CHRIS KENNY:
I’m joined in the Melbourne studio by the Treasurer of Australia Josh Frydenberg. Thanks for joining us Josh.
JOSH FRYDENBERG:
Thank you Chris.
CHRIS KENNY:
Look I want to first off get your reaction to what I opened the show with and that is the Belt and Road Initiative. How can we have a situation where a Federal Government, obviously with responsibility for foreign affairs, has a very stand-off approach to the Belt and Road Initiative, yet the Victorian Government just marches in and signs up an MoU basically endorsing this strategic plan in exactly the terms that China would want?
JOSH FRYDENBERG:
Well look, the first point I want to make Chris, to your viewers, is Australia is a great beneficiary out of the two way trading relationship we have with China. In fact, China is our largest trading partner and since the FTA was agreed by the Coalition Government this has increased.
We also know that there is a need for increased infrastructure investment in our region, there is an infrastructure deficit. So, Prime Minister Scott Morrison said earlier this month that we welcome the contribution that the Belt and Road Initiative could make to infrastructure spending in our region, but that being said, we also want certain international standards of governance as well as transparency.
And we don’t want to see our regional neighbours get into a siltation of greater indebtedness than they can actually service effectively. That is what our focus is. Now, State Governments are entitled to enter into agreements with other countries, it happens at various levels, but you’re right it is the Federal Government which has sole responsibility for the direction of foreign policy on behalf of this country.
CHRIS KENNY:
That’s the point there, you’re talking about the very important economic relationships here, and of course there are big strategic issues at play as well. There is no relationship that requires more deafness in Australia policy than balancing up those economic interests with China, versus our security alliance with the United States, and balancing it up against China’s strategic plans, and perhaps never more so than the current period where we’re looking at almost a Cold War stand-off between China and the US. So, how can you possibly afford to have State Governments cutting across such delicate area of foreign policy?
JOSH FRYDENBERG:
Well it’s very important for State Governments to always keep a focus on those levels of governance and transparency and indeed, indebtedness…
CHRIS KENNY:
But Daniel Andrews and his Government would have no vision, no transparency on the deeper defence, security and strategic issues at play here.
JOSH FRYDENBERG:
And that’s why they need to work very closely with the Federal Government. As you know, we signed on to the AIIB, which was the Asian Infrastructure Investment Bank in the region, because we were, as a founding member, helping to shape the governance record of that multilateral organisation.
So too, when it comes to the Belt and Road Initiative, we’re calling upon all countries that are engaging in these infrastructure projects to keep in mind governance, transparency and of course indebtedness.
CHRIS KENNY:
Well of course, apart from State Governments like Victoria running their own race on this; of course business has a different perspective on this as well. Business is always going to be looking for whatever investment opportunities they can get.
A very senior businessman in Malcolm Broomhead has been very critical of the Government’s attitude on Belt and Road, saying that you have been naïve about what’s being implemented and accusing the Government of insulting China unnecessarily.
JOSH FRYDENBERG:
They’re very ill-chosen words from a senior leader of the business community and I know Malcolm, and have good relations with him, but he should know better than to use that sort of extreme language, which is very factually inaccurate.
CHRIS KENNY:
Well, we have business though running those sorts of arguments, and a State Government signing an MoU, isn’t it time for Canberra to step in and make sure that everyone understands that this relationship is managed through the Foreign Minister’s office and the Prime Minister’s office, not through a Premier’s office.
JOSH FRYDENBERG:
Someone like Malcolm Broomhead should be reaching out and seeking levels of briefing if he has not already done so. I think it’s important for the business community to be continuously in dialogue with our foreign ministry, which clearly has its finger on the pulse as to what’s happening in the region, but more importantly what are Australia’s national interests.
But I do want to reiterate that we welcome further investment in infrastructure in our region, and we play a role in a number of multilateral institutions to do that. China is a very important economic partner for Australia and will continue to be so for decades to come.
CHRIS KENNY:
OK, I want to switch to the domestic economy and the hot button issue around the country at the moment is real estate prices. We’re seeing a steep downturn in Sydney and Melbourne, a little bit of the downturn in south-east Queensland as well. It’s the sharpest downturn since the GFC. Are you worried that this might undermine confidence in the domestic economy?
JOSH FRYDENBERG:
Well, we’re watching the domestic housing market, Chris, very carefully and you’re right, prices have come down in capital cities over the last 12 months from high levels to what the Reserve Bank of Australia have said are more sustainable levels, so we welcome that.
Part of the reason prices have corrected in the residential housing market is because APRA, the key prudential regulator, has tightened the screws on investor lending. So we’ve seen a changing dynamic in the housing market from investor led growth to more owner-occupier led growth.
We really welcome the fact that over the course of the last year more than 100,000 first home buyers have got loan approvals which is the highest level since 2009. So, while the market is correcting, you have a Labor Party which is proposing to take a sledge hammer to housing prices.
If you own your house, as a result of Labor’s policy to abolish negative gearing as we know it, your house will be worth less and if you rent your property you will be paying more. This policy will hit millions of Australians, will affect every person who owns their house and comes at exactly the wrong time when we’re starting to see prices come down from the heated market that we’ve seen previously.
CHRIS KENNY:
Well there’s no doubt that Labor’s tax changes on negative gearing and capital gains tax are aimed to take the heat out of the market. They were announced at a time when the market was overheated so they are aimed to take the price pressure out of the market, so no doubt they would exacerbate any downturn. But just a moment ago, you were singing the praises of a downturn, you were saying this is a good thing because it makes housing more affordable and allows first home buyers in.
JOSH FRYDENBERG:
What we’re seeing is a managed transition in the market, that’s the key point. We saw Fitch, which is one of the three world leading credit rating agencies, say recently when they reaffirmed Australia’s AAA credit rating, that one of the things that they’re concerned about is a big drop in investor demand in the housing market.
Now, this is exactly what Labor’s policy is designed to achieve. We think it is completely unnecessary. And I have to tell you, Labor, Chris, is all at sea when it comes to details of their own policy. Bill Shorten and Shadow Treasurer, Chris Bowen, have said prices will go down as a result of their policy. Their Shadow Finance Minister, Jim Chalmers, has said prices will go up as a result of their policy. Joel Fitzgibbon, always ready for a quote, has said they’ll neither go up nor down as a result of their policy. So, you know, this is the blind leading the blind when it comes to this particular policy.
CHRIS KENNY:
Now we all understand though the argument that if you see a bit of a downturn in the housing market it helps people get into the housing market. Obviously there’s been a lot of a talk about housing affordability so it can be good for that.
But on the other hand, anyone who has recently taken out a mortgage or taken one out 12 months ago, gets no comfort at all in seeing their asset price shrink. Of course, that’s a frightening and disheartening thing to see. And while this is going on we’re seeing a lot of people watching their asset prices shrink over the past 12 months, there’s sluggish wage growth, power prices are high, petrol prices are high.
It’s little wonder that people aren’t feeling prosperous in this country at the moment. It’s little wonder why someone like Andrew Leigh from the Labor Party is telling the world that Australians are feeling the pinch.
JOSH FRYDENBERG:
That was a really pathetic attempt but a junior, junior underpaid Shadow Minister in Andrew Leigh, to engage in a self-indulgent spray against his own country in the New York Times.
Let’s get real, The Economist has produced a front page and extensive summary of the Australian economy’s performance under a headline “Aussie Rules: What Australia Can Teach the World” [sic]. GDP growth has occurred at 3.4 per cent through the year, a faster rate than any time since the height of the mining boom in 2012, faster than any G7 country and significantly above the OECD average.
We have delivered on our commitment to create more than one million new jobs and we’re seeing female workforce participation and young people getting into the job market more than ever before. We have a AAA credit rating from the three leading credit rating agencies, one of only 10 countries in the world to have that and our budget is coming back to balance a year earlier than expected in 2019-20.
So we are being lauded for our economic performance and the economy, Chris, doesn’t run on auto pilot. But despite all that success, you’ve got a junior, junior Shadow Minister going into a foreign paper to downplay Australia’s economy and send exactly the wrong message to investors abroad. How many jobs does that create when he writes an op-ed in the New York Times attacking his own country? Really pathetic, if you ask me.
CHRIS KENNY:
But, the broader point here is, those big picture numbers are incontestable, but as I said, with slow wages growth, with people looking at their home prices shrinking, with high petrol prices, high energy prices. Does that explain why the voters, the people of this country, don’t feel particularly prosperous? Don’t feel as if they’re sharing in this economic recovery?
JOSH FRYDENBERG:
Well, I do think that Australians acknowledge that the Coalition is a far better economic manager than the Labor Party. We have taken the tough decisions as part of Budgets since we got elected five years ago.
In fact, we brought the rate of real spending growth down to the lowest level in 50 years and the number of working age Australians who are on welfare is now at its lowest level in 25 years.
So, I think the Australian people do understand that the Coalition can be trusted to be prudent and responsible fiscal managers. At the same time, you do point out, power prices are too high; that’s why we’re implementing the recommendations of the ACCC. You do point out that petrol prices have gone up quite significantly; but as you know that’s a function of two factors, one, of the Australian dollar, but also where the global oil price is.
And you are right to point to real wages growth, which has not been as fast as we would like it. But the Reserve Bank of Australia says the Australian economy continues to grow and the spare capacity in the labour market will be eaten away and we will see real wages gradually increase.
I’m confident that come the next election, the Australian people will see a very clear choice, between Bill Shorten and his big new tax and spend agenda. As you know, taxing on retirees, taxing on your property, taxing on your business, taxing on your income and taxing on your electricity bill, as well as giving the union law breakers a seat at the top table to become union law makers under his government.
Compared to what we’re proposing, a low taxing, a low spending agenda, where government is there to facilitate the private sector to be the best that they can be. That is what has delivered real growth and real jobs over the last five years.
CHRIS KENNY:
Just quickly, on a couple of those issues. Petrol prices, are you looking at doing anything on petrol excise? Or will you rule out any action in that regard?
JOSH FRYDENBERG:
We’ve got no plans to change the excise arrangements, bearing in mind what I just said to you, which was very clear that prices have gone up as a result of the changes in the Australian dollar as well as what happened in international fuel markets.
The Labor Party will go and promise you the world. But we saw what happened with their fuel watch and their so-called petrol commissioner who was given no commission. Both were debacles and we’ve got to be very careful in this area, knowing the constraints that are operating internationally, given that we import the vast bulk of the petrol that we consume.
CHRIS KENNY:
Well, climate and energy policy, under your remit when you were energy and climate minister was at the heart of the change of Prime Minister. It was at the heart of why Malcolm Turnbull was overthrown by his own party. What are you doing in that space now? Are you doing anything more to bring down electricity prices and to make our electricity more reliable as well? Or the policies we’ve seen are what we’ve got? Is there nothing left to offer Australia on electricity reliability and affordability?
JOSH FRYDENBERG:
Well, there is a lot to offer and there is a lot that we’re doing, as well as, there has been a lot that we have achieved. As you know, we saw prices come down in Queensland, South Australia and New South Wales from the 1st of July this year.
We’ve seen wholesale prices come down by around 25 per cent through the year and we were successful in passing legislation through the parliament to prevent the networks gaming the system and putting in new reforms that are seeing millions of Australians get a better deal from their retailer.
That being said, there is more to do. We are no longer pursuing the National Energy Guarantee as our policy, but we are pursuing a reliability guarantee, which Angus Taylor has been successful in getting the states to agree to. And that will ensure that we have more firm power coming into the system so that when the wind’s not blowing and the sun’s not shining, power is being generated.
When it comes to price, as you know, we’ve separated the role of the Environment Minister and the Energy Minister and we are implementing the ACCC’s recommendations, which include using the Government’s balance sheet to support the establishment of more firm power in our system, particularly to support industrial customers, the plastics, the paper, the chemical manufacturers, those in the mining industry that use a lot of power.
They’re some of the changes we’re implementing as well as a standard price from which the power companies benchmark their discounts to avoid the complexity and confusion that we’ve seen to date. So, we’re doing a lot of things in the energy space, but as I’ve told you numerous times Chris, there is no silver bullet in this particular space.
CHRIS KENNY:
Josh Frydenberg, just tell me now, what are the central differences between the Turnbull Government and the Morrison Government?
JOSH FRYDENBERG:
Well Chris, there is continuity and change. There’s continuity in the health and education policy. Obviously, in border protection policy and we’ve just seen the Trans Pacific Partnership, which a lot of work was done under Malcolm Turnbull, coming to fruition. So, there is that element of continuity.
In terms of change, as I said, we’ve separated out energy and environment as Ministerial portfolios and we’re no longer pursuing the National Energy Guarantee. Prime Minister Morrison has also made a very clear point of dealing with the drought stricken communities, and helping them as much as we can, including his $5 billion Future Drought Fund which was recently announced.
Again, work was being done under Malcolm Turnbull, but this is also a key priority for Scott Morrison. Scott Morrison is his own person. He brings his own set of skills and experiences to the job. The people of Australia like what they see, we’ve got an economic plan that is delivering for Australians with more jobs and lower taxes and just the other week, we passed through the parliament tax cuts for over three million small and medium sized enterprises, employing some seven million Australians.
That’s what Coalition Government’s do, they lower taxes, they create jobs, that’s our economic plan and we’re continuing to roll it out.
CHRIS KENNY:
And you’ve blocked your diary out for Thursday night to sit down and watch Malcolm Turnbull on Q&A?
JOSH FRYDENBERG:
I’ll leave that to the commentators like you.
CHRIS KENNY:
Thanks very much for joining us, Josh.