TREASURER:
It has been another very interesting day here in Washington. Following my meetings on the Hill, I see that the Republican leadership has offered a deal to President Obama. This is an important step forward because it ensures that America does not default on its debt. As I said yesterday on the ABC, I expected that such a deal would be offered which would provide some stability for financial markets and certainty for investors.
Overwhelmingly, today we have been focused on the medium to longer term issues that are a challenge for the global economy. In meetings with the heads of the World Bank, the IMF and the Federal Reserve it is quite clear that we cannot allow ourselves to be overwhelmingly dominated by discussion of the short term issues. We need to focus on the medium and long term challenges to growth in the world economy - that was certainly a point of discussion with Finance Ministers that I met with from India and Japan, in particular. Over the next day or so I will also be meeting Finance Ministers from the rest of the G20.
The message is clear. As long as we all continue to focus on the medium term challenges - and not be distracted by the day to day events here in Washington - then we can have a growth trajectory for the global economy that sustains the current level of growth and improves on that growth with further new investment in infrastructure and a range of other growth initiatives.
JOURNALIST:
The Republicans have already headed into the White House for what now has become a very critical meeting with the President. How important is it for a country like Australia that they actually come to some deal?
TREASURER:
As I said yesterday America is not going to default on its debt. There was a clear message that I got out of meetings with members of Congress yesterday; [and it was] no matter how strong their views were there would be a resolution on this matter. It is quite clear that America is being pulled back from the brink as sensible people expected. That is the good news, but the fact is America cannot continue to sustain its current lifestyle. It needs to address some of the structural problems it has in its Budget. At the same time there is a message there for Australia - that we cannot continue to live beyond our means. We need to put in place programs that address the ongoing fiscal challenges, particularly those left by our Labor opponents.
JOURNALIST:
Is there any optimism at the G20 level that there will be a deal [inaudible]?
TREASURER:
There is an expectation that a deal will be reached. The threat of default is so grave that no sensible person would accept that it is a realistic option. Again, the benefit of me being here has been the chance to engage in conversations and discussions with leadership of the Republican Party and the Democrats to get a better feel, on behalf of the Australian people, for the determination of the Congress to get a resolution. I have been satisfied that is the case. As I said in my discussion yesterday with Fran Kelly on Radio National, I said it would be a case of having an option put forward to have a three to six week extension on the debt limit whilst negotiations continued. That has proven to be the option we have at the moment.
JOURNALIST:
Treasurer, you mentioned some of the medium term [challenges] the world should be focusing on. What are some of those areas of policy specifics that world leaders, such as yourself, should be focusing on?
TREASURER:
Overwhelmingly there is a focus on infrastructure and the challenge of financing infrastructure. Governments around the world recognise that they have not got the fiscal capacity to be able to fund the massive infrastructure needs – not just of the developing world, but importantly, of the developed world. It is important to make the point that the developed world also has significant infrastructure demands mainly focusing around upgrading and maintaining infrastructure. In discussions with the World Bank and its new President we talked at length about potential funding models for infrastructure. Certainly it is a focus of discussions of the IMF and I expect it will be in the IMF discussions over the next few days. It will be a focus for Australia in its leadership role in the G20 next year. The fact that all the G20 Finance Ministers have been keen to meet with us illustrates a fact that the leadership of the G20 by Australia is a very significant event. There are high expectations for us as the Chair of the G20 next year that we will have a simple agenda - not a complicated and overly ambitious agenda - and that we will focus on real outcomes because Australia is a long way away. Having said that, they will travel to Australia if there is a worthwhile agenda to pursue.
JOURNALIST:
So is infrastructure going to be your top priority when you host the G20 because it has particularly been a Labor [inaudible]?
TREASURER:
Whether it is Liberal or Labor, what matters is that you get the job done. As Tony Abbott said, he wants to be an infrastructure Prime Minister - we want to be an infrastructure economy as a leader for the world. Being the Chair of the G20 next year, there is a very strong appetite to focus on how to fund infrastructure and how to facilitate infrastructure, particularly in developing countries.
JOURNALIST:
On that, what have the ratings agencies said to you about using Government guarantees to fund infrastructure projects?
TREASURER:
We are meeting the rating agencies next week in New York and clearly I am looking forward to those discussions. They are important discussions but they are also going to focus on what we can do to ensure that Australia maintains its credit level at a AAA level but, at the same time, we need to be more ambitious in the way that we fund infrastructure in Australia. Ultimately, we have to have a medium to long term infrastructure plan to stimulate economic growth, [and] to give job stability and certainty to address the challenge of rising unemployment. These are some of the things that we are addressing during this trip.
JOURNALIST:
The Opposition says on free trade with China that is impossible for a free trade deal with China unless you back down on the foreign investment review threshold reduction. Which are you more committed to?
TREASURER:
I am more committed to whatever is in the best interests of our nation and our economy. Clearly there is an appetite for freer trade and that is very encouraging for me as the new Treasurer to have very engaging discussions about free trade with a number of our major trading partners. There is a strong appetite to find ways to improve the flow of capital around the world - that is part of the equation. There is another part of the equation - I think there is a global agreement on it - for the G20 next year and that is about addressing the erosion of the tax base of many of the developed nations. If I were to identify the two key issues that are the focus of the G20 Finance Ministers, they are: How do we fund the massive demand for new and existing infrastructure? Secondly, how do we address the erosion of the tax base? Together they form part of the growth equation that is going to be the focus of the G20 Finance Ministers.
JOURNALIST:
Treasurer, can I just ask you a quick question on penalty rates and whether it is time to revisit them. Industry groups are pushing for that to happen after the Fair Work Commission rejected to cut the loading. Is it time to revisit them?
TREASURER:
Structural reform is so important if we are going to take some of the upward pressure off unemployment. We have, overall, a rising unemployment rate in Australia as a legacy from Labor. Obviously I am encouraged by the headline figure yesterday but the underlying trend is of concern. We need to look at broader structural reform. Having said that, we gave commitments during the course of the election and we are not going to reneg on those commitments. We are going to be a consistent and predicable Government. That means that what we promised before the election we keep to. That includes having a proper Productivity Commission review on workplace relations but not having any kneejerk reactions to individual cases of the Fair Work Commission.
I should touch on one other thing. There is a very clear lesson for Australia here today in Washington and it is this - when a Government sets a debt limit the Government has to have a credible plan to make sure you never reach that limit. Labor let us down. They set the debt limit on a number of occasions. They introduced a debt limit because they did not trust themselves, now we find that one of the first acts of a new Government is to have to increase the debt limit left by Labor. I don't like it but we are going to have to do it because we must. We are not going to make the same mistake that has been made by Labor and has been made here in Washington and that is set a debt limit that we end up breaking. That is a key lesson for Australia and hopefully it will be part of a mature debate about dealing with the debt limit that is the legacy of Labor. Thank you very much.