20 September 2013

Doorstop - APEC Finance Ministers’ Meeting, Nusa Dua, Indonesia

Note

SUBJECTS: APEC Finance Ministers’ Meeting, infrastructure funding, relationship with Indonesia, GST, Asia Region Funds Passport

 

JOURNALIST:

You are effectively spearheading the new Government’s engagement with Asia and the world. Can you give us an account of how the last two days have gone and how those introductions have gone?

TREASURER:

We have had a number of very important discussions and bilateral meetings – Finance Ministers from Indonesia, Korea, China as well as meetings with the World Bank, the Asian Development Bank. Also numerous discussions with a number of others including the Finance Minister of Hong Kong, the Deputy Finance Minister of Russia and I still have a number of other bilaterals to go. It has been a very interesting 24 hours and I think we have formed the basis for a terrific partnerships and discussions moving forward. I should also add I have renewed old friendships such as that with the Deputy Prime Minister of Singapore Tharman. He has been a friend for some period of time and obviously globally he is very well regarded.

JOURNALIST:

In the US in the last few days we have heard about tapering and they are not going to take their foot off the pedal there and we have seen the Australian dollar rise as a result of that. What is your response? Have you had discussions with other ministers here in relation to the US economy and its implications for Australia down the track? Specifically the implications for our Budget?

TREASURER:

There has been extensive discussion about the decisions of the Federal Reserve. They are for the meeting but, from an Australian perspective, we are not going to respond to ‘shortterm-ism’. We are going to respond to the structural challenges moving forward. We have been encouraged by the discussion that has been focused on meeting some of the fiscal challenges, some of the current account challenges and very importantly – and I think the dominant part of the discussion for the last 24 hours – and that is how to meet head-on the infrastructure challenges that member countries are facing. I am very pleased that Australia is taking a lead role in that regard.

JOURNALIST:

Do you have concerns though about the impact on – for example – the Australian dollar’s rise in just the last 48 hours as a result perhaps of the tapering debate? Do you have any concerns about our Budget?

TREASURER:

The market is never wrong and we have got to deal with what we are presented. I am not going to react to short term market volatility. I am just going to respond to the medium and longer term challenges that we face in Australia which is to address some of the structural challenges in our Budget, and to continue with the appropriate structural reform in the economy that is going to improve our productivity growth. Also, very importantly, to focus on our medium to long term needs in infrastructure which will help to improve our productivity growth.

JOURNALIST:

The former Finance Minister of Indonesia who is now at the World Bank has characterised what has happened this week as breath space for her country. But she said it is important now that Indonesia and countries in a similar position do not take their foot off the pedal in terms of structural reform. How do you think that applies to Australia?

TREASURER:

Let me say I was hugely impressed with our discussion. She is an immensely impressive figure. Obviously the cost of credit is comparatively low at the moment and governments do not have the fiscal capacity to be able to fund their infrastructure by themselves. They are going to need private equity. It was very interesting to hear the Finance Minister of China talk extensively about the need to encourage private equity but also the need to have a prominent role for the public sector. What has been of most interest to me in the last 24 hours has been the recognition right across APEC, and in a number of multi-lateral organisations,  that Governments have to be more innovative in the way that they fund the massive demand for infrastructure over the next few years. Australia has a lead role to play in that in two ways – the work we have done in setting up a new PPP Centre in Jakarta which Prime Minister Abbott will talk about at the APEC Leaders meeting coming up soon, but also with our Asian Funds Passport. I welcome the fact that we are able to proceed with our Asian Funds Passport. I must admit the wheels move slowly but Irene has done a great job. It is well and good for Ministers to talk about funding infrastructure but unless they can convince regulators to move more expeditiously and their colleagues to become more supportive then the funding for infrastructure is going to take a long time to materalise. The Funds Passport is actually a significant opportunity although I do recognise that it is moving slower than I would like.

JOURNALIST:

Did the issue of foreign investment come up with your Indonesian counterpart?

TREASURER:

We have talked about foreign investment and it wasn’t just with the Indonesians – it came up in a number of bilaterals. Australia is open for business and they welcome that.

JOURNALIST:

So what is your view in terms of the Indonesian proposal to buy 1.5 million hectares of land in Northern Australia? Do you have a view on that?

TREASURER:

These things are judged within the framework of our foreign investment rules. We obviously look at proposals on a case-by-case basis. There was no specific proposal put to me in relation to that but I was very encouraged in my discussions with the Indonesian Finance Minister where it was recognised there is mutual benefit in expanding the cattle trade between Australia and Indonesia [inaudible]. We want to work closely together to expand and facilitate the export of food from Australia to Indonesia to meet Indonesia’s growing needs.

JOURNALIST:

Further on foreign investment in terms of Graincorp, do you share Barnaby Joyce’s concerns for Graincorp?

TREASURER:

As the decision maker in this process I will go through the proper processes. We will have a methodical process for evaluating individual proposals and you can rest assured my decision will be not contrary to the national interest.

JOURNALIST:

Tell me what your appraisal of the bilateral relationship is on the basis of your talks with Indonesia?

TREASURER:

Very strong. The Finance Minister of Indonesia and I had a very warm discussion. We have had a number of discussions over the last 24 hours and I was pleased to invite him to come visit Australia. Both he and his wife studied in Canberra and they are very fond of Canberra which is very encouraging. The Finance Minister is very keen to forge deeper ties with Australia. I was particularly encouraged by the very positive response to our provision of Treasury officials to the Ministry of Finance here in Indonesia. I indicated on behalf of the Secretary of the Treasury that we would welcome Indonesians coming to Australia to work in our Treasury and we are going to proceed with that. It is also the case that we are going to help facilitate public servants here in Indonesia working in state Departments of Treasury in Australia to better understand how infrastructure works. The Victorian Government, I understand, has already provided extensive support for that proposal as well.

JOURNALIST:

Where do you think it is a priority for the Abbott administration to advance on the progress of FTAs? Are there any in particular you …? [inaudible]

TREASURER:

Free Trade Agreements?

JOURNALIST:

Yes.

TREASURER:

They did come up in a number of our bilateral discussions. I think there is a deep willingness to engage more with Australia - whether it be the discussion I had with the Financial Secretary of Hong Kong about RMB based trading or be it how we can get on with the job of closer economic ties with the Deputy Prime Minister and Minister for Finance in Korea. In each case we have seen common ground and common goals. I know my colleague Andrew Robb is very keen to progress Free Trade Agreements. There is a willingness to get on with things – on both sides of the discussions.

JOURNALIST:

Are there any ones you know you are more attracted to push to complete this?

TREASURER:

I will leave that to Andrew Robb – he is the Minister for Trade.

JOURNALIST:

You have mentioned that when the Prime Minister comes here he will be dealing with the PPP Centre in Jakarta. From your point of view what are the other important things that he should be dealing with when he is Jakarta?

TREASURER:

I am not going to give the Prime Minister megaphone advice.

JOURNALIST:

I’m not suggesting you do, but you are the Treasurer.

TREASURER:

I will be discussing the matters when I return. There is great warmth towards Australia and the new Government from the Indonesian Government. There is no doubt about that. The fact that the first bilateral meeting had by an Australian Minister was with the Finance Minister of Indonesia is a good indication. The fact that we both moved heaven and earth to make that meeting happen first and it went extensively overtime proves that there is a genuine depth of sincere engagement. There is mutual benefit. Ultimately international politics is about mutual benefit and self- interest often governs international relations. The fact that we have common interests and they are so obvious to all of us is widely recognised.

JOURNALIST:

Just one more domestic issue; Colin Barnett yesterday issued fresh calls for the GST to be looked at. What’s your reaction to that?

TREASURER:

Three weeks ago before the election we said “there would be no change to the GST. Full stop. End of story.” Today we say, after the election, “there will be no change to the GST. Full stop. End of story.”

JOURNALIST:

But it will still be part of the review – full stop, end of story?

TREASURER:

Nothing will change on this. It goes through the review [inaudible]. But we have said no change to the GST. Full stop. End of story.

JOURNALIST:

Colin Barnett is a Liberal Premier. What would you say to him about this? Should he go and have another look at things about extracting money in his state [inaudible]?

TREASURER:

Premier Barnett is a hugely impressive state leader. I have a high regard for him, I don’t always agree with him on things. In terms of the proposal to change the GST I don’t agree with him but I recognise States face structural challenges. They have got growth expenditure in health and education and Western Australia has in infrastructure. Obviously we have got to look at ways of helping Western Australia deal with some of the growth challenges and there are other ways to do it. Sometimes it is too easy to default to a single silver bullet solution when the solution needs to much broader and far more sophisticated. I look forward to having discussions with Troy Buswell when the opportunity arises for further discussions with State colleagues about some of the structural challenges they face.

JOURNALIST:

What more needs to be done on the funds passport? Why is it moving so slowly?

TREASURER:

It is a significant step forward today in having a written agreement between Korea, Singapore, New Zealand and ourselves. Hopefully that will be a path breaker for others to follow. I would hope that Thailand and a number of other countries will join us in the near future. We need to get some common ground in relation to the principles, consult with individual stakeholders, get the regulators to sign up, legislate in our own jurisdictions and get on with it.

JOURNALIST:

Is it all-in requirement? Does everyone have to sign?

TREASURER:

I think it is really important that we try and get as many jurisdictions in as possible to begin to make it real and inviting. It is so obvious that an investor in Korea should be able to seamlessly buy into a collective investment vehicle in Australia and vice versa without having to go through enormous regulatory hoops. If we are going to truly build the infrastructure Asia needs we need private equity and you have got to make it easy for private equity, not hard.  I think one of the challenges for Finance Ministers in the region is to stand to their regulators who find it easy to say no and teach them to say yes. A regulator will always default to the no position because it is easy. The hardest thing for a regulator to do is say yes. We have got to move beyond that. This is a step forward but, as I said, I will doing what I can to try and expedite [inaudible].

JOURNALIST:

Is there some kind of critical mass in terms of countries?

TREASURER:

Korea, Singapore, Australia and New Zealand is a very good start. Given the capacity to raise funds in each of those jurisdictions particularly in Australia with our massive increase in the pool of superannuation funds there is enormous potential. It is also a case of being able to facilitate this - we could get first mover advantage in this.

JOURNALIST:

So you do activate the process between the countries that have signed up?

TREASURER:

We will get on with it. The countries that are signed up need to get the approval process consistent and then legislate where appropriate and then we can move.

JOURNALIST:

How long will that take in Australia’s case?

TREASURER:

I am prepared to move heaven and earth to make it happen. If we need to be the first we will be the first. But it is no use us legislating if Korea and Singapore have a different view on what is required so we have got to come to an agreement. I am very confident we can. I believe New Zealand will be very supportive moving in this direction and Singapore is very supportive. Tharman is a great believer in markets and I must say the depth of experience of the Deputy Prime Minister of Korea and the respect he is held by many others helps to reach out to those not signing today but may in the future.