WALEED ALY
Gentlemen let's get down to it shall we. Is it not a total failure on behalf of both major parties that we're now reached a situation where car manufacturing in this country is finished, as it inevitably was going to at some stage and we seem to have no economic plan for dealing with it, not plan B, no clear jobs that are going to replace them, that anyone can point to as being concrete and we're simply behind the eight ball.
ARTHUR SINODINOS
If I can just come in on that first Waleed. The first thing in these circumstances is not to throw more money at something that was not going to be sustainable. And I think if you read the Productivity Commission report on the automotive industry, how they talked about having a production run of two to three hundred thousand to be cost competitive and the other factors which impacted on our competitiveness as a country, it was clear that the automotive industry in its present incarnation and I add that rider, in its present incarnation, did not appear to be sustainable.
So in a sense this is a decision point, this is a tipping point, this is a watershed. But I'm actually quite optimistic that out of this the Australian political establishment on both sides will be forced to take on the very issues around innovation, competitiveness, risk-taking that in a sense we've always been able to put in the bottom drawer because we think: well, you know, we just keep doing business as usual and business as usual is no longer delivering the usual result.
ANDREW LEIGH
Waleed I agree with much of what Arthur has to say around the importance of fostering innovation, but I disagree with the notion that it was always inevitable the car industry was going to leave Australia. And frankly if I'd been on this program a year ago and said people should be aware that following the election of an Abbott Government Holden and Toyota will announce that they're shutting down, within a few months of Tony Abbott becoming Prime Minister Australia will have a future without a car industry, I think you and Arthur would probably have said that I was fear mongering.
And so we want to be aware of that job loss. The fifty-four thousand jobs that have been lost and the importance of having a mix of good jobs in the country, of which manufacturing jobs are an important part.
WALEED ALY
Sure, but I am not hearing from either of you a really clear answer to the question as to what innovation means exactly.
ANDREW LEIGH
Well we laid out much of that in Government through the Australia in the Asian Century White Paper, which was essentially setting out an optimistic view about the rise, the economic rise of Asia, this movement of 2 billion dollar, 2 billion more consumers into the world middle class and the role that Australia had to play in offering services, such as health, education and finance, which you see as being big growth employment markets.
WALEED ALY
Sorry health, education and finance? So how many factory workers in Ford of Holden or Toyota and going to move into education or finance or health?
ANDREW LEIGH
Well Waleed, that's exactly why I think it's important to also maintain a strong automotive sector. And I am disappointed to see a Government who's automotive industry policy seems to be a white flag and nothing else.
WALEED ALY
Alright Arthur given that…
ARTHUR SINODINOS
Waleed can I say on this issue of adjustment that we have till 2017 to help engineer a proper transition. Now some workers will leave before 2017 from Holden or Toyota. But the point is, you don't have to have a strategy of what their next job is going to be today if you've got a transition period to help formulate a strategy, which has to take into account that there are different workers at different stages of their working lives who will have different needs. So there will be adjustment strategies which address those different requirements. It's no different to what we did in the 80s, 90s and other periods where they had to be structural adjustment.
Now it is true there will be some older workers who will decide to in effect retire or leave the labour force. There will be younger workers, particularly those with families who are mid-career, who will want to get onto another career. Some of them will find other jobs in the market off their own batt, but there will be others who will want to be retrained. And through a combination of Commonwealth assistance and State assistance we've put a hundred million on the table already. We can help to provide that sort of training and retraining.
But the economic fact is that in the medium to longer term the resources which were once tied up in this sector are now available, we're talking about the labour obviously, the capital and the other resources to go into other areas which may be more valuable from a national perspective. And that's the whole point.
WALEED ALY
Can we be specific about that though? Because this is the thing, I hear buzz words like innovation and so o, I don't know what it means, I don't know what the new jobs are going to be, I don't know what they're being retrained in.
ARTHUR SINODINOS
Well innovation in manufacturing for example means that you actually try and get higher value jobs, which have a sustainable competitive advantage so you don't have to rely on costs as a way of competing with other lower cost producers overseas. So increasingly we're finding a lot of Australians who are either working in small scale manufacturing, where scale itself is not the issue, it's the innovation that you put into it, 3D printing and other such things are providing a capacity to do that.
The thing about innovation is that the sunrise industries don't have a constituency; the declining industries do have constituencies, often quite loud. But if you provide the right conditions for risk taking and entrepreneurship, while not being able to predict the exact composition of what's going to happen, these jobs will come. As they will come in advanced services over time. But if you're asking me to itemise which job a particular worker in Toyota will go to tomorrow, you're deliberately putting up a question I can't answer and Andrew can't answer.
WALEED ALY
You mention free trade agreements, let's talk about that because Toyota mentioned them as well and they mentioned them as part of the reason that they can no longer go on making cars in this country. Andrew Leigh, I think this is a real question for the Labor Party, because I remember interviewing the Trade Minister Andrew Robb late last year, in Parliament House, when a free trade agreement with, I think it was South Korea was announced and the upshot of that was specifically that car manufacturing was going to be hurt as a result of that, but agriculture was going to be a bit winner.
And I also remember on that very day that Bill Shorten stood up in Parliament and welcomed that free trade agreement, given that position, are you really able to be consistent and say that you are not, as a Party, supporting a range of policy majors that made car manufacturing just about impossible in this country?
ANDREW LEIGH
Well Mr Shorten welcomed the agreement and said that he looked forward to seeing the text and I don't recall that text having yet been tabled. It is important that the Government is signing us up to free trade agreements that get us a good deal. But I think it's important to recognise that there is a range of ways in which Government has assisted the automotive sector over recent decades and increasingly direct support for research and development has been the main channel through which that's operated rather than through tariff walls.
And I think we want to be careful about saying things like the Prime Minister's comments that car workers were now going to be liberated. I think in many cases these workers will struggle to find alternative employment and I think when we look at the freeing up of the capital, as Arthur has said, it's arguable in theory, but in practice I would expect that General Motors and Toyota are not going to take the capital that they previously had invested in Australia and put it into other industries in Australia. They'll take that capital and they'll put it into other countries where they're building cars, so there is some loss of capital.
WALEED ALY
Did Paul Keating refer to those who were on the factory line as being liberated from their jobs when he was in power and the deregulation of the economy meant that those jobs went as well?
ARTHUR SINODINOS
He did it in 2000 when he was looking back on the impact of the reforms in the 80s and 90s and making the point that, and he was making the point to be fair to him in the broad, that by those changes these workers and others are being liberated to go on to potentially better and higher paying jobs.
WALEED ALY
Right, so this is the point I'm making. This is a by-partisan result. This is the result of successive governments who set policies in place that have this inevitable consequence as an outcome, right? I'm sure…
ANDREW LEIGH
I don't think that's a fair characterisation Waleed. I think if there is an issue which has differentiated the two political parties out of the last five months, it was the approach to the automotive sector…
WALEED ALY
What about the last thirty years?
ANDREW LEIGH
Well there has been strong work done by Labor in Government in order to make sure we have and automotive sector…
ARTHUR SINODINOS
Waleed…
ANDREW LEIGH
And you would never have seen Labor Party Treasurers or Prime Ministers goading a car company to leave as was happening with Mr Hockey.
ARTHUR SINODINOS
Waleed can I just, slightly different angle on this. I think the tipping point was reached with the public, when over the last few years Labor attempted to secure more jobs and claimed to be securing more jobs in the motor vehicle sector by adding to assistance it was providing to both Ford and Holden. But very soon after that assistance was provided jobs were actually being reduced in those companies. I think people were starting to see a break in the link between government support and either maintenance of employment levels, or increase in employment levels in fact going the other way.
And the other fact is that most Australians were voting with their feet and buying imported vehicles, which suggested that they also have an issue with domestically produced vehicles. So I suspect, while a lot of Australians would say: you know we'd like manufacturing in Australia, they weren't voting with their feet or with their wallets when push came to shove. So that the future of the industry was very much in doubt for a whole variety of factors beyond the control of Government.
WALEED ALY
Alright, before I let you go gentlemen, I do want to raise this question of financial fee reforms and I have to raise this Arthur, because it's your, this is your baby, this initiative and it hasn't got much attention. I think it was dropped just before Christmas. The idea that you would make changes to the way that financial services, the fees are structured. Why has it led people to accuse you of really removing consumer protection. So an example is that you would seek to dump the opt-in clause for financial advice fees, which could cost a whole lot of people a lot of money without them really realising what's going on. What's the rationale here?
ARTHUR SINODINOS
Waleed the rationale is that we consulted people across the industry and elsewhere, there was a view that we could retain the consumer protection in the legislation while reducing some of the cost of complying with the legislation.
And what we did when we came into Government is to implement those election commitments, including removing the opt-in requirement on the basis that if you're not happy with what your financial adviser is doing, at any time you can decide that you don't want them to be involved with you anymore. We also maintained the protection around the payment of commissions not being allowed where personal financial advice is being sought.
Where there has been an issue is there is a provision to allow that in relation to provision of general advice. For example if you go to a bank teller who shows you a particular product, if you then, but who makes it clear to you that look you can't, or she, can't give you personal financial advice, if you take that product away, read the product disclosure statement, then decide to take that product, well that's one transaction.
But what we've said is in the case of such general advice, we wouldn't apply the full provisions that we apply where someone is giving personal financial advice. Some people are saying well this is a potential loophole, there has got to be something done about it. What we're saying is, we're happy, as part of the consultation process to look at the regulations, implementing what we intend to do, so there is no backdoor way in which we water down any of the protection that banned commissions being payed when people give personal financial advice.
I'm sorry it's a bit complicated but…
WALEED ALY
All right, I understand it's complicated, it's necessarily, comes with the terrain, but Andrew Leigh are you happy with those safeguards that Arthur has outlined?
ANDREW LEIGH
This is an area I'm deeply concerned about Waleed. Typically I can see where Arthur is coming from on an issue, even if I mightn't agree with his position. On this one I am really at a loss to understand why the Government would wind back consumer protections put in place to prevent what happened with the collapse of Storm Financial.
So take the couple that were featured in the Australian Financial Review on the weekend, Cecily and Robin Heard, they'd payed off their Townsville House, before they invested in Storm Financial and lost it all because the investment product was a marginal loan and saw them now just living in an apartment trying to make ends meet. And it's because the advisers were getting what we call conflicted remuneration that they were being paid in order to recommend products that were not in the best interests of the consumer.
You've got to have those protections in place, because there is a huge information differential between financial advisers and their clients. And when the Government talks about compliance cost savings in the industry, well the risk is that you might save the financial planners a little bit on compliance costs, but if you do so with the cost of creating another Storm Financial collapse, then that's a terrible cost on the community, on people who ought to be able to expect that when they go to a financial planner, they'll get information that is going to be in the interests of their pockets, not the pockets of the financial planner.
ARTHUR SINODINOS
Waleed can I just make the point, I think the example that Andrew talks about would not be covered by what we're talking about here. Because what we're talking about here is where Storm Financial were flogging particular products, he is talking about a product I think which came through the Commonwealth Bank. We are talking about an entirely different situation, where they are providing personal financial advice and the safeguards of the FOFA reforms would immediately kick in. You could not do that, I believe under the reforms as they stand today and as we seek to amend them.
WALEED ALY
Gentlemen, got to move. I will keep an eye on that one because it's going to be an interesting one to see unfold. But Arthur and Andrew always good to speak to you. Thank you very much for making a 2014 debut and hope we do it again soon.
ARTHUR SINODINOS
Thanks.
ANDREW LEIGH
Thanks Waleed, thanks Arthur.
ARTHUR SINODINOS
Thanks.