Alberici affair shows ABC needs expert economics analysis

With a bachelor of arts and a major in Italian, is the ABC’s Emma Alberici really the voice of economic reason?

ABC reporter Emma Alberici. Picture: Supplied

A fortnight ago this column discussed the lack of business and economics expertise at our ABC. Right on cue the Emma Alberici affair blew up three days later.

The Australian Financial Review savaged Alberici on February 15 for a news story and analysis piece that have been defended or criticised depending on the political and economic expertise of writers who have waded into the debate.

The news piece on companies paying no tax was amended on February 16, while the analysis was removed from the ABC website for a week before being substantially rewritten and posted again on Thursday.

Paul Barry on the ABC’s Media Watch last Monday criticised aspects of Alberici’s work. Yet most pieces about the ABC’s decision to react to complaints about Alberici’s work from the Turnbull government have not nailed the problem journalistically. Here is an unvarnished truth: it is easy to produce a story with a desired political outcome and present it as “balanced” simply by carefully choosing who you quote.

In Alberici’s case a lot of weight was given to left-wing academic John Quiggin and economist Saul Eslake, a prominent commentator whose position on the central question — do corporate tax cuts eventually trickle down as increased wages? — seems to have changed over the years. Most market economists would agree with the “trickle down” proposition.

Alberici did quote Deloitte Access Economics partner Chris Richardson. He told the ABC’s Q&A audience three weeks ago the government’s proposed tax cut from 30 per cent to 25 per cent for companies with turnovers of less than $50 million would add about $20 billion to annual GDP. His evidence? Just trust the experts, the economic modellers, he said.

Some subtlety of thought is needed here. Truth is, in a $1.8 trillion economy such as Australia’s, $20bn is not a giant leap forward. It is just over 1 per cent. Nor is any link between increased company profits, investment, growth across the economy and eventually wage rises linear. Yet the history here and in the US is pretty clear. The big company tax cuts of treasurers Paul Keating and Peter Costello did stimulate growth and eventually wages here, as did Ronald Reagan’s tax reforms in the US. It looks like the US economy and wages are already reacting positively to Donald Trump’s proposed cuts.

This paper’s contributing economics editor, Judith Sloan, nailed Alberici’s piece when she wrote on the Catallaxy blog on February 19 that the analysis looked like a grab bag of quotes harnessed to prove the point Alberici started with.

In a column in The Weekend Australian on February 17, Sloan challenged the left’s belief that companies here don’t pay their tax bills. Tax Commissioner Chris Jordan has been fierce in chasing down debt; and, as Sloan says, reducing the corporate rate for companies paying zero now (because of depreciation, losses carried forward etc) won’t cost the government a cent. Self-evidently.

Alberici’s analysis piece did precisely what the ABC objects to in the reporting of climate science. It created a false balance by giving much weight to a view not widely held in the economics profession but dominant in the political thought of the Labor Party, the Australia Institute and the Greens. It did not respect the modelling Richardson referred to.

It is not just the ABC in the company tax quagmire. Former Sydney Morning Herald business reporter Michael West and even parts of The Australian Financial Review have fallen into the trap of citing effective company tax rates against turnover rather than against profit. Sure there are serious issues about intercompany loan deductions used by foreign-based companies that the Australian Taxa­tion Office has chal­lenged suc­cessfully in court. There is also the issue of marketing hubs out of Singapore that BHP and Rio Tinto should be ashamed of using to dodge tax.

Yet the truth is, when a company such as Chevron spends $80bn building natural gas facilities here, it will take a long time before that cost is depreciated and profit and tax begin to flow. Ditto Qantas. Its restructuring after the GFC involved large losses as Qantas chief executive Alan Joyce took on his pilots’ closed industrial relations shop. He now expects Qantas to be paying company tax again next year after carry forward losses have been claimed and new plane depreciation costs ease.

Business writers who do not understand such things should not be writing in the area. Those who wilfully conflate turnover and pro­fit should be run out of journalism. Alberici is a good reporter and strong interviewer. She has cover­ed business, been a foreign correspondent and hosted the ABC’s Lateline, where regular viewers soon understood her political leanings. So what? We all have them. The question is: does she have the qualifications to be the ABC’s chief economics correspondent? As Aaron Patrick pointed out in The Australian Financial Review last week, she has a bachelor of arts with a major in Italian.

Look at this paper’s economics team. Sloan is a former professor of economics, a former commissioner of the Productivity Commission and the Australia Fair Pay Commission, and has sat on the boards of Mayne Nickless, SGIO Insurance, Primelife (chair) and Santos. Economics editor David Uren has been a senior economics writer for this paper for 15 years and was editor of Business Review Weekly. He has a BA (hons) and a masters of business. Economics writer Adam Creighton studied economics at Oxford and was an economist at the Reserve Bank. Economics contributor Henry Ergas is a former economics professor at the National University of Singapore and has worked at the OECD, the Trade Practices Commission and for several economics consulting firms.

These appointments were designed to ensure The Australian has the best economics reporting and that the coverage also fits with the paper’s mission to advance national prosperity.

Different papers cater to different demographics. So The Sydney Morning Herald carries Ross Gittins, far less market oriented than this paper’s economists yet perfect for the Sydney inner-west teacher set and Sydney north shore doctors’ wives. The ABC needs to reflect on what it wants from its economics coverage: a prosperous Australia or policies of envy.

In my view the ABC needs to hire an expert economics editor. Comment and analysis should be left to that person while Alberici focuses on business and economic news and interviews. Freeing up ABC editorial guidelines as suggested by Media Watch will make matters only worse.

So will corporate tax cuts flow through to wages? Yes, eventually, but the world only started to come out of the greatest economic shock since the Depression seven years ago. And domestically the unwinding of the mining construction boom has left spare labour market capacity across the country. Three billion people are entering the First World, competing with workers from traditional developed countries. The internet, the mobile phone and robots are changing the value of human work, pressuring wages.

Are corporate tax cuts really the best way to stimulate growth? Probably not. There is a strong argument for personal income tax cuts that extend to the 50 per cent of Australians who are net payers after benefits. But that would raise even more divisive greed arguments from the Australia Institute, the Greens, the ALP and our ABC.