25 August 2015
Transcript - #2015182, 2015

Interview with Ross Greenwood, Money News

ROSS GREENWOOD:

Joe Hockey, the Treasurer, joining us on Money News. Many thanks for your time Joe.

TREASURER:

Great to be with you Ross.

ROSS GREENWOOD:

Look, here’s the thing. A lot of people wonder whether the Chinese fall is really speculative hot air that’s coming out. The big worry, the concern more was, when you saw the United States stock market falling as heavily as it did over two sessions, more than 1,000 points in those two sessions. That made you wonder whether, really, this would drag on around the world? 

TREASURER:

The fact is, as I said this morning, it’s about the fundamentals and the return on investment is still good in Australia and it will continue to be good for so long as the economy performs. Now, the fact is that the United States economy is near full employment and its economic recovery is strong enough for the Federal Reserve to be thinking about increasing interest rates. The European economy is better than expected. This time last year, on the way to the G20, we expected there was a 40 per cent chance Europe would go into recession this year. It’s actually defied that and starting to get some good growth. Japan again, getting some growth which it hasn’t seen for years, and China – my information is that the transmission rate of interest rate cuts and monetary policy easing in China is starting to flow through even to the property market there in the capital cities. So, the information we’re getting is that the fundamentals of the Chinese economy continue to improve. Having said that, the Chinese stock market is still 30 to 40 per cent higher than it was a year ago which really does defy logic given that the Chinese economy, it’s been speculated on, has been growing at a slower rate than expected.

ROSS GREENWOOD:

Indeed. Many people have told me that really the problem is that the seven per cent growth rate, this is Kerr Neilson, the Chief Executive of Platinum Asset Management, one of the best investors in this country. He always said that the seven per cent growth target that China had was nonsensical. But one point about Australia, you said so long as we continue to perform, one of the real issues about Australia’s economy right now is that it is not performing. It is being dragged down by the mining sector for sure. When you’ve got the Reserve Bank Governor, Glenn Stevens, says he thinks maybe the long term growth rate for Australia might be more like 2.25 to 2.5 per cent, rather than around 3.2 per cent to 3.25 per cent. That is a cause for concern. It says that something else needs to change in our economy if we’re to get the sort of growth rates that we need to pay down the national debt.

TREASURER:

Well, I think he’s been taken out of context a little bit there but I understand what you’re saying. How do we improve economic growth in Australia? It comes through delivery of the economic plan that the Prime Minister and I and the Coalition Government has started doing. And that is, to get rid of the taxes that are handbrakes on the economy like the Carbon Tax and the Mining Tax. Importantly, to open up new trade deals as we are with China, Japan and Korea. At the same time, start getting the Budget back to a sustainable path, and we’ve made $50 billion of savings and they’ve already gone through the Parliament. Also, we’re rolling out the biggest infrastructure program in Australia’s history. Now, you know, two kilometres from me Ross is the Sydney CBD which has 165 registered cranes in it at the moment. I mean that is an illustration. When the Prime Minister said Australia is open for business, he wants cranes over our cities. Nothing illustrates it better than all the cranes over Sydney which is part of the partnership we’ve got with the state government, and which we’re endeavouring to do with other state governments around Australia.

ROSS GREENWOOD:

So is that the Mike Baird effect or is that the Tony Abbott effect?

TREASURER:

Well, let me tell you, it’s a combination because we are contributing a significant amount of money to New South Wales - billions of dollars to New South Wales.

ROSS GREENWOOD:

Is it happening in Brisbane? Is it happening in Adelaide?

TREASURER:

Well yeah actually. In Brisbane, yes. In Melbourne, even you’re starting to see if you look out the window in Melbourne you can see a lot of cranes. Even in Hobart I think there’s two cranes which they haven’t had for about 20 or 30 years. But the fact is, if you’ve got state governments that are willing to work with you, and the New South Wales Government has been the most enthusiastic in that regard, then you can see the benefits of government policy. But it’s also got to be combined with other things. I mean we have the lowest interest rates Australia has had in decades, that’s part of it. Obviously the lower Australian dollar compared to the US dollar is helping Australian manufacturing exports, it’s helping Australian agricultural exports, and it’s also importantly helping us with exports in tourism and education.

ROSS GREENWOOD:

Treasurer, you and I both know that’s not enough. You and I both know that it’s about the tax system. We both know that it’s about industrial relations. We both know it’s about trying to get rid of penalty rates, and a range of others. I tell you someone who I spoke to today, someone you know very well, Martin Parkinson. He’s the former Secretary of our Treasury. So, he’s one of the big three along with you and the Reserve Bank Governor who have run Australia’s economy. Here’s what he told me not only about the market fall today, but why it should be seen as a wakeup call to politicians and the community generally:

“we should see this as a catalyst for reform. Not a reason to sit on our hands, far from it. This is the sort of thing that we’ve been warning about, not the specifics of it, but the external shock – are we ready for it. Are we ready for the big changes, the change in economic weight towards Asia, the impact of technology, demographic change, sustainability issues. Are we ready for it is a nation? Australia’s no different to a lot of other advanced economies. We’re ill-prepared. Now, we’ve been talking about the need to get prepared. But it’s time to move from talking about it to doing something about it.”

And Treasurer, isn’t one of the real problems, when you tried to implement that reform in your first Budget, the Senate wouldn’t come along with you, the opposition parties wouldn’t come along with you, the crossbenches wouldn’t come along with you. The business community was reluctant to come with you. And the community was generally dragging its heels.

TREASURER:

Well, and since that time we’ve seen a turnaround in attitude from a lot of those parties. The Labor Party is still recalcitrant, but you’d expect that. The fact is you’re seeing the business community recognise that we need to have reform, particularly taxation reform. But also, it’s a partnership Ross. I mean reform isn’t going to come from the Treasurer, the Prime Minister or anyone else standing on a soapbox in Canberra telling Australians what’s good for them. What we are seeing is more empowerment of consumers than ever before, and I’m giving a speech about this tomorrow morning. And consumers, because of mobile phone technology, because of the fact that they can access credit more readily than ever before, you’re able to setup a small business that can export to the world on your mobile phone in the lounge room at home. Now, what those consumers want is to be free to be able to have a go. In our last Budget we delivered a $5.5 billion tax cut and tax package for small business. It was the biggest tax package ever for small business and you can see it flow directly through in retail sales and confidence in the community as people are prepared to have a go, they just want government to get out of the way. Now part of the reform that needs to occur in Australia is about reducing the regulatory burden on business, reducing the penalties associated with people innovating and investing in R&D and so on, and that’s what we’re endeavouring to do. We’re on the path, but there’s still much work to be done.

ROSS GREENWOOD:

The problem is you may be on the path, but the issue is you can’t get it through the Parliament. And if you can’t get it through the Parliament, it can’t happen. It’s not like New Zealand, where say for example, in New Zealand they were able to raise their GST, they were able to sideline competition authorities to allow [inaudible] to become the biggest theory export company in the world. They were able to do things because they didn’t have to deal with the Senate, they didn’t have to deal with recalcitrant state governments. They were able to make decisions. One of the problems that I see with governments of either side, is that it’s tough for them to make pragmatic decisions that can be held to account really.

TREASURER:

Well, that’s why you have to have more than one leader. It’s important, yes you’re right, you need to get things through Parliament, and we actually have gotten significant reforms through the Parliament, even without the Labor Party. We, for example, got significant reforms to the age pension through Parliament in the last fortnight in June, but there are other areas where you can have reform. Our Asset Recycling Initiative which was a deal done with the states was an incentive, a financial incentive, for the sale of assets such as here in New South Wales with a net result. You know, I’m giving Mike Baird $2 billion as an incentive and a reward for reinvesting part of the proceeds from the sale of poles and wires into new productive infrastructure. Now that wouldn’t have happened if we didn’t have the Asset Recycling Initiative, the Labor Party blocked it in the Senate with the Greens, but we did it through direct appropriations. It’s actually delivering results and now you’re seeing it in the sale of the Port of Melbourne in Victoria, where the Victorian Government is getting on with it, and good on them; with the sale of the Port of Fremantle in Western Australia, and even the introduction of tolls for heavy vehicles in parts of Western Australia where they weren’t prepared to do that, and also a range of other initiatives in South Australia and Tasmania. Queensland of course has said they won’t participate in it, so we’ve rolled out the $5 billion Northern Australia Infrastructure Facility, and already I’ve got proposals on my desk to access that facility to build major new critical infrastructure to open up the whole of Northern Australia. So these things are happening, but of course there’s more work to be done.

ROSS GREENWOOD:

Are you confident the economic growth rates will pick up between now and the next election?

TREASURER:

Well, I expect, provided that the rest of the world continues on its growth path – I mean there’ll be patchy moments over the next two to three years – but overall, I am absolutely confident that the Australian economy is going to continue to grow and over time grow strongly…

ROSS GREENWOOD:

Given the polls, are you confident now that you will be in Government after the next election to be able to try and implement some of these policies?

TREASURER:

Well of course, I mean we’re the only ones with an economic plan. We’re the only ones offering Australian people a plan that involves substantial tax reform which we will detail in the lead-up to the next election. We are offering a plan that helps to deliver jobs. I mean Ross, last month 38,000 jobs were created in Australia in one month, under Labor, 3,600 a month. So ten times the number of jobs created last month than the average under Labor in the last 12 months in office. So there is momentum building, there are parts of Australia that are still doing it pretty tough…

ROSS GREENWOOD:

There’s big areas of underemployment, youth unemployment, but even senior unemployment is a major problem that we talk about on this program all the time.

TREASURER:

That’s one of the reasons why we have announced a number of initiatives in relation to incentives for business to employ people over the age of 50. But also in relation to youth unemployment, we’ve restructured our employment programs. We’ve extended the loan scheme that’s available to university students, we’ve extended it to sub-diploma courses, so that you don’t have to be a university student in order to get a leg-up from the Government. You can have training programs and also apprenticeship incentives. We’ve done a whole range of things and the Australian economy continues to restructure, this is a fundamental point, from being a mining construction economy to being a more diversified, more open economy that is exporting services into the Asian region. I am more optimistic about Australia’s future than any other time in my life, and why? Because we are on the threshold of the emergence of the massive Asian middle class and they want to buy the things that we can sell them.

ROSS GREENWOOD:

Just a final one, bank deposit tax, yes or no?

TREASURER:

I’ll have more to say about that in the not-too-distant future.

ROSS GREENWOOD:

Can I read that as a yes?

TREASURER:

You can read that as a statement that I’ll have more to say about it in the not too distant future. I’m mindful of all the issues there, very mindful of it. It was a Labor tax that we are thinking very carefully about.

ROSS GREENWOOD:

There we go, the Treasurer, Joe Hockey. Always good to have him on the program, we appreciate your time tonight.

TREASURER:

Thanks very much Ross.