TREASURER:
It is terrific to be here with my good friend and State colleague Mike Baird, the Treasurer of New South Wales. This weekend we are welcoming to Australia the G20. In Sydney we are welcoming the G20 Finance Ministers and the G20 Central Bankers. The people coming to Sydney this weekend represent 85% of the world economy and 75% of world trade. The decisions that will be made this weekend - together with decisions that will be made over the next 12 months under the leadership of Australia - will have an impact on the global economy. We want to aspire to have a stronger global economy and we want stronger growth. We are working towards real goals to deliver stronger growth. There are a number of inputs, but the input we want to talk about today is infrastructure investment.
Australia is facing a significant drop in the amount of new investment in the mining and resources sector. Accordingly, we need to stimulate other parts of the economy that represent 80% to 90% of the Australian economy. The best way to do that is to start investing in new and productive infrastructure. Here in New South Wales, the Government has increased their infrastructure spending by 40% during the course of these four years. We need to collectively do more. We need to focus on the productive infrastructure that is going to drive new investment and new job growth. That productive infrastructure - ports, railways, roads, airports and a range of other facilities - is going to deliver the job creation of the future. I have worked very closely with Mike and the New South Wales Government. I want to praise the New South Wales Government for its approach to the recycling of Government investment in existing assets into new assets. The sales of ports with proceeds going into new road infrastructure is a benchmark for the rest of Australia and arguably many countries around the world. I will be using that as a clear example with G20 Finance Ministers this weekend. This is where the rubber hits the road in determining the future of the global economy. I look forward to meeting with all of my fellow Finance Ministers and Central Bank Governors as we shape the destiny of the world economy. Over to you, Mike, and thank you for having me.
MIKE BAIRD, NSW TREASURER:
I also want to say that it is fantastic to be here with my good mate, Joe Hockey, with his new responsibilities in chairing the G20 Finance Ministers meetings. We want to welcome the G20 Finance Ministers to Sydney. We see Sydney as the centre of financial services across Australia - but not only that, it is increasingly more important across the Asia-Pacific. To have the Finance Ministers here at the centre of financial services is absolutely the right thing. We welcome them with open arms and, more importantly, we welcome them with an agenda to grow growth, not just globally, but here in Australia. Recently I was in a position where I was in London visiting global infrastructure clients and all of them were very consistent; they said that over the next five years that what we see in Sydney, New South Wales and Australia, is the infrastructure capital of the world. More importantly, new infrastructure projects that are going forward here in NSW, and indeed other States, are where they see that their money is going to come to [inaudible]. It is an important part for them in terms of their growth, it is an important part for us. We see a real opportunity, and certainly as the Federal Treasurer has said, how do you make up for a fall in mining investment across the broader economy? Well, there is an opportunity to invest in productive infrastructure. Since we came to power three years ago, that has been one of the key drivers. How do we get this economy moving while we control our own expenses? You invest in the drivers of the economy and infrastructure has been foremost in our thoughts. While we have been developing models, while we have been recycling assets on the balance sheet and turning them into new assets, we continue to look for new partners across the world to continue to improve that productive infrastructure to provide more opportunities for us to create more infrastructure. While that meeting two weeks ago suggested there are real opportunities here for us in this State and across the nation, what the meetings over the next few days will do will solidify some of those opportunities and drive opportunity in some of the best financial minds in the world to look at growing infrastructure here. I am delighted to be here, delighted to support Joe in his important role over the next few days and, obviously, welcome everyone to Sydney.
JOURNALIST:
[inaudible]
TREASURER:
Those decisions are for the State Government. What we have to do is to give Mums and Dads the opportunity to own Australian infrastructure that has a proven return on investment. I get superannuation companies and industry funds coming to me all the time saying there aren’t enough infrastructure assets in Australia for us to own. Superannuation money is going offshore to invest in infrastructure in other countries. Now they are looking for a proven track record of return on investment and Governments do hold a lot of assets that have proven track records. Government does have the capacity to invest in new infrastructure if it can recycle the investment. Individual decisions are up to the State Governments, but the decisions are also up to the Federal Government as well.
JOURNALIST:
Do you, as Treasurer of Australia, support it?
TREASURER:
I support whatever decision is made by my State colleagues.
JOURNALIST:
Are you considering doing something to change the tax arrangements around privatised assets?
TREASURER:
Yes, we are. We are working with our State colleagues recognising the fact that when assets are in State hands, currently the tax equivalent revenue goes to the States. There has been benefit to the Commonwealth Government when there has been privatisation of a State asset. I recognise that it has been very difficult for the States to be in a position where they might lose that revenue stream. We have got a very short timeframe to move on recycling of assets and the construction of new assets. We are going to be working with our State colleagues over the next few months. We will have more to say about the ways that we can help with the recycling of assets.
JOURNALIST:
[inaudible]
TREASURER:
There have effectively been job losses in manufacturing on a consistent basis in Australia for many years. Under the previous Federal Government we lost a manufacturing job every 19 minutes. There has been a trend, there is no doubt about that, the trend is worldwide. For example, in China between 1995 and 2002 they lost 30 million manufacturing jobs. Technology has in many ways replaced a lot of the labour associated with manufacturing. Manufacturing has become a lot more sophisticated and reliant on a whole lot of different inputs. I am not down about manufacturing in Australia. I am hopeful - Australians are innovative. Areas where we have developed new manufacturing over the years relates to innovation. For example, one of the biggest employers in Australia and certainly in manufacturing is Boeing. Boeing provides component parts for their major passenger planes. That is a great story about innovation - this is in our domestic capacity and we are a component supplier. We do not need to build a plane from design to flight. We have opportunities in motor vehicles to be a sophisticated component supplier. We have also got to look for new jobs in manufacturing. There is a wealth of opportunities in health services - we have seen the emergence of Cochlear - but there are many other examples of when Australian innovation turns into Australian manufacturing. Ultimately this means Australian jobs and I am quite hopeful about that.
JOURNALIST:
Do you know if it is still the plan to sign a Free Trade Agreement with China this year? A report in theFinancial Review suggested it is not a priority for them…
TREASURER:
I understand that. We have just signed a Free Trade Agreement with Korea. We are in very advanced negotiations regarding a Free Trade Agreement with Japan. We are absolutely committed to pursuing the Free Trade Agreement through the TPP. If that report is correct, there are many other opportunities in the region and some of which we have already converted into a very real free trade agreement – such as that of Korea.
JOURNALIST:
[inaudible]
TREASURER:
I am leaving that to my colleague Andrew Robb. So far our progress has been exceptional in free trade agreements, particularly with Korea where you are seeing a massive drop in tariffs on beef, lamb, wine, beer exports and a range of other things. It is a great benefit for Australia. Ultimately there are a lot of things at play – one of the things we need to do, is broaden our market. No matter if you’re selling widgets, agriculture produce or resources, the bigger the marketplace, the better it is for Australia given we produce more then we consume.
JOURNALIST:
[Inaudible]
TREASURER:
Australia has one of the most competitive motor vehicle industries in the world, in terms of the number of different brands and types of cars coming into Australia. A lot of international players test their markets by coming to Australia. Some come in, some go out - as we have seen with a number of brands over the last few years. The fact is, Australians have chosen not to buy Australian made vehicles – Australian consumers have made that decision over time. Manufacturers here in Australia, even though they’ve produced some really good product, it hasn’t been as attractive to Australian households as it once was – that is the market place. Australians have determined the future of the motor vehicle industry. At the same time, General Motors, Toyota and others are closing factories that have had annual production of 300,000-400,000 motor vehicles. Here in Australia you had motor vehicle production at less than 100,000 per year from some of our factories. Quite clearly, there has been a massive consolidation in motor vehicle manufacturing around the world.
JOURNALIST:
Mr Hockey, I was wondering if you could expand on what you said yesterday about growth and the G20. Are you seeking some sort of agreement from the partners that come here?
TREASURER: Yes, we are. We are working towards an agreement. I don’t want to pre-empt the communique which will come out on Sunday. I have a number of bilaterals over the next few days with Finance Ministers and Central Bank Governors, but our drive for growth is not just here in Australia. As Chair of the G20 we have a responsibility to work with everyone to drive global growth. It sounds quite exceptional doesn’t it? Standing here in Sydney, Australia and we are talking about driving growth. We are the Chair of the G20 and we are expected to take the lead in this area and we want to work with other Governments. It is very significant that Finance Ministers of the world and the Central Bank Governors are coming here to Sydney. There are five meetings for the G20 Finance Ministers during the course of the year. Two of them are in Washington. The fact that they are coming here for the first meeting of the year is hugely important. There will be discussions about tapering and what it means for the global economy. This is where the rubber hits the road - even for the smallest of businesses in Australia because the level of the Australian dollar affects everyone in Australia – and is closely linked to the American Dollar and tapering, and a range of other factors at play. Taxation arrangements - particularly in relation to major digital companies and transfer pricing by companies - is hugely important to Australian businesses and that is going to be discussed. As I said, how do we get more private sector money into infrastructure, not just here in Australia where there is a backlog of at least $400 billion of projects, but globally, how are we going to drive it? Ultimately our resources will help to build a lot of that infrastructure particularly in the Asian region. The more we can drive an agenda for growth, the more jobs are going to be created and the more prosperous our nation will be.
JOURNALIST:
Can I ask about infrastructure spending and the works in New South Wales? It sounded like you were very frustrated with the pace of infrastructure development in the State. How serious are you about those threats to ‘use it or lose it’?
TREASURER:
The first thing I’d say - and Mike will be able to confirm this - the first thing to say is that the previous Federal Government treated infrastructure funding as a tap. They would turn it on, turn it off, and give late notice about payments. The previous Federal Government was, in many ways, to blame for having an inconsistent stream of funding to the States. Despite that, these guys have managed to deliver a very significant increase in infrastructure activity, but now we all collectively have the responsibility to go further. As Mike pointed out, we have got this challenge that investment in the mining industry has fallen dramatically because the mining industry is going into the production phase. Our outputs from the mining and resources industry are increasing dramatically, which is fantastic, we are earning a lot more money from it. The problem is all the construction of those mines and resources projects has dropped significantly as demand around the world has fallen and supply has increase. Now all those sparkies and plumbers and concreters and engineers and others that have been working out there building the mines, we now need to bring them into the cities and into rural and regional Australia to build other things that grow the non-mining side of the economy. We have some heavy lifting to do, but the private sector does as well. I might get Mike to add to that.
MIKE BAIRD:
I think that Joe is clearly putting a challenge out to the nation to build more infrastructure. It is one that we warmly embrace, one we totally agree with and one we have been actively managing since we came to power. The infrastructure spend in New South Wales, as Joe articulated, is up 40% over the next four years. It hasn’t come by chance. It is a very purposeful strategy to provide an opportunity for the State Government to contribute to economic growth because it has been fragile. At the same time we are getting into the backlog. Getting into the backlog puts jobs on the ground and provides a more productive economy going forward. You look at two key projects: the North-West Rail Link was promised under the former Government, then stopped and ultimately it had a brochure and a video - that was what was delivered. What we have is over $4 billion [of investment] over the forward estimates. We have the boring machines going into the ground this year. That project is happening - the largest rail project in the country. Right alongside it, we have the largest road project ever undertaken in the country with the WestConnex - which we are partnering with the Federal Government on. We have taken every possible measure to find capital, to put it towards infrastructure, to tackle the backlog, to get jobs on the ground, to get this economy moving. You see the relative performance of New South Wales and how it has tracked over the three years and what you saw in the previous ten years and you see New South Wales starting to move - that is not a coincidence. There is a range of factors that go into it. The Federal Treasurer’s strategy - and call to Australia, to every State Government, to play a role in building infrastructure - to make up for the falling investment as the mining investment comes off is exactly the right call. Indeed it is exactly what we have been doing here in New South Wales. You have to take every measure and obviously recycling has been a key part of that overall strategy.
TREASURER:
If I could just add something; Bob Carr should apologise to the people of Sydney and NSW for giving up on infrastructure when he announced that Sydney was closed for business soon after the Olympics. I remember it quite vividly. I had a very public fight with him at the time whether Sydney should be planning for a bigger population and he said, ‘The doors of Sydney were closed and we must give up on infrastructure’. Now the people haven’t given up on coming to Sydney, the people still wanted to come to Sydney but the infrastructure struggled. These guys are trying to backfill the mess left by Bob Carr. I, as a Sydneysider - forget the politician or the Treasurer, as a Sydneysider - will never forgive Bob Carr for what he did when he said Sydney was closed for business years ago
REPORTER:
I was talking about access to capital. Is there any scope for changing the rules on super investment? The industry seems to need under its fiduciary requirements, a CPI plus a substantial return above CPI to meet its requirements. You have had lobbying efforts or representations from the super industry complaining that there aren’t sufficient avenues for investment and infrastructure which give them certainty and cash flow over 20, 25, 30 years. Are there any strategies [to deal with this]?
TREASURER:
Quentin, what you are suggesting is that we should legislate for a lesser return for superfunds and we won’t do that. Ultimately, people are going to rely on their earnings from their superannuation to sustain their quality of life when they retire.
REPORTER:
[inaudible] WestConnex in investing in unknown traffic projections.
TREASURER:
That’s exactly right. That is why, ultimately, governments take a lead. That is why we are putting $1.5 billion into WestConnex. The State Government is putting in considerably more – $1.8 billion.
REPORTER:
[inaudible]
TREASURER:
Ultimately, everyone takes a risk. Don’t forget, taxpayers’ money belongs to taxpayers. It is not the gift of the Government, it is not sitting in my back pocket. It belongs to the Australian people. We want things to work. If there are existing assets that can be recycled so that the Government has seed capital to get new programs up and running, that is what we have got to do. Don’t worry Quentin, we are not going to sell the ABC - it doesn’t generate revenue by the way.
JOURNALIST:
You said that printing money was like morphine in an interview. Isn’t that hubris? Aren’t you putting pressure on Janet Yellen and people who know a lot better about how to manage risks in the global economy?
TREASURER:
The quantitative easing that exists around the world was there to address a problem out of the GFC. It has been like morphine. You have to get off it at some point. It is not easy, it is hard. So far, in my view, they have got it right. There will be Finance Ministers who will come to Sydney on the weekend and they will have a different view and they are entitled to it. But I do not see any systemic problems at the moment associated with tapering that should cause concern to global Finance Ministers. This is hugely important. There are a number of countries that have domestic challenges - we all do - but the US Federal Reserve has an obligation to act in the best interests of the United States. I don’t think for a second that we are just going to agree with our great mates in the United States on everything because US Congress has dragged its feet in relation to reform of the IMF. I have written op-eds and contacted Congressmen directly seeking to have them initiate the changes that are necessary so that the United States can support the reform of the IMF to give developing countries, in particular, a greater voice. That will come up in discussions again this weekend, but the beauty of these forums is that you can be frank and honest with each other and there will be plenty of opportunity for Finance Ministers and Central Bank Governors to do that.
JOURNALIST:
Now to the AFP raids on Channel 7 yesterday - do you think it was a waste of taxpayers’ money?
TREASURER:
That is a matter for the Australian Federal Police. That is not a matter for us. I am sure they would have got a warrant and gone through the proper processes.
JOURNALIST:
It is being described as overkill.
TREASURER:
I support the AFP.
JOURNALIST:
Mr Baird, just on ICAC’s announcements yesterday - how has the operation of your Government been affected by the corruption investigation into three Liberal MPs?
MIKE BAIRD:
There is an investigation underway and we are not going to provide running commentary. Let’s be very clear, if any wrong doing is found you should throw the book at those individuals – full stop. We are going to get on with the business of governing, that is obviously what we were elected to do. Clearly we are not going to provide a running commentary on the matters before ICAC. There is a merit based process determined by Cabinet. He has stood down, that is the appropriate thing for him to do. As I said, we are going to get on with the job with governing New South Wales and that is what the people of New South Wales would expect.