JIM CHALMERS:
Yesterday afternoon and into last evening I co‑chaired with Chairman Zheng Shanjie, the Chairman of the National Development and Reform Commission (NDRC), the first Strategic Economic Dialogue in 7 years.
These were frank and fruitful discussions between myself and the Chairman of the NDRC. The discussions ran for more than 3 hours. They ran over time. We are very grateful for the time that the Chairman was able to give us at a time when there’s a lot going on here in China, and I wanted to talk about that a bit as well.
These were the first meetings by an Australian Treasurer here in 7 years. It’s another really important part of our efforts as a government to stabilise this really key economic relationship in the interests of our people.
This economic relationship is full of complexity and full of opportunity, and we believe we give ourselves the best chance to manage and maximise those complexities and those opportunities when we engage in a meaningful way, as we have been doing over the course of the last couple of days.
Obviously Australia and China – we have our differences. But we have agreed to work together where we can when it comes to really important areas like trade and investment, decarbonisation of our industries and business engagement as well.
I’m really pleased that we agreed yesterday that we would conduct these Strategic Economic Dialogues annually, and the next one will be in Australia next year.
We were able to have advanced discussions, frank and fruitful, productive and practical discussions, about the key issues confronting both of our economies and the global economy more broadly as well.
There couldn’t have been a more important time to be engaging with Chinese counterparts than right now. We saw the announcements made earlier in the week and more signalled yesterday by senior policymakers here in China.
I want to make it really clear – we welcome efforts to boost growth in the Chinese economy. We are very pleased to see these additional steps being signalled by the Chinese government in order to boost economic activity and boost growth here in China.
China is Australia’s biggest partner. We have a lot at stake and a lot to gain when it comes to this key economic relationship. If you look at the Treasury forecasts for growth in the Chinese economy, if they eventuate, those 3 years of forecasts, that would be the weakest period of growth here in China since the opening up in the late 1970s. What happens here and what is decided here has big consequences for our own economy, our own workers, businesses, investors and for our country more broadly.
We do have a lot at stake, and we do have a lot to gain when it comes to the engagement and the stabilisation of the relationship with China as well. We know that a more stable relationship is good for Australia, and that’s why I’m here. It’s as simple as that. That’s also why I consulted with the Chairs and CEOs and senior executives of around 15 different very major China‑facing Australian businesses, because we do know just how important it is that we get this right.
Growth in the Chinese economy has been a key contributor to weakness in the global economy. When the Chinese economy is soft, we’re not immune from that. We understand that. That’s an important reason for the timing of this visit being so crucial.
Shortly I’ll be meeting with the Chairman of the Chinese Securities Commission as well, Wu Qing, and I will get from him some further insights about the performance of the Chinese economy, particularly the financial conditions here. That will also be another opportunity to talk about the measures announced and signalled through the course of this week.
I was very grateful to Chairman Zheng last night for the opportunity formally in the dialogue and then informally at the dinner to canvass some of the contexts for the decisions that have been taken, announced or signalled in the course of this week. The NDRC is really going to be one of the most important institutions when it comes to rolling out this support for the Chinese economy at a really important time.
It was crucial that we restart these discussions, the Strategic Economic Dialogue. It’s a very good outcome for Australia that we will be hosting counterparts next year to continue to advance these discussions on areas like trade and investment, decarbonisation of our industries and business engagement. I’m looking forward to hosting colleagues and counterparts next year in Australia.
So very valuable and well‑timed discussions. Very practical, very productive. I’m grateful for the generosity of our Chinese host as we canvass some of these really important issues.
I’m happy to take some of your questions.
JOURNALIST:
Treasurer, as you say, you couldn’t have got luckier with the timing. How convinced are you by the extent of the stimulus measures announced by the Chinese this week?
CHALMERS:
Clearly some of the detail of these measures is still to come and subject to those details we think this is a really welcome development, a very welcome development here in China but also for the global economy, and especially for our own economy.
We are very pleased to see the Chinese authorities announce or signal the sorts of steps that we have been hearing about this week publicly and also in our private discussions with our counterparts.
This can only be a good thing for Australia, subject to those details, because we know that weakness in the Chinese economy does flow through to our own economic conditions. Some of the key reasons why our own economy is slowing considerably are global economic uncertainty, of which China is a part, combined with inflationary pressures at home and the impact of higher interest rates – those 3 things are combining to slow our own economy considerably.
When steps are taken here to boost economic activity and to boost growth for the Chinese economy, subject to the details that will be released in good time, we see that as a very, very good development for Australia.
JOURNALIST:
But do you think they’ll work?
CHALMERS:
It remains to be seen. But we’ve seen on earlier occasions when the authorities here, the administration here, steps in to support activity in the economy that is typically a good thing for Australia – good for our businesses and workers, our industries, our investors, and good for the global economy as well.
Like a lot of people around the world, we have been concerned about the softer conditions here in the Chinese economy. Subject to the details that will be made public in good time, any efforts to boost growth and support activity here is a welcome one around the world and especially at home in Australia.
JOURNALIST:
Can you talk us through some of the specific impacts that happens in Australia, the flow‑on effects, when you have an annual growth figure here in China that is below that 5 per cent target?
CHALMERS:
We see that across a range of different indicators, but the easiest to understand is the demand for and the price that we’re getting for some of our bulk commodities. One of the reasons why I consulted with BHP and Rio and Fortescue and Woodside and others before I came here to China is to understand the implications for our exports of a softer Chinese economy.
We’ve seen the iron ore price, for example, is really quite low by recent historical standards. I think it’s down about 40 per cent since the start of the year. Similarly, when it comes to thermal coal. That has implications for us. It has implications for the Budget but, more importantly, it has implications for the economy. Even if in the course of this week we’ve seen a minor correction, a minor improvement, in the prices we get for some of our bulk commodities. That’s obviously a good thing when it comes to our major exporters.
But more broadly, softness here has implications for growth in the global economy. We’ve even seen in the last 24 hours or so our own Reserve Bank putting out its financial stability analysis and has talked about the consequences of weaker Chinese growth for the global economy. We’re not immune from that, really, right across the board. But the easiest way to understand it is when it comes to the impact on our exporters.
JOURNALIST:
Treasurer, there’s been a lot happening in Beijing on the economic front. There’s also been lot going on on the military front. There was the first intercontinental ballistic missile shot in more than 4 decades a few days ago, and on Wednesday before you arrived Australia, Japan and New Zealand sailed their navy vessels through the Taiwan Strait. We’ve also had all 3 of China’s aircraft carriers for the first time operating on [inaudible].
Can I get a direct comment on the ballistic missile [inaudible] and a comment on Australia’s freedom of navigation operation? And then maybe just talk to us about how you reconcile, obviously, the economic relationship is so important, but there’s other things going on as well, just talk to us about you reconcile that, thanks very much for that.
CHALMERS:
Thanks very much for that, Will.
Australia, like other countries in our region and around the world, has a lot at stake when it comes to a stable, secure, peaceful and prosperous region. It’s not unusual for navies to conduct the kind of exercises that you’re describing in the Taiwan Strait. These are routine activities, and they’re conducted in accordance with international law. That wasn’t part of our discussions yesterday.
In terms of the other parts of your question, I was able to reiterate in the meetings yesterday afternoon our expectations of safe and professional conduct of all militaries operating in our region. Obviously I’m aware of the reports about the testing and other reports that you refer to in your question, and I was able to raise that in the conversation yesterday afternoon. But as you would expect, the overwhelming focus of our discussions here has been the economy.
JOURNALIST:
So in your discussions yesterday about the stimulus measures, was there any discussion about whether these plans are aimed at very short term now or whether this was medium term? [Inaudible] And also, how do you see [inaudible]? Is this actually going to supercharge Chinese national output and Chinese exports? [Inaudible]
CHALMERS:
In reverse order, I was able to talk about the importance of safeguarding the global rules‑based system of open trade in the context of some of the issues you raise in your question and the free and fair and open markets that have served the global economy and our economy so well for so long.
When it comes to the urgency or otherwise of steps that have been flagged to boost growth here, I don’t want to go too deep into the informal conversations that we had about some elements of that, but it was a feature of our discussions.
This balance that we’re all trying to strike between doing what is necessary in the near term – whether it’s here supporting growth, in Australia, a primary focus on inflation on the cost of living without ignoring the risks to growth – balancing those near‑term considerations with what we need to do to set ourselves up for another generation of growth and prosperity.
The discussions were about those steps flagged and announced throughout the course of the week. Some elements of that will have some urgency associated with it. But the government here wants to make sure that anything that they’re doing in the near term also serves a useful longer term purpose. In that, we have a lot in common. In Australia fighting inflation without ignoring the risks to growth, budget repair but also investing in skills and housing and energy and in a Future Made in Australia – all that is about trying to recognise our near‑term pressures and our longer‑term opportunities, and that’s how my Chinese counterparts see it as well.
JOURNALIST:
[Inaudible] the US is [inaudible] some kind of [inaudible]. What will Australia be doing about that? And did your Chinese counterpart raise that in his [inaudible]?
CHALMERS:
My colleague the Energy Minister has made it clear that we don’t intend to ban imports of EVs from any particular country.
We will continue to discuss with American counterparts the steps that they’ve announced and the steps that they’re taking when it comes to EVs. But we will take our own advice when it comes to the best way to manage and maximise that really important market for EVs.
These sorts of issues came up in the broad in the discussions yesterday afternoon. We know that this is an issue of concern to our Chinese counterparts. But from our point of view, when it came to technology and innovation and the net zero transformation, our highest priority and our focus in the discussions was on other areas, including the decarbonisation of steel, for example, trying to maximise the chances that we have working together when it comes to our iron ore and their steel production. We both have an interest in greener steel production, and so that was a bigger part of the conversation than some of these other issues around EVs and other technology.
JOURNALIST:
Treasurer, I’m sure Australian lobster farmers would be very interested to know whether you raised their concerns yesterday. Are you any closer to knowing when the ban will be lifted? Will it be this year?
CHALMERS:
I did raise it last night and yesterday afternoon. We’re seeking a speedy resolution of the restrictions on lobster.
We’ve made really quite encouraging progress, engaging with Chinese counterparts, to see something like 20 of the $21 billion in trade restrictions lifted. That’s good for our workers and our businesses, our exporters and our investors. I wanted to pay tribute there to the efforts of our people here in China led so capably by our Ambassador, but also Ministers Wong and Farrell and the Prime Minister.
This is a very tangible way that we have seen progress made as a consequence of our effort to stabilise the relationship. There is more trade of more goods than when we came to office because of those efforts.
Obviously we’re aware we have a little ways to go yet, particularly when it comes to lobster. I did raise that. We are seeking the speedy resolution of those issues. We know that teams on both sides are discussing the issue of lobster in particular, trying to get to a resolution on that. We’d like to see that before long.
JOURNALIST:
What’s the hiccup?
CHALMERS:
As I understand it, there are still a couple of technical issues being worked on between our agriculture and trade departments and administrations. We knew that coming here.
I intended to raise it here and I have. We do want to see a speedy resolution, but we know that there’s a little bit more work to do. But ideally, hopefully, we will see our wonderful Australian lobster gracing the tables of Chinese homes and restaurants as soon as possible.
JOURNALIST:
The Chinese delegation was seeking reassurances around Chinese investment in Australia. Did they raise anything specific [inaudible]?
CHALMERS:
I really welcomed the opportunity to convey to Chairman Zheng and to his colleagues the same thing which I have said publicly, and I mean it.
Our foreign investment regime does not target any one country. Ours is a non‑discriminatory regime, which is about managing risks in foreign investment. It’s about strengthening the foreign investment regime and streamlining it where we can to manage the economic and security risks which are sometimes part of foreign investment proposals. That doesn’t single any one country out. It is just a sensible, considered, commonsense way to manage foreign investment in Australia.
Foreign investment in Australia is welcome. We support overwhelmingly most of the applications that are made to us. Where a proposal is rejected it hasn’t all been from one country. It hasn’t all been from here.
I really did genuinely welcome the opportunity to step the Chairman through that. We agreed to have more discussions about some of those issues. Wherever we can provide more clarity on these sorts of issues we welcome the chance to do that.
JOURNALIST:
What did they say about critical minerals? Because obviously some of those investors have been in that industry. It’s something the Chinese dominate in, and we have seen the announcement earlier this week of the co‑financing agreement between Australia and the US and other countries. So were they concerned about these efforts to diversify supply chains in critical minerals?
CHALMERS:
There’s a recognition that every country manages its economic and national security interests in a way that’s appropriate for them.
Every country has some system or set of arrangements to screen investment, and countries make agreements with each other about key supply chains like this one.
We think that critical minerals are the opportunity of the century for Australia. I am a huge supporter of the Australian critical minerals industry. But our efforts there aren’t about protecting. They’re about engaging with the world, providing wonderful critical – Australian critical minerals – to markets around the world. Obviously not just with our Chinese counterparts but right around the world there’s a lot of interest in Australian critical minerals, and that’s for good reason.
JOURNALIST:
Do you see the Chinese overcapacity in thins like rare earths as being a threat to Australia’s industries? Australia’s paying billions of dollar to companies like Arafura to develop the industry and yet Chinese exports are growing and prices are falling. Are those – firstly, are those investments by the Australian Government and those companies at risk, and, secondly, did you raise those issues with the Chinese?
CHALMERS:
We’ve been one of the world’s major beneficiaries of properly functioning global markets for resources and for other goods and services as well. The global economy has been a major beneficiary of that, and we’ve been a major beneficiary of that. We want to see it continue.
Clearly, when it comes to some markets for some resources, we’ve seen some extraordinary volatility in some of those markets. I was able to reiterate with Chairman Zheng just how much we value the proper functioning of global rules‑based markets. I believe that it’s in everyone’s interests that see those markets function properly.
JOURNALIST:
Just following on on investment, [inaudible] Australia‑China Business Council Summit. There’s been a lot of confusion among Australian China facing businesses and Chinese businesses who want to operate in Australia, they heard the comments you repeated today about Australia not having – not targeting any one country. But then they say, well, look at the reality of it. They said they’re very confused about where they’re allowed or not. You have approved or allowed the investment of Rio and [inaudible] for that new iron ore project 2 years ago. Clearly Investment can be approved from China. Can you speak to the model? Is it that? Is it a 50–50 JV with an Australian partner? Is that what Chinese businesses should be coming to Australia with if they want success? Just speak to that a bit.
CHALMERS:
We approach each proposal on a case‑by‑case basis, and we’ve done our best to provide as much information and clarity and certainty about the sorts of things that we consider when we judge those applications on a case‑by‑case basis.
We’ve made it very clear, for example, that we take a harder look where it applies to critical infrastructure, critical data, critical minerals. I think that’s understood. It’s certainly been clearly communicated by our government. But if there’s more information and more clarity that we can provide, I was able to convey to Chairman Zheng yesterday afternoon that we’re happy to try and provide that.
We approve overwhelmingly the vast majority of proposals which come to us when it comes to foreign investment. Rejecting proposals is a very rare thing, and it isn’t just from one country. We run a genuinely non‑discriminatory Foreign Investment Review Board process. It is rightly robust. We want it to be robust, but we also want it to be clear and transparent, and if we can do more on that front, we will.
JOURNALIST:
Treasurer, you’re flying back into a really big storm over negative gearing. Did you ask Treasury to model reforms, and when will we get a definitive answer from the government about whether you will take a new policy to the election on negative gearing?
CHALMERS:
First of all, I hope I’m flying back into another Brisbane Lions premiership, but I’ll also be flying back into the opportunity to do a couple of things when I’m back.
I’ll be releasing the Final Budget Outcome on Monday with Katy Gallagher, which will show a bigger second surplus than forecast in the Budget in May. There’ll be a number of opportunities to talk about this and these engagements here as well.
When it comes to negative gearing changes, it is not unusual at all for governments or for treasurers to get advice on contentious issues which are in the public domain, including in the parliament. It is not unusual for treasurers to do that, but we have made it very clear through the course of this week that we have a broad and ambitious housing policy already and those changes aren’t part of it.
JOURNALIST:
So you’ll rule out any changes to negative gearing before the next election and during the next term?
CHALMERS:
We’ve made it really clear through the course of the week that our priority and our focus is on rolling out $32 billion worth of investment, because our highest priority and our biggest focus is supply. Whether it’s in Brisbane on Wednesday where I took a number of questions about this or throughout the course of the week when the Prime Minister was able to take a whole bunch of questions on this as well, we’ve made it clear. Our policy is to boost supply. Our policy is to invest $32 billion in that effort and these changes which we get advice on from time to time because they’re in the public domain or they’re in the Parliament, they’re not part of our policy.
JOURNALIST:
Is the Australian economy at risk of shrinking if Trump is elected in the US, given he’s flagged up to 60 per cent tariffs on all imports and overruling the Federal Reserve on interest rates [inaudible]?
CHALMERS:
As you’d appreciate, we don’t comment on the domestic political debate, especially from another country and especially in the most intense part of an American election campaign.
We have shown a willingness and an ability across Australian Governments of both political persuasions to work with whoever the Americans choose as their President and the people that they elect to their representative bodies. We play the cards that we’re dealt when it comes to decisions taken appropriately by the American people.
I share President Biden’s view that nobody has anything to gain from a trade war between the US and China. The policies being proposed by either side of politics in the US are a matter for them. Broadly and in principle I hold President Biden’s view – nobody has anything to gain from a trade war between this country and the US, least of all Australia.
JOURNALIST:
How much did the US election come up in your discussions yesterday?
CHALMERS:
I don’t think it came up at all. It may have come up informally, but I don’t believe so.
Thanks very much.