of all of those dynamics, the 5 things, you know, the pace of change and so forth, is the ability of not just a political system, but I think, a whole community to do change. That is to be nimble.

Right, as new challenges arise and to take advantage of them or to minimise the risks of them, whatever it might be. And yet we have a political system, a political culture that feels more divided than it has at any time in my lifetime. And there’s a whole virtue being put behind on the political right on sort of resistance to change.

You know, net zero being the walking away, as the Coalition has done from net zero being a very good example of that. But there are, there are plenty more. And we see this influencing the migration debate, influencing taxation discussion, housing, range of other things.

Right. So, in a way, the challenge for governments in the future, and perhaps in a very crucial way, the challenge is to sort of rebuild a community confidence in that ability to do things, to respond to new situations. Yeah, I think that’s right.

I mean, I think successful reform will help make the case for more reform. You know, I think there will be a sense of when you can bed down difficult reforms and do it in a way that people eventually come to accept, that makes it easier to do the next thing. And does that turn on people not feeling quite so pressured in the hip pocket?

Because that’s sort of a background condition, isn’t it? It really is. And this comes to the other point I want to make.

We don’t pretend people aren’t under pressure right now. It’s releasing an Intergenerational Report in the teeth of some difficult challenges in the here and now. I understand the risks associated with that, but the 2 main points I make about your good question, Mark.

First one, the way that power is set up in our society and in our politics is much easier to knock something over than to build something. That’s the first point. And the second related point.

When I studied here at the ANU a long time ago, we learned about the big dividing lines in our politics. Left, right, conservative, progressive. I think there’s an entirely new dividing line in our politics and that is there’s a group of people who see the pressures on people are accepted, acknowledged, right across the board.

Now there’s a group of people who want to pick at that, prey on that, catastrophise that, politicise that, but not do anything about it. I mean, that’s essentially One Nation. And there’s serious governments like ours operating from somewhere near the political centre who don’t just acknowledge the pressures that people are under, but want to do something about them in the here and now, but also in the intergenerational context.

And that’s the big divide between hoping that these challenges get worse, that you can benefit from them politically versus acknowledging them and acting on them. And if there’s a theme of our government, it’s that we don’t just acknowledge cost‑of‑living pressures. We’ve got tax cuts and more bulk billing and better wages to respond to that.

But in an intergenerational sense, we don’t just acknowledge the problem in the housing market or in incomes. We’re doing something about it, tax reform and the like. We’ll take a quick break there and be back in a moment.

Welcome back. One of the things that I find interesting in this report is the comments you’ve had to make and you’ve made in your address and also which is, you know, forecast in the document itself around superannuation and the crucial role that’s going to play in providing wealth and security, financial security for future generations. Now, that’s something that you’re rightly proud of.

But it does highlight, I think, the potential for another problem, which is that we’re very well aware currently that in the housing crisis, as we call it, that we have at the moment, there is a, an imbalance between those who don’t have access to the bank of mum and dad. And those who do. Are we talking about a different version of that into the future?

Because, of course, a lot of people will be – a lot of superannuation accounts won’t be expended by the time people are expended, if I can put it crudely. And they’ll pass those – Indelicately. – Indelicately, yeah. And so those funds will go to their offspring.

Right. And so are we building into the future a kind of an inheritance class? A class that is advantaged by that and plenty of other people who won’t be.

Look, I don’t think that’s the primary impact of super, but I mean – Well, it’s not the primary intention of it. No, but obviously, you know, there’s an issue in superannuation where people are incredibly conservative about how they draw down on their super in retirement. Because there’s the thing that the boffins call longevity risk, which is people don’t know for how long they’ll need it.

And so often that means they’re more conservative than they need to be and then they pass on a bigger proportion to their kids. There’s an issue there. But super in this IGR is really one of the standout positive stories.

Because the genius of super is, as a country, we’ve got more older people and yet the spending as a share of our economy on pensions goes down rather than up, even though retirement incomes are going up. There’d be countries all around the world looking at our super system and saying, that is genius. We’ve got retirement incomes up, spending on the pension down while more and more people retire.

That’s one of the great Australian superpowers, to pardon the pun. Now, I’m a fan of super, right. And I’m not saying you’re bagging it.

No, no, no I’m not. But I’m going to put something to you that might sound like, oh, it’s – – going to be referring to the last question. Can I just throw this in?

We already have an inheritance class in Australia. If you’re born to the wrong parents and you lose the ovarian lottery, so to speak, that class line exists. But it’s more along the lines of a house.

Yeah, yeah, no, I accept that. And I guess what I’m talking about here is the potential for that to be the case in the future. And you make an interesting point, Jim, about the expenditure on the age pension versus, you know, as a function of the overall community and a rising number of older people.

And that actually coming down. And that’s really interesting. But of course, supporters of other policies might say, yes, but we tax super concessionally and therefore there’s foregone revenue in the budget all the way through in the accumulation of that nest egg.

Yeah, people will say that. I mean, we took some difficult decisions to make those tax concessions a little bit fairer and a little bit more sustainable. Recognising – This is the accounts of $3 million and over.

Yeah, we created essentially another threshold impacting a tiny, tiny, tiny amount of Australians, but really recognising that there is a tax expenditure there as well. But there’d be very few if any countries looking, even accounting for that, very few if any countries who would look at our system and not want to trade places with us. In the context of ageing populations right around the world, super is really the secret sauce in lots of ways that gives us a lot more confidence than we would have otherwise about these intergenerational pressures.

And that’s why we’ve been strengthening super. You know, getting it to 12 per cent, paying it on parental leave. You know, all of the effort we’ve put into super is because super is for retirement.

There will be more and more people retired. They’ll be retiring with much, much bigger balances over this IGR period, and that’s overwhelmingly a good thing. If I can put this to you.

You said in your speech here at the ANU that economies aren’t built on forecasts, they’re built on actions. One Nation is doing very well at the moment because it appears to be filling a gap, if you like, that the major parties have created essentially for it to fill. And I wonder if that feeling of left‑behindness, if I can phrase it like that, particularly among young and disenfranchised folk, how do you turn something like the IGR document into actions?

And if there’s one thing you really want folks to know about the actions built into this IGR, what are they? Well, we’ve talked about housing. I mean, that’s a big one for me.

We’ve talked about superannuation, another big one, making our economy more productive so we can lift living standards. There’s about 10 different ways that we’re responding to the challenges in the IGR. And you asked me about One Nation, which is obviously right now people are under pressure.

They’re looking for different ways to express that politically. We acknowledge that as well. But if you look, even in the last few weeks, you look at the 2 policy announcements that One Nation has made, both of them would make Australians worse off.

You know, one would smash their retirement incomes, one would smash the economy. So, super and migration are the 2 big policy announcements they’ve made. So, if you go beyond the kind of atmospherics, which I know are powerful.

But if you go beyond the atmospherics of what they are talking about, and wages too, typically, what they are putting forward would make people worse off rather than better off. And so for us, you know, it’s a difficult time around the world to be an incumbent. But you’d rather be an incumbent than not, because you can actually deliver real change in housing or super or wages.

And I would stack that up against the impact of the sorts of policies that parties of the far right have been putting forward, including here in Australia. And yet we see in places like Germany and many, many other places, they’re making now material gains, not just in opinion polls, but ballot boxes. And it feels pretty scary.

I mean, I think anyone who sees the developments in Germany find that incredibly confronting during the history of that country. But also I think there’s a broader point there and really important broader point. We’re tempted to think in Australia, whether it’s economic conditions like inflation or weak productivity growth or pressures on the budget or politically with One Nation, or we’re tempted to think in Australia that this is just happening to us, but really there is a global phenomena playing out.

And what I tried to say in the speech around the IGR and acknowledging all of the difficult stuff, often confronting stuff that we have to deal with, we are genuinely better placed and better prepared and got a better plan than other countries. And that’s not complacency talking, but there is a degree of confidence, I think, that we can work our way through the difficult economics and politics of the near term and do better than other countries have been doing or will do when it comes to grappling the way that our economics is playing out in our politics.

It’s a really fascinating time because there’s a sense that the answer to the fear in the community is courage in government, you know, to keep reforming and to be doing things, to be actually providing solutions to problems, to be checking them off and being prepared to even look at some big things. I mean, you did your PhD on Paul Keating, a big reformer, right?

Consider this reform, because the IGR talks about a population in the future that is older, that has a smaller workforce as a proportion of those in the overall population. So, smaller income tax base, for example. We see wealth accumulating to people in superannuation in ways that the system has been designed, as we just discussed before, that’s a good thing.

But nonetheless, is there a danger then for young people who will be coming into the electoral system and thinking this is not set up for me, I’m not, I’m not represented by the system in the way that I need to. Could it be that Labor needs to be looking, perhaps not this term, but in future terms at electoral reform, at perhaps guaranteeing a number of seats in the parliament for younger people, for example, to ensure that there’s a balance of interest across the parliament?

Well, I haven’t given that a moment’s thought as the truth of it. I’ve got other things to focus on. But I will say that one of the things I’m proudest of, one of the most remarkable developments in my time in politics is the way that our parliamentary party is way more reflective of the community than when I got into politics in the first place.

You know, our party room, not to be partisan about it, our party room is mostly women. There’s a remarkable amount of cultural diversity and also generational diversity too. I mean, I spent time with Charlotte Walker the other day in her early 20s in the Senate from South Australia.

Wonderful Senator in her early 20s. We’ve got members of all ages really, from Charlotte all the way up to – I don’t dare guess who might be our oldest member of parliament, but we’ve probably – Probably Mike Friedlander. It might be.

Yeah, it might be, but that covers I think at least 50 years. So, that’s not a horrendous generational spread. You mentioned 1986 before you see photos from that era.

There’s a lot of 60‑year‑old white blokes with comb‑overs in those photos. And, I’m heading there myself, I’m not making judgments on anyone but our parliamentary party is, is plenty diverse, much more diverse than it’s ever been. But that’s going to be the challenge going forward, isn’t it.

I mean, I suppose what I’m saying is democracy, you know, needs to itself keep moving. It’s not like a perfect system that was set up, of course. Right.

It needs to be, it needs to adapt to these changes. Right, so. And faith in the democracy and faith in the economy, faith in reform, social unity, all of these things are kind of interrelated, they’re dependent on each other.

Yeah, I agree with that 100 per cent. I mean, a lot of what we talked about today is because you can’t separate what’s happening in the economy, what’s happening in the world, from what’s happening in our politics. And anyone who pretends that you can is kidding themselves.

And right around the world, people express their economic frustrations politically in legitimate ways. And again, when you’re a government like ours, centre‑left, methodical, considered, we try to be the adults in the room. When you see those pressures, you don’t pretend them away, but you try and alleviate those pressures, not just for political reasons, but because those pressures are real.

We don’t dismiss them. You wouldn’t hear a single minister in our government ever say that people are wrong to talk about the pressures they’re under. They are under pressure.

A lot of that’s global. A lot of that’s being imposed on us. Some of it is domestic as well.

And so, you know, every day that we’re in government, we’re trying to work out what can we responsibly do to respond to these legitimate pressures at the same time as we plan for the future. And sometimes the things that we’re doing in the here and now will pay off in the generations to come. You know, cutting income taxes because of that income tax burden, making the housing market fairer, making super stronger, all of that stuff we’re doing in the near term, but will pay off considerably in the decades to come.

I want to turn now to kind of 2 things and that they do stick together. The matter of migration and the inherent nature of the IGR not being a bipartisan stance is how, when we’re thinking about the future of Australia, can we create something like the IGR or a future-facing policy stance without having some kind of talk with the opposing side about what the future might hold?

And within that, I wonder if you can focus on the aspect of migration and how we wade through the weeds here when it comes to that uphill battle that we’re faced with where perception is far more powerful than reality for the average person. Well, I think on the first point, bipartisanship is harder when our main opponents are fighting on 2 fronts. I mean, the, again, not to get kind of too partisan about it, but if you are the Liberal Party or to some extent the National Party, you’re always, they will always be working out how do they recover some of the ground lost to One Nation.

And so I think that makes bipartisanship from their point of view less attractive. And that is playing out in the migration debate because we’ve taken a very sensible approach to migration. We’ve got net overseas migration down almost 50 per cent from its peak.

We’re taking a more active role in managing elements of the program, but we’re trying to do that in a way that balances all the considerations, economic and social and all of the rest of it. And you can see in most of this Intergenerational Report how important it is that we do maintain a robust migration system. Again, a lot of other countries would envy our migration settings, because in the context of fertility rates, which are falling faster than we anticipated even 3 years ago, in the context of an ageing population, a well-maintained, well-run, robust and transparent migration system is more important than ever.

And so we’ve gone for the responsible path on migration. We’ve tried not to play populist politics with migration, but the environment for it is difficult because we’ve got at least 2 parties to our right who would, I think, rather politicise the big challenges in migration rather than help us solve them. So, if I might ask, is, when it comes to migration, is it a political strategy or is it thinking about the numbers first?

What is best for Australia, which one goes first? Well, it’s an economic strategy. I mean, it recognises that migration is a force for good in our economy and also in our communities.

I represent a very multicultural part of Australia and I’m proud of that. I value that, cherish that. But overwhelmingly, it’s about trying to get the migration settings right in our national interest, our national economic interest and in other ways.

And right now, that means normalising net overseas migration numbers, getting them closer to something like 225,000 a year, making sure that the visa system is robust, making sure that we’ve got the right amount of temporary workers and skilled workers to satisfy our economic needs. And in a world where this debate is very emotional and often very populist, our job is to explain how we can get the net overseas migration numbers down at the same time as we maintain the things that we desperately need from migration.

And I’d be very surprised if any objective reader of the Intergenerational Report wouldn’t share our view that migration is a force for good in our economy and in our society, increasingly important in the context of an ageing population, where we’ve still got skills shortages. And so we embrace this responsibility to do the right thing, even in the context of this very emotional, very supercharged broader migration debate.

Final question, because I know you need to be moving on. Why is it important that we have a seat on the security council, the UN Security Council? Because that’s what the PM’s pursuing at the moment.

I just wonder in the context of Australia and the world, and the priority that’s been placed on that, why do you see it as important? Well, one of the big shifts in the Intergenerational Report is the way that the world is fragmenting, which is kind of a classy way of saying that the world is going mad. And for a middle power like Australia, we get much more out of more engagement rather than less engagement.

And a seat at the top table at the UN, I think would be a really important way that we demonstrate how much engagement matters to us, even at a time when the old relationships, including trading relationships, are splintering in the world. The calm of the post‑Cold War period being replaced by the chaos of the current day and into the future. And so one of the things that Australia and Australians are really good at engaging with the world on our terms.

And I think a seat at the UN Security Council will help us make the case for the kind of world that we can succeed in. And it’s a long‑term engagement, isn’t it? I mean we’ve been there right from the start in a very critical way.

Yeah. And when you put out an IGR is looking exclusively forward. But, everything in our past is contextual.

And you know, we’ve always been good at engaging or certainly since World War II, we’ve been really good at engaging with the world. We were part of the conception of the UN and the Bretton Woods Institutions and all of that. There’s a lot that we can be proud of.

And if you think about these 40‑year cycles that our economy moves through since Federation, the agricultural economy, industrial, the economy that Paul opened up to the world, every 40 years we create a new economy together. And this new economy that we need to build now, we need to make ourselves indispensable to these global supply chains and global engagement’s a big part of that.

We need to get AI right, minimise the risks of AI. We need to make sure that we’re part of this global energy transformation. And all of that is possible.

All of that is possible. There’s so much in our past that gives us great confidence that we can make this work for us. Even as the challenges and the risks escalate, so too do the opportunities for Australia and that includes the way that we engage with other middle powers and the big powers, whether it be via the UN or in other ways.

Treasurer, thanks so much for being with us on Democracy Sausage. Thanks, Mark. And thanks, Liz.

Thank you, Liz. Thank you. That was terrific.

And that’s Democracy Sausage for this week. Thank you again and bye for now.