QUESTION:
[start of audio] Notwithstanding the fact that the world economies, as we heard this morning, forecasted growth has been continually downgraded, is there a mispricing of risk going on at a global level and what are the implications of that for Australia?
TREASURER:
Well, the world is awash with credit, there is no doubt about that, and people are searching everywhere for yields. There are, I am always reluctant to pass comment on the market because the market is the market, having said that, it seems a little odd that the Spanish Government can borrow at lower interest rates than the US Government in this current environment. And quite clearly there are warning signs if there are events that cause longer term rates to go up then there might be a bit of a race to the door by a number of traders and investors. But overwhelmingly, now is the time for Governments to sell assets, and take the money out of that capital and put it into new productive assets, and the prices that we can achieve from our assets today are much better than they may be tomorrow, and here I am in Victoria and just look at the prices achieved from electricity assets here. Well, I’ve done everything I can, including laying down a $5 billion asset recycling fund for my state colleagues, and selling assets ourselves so we can take our money out of assets where the Government balance sheet is comparatively lazy, and start investing in productive assets that are going to build the infrastructure for a stronger economy.
That’s exactly what we are doing, that is what we are facilitating, and whilst there seems to be some predictably extraordinary behaviour in global capital markets, we’ve got to focus on the medium and long-term and the way that we run our own Budgets and that’s what we’re going to do.
QUESTION:
[inaudible] …the same report you referred to also pointed out that for every dollar the Government spends on Paid Parental Leave, you would get double the impact on workforce participation if you spent it on childcare. And we can see that in Australia, essentially women on middle incomes had very little financial incentive to work more than three days a week because their take home pay, after you’ve taken out tax and given up welfare and paid for childcare, means they take home very little [inaudible]. So in strained Budget times, when you don’t have a lot of money to spend, wouldn’t you be better off spending any additional money from a company levy or wherever else, on reducing the effective cost of childcare so that parents take home a bit more of their pay packet, rather than spending it on Paid Parental Leave?
TREASURER:
Well, it’s got to be a mix of both. I’ll treat that as a Dorothy Dixer, you’ve got to have a mix of both. As the Australian newspaper knows, obviously it has seen the Productivity Commission, or it might have had a hint of the Productivity Commission report on childcare coming. I haven’t received that report yet, which is interesting isn’t it? You need greater flexibility in childcare. My electorate of North Sydney has, I think, amongst the highest, most expensive childcare in Australia. Part of that is associated with the high cost of real estate to provide that childcare. But also, the previous Government had a massive new wave of regulation of childcare, which at the end of the day reduced the flexibility of the childcare that is provided. So there are many factors, and I know Sussan Ley is speaking a little bit later and I’m not going to pre-empt what she says, but it has got to be a combination of both.
Can I say something about Paid Parental Leave, because I know there are a number of people who are critics in this place. I want to say this emphatically, I grew up in a small business family and my parents couldn’t afford to pay Paid Parental Leave to the receptionist of the young woman who came to work. And my father had to endure a turnover of staff that went off to the public service to get Paid Parental Leave, or went to a big business to get Paid Parental Leave when he couldn’t afford to do it. And hardly any small businesses in Australia can afford to pay it.
For the first time we are putting them on the same level playing field as big business, for the first time we’re putting them on the same level playing field as the public service. For the first time, in one of the fastest growing areas of microbusiness in Australia, women setting up their own home-based business, for the first time, they are not going to be financially penalised for housebound duties and lose the opportunities associated with the growth of their microbusiness as a result of our Paid Parental Leave scheme. Because for the first time we recognise that people should not be financially penalised and as I pointed out in this speech, try living in any capital city in Australia on just one household income. It is nigh impossible, but the mortgage still keeps coming in and the bills still keep coming in. So there is a financial penalty associated with childbirth on a scale that my mum never had and others of that generation never had. They had different challenges, I totally recognise that. But the financial challenges today, for an everyday household are far more complicated, necessarily, because of the [inaudible]. So for the first time we are giving women the very same opportunity. For the first time we are giving small business the very same opportunity as big business and the public service and I see that as a great outcome and that’s without compromising our commitment in any way to childcare.
QUESTION:
[inaudible]
TREASURER:
Well, I don’t think competition, and we shouldn’t think, Australians are at their best in a competitive environment. Be it in tennis, or be it in business or be it in any particular field. We can compete with the best and beat them. So why don’t we want to do it in higher education? Why do we need to have a regulated environment? Why not allow our people to be their best and allow our institutions to be their best? And as for the assets, I mean, look at the competition that is emerging out of massive campuses in Asia as a starting point. Campuses with a quarter of a million students with a financial muscle that can become a honeypot for the best academics in the world.
As a student, I went to Sydney University, I want my university to be recognised as the best in the world, because it enhances my career prospects all over the world, because labour is more mobile than it has ever been. Our children are more likely to work overseas, and wave around their degree from their alma mater; more likely to do that than we ever did. So we want to have reputational advantage, and that is why our campuses need to be better. But they have been hamstrung by regulation. They have got a speed limiter on their capacity and at the same time as we are putting in place that speed limiter on our tertiary institutions we are also limiting our ability to help those people who might not get to university but who want to undertake TAFE courses or undertake an apprenticeship; we are limiting our ability to help them. Because we are lifting the hand break on our tertiary institutions, it is a combination. Our reforms in the Budget are about preparing Australian educational institutions for the future. That’s what we’re about.
QUESTION:
[inaudible]
TREASURER:
I think we’re trying to set them free.
QUESTION:
[inaudible] but in public commentary there is a sense of pessimism and uncertainty about the Government’s capacity to actually legislate its Budget. And as you know, very significant elements of your Budget, more so than anything we’ve seen for a number of decades, are in serious jeopardy. I wonder if you could tell the audience what your assessment on the Government’s ability to get the Budget through [inaudible] to what extent that you’ll be caught here on the issue of fairness which has been put up in lights as the main critique of the Budget.
TREASURER:
The fairest thing we can do is prepare Australia for the future. In fact, the fairest thing we can do is prepare Australia for many different futures, none of which we can predict. But we know, that if we strengthen our capacity as a nation, if we improve our productivity, if we improve the capacity of individuals to excel, we know that our future can be bright. We have the right time zone, the rest of the world wants what we have. Thankfully they don’t want to invade us to get it. This is a terrific moment in history. But we can’t sit back on our heels, we can’t be lazy about it. Reform, you’ve got to fight for it, but you’ve also got to recognise that under previous Treasurers and previous governments the governments say ‘look we’re going to do this, we must do that, in order to change the way we behave’. What’s happening is, the community is changing the way we behave and government has, in a sense, reacted to that. Lift the constraints off of higher tax and more regulation and allow the community to achieve its best.
So what is one of the key drivers of reform? Well, globalisation is a key driver of reform. But instead of more wisdom coming out of Canberra, out of Parliament House Canberra, wisdom is coming from the community. We’ve got to take them with us and we’ve got to allow them to encourage us to come along. And in part that is the answer in the Senate. I mean, the Senate is, I would like to think, of a centre-right persuasion. Ultimately the people sitting in the middle are the ones that are going to see common sense, but they need to be predictable and they need to be consistent to their values and I think that it is a good thing for political parties to restate their values. I’d like the Greens, for example, to restate their values on reducing carbon emissions. Or I’d like the Greens to restate their principles on increasing taxes on fuel. Or the Labor Party to restate whatever principles it holds today. I’d like individuals to state their principles. And if they do that, if they declare what they believe in, as I think a number of Palmer United and also a number of the other independents in the Senate have started to do, then we will get greater clarity about what in the Budget is going to pass.
Now, the advantage that David talked about of having been around a while, it took Peter Costello a long time to get some of his initiatives through the Senate. In fact, I dug out one of his old, one of the stories from the Australian actually, about how he was quite frustrated that a number of education reforms were struggling to get through the Senate in 1997. Well, we just brought down the Budget, it has barely been out there for two months. People shouldn’t write it off. The second thing is, there are always other ways that we can get some of those things happening. For example, there are other ways we can do it. We believe the best policy path is the one that we’ve laid down and we would hope that our friends in the Senate will see that. [inaudible]
QUESTION:
In the previous session, people like John Daley and [inaudible] expressed a lot of anxiety about the rapid growth in health spending and are worried about how we can get that under control. Obviously, the main way we can keep that under control is if somehow we could control, you know, reverse the obesity and diabetes epidemics [inaudible] and as you mentioned getting those things under control, getting obesity and diabetes under control, it’s the greatest public health challenge of our time. I’ve got a theory that says that if you the Treasurer and your Treasury Department took over health policy there would be a real chance of that happening in that the economists at Treasury are excellent with…
TREASURER:
That would be an early grave for me Rory.
QUESTION:
Economists are good at evidence based policy, so I guess I’d encourage you to get some of your people to look at the science of [inaudible] which is a simple thing that basically says that the indicators of obesity and heart disease are, I won’t go on, but high blood pressure [inaudible] all those things, that’s a pretty uncontroversial modern science. [inaudible] low carb diets are seen to fix it.
TREASURER:
I get the message.
QUESTION:
Could we have a national conversation about dietary policy in Australia, high-carb versus low-carb.
TREASURER:
The irony is I went to a research facility in Concord, in Sydney, and had a number of presentations from eminent scientists and researchers and medical researchers and after a survey of 1,200 they found that having a high protein low carb diet was going to give you a better quality of life which turns some medical research on its head. But the overwhelming message I’ve got was actually if we delay the aging process that’s the best way to improve the overall health of the general community. Through medical research we can delay the aging process and Australia is actually making great strides in this area. But one of the things we have failed to do, even though over time we are going to get to an average spending of around a billion dollars a year on medical research, is we are failing to implement clinical trials and failing to commercialise adequately some of the great research initiatives we have in medicine.
Our initiative in building the biggest medical research endowment fund in the world, which in perpetuity, doubles the medical research budget in Australia and guarantees that future Governments aren’t going to chop and change the base funding for medical research. That in turn, which then will help to facilitate clinical trials, which will help to facilitate at the end of the day, commercialisation in Australian medical breakthroughs will in turn reduce the cost of the medical system because we have the capacity to find the cures for the diseases that are going to afflict our nation in the future and afflict our nation today and obesity is one of them. But there are many things, the mortality rate associated with brain cancer is truly [inaudible] and from my perspective, Charlie Teo is a great mate of mine, and he is one of the people who has convinced me how important our medical research endowment fund will be for the future of medical research in Australia and also for our development as a medical research centre. I mean, we keep looking at Silicon Valley for IT, but by God, if we can have the equivalent of Silicon Valley for medical research here in Australia, we have just got to have a go and we’ve got to fund it and we haven’t got the recurrent expenditure to fund it. But we are asking everyday Australians to contribute when they go and visit the doctor in the same way they do with the PBS. That in turn will help us to build a better quality of life through the health system going into the future.
QUESTION:
My question is about the Commonwealth Bank financial planning scandal, as you know they’ve announced compensation today for the victims, given your mother-in-law was one of the victims, I would be interested in your view. And also they’ve opened it up for the last decade, that their advice can be reviewed, do you think that will open them up to massive compensation claims.
TREASURER:
Because my mother-in-law was involved I have stayed out of the matter, appropriately. Mathias Cormann has done an outstanding job of handling a very difficult issue. Clearly the Commonwealth Bank was just too slow to get to this point, clearly. A lot of the anxiety could have been averted if they had have moved more quickly. But I do recognise that they have apologised. Firstly, you have got to recognise that the problem exists and for a long period there was denial. The second thing is, you have got to show appropriate contrition for what happened, and now they’ve done that. The third thing is, you have got to have a plan to ensure that people are given appropriate compensation. They are starting to do that, but this is one institution, I don’t think it is systemic, it is best to ensure that, you know, integrity issues are ultimately going to be in the hands of shareholders and customers of the Commonwealth Bank and people who have been affected by their previous financial advice [inaudible].
QUESTION:
Mr Hockey, I felt you were on the verge of telling us something secret and I had to give you another opportunity to get it off your chest. You were saying that there are other ways of doing this in the Senate that has blocked some Budget measures. Could you [inaudible] section 96 of the Constitution, can you regulate to do some of your Budget initiatives, could you unpack that for us a little bit.
TREASURER:
The starting point is, some of the biggest savings initiatives are not subject to new legislation, for example, foreign aid. The reduction of growth in foreign aid is one of our bigger long term savings and secondly changes in the funding relationships with states, even though they get more over the next four years, by the way, which might have been lost in all those newspaper ads that they’ve [inaudible]. The fact is that there are reductions in Government expenditure where it can be undertaken. The structural reform that we have put in place only happens in [inaudible] a small numbers of cases, immediately, through legislation. Such as the increase in the excise on fuel. Which, by the way, if the Greens hold that one out, it would be truly obscene. The Greens are playing politics instead of showing any principle, no wonder their base is in uproar. It is extraordinary and I’ll have more to say about that over the next few weeks and months.
In relation to structural change in welfare, a number of those initiatives don’t start immediately. Also, in relation to the health system, the changes don’t start immediately. In relation to the asset recycling program we are not going to let the Labor Party’s politics hold us back and we will still appropriate to the states the funding necessary for the asset recycling program because we need to start building now. We need to get on with the asset sales and the asset construction now and we tried to set up an appropriate process to do that but Labor and the Greens and everyone else wants to have their two bucks worth. We’ll keep putting that up to the Senate to have an appropriate process but there is a second option and that is to appropriate to the states and we will do that because we have to build the infrastructure. Because you know that the investment in mining construction has come off enormously and this morning the Reserve Bank Governor in Hobart, further identified it as a challenge for the economy.
So, mining investment was driving a huge amount of growth in the Australian economy, that’s predictably come off. We’ve gone into the mining production and export phase, fantastic. But the other 90% that the economy needs to be lifting, the other 98% of employment needs to be lifting. And the way to do that is to build infrastructure fast. Now, the Federal Government doesn’t own a construction company. We work in partnership with the states, they’ve got the planning powers, they’ve got the environmental approvals and they’ve also got the plans and resources to roll it out. We are laying on the table the biggest incentive program, I would argue more so than national competition policy, but one that is changing the shape of infrastructure in Australia. $5 billion on the table now, I’ll give them 15% of the net proceeds of any sale they have that they then go and put into new productive infrastructure [inaudible].
As I said before, the world is awash with money at the moment, governments are not but the world is. What we’ve got to do is get things moving and the best way to do that is not to have various handbrakes in the Senate being pulled for political purposes , but simply keep driving to make sure that we do get the growth agenda and job agenda through. Now, it may take more than one occasion for us to try and get things through and as I said, if we look at both paths, it has taken time to get things through but we will not waver in our determination to get the best policies through parliament to deliver the growth and jobs agenda that Australia needs.