TREASURER:
[Inaudible] The view on where we see events that have occurred in Greece overnight and more recently in China. Starting with Greece, the successful negotiations are encouraging. They are an important first step in helping to rebuild trust between the Greek Government and their European colleagues. We welcome the breakthrough in negotiations, but there’s much work to be done in a very short period of time. There is a ferocious legislative program that is required to be implemented in the next 48 hours by the Greek Government. Nineteen countries need to agree to whatever the negotiated final agreement should be and that’s across the Eurozone. And of course, early next week the Greeks will have a repayment requirement to the European Central Bank of 7 billion euro, that covers the European Central Bank and the IMF. They will require bridging finance to meet that obligation, as well as the obligation of the 5 billion euro debt repayment in August. I have said repeatedly over the last few weeks that I’ve been reassured that the leaders of the Eurozone have matters in hand, that has proven to be true, but I don’t want to overstate the potential for this to go wrong. Having said all of that it is encouraging that first steps have been taken.
There’s a salient lesson here not just for Australia but for everyone, that if you don’t undertake the necessary reforms to get your house in order when you can, then ultimately the pain will be much more significant further down the track. Now Greece has to undertake the privatisation program that they promised they would never undertake, the reform to their tax system that they said they wouldn’t undertake, and of course a reform to their pension system that they said they wouldn’t undertake.
The impact on Australia of the developments in Greece is minimal. Having said that, we can never be complacent and it’s a reminder that we almost always must be prepared for the unexpected events that may occur as a result of increasing volatility in the global economy.
Secondly, I wanted to address China. The Chinese stock market dropped 25 per cent in four weeks. But is now 18 per cent higher than its low point last Thursday. It is a very volatile market. It’s still 90 per cent higher than it was 12 months ago. The Chinese economy is in transition and in my discussions with Lou Jiwei the Finance Minister in Beijing just two weeks ago, we talked at length about the Chinese economy. So far as I am concerned and the Treasury is concerned our Budget forecasts for the Chinese economy remain unchanged. We expect growth of 6¾ per cent this year, 6½ next year and 6¼ per cent the year after. So our relationship with the Chinese economy remains unchanged by recent volatility.
The transition is still in play in the Chinese economy and I was reassured by the Finance Minister of China that they have significant capacity in both fiscal policy and monetary policy to address some of the challenges that maybe faced over the next few years as the Chinese economy continues to undergo that transition from a heavy reliance on export and domestic infrastructure, to increasing domestic household consumption.
So, overall, whilst the world will have its challenges and it will be ever thus, the Australian economy continues to strengthen. There is no doubt from my discussions with retailers and a number of others, that the month of June was a good month for the Australian economy. That was reflected in the very good job numbers that came out recently. We have momentum building in the Australian economy, it is not affected by what is happening in either Greece or China, but we must be vigilant; we remain vigilant. And as far as the Government is concerned our economic plan is on track. We are building the jobs and we are building a stronger economy.
Over to you.
JOURNALIST:
Are you concerned about the impact it’s had on consumer confidence [inaudible]?
TREASURER:
Look consumer confidence in Australia is volatile. It’s a volatile indicator. And clearly, a lot of the speculation about Greece and China has had an impact over the last few days, but I’m very encouraged by business confidence data. And I’m very encouraged by my discussions with business leaders over the last few days which indicates that they’re continuing with plans for investment, in fact, looking for opportunities through increased investment across the Australian economy. And that the transition in the Australian economy is well underway, from mining construction to mining production. But also importantly, we are focussed on increasing services exports and certainly the data is suggesting those services exports, particularly in the Asian region, are growing.
JOURNALIST:
Treasurer, you said that Australia is not affected by what is happening in Greece or China. Can I just clarify that we’re not affected by what’s happening in China, even the iron ore price?
TREASURER:
Well, we’re watching carefully the iron ore price. It’s interesting, that since the Budget the iron ore price has averaged $54 a tonne. We, in the Budget expected $48 dollars a tonne, so there is some volatility in it. Obviously, the Australian dollar’s coming off. We expected that as well. We welcomed it in many ways. That will create different challenges, but it certainly gives Australian exporters a good opportunity that they haven’t had for some period of time with the higher Australian dollar. So a lower Australian dollar is inevitably going to help the South Australian economy, the Victorian economy, it’s going to be of great benefit for tourism and education, exports. So the diversity of the Australian economy is working in our favour.
JOURNALIST:
Live cattle exports to Indonesia. How concerned are you by the latest cuts to live cattle exports to Indonesia? And how sure can you be that this does not reflect broader damage in our relationship with Jakarta?
TREASURER:
Well, I can say to you that I had a very good discussion with the Indonesian Finance Minister ten days ago in Beijing and we are very keen to be in contact again soon. The very clear impression I’ve got and certainly Julie Bishop has received, is that relations are robust and strong between Indonesia and Australia. I don’t think there is any relationship at all between some of the recent issues we’ve had to deal with and the decision in relation to cattle exports. There has been volatility in the past in demand for live cattle. Barnaby Joyce has informed us that he is endeavouring to speak with his counterpart in Indonesia as soon as possible to get some greater clarity about it. Recent events involving the two executions have not had any impact on this decision in Indonesia.
JOURNALIST:
Mr Hockey, were any Ministers given any notice of this decision and was there any explanation given for it? Because it’s not just a drop, it’s a huge drop. And do you have any outsets for the future as to where the trade will go?
TREASURER:
Look, I just spent ten days in Northern Australia and there is not only a great deal of demand for live cattle in the Asian region, but there can be some volatile demand out of Indonesia from time to time. We'll work through the issues. They are a business partner. Ultimately they rely on our supply of protein and that's why the previous decision of the Labor Government to turn off the supply of protein overnight was so damaging. It takes a long time to rebuild, but having said that live cattle exports to Indonesia have been incredibly strong over, well, since we've been elected.
JOURNALIST:
Do you have any idea why this decision was made?
TREASURER:
We're working through it Michelle, we’re working through it.
JOURNALIST:
Any information at all?
TREASURER:
No, as I said, there has been volatility in demand levels quarter on quarter in the past.
JOURNALIST:
Treasurer, it's been about two weeks since a judge gave you a partial victory in your defamation case against Fairfax. We haven’t heard a comment from you yet. Were you pleased with the result or considering an appeal? And secondly on tax reform, is taking the GST off tampons still on the table?
TREASURER:
They're two hopefully unrelated matters. The first matter is still before the courts even as we speak, so I'm not going to comment until it's all over and I'll have something to say and that'll be the end of it. The end of it for the moment, we'll see. And in relation to the second point, I have a meeting scheduled with the State Treasurers in August. I have written to the State Treasurers in relation to the removal of the GST on sanitary products. There needs to be unanimous agreement by the States for us to proceed. It's in their court and we're waiting to hear back from them.
JOURNALIST:
Treasurer, are you one of the Ministers that wrote to the CEFC recently about the investment mandate. Obviously they’re going to respond to that draft proposal. Are you open to any argument from the CEFC that it may be against the object of the Act? In other words, are you prepared to reconsider proceeding with the investment mandate change if there’s an argument in turn against the object of the CEFC Act?
TREASURER:
Well, we will wait and see what the CEFC comes back with. They’ve asked us for an extension of time, I’m agreeable to that. [inaudible] they were meant to respond by the 24th of July and I think they misplaced the letter or something to that affect. I’m happy to give them an extension. We want the CEFC when it is lending taxpayer’s money to be careful and prudent with that money. We want them to fulfil their obligations under the Act. We also want to make sure that they’re not simply doing what the private sector is doing in relation to a number of investments in wind turbines and household solar panels. They’ve simply been a member of a funding syndicate with other banks. Now if they’re just another bank that is participating in a lending syndicate, well that’s the sort of business the private sector can do. So we want them to fulfil a mandate that they have and to invest in what is appropriate products that are going to, hopefully make the planet better. Now, Mathias Cormann and I consult with them regularly, we just want to make sure that firstly there is low risk for taxpayers, and secondly, that we get a reasonable return on the money that we’ve provided to them.
JOURNALIST:
[Inaudible]
TREASURER:
Well, that’s the point, projects in Northern Australia may require concessional treatment because they’re very large scale, that’s why we’ve made $5 billion available. For example, in the case of WestConnex, our concessional loan through the NSW Government was the tipping point in making sure we got on with WestConnex Stage 2. Now that was important concessional loan, because it then made Stage 3 of WestConnex viable. The second thing is when the Federal Government in those cases is involved in providing a loan we’re providing it through the States, whereas the CEFC is directly interfacing with businesses and consumers. There is a much higher risk associated with that than passing it through the States.
JOURNALIST:
Aren’t you increasing its risk by limiting its investment mandate [inaudible]?
TREASURER:
Well, if the CEFC is simply doing what every other bank is doing, then what’s its purpose?
JOURNALIST:
It’s arguing it’s not, it’s arguing providing fulfilling gap funding [inaudible]
TREASURER:
Well, the evidence would suggest that they are a member of a number of loan syndicates in wind turbines and in household solar panels, and if they’re a member of a syndicate, in some cases the rest of the syndicate is providing much more money than the CEFC, then they’re simply just another bank.
JOURNALIST:
Treasurer, firstly, does the Government have an update on what’s being done to help Jodi Magi who’s detained in Dubai for things she posted on Facebook?
TREASURER:
No, no I haven’t. I haven’t received any information on that but it certainly did sound like an extraordinary reaction.
JOURNALIST:
And secondly, do you have confidence that Barnaby Joyce has the right qualities to be Deputy Prime Minister and Leader of the Nationals in the future?
TREASURER:
Well, Barnaby Joyce is not the Deputy Prime Minister. He’s an outstanding Deputy Leader of the National Party and outstanding Agriculture Minister. I regard Barnaby Joyce as one of the most authentic, genuine people I’ve ever met. And as you know, he doesn’t play any games, he’s a straight talker, he has very good values. Sometimes I don’t agree with him, often I do agree with him. You know what I love about him, he puts Australia first.
JOURNALIST:
He could well be the Leader of the Nationals later on?
JOURNALIST:
Treasurer, does it concern you that recovery in the Australian economy seems mainly focussed on New South Wales and Victoria and not spreading elsewhere around the country?
TREASURER:
Well, that’s one of the challenges, that we want to broaden the economic recovery in Australia. Naturally enough, Western Australia and Queensland have faced significant job losses during the course of the transition in the Australian economy to the mining construction, to the production phase. They’ve also faced significant challenges associated with the dramatic drop in commodity prices, particularly in coal and in iron ore. So we want to work closely with the State Governments to help them recover from those job losses. I remain concerned, obviously, about the South Australian economy; and the unemployment rate is just too high in South Australia. I hope the South Australian Government is more prepared to work closely with us to help to build jobs and business confidence in South Australia. The lower Australian dollar will help South Australia and Victoria. Quite clearly, the reform agenda in Tasmania has had a very positive impact in that State. And despite facing some significant challenges, the Northern Territory is also doing well and I think the ACT is doing well as well. So look, you know, we have a diverse economy, as a result, at any one time you may not have every part of the Australian economy performing at speed. That’s one of the challenges that we have. We’ve got to try broaden the growth across the nation, broaden job creation, that’s one of the reasons why getting rid of the carbon tax and the mining tax, undertaking a number of major reforms here, getting the Budget under control, opening up new free trade agreements with China, Korea, Japan, they are all taking us in a positive direction as we are taken to a broader economic base.
JOURNALIST:
Treasurer, do you think Greece will ever repay its debt?
TREASURER:
I hope Greece does repay its debts. You’ve had countries default on IMF loans before. The fact is that, there’s only two ways for Greece to go. Either Greece can undertake reform as a member of the Eurozone, or it can undertake reform outside of the Eurozone. It’s always going to be easier for Greece to undertake difficult but necessary reform when it has the support of the Eurozone, because without that support it would be a very, very lonely journey for the people of Greece. And what I’m most concerned about is that in Greece, its economy has shrunk by more than 25 per cent over the last five years. It’s been in a recession for the last five years. A lot of wealthy Greeks got their money out, but it is the most vulnerable Greeks, it is the most vulnerable, the poorest people in the Greek community, that are paying the biggest price for the lack of reform over a number of years. That’s why you’ve got to undertake reform. So that everyone has a chance to get ahead, because ultimately, as in the case of Greece, when you don’t undertake that necessary reform, it ends up being the most vulnerable, the most disadvantaged that pay the greatest price, because the wealthiest people can take care of themselves.
JOURNALIST:
Will you like to deliver another Budget before the next election?
TREASURER:
I’d like to deliver a number of additional Budgets over the next few years. Thanks very much.