FRAN KELLY:
The Treasurer joins us again in our breakfast studio, Joe Hockey welcome back to breakfast.
TREASURER:
Great to be with you Fran.
FRAN KELLY:
Now, you said quote: “Australia has one of the fastest growing economies in the developed world. How good is that?” But how good is it Treasurer if our economy is growing at a slower rate than the previous December quarter when it was travelling at 2.5 per cent?
TREASURER:
Well, Fran it bounces around quarter to quarter, but if you look at the trend the Australian economy is strengthening and in the first three months of this year we had one of the fastest growing economies in the developed world. Now, the most important aspect to the National Accounts is the diversity of the growth. We have big volumes in iron ore and coal still going offshore, even though prices are down. But most significantly, we’re seeing growth in services and that fits in with our economic plan which we’ve been talking about now for 18-months and delivering on with free trade agreements with China, Korea and Japan. We’re opening up the opportunity for services exports, so you’re seeing services like tourism, and education, health services, starting to grow and grow their opportunities in Asia.
FRAN KELLY:
But it’s still patchy, the growth we saw yesterday in these figures, not counting exports. Mining [inaudible] WA, and the Northern Territory contracted in the quarter. Growth in Queensland was flat. So, there is some concern, real concern, and a really negative picture in some parts of the country.
TREASURER:
Well I’m sorry that’s wrong, because the National Accounts figures exclude exports. So how you could exclude the impact of exports from the Western Australian economy or the Queensland economy or the Northern Territory economy is rather bizarre. So that’s why when people talk about dark clouds or recession, they’re just dead wrong, dead wrong. When you’ve got one of the fastest growing economies in the developed world in the first three months of this year, for some people to talk about dark clouds on the horizon or recession, they’re just made to look like complete fools.
FRAN KELLY:
But at 2.3 per cent, our economy isn’t growing fast enough is it, to provide jobs for all those looking for work, you agree with that?
TREASURER:
Yes, and that’s why our Budget, which has the effect of focusing on small business and jobs – we have a $5.5 billion jobs and small business package, it has been calibrated to respond to the increasing demand of Australians for jobs. Now, we’ve got strong jobs growth, but we need the economy to grow even faster to create the jobs that are going to respond to the demand. So, that’s why our small business package is so important, and it’s calibrated at exactly the right time on the back of our massive increase in infrastructure spending as well.
FRAN KELLY:
Treasurer, just to diverge from the Budget for a moment, I mean from these figures for a moment. If the small business package is so important, why didn’t the Government accept Labor’s offer to pass the Bill yesterday? Why did you reject that and want to keep talking in the Parliament for another day or so?
TREASURER:
Well, Fran it was a complete stunt…
FRAN KELLY:
But doesn’t it work in your favour? It’s a stunt that works in your favour isn’t it?
TREASURER:
Hang on, hang on, it was a stunt Fran. You know why it was a stunt? Because I think there were still 11 scheduled speakers, including speakers from the Labor Party, that wanted to speak on the Bills…
FRAN KELLY:
But so what? So what? Don’t you want to get the package through?
TREASURER:
Well, it is the Parliament. Number one, it’s the Parliament. Number two, it’s the House of Representatives, it was always going to go through the House of Representatives either late last night or today. Number three, it can’t go to the Senate because the Senate doesn’t sit for another week. Now, Bill Shorten’s doing this because he’s playing catch-up on small business. Of course, the Labor Party had five Small Business Ministers in 15 months. So, they’re playing catch-up on small business. The real test for the Labor Party is when the Senate actually sits in 10 days time, will the Labor Party facilitate it going through the Senate immediately without sending it off to a committee or engaging in obfuscation, that is the real test…
FRAN KELLY:
Well I think there’s every sign they will won’t they? They’ve just said…
TREASURER:
Well, no I’m sorry they haven’t Fran. They haven’t said that they will facilitate fast passage through the Senate, that’s why it was a stunt. So please, do not buy the political commentary about it being some great deal from Labor, because they’re just playing games again.
FRAN KELLY:
Okay, let’s get back to the figures from yesterday and look at wages, because according to one report I’ve read, the average income per worker fell 0.5 per cent in the quarter. The average amount of Australian income – of income that Australians receive shrank for a fourth straight quarter according to the Fin Review. Our living standards are falling, aren’t they?
TREASURER:
No they’re not falling. Asset prices are rising, but because we have had the most significant fall in the terms of trade in our history, that is washing through the system, we’re seeing that...
FRAN KELLY:
But wages are low and going down.
TREASURER:
Well that means our national income has come off, but, but, we are still increasing the size of the Australian economy. The Australian economy increases in size overall, so…
FRAN KELLY:
Yes, but if our incomes are coming off it doesn’t mean we are going to feel…
TREASURER:
Well, hang on. Because we’ve got asset prices rising…
FRAN KELLY:
Some of us do. Not everyone.
TREASURER:
Well, not everyone has wages falling either. I mean, wages aren’t falling, you’ve got wage growth – overall you’ve got wage growth in the economy, there’s no doubt about that. The figures indicate that. But I’d say to you Fran, we have faced significant headwinds. You look at the fall in the iron ore price. When we came to government it was around $120 a tonne, now it’s around $55 a tonne, I’ve budgeted at $48. That has a big impact, that’s our biggest export.
FRAN KELLY:
Sure.
TREASURER:
So we’ve got massive volumes, but we’ve had falling prices. But yet, the Australian economy is successfully graduating from that mining construction phase to a more diversified economic phase. 70 per cent of the Australian economy is services, yet it represents just 17 per cent of exports. The most exciting part of the National Accounts figures yesterday is we’re seeing services exports rise. So if we can increase services exports to even something near mining, we will massively increase the wages and wealth of the Australian people. That’s exactly what our economic plan is about.
FRAN KELLY:
There are some who look at the fundamentals at the moment and say the Government could be doing more to stimulate the economy, for instance taking advantage of record low interest rates to borrow, to spend on new infrastructure. To increase the productivity of the economy.
TREASURER:
Well, I’d just say to those people, we have the biggest infrastructure program underway in Australia’s history. The equivalent of more than eight new Snowy Mountain Schemes were announced in last year’s Budget.
FRAN KELLY:
So we’re doing enough on the infrastructure front right now you feel?
TREASURER:
Well, the challenge we have is State Governments. Some State Governments have been pulling back on infrastructure. I mean, the Victorian Government cancelled a massive East West project in Victoria that was shovel ready. In fact, 600 people of the 10,000 to be employed were already at work and the new State Labor Government cancelled that…
FRAN KELLY:
I’m talking about Federal Government debt, because you were concerned about debt and I just noticed that last month you urged Australians to go out and borrow and spend up for the economy. If it’s dangerous for governments, isn’t it dangerous for households too to take on more debt?
TREASURER:
Well, hang on. Can I finish the other answer? The second aspect is, that the Queensland Government had a massive recycling, asset recycling program and new investment in infrastructure under the previous government. There was a change of government there, they cancelled. Now the hope for the side at the moment is the rollout of infrastructure in Western Australia, the recovery in much smaller degree obviously in Tasmania. But in particular, what’s happened overnight in New South Wales, with the asset recycling program, the sale of poles and wires, and the massive investment of over $20 billion in new infrastructure. So that is helping and the Federal Government is partnering in that new infrastructure, that is hugely important. At the same time, we’re rolling out our own new infrastructure, including airports. We are supporting, even here in Canberra, light rail and a range of other things. We have a big program, but we want the private sector to unleash their balance sheets, to start investing in the infrastructure that is going to help to build a stronger Australian economy.
FRAN KELLY:
It’s 17 to eight, our guest is the Federal Treasurer, Joe Hockey. Joe Hockey your Treasury Secretary, John Fraser, said this week that Sydney and parts of Melbourne are unequivocally facing a housing bubble. Now the PM doesn’t agree, I don’t think you agree either. But you are a Sydney property owner, you see how crazy house prices are in Sydney, don’t you ever worry about a housing bubble?
TREASURER:
Well, I like many others, if you have a home if you’re already there, even with a mortgage, you wonder how your children are going to get a home…
FRAN KELLY:
Exactly.
TREASURER:
Now, look, the best way to respond to elevated house prices is to increase supply. What we’ve seen is a massive increase in the amount of housing construction in Australia in the last year, up 18 per cent, up 18 per cent. Which is 30,000 more dwellings that commenced construction last year than the year before. That is the best way to respond to elevated prices…
FRAN KELLY:
It is, but…
TREASURER:
…and it’s happening. And what’s happening Fran, is that is happening, that is very important, it is happening. If that can happen faster, that’s even better. We’ve got very low vacancy rates in places like Sydney. So the best way to respond to that is to get more housing stock up and away.
FRAN KELLY:
It’s true, but I have kids who are looking at those apartments coming [inaudible] and they’re still you know, $600,000 to $700,000 for a two bedroom apartment. People in their 20s and 30s can’t fund that. What can we do to help them get into the market?
TREASURER:
That’s what I’m saying, I mean the point is you’ve got to have more supply. The demand is there, it’s not inflated demand. Because you’ve got very low vacancy rates. We have put in place a much stricter regime in relation to foreign investment as you know, and the Labor Party still hasn’t committed to support that. But we have put in a stricter regime. It does matter, you’ve got to get the stock up. If you look at what’s happened around the world, bubbles burst in real estate when there has been too much supply and not enough demand. Whether it be in China or the UK or Ireland or the United States, that’s when the bubbles burst. I’d say, we are a very long way from that in Australia. By the way, it is mostly Sydney, parts of Melbourne, but the rest of Australia you know, house prices have been coming off in Western Australia, so you’ve got to be very careful about how you respond to this. We certainly, we certainly don’t subscribe to the suggestion that you’ve got to go into the market and deliberately try and deflate house prices.
FRAN KELLY:
Treasurer, can I ask you on another matter, on citizenship, would it be going quote, would it be going too far, your colleague Malcolm Turnbull says and I’m quoting him from yesterday: “Some people like to suggest that some people are tougher on terrorism than others. Let me say this to you, really well informed people can have very different views about what the right measures are on national security and have very different views about the right balance between citizenship and national security”. What’s your view Treasurer, is it going too far to strip sole Australian nationals of their citizenship if they’re involved in terrorism?
TREASURER:
Well, Fran, that’s why we have put it to the community, because I see citizenship as not the gift of government, but the gift of the Australian community. The Prime Minister and the Cabinet and the Party Room have said okay let’s discuss this with the Australian people. So, Philip Ruddock is leading the national discussions with Concetta Fierravanti-Wells and that’s the appropriate place to be. But if someone takes up arms against the Australian people and they have dual-citizenship, our very strong view is they should be stripped of their Australian citizenship…
FRAN KELLY:
Indeed, but on this other point of the sole-citizenship. Arthur Sinodinos weighed in last night, he said this issue certainly should always be a matter for the Courts not discretionary power, do you have a view on that?
TREASURER:
Well, everything is subject to judicial review, it’s subject to judicial review…
FRAN KELLY:
Well, the initial dual-citizenship legislation is planned to have Ministerial discretionary power initially isn’t it?
TREASURER:
Yeah, that’s right but it’s subject to judicial review. So, the Courts always have a role, the Courts always have a role. But the fundamental point is Fran, if you’re a dual-citizen and you take up arms against Australia, if you engage in a heinous terrorist attack against Australians, why should the Australian people continue to engage with you as an Australian citizen? Why should you be part of that great club called Australia?
FRAN KELLY:
Joe Hockey, thank you very much for joining us on breakfast.
TREASURER:
Thanks very much Fran.