10 September 2015
Transcript - #2015198, 2015

Interview with Kieran Gilbert, Sky News

KIERAN GILBERT:

Mr Hockey, thanks very much for your time. I want to look at this ministerial statement you gave yesterday after your talks in Turkey at the G20. You’re cautiously optimistic about the global economy, why is that?

TREASURER:

I think China’s transition is going to work in Australia’s favour, and they are managing it carefully. The United States is now looking to increase interest rates, which is a sign that their economy is growing on a sustainable basis. Europe is growing, whereas last year there was a 40 per cent chance of recession. The Japanese are turning things around which is encouraging, given they’re our second biggest trading partner. So globally, even though there’s been a slight downgrade in IMF forecasts, you can see some good indicators for growth.

KIERAN GILBERT:

You seem quite sanguine about the prospect of a rate hike by the US Federal Reserve. The IMF Managing Director Christine Lagarde isn’t so relaxed about it. Many world economists are worried that if the Fed increases the official rate there that this will lead to turmoil, particularly in developing nations and even China could see a flood of capital out of China.

TREASURER:

Well, there is a division in global opinion. The OECD for example, Angel Gurria, said at the G20 to Stanley Fischer, the Deputy Head of the US Federal Reserve, he said just do it, take away the uncertainty. If you’re going to make a decision, just do it. Now the issue is, whether the current uncertainty about the actions of the US Federal Reserve are creating more volatility than the Federal Reserve actually moving to increase rates. When they move to increase rates, the United States is still going to have an incredibly accommodative monetary policy setting. It’s still very accommodative. It’s just a signal that the United States, near full employment and with strong growth, is on a sustainable path. That’s good news for us…

KIERAN GILBERT:

But do you accept there will be some turmoil in the immediate aftermath of that?

TREASURER:

I’m not sure that there will be turmoil, but there may well be turmoil and volatility if the United States Federal Reserve does not move. So the bottom line is, we cannot as a world continue with extremely accommodative monetary policy. The only way we’re going to get good, structural long term growth is through structural change in our own economies. Australia’s doing that. We’re heading down the path of tax reform, importantly, we’re moving into infrastructure. We’re reducing some of our other costs in the economy, we’re moving from a mining and construction phase into a services exports phase. So we’re going through that transition. That’s the way we’re going to earn strong growth in the future.

KIERAN GILBERT:

Are you more in-line with the RBA Deputy Governor in terms of the growth forecast? He’s quite optimistic about the rate of growth; that it will remain at around three per cent. If the economy’s going so well right now, should unemployment today then fall when we see those official unemployment figures later today?

TREASURER:

Well Kieran, we’re going to see some volatility in the unemployment numbers because on the 1st of July we changed our job services program, so that there are about 40,000 people who previously weren’t necessarily looking for work, who now have to look for work. That will increase the workforce participation rate and it will create some volatility in the headline number. But that’s a good sign, because we want to take people off welfare and get them into work, looking for work and getting jobs.

KIERAN GILBERT:

So it could be up over six and a half per cent today?

TREASURER:

We’ll see what the number is later in the morning. Importantly, it indicates that we are getting on with the job delivering on what the Intergenerational Report said was necessary. We have to increase workforce participation. One of the pools of people that we can go to is those people who have been receiving welfare benefits but haven’t been actively looking for work, and that helps to increase the size of our economy.

KIERAN GILBERT:

It went from, correct me if I’m wrong, but 6 to 6.3 per cent with the July figures. If it went from 6.3 up over 6.5, that’s more than what the Budget had suggested, isn’t it?

TREASURER:

Well, no, the Budget forecast at the end of this financial year, 6.5, but there will be some volatility from month-to-month. But importantly, we’re seeing better job creation. We inherited job creation from the previous Labor Party of around 3,600 jobs a month. We’ve now got it well above 20,000 a month on average. That’s a good sign, but there’s more work to be done.

KIERAN GILBERT:

In terms of the China free trade agreement, we’re seeing in terms of barley and the sorghum - China buying all of our produce basically, they’re offering more than the Middle Eastern countries. This is described in the Fin today as a grain boom. How much is at stake here if we don’t get this deal through by the end of the year?

TREASURER:

It’s a huge cost to Australia if we do not have this free trade agreement. We lose future jobs. Importantly, we’ll also lose future income. And we’re competing against other countries in various markets. New Zealand is coming up to the seventh anniversary of their free trade agreement with China. The dairy boom in New Zealand has created massive wealth for that country. They’ve only got a 2.5 per cent tax on New Zealand dairy. We’re facing taxes of up to 15 per cent on Australian dairy going into China. Now as a government we’ve abolished a number of Labor taxes – the carbon tax, the mining tax, the bank deposit tax, the car manufacturing tax, and the piggy bank tax - so we abolished those. But under a free trade agreement, we’re getting the Chinese to abolish their taxes on the things we produce, which is a great win for our economy and a great win for well-paying jobs.

KIERAN GILBERT:

Just a couple of quick questions, I know you’ve got to go, but should the Prime Minister then sit down and talk with Labor about their concerns, placate them; as they say John Howard did with the Opposition before the US free trade agreement went through the Parliament? That the PM should show some leadership on that and get them around the table, resolve their problems and get on with it.

TREASURER:

Well, understand this, their complaint about the China free trade agreement is about an issue that was exactly the same under the Chile free trade agreement that they negotiated, and the Korea and Japan free trade agreements we signed last year. So why are they just taking this position in relation to the China free trade agreement. I’ll tell you why - it’s politics. The CFMEU is controlling Bill Shorten. The CFMEU helped Bill Shorten on the floor of the Labor Party convention in relation to other issues. So this is the payback. It is going to hurt Australia. It is going to hurt our reputation. Mr Shorten’s got to understand that he is friendless amongst the senior Labor echelons when it comes to opposing the free trade agreement with China.

KIERAN GILBERT:

A number of the backbench, of your backbench, want Cabinet to rethink what’s called the effects test - the change to the competition law that would have benefitted small business. Is this something that the Cabinet might reconsider? Because obviously your colleagues on the backbench believe that this is something that should happen in terms of protecting small business further?

TREASURER:

I’ve been in politics now for nearly 20 years, and being involved in one way or another with this issue for that length of time. It has always been contentious, dating way back to 1975 at the beginning of the Trade Practices Act. I’d just say to you Kieran, Cabinet hasn’t made any final decisions. We are consulting widely on potential changes. The issue is - does it benefit small business? Does it actually benefit business? Does it benefit consumers? That’s the fundamental point.

KIERAN GILBERT:

So Mr Billson wasn’t rolled on this?

TREASURER:

No, no, the issue has not been resolved by Cabinet, because we’re still seeking further advice including consulting the backbench but also by consulting interested parties.

KIERAN GILBERT:

Mr Hockey, thanks.

TREASURER:

Thanks very much Kieran.