PRESENTER:
Treasurer, thank you so much for joining us. Lots of buzz about that Australian dollar dipping below US 90c. Of course this is something that is welcomed by you and the RBA Governor there, but how long can it remain at these weak levels and how much further does it have to go?
TREASURER:
Well, Angie I am not a commentator on the Australian dollar. Fundamentally the Australian economy is focussed on dealing with the transition from the mining construction boom to a broader based economic growth trajectory. The Aussie dollar will go up and down. I consider it a mug’s game to pass comment on where the Australian dollar should be or where it’s at.
PRESENTER:
That may be true, but of course that Aussie dollar is tied very intrinsically to your number one trading partner, that being China, and it is really concern about China’s slowdown and its impact – that ripple effect – on Australia that has a lot of people downing that Aussie dollar. Do you have some similar concerns about China’s impact, negative one, on Australia?
TREASURER:
China is our biggest trading partner but it is a diverse relationship. Mining and resources represent only about ten per cent of Australia’s economy and about two to three per cent of employment so our economy is much more diverse than the relationship with China in relation to resources and energy. Fundamentally, I am still a very strong supporter of sustained growth in China, I am a believer in it, and the leadership in China has indicated to me and others in the G20, in our role as President of the G20, but also in bi-lateral discussions, they are determined to implement the reforms that are going to strengthen the Chinese economy and make it more resilient over the medium and longer term.
PRESENTER:
Well you’re preparing to meet your G20 counterparts in the coming days next week, specifically the 20th and the 21st. What exactly will you be talking about in terms of how to keep to that two per cent GDP growth goal and are you going to keep it there?
TREASURER:
It was an ambitious target that we set in our meeting in Sydney in February, but we have made great progress along the way in getting to that additional two per cent growth by 2018. Countries have submitted their plans for new policy initiatives that are going to help to get to that two per cent. There is still much work to be done, but it is true, the G20 meeting in Cairns this weekend is a hugely important meeting because it will come off the back of the latest meeting of the Federal Reserve. It certainly will be dealing with some of the structural challenges facing the global economy, we hope to nail down some of the key initiatives in financial regulation that came out of the GFC and are recommended by the Financial Stability Board and we also have big and ambitious plans to involve the private sector more in the delivery of infrastructure, essential national infrastructure, right around the world.
PRESENTER:
That’s a little bit of a challenge isn’t it? Because the private sector right now has a lot of cash it just doesn’t want to spend it. Instead of capital expenditure it is spending it on dividends, in fact, we have never seen dividends outpace capex as it has in Australian equities for the very first time since 1992. Talk about the challenge there as you try to lure these private companies to support your policy initiatives.
TREASURER:
The fundamental point is this: governments have, right around the world, effectively run out of money. They haven’t got the fiscal capacity to deliver the sort of infrastructure and upgraded infrastructure that our countries need. Certainly, only through developing that infrastructure and building that infrastructure are we going to improve the productive capacity of our economies. Now, given Budgets from governments haven’t got a lot of capacity, given that monetary policy is around its most accommodative levels ever, you need to have structural reform. That structural reform involves using the massive balance sheets of the private sector, the incredible liquidity that is floating around the world and using that in partnership with government to deliver infrastructure on a user pays basis so that governments can share the risk with the private sector and, in fact, the private sector can share the risk on return with governments. I think the public/private partnership is the way to go and what we need to do is to develop some common documentation, common rules, right across the world so that there is a relatively consistent investment environment for global funds in essential infrastructure.
PRESENTER:
Infrastructure is going to be key, what other new policy initiatives do you hope to implement specifically from Australia to achieve that two per cent GDP growth by 2018?
TREASURER:
From an Australian perspective we have many initiatives under way. The Government will soon be delivering an innovation paper that will outline a range of different programs that will help to further free up our markets and provide incentives for businesses to grow. We have abolished the Carbon Tax in Australia, we’ve abolished the Mining Tax in Australia, we’ve pulled back on industry assistance for companies operating in Australia in a globally competitively environment. Importantly, we have a credible program to get the Budget back to surplus, start to pay down some of the legacy of debt that we have. We have a Financial System Inquiry that is going to deliver a robustness about our financial system that, of course, has been more robust than many other systems around the world and we importantly have a new competition framework that is going to encourage many participants from around the world, to be more active in the Australian economy. Fundamentally, Australia is open for business, with growth around three per cent and falling unemployment, I am very confident that we can do even better.
PRESENTER:
Treasurer Hockey, thank you so much for joining us.