TREASURER:
The disappointing labour force figures revealed today are the unfortunate reality of six years of Labor Government. They are not unexpected but they indicate the size of the challenge that we have before us. In the Pre-Election Fiscal Outlook released under the previous Government, they forecast an unemployment rate of 6.25%. The unemployment rate today is broadly in line with that expected figure. It is also broadly in line with the Mid-Year Economic and Fiscal Outlook forecast of 6.25% this year and next. The fact of the matter is that this is a lag indicator. Unemployment has always been a lag indicator. It is usually three to six months behind changes in the growth rate. Australia needs to get back to trend growth of 3% and beyond to address the rising unemployment rate. We are currently growing below trend. We are currently forecast to continue to grow at below trend rate. If we want to get the unemployment rate down, not only from 6%, but from 6.25%, which is the current forecast, we need to improve the growth rate of the economy. It does not happen overnight. We need to have structural change and we need to get our plan through. The Coalition does have a plan for jobs and we do have a plan for growth. It focusses on our core commitments during the election to get rid of the carbon tax, to get rid of the mining tax, to start to get the Budget into better shape. To get rid of the regulation; to put in place an Australian Building and Construction Commission - these are the types of initiatives that will start to grow the economy, together with a real infrastructure plan that delivers the productive investment so necessary to grow the non-mining side of the economy. The reality is, in March of 2008 there was an unemployment rate of 4%. February, six years later, it is 6%. That is the reality. We have had below trend growth for five of the last six years. So we have got to get growth up. The best way to do that is to embrace our plan to restructure the Budget and restructure the economy. I am very confident about Australia’s future. I want to emphasise that. We can be a much stronger economy. We can be a more vibrant economy. We are going through a transition – there is no doubt about that. But it will get better, it must get better and Australians instinctively want it to get better. But they also want the promises delivered at the last election. Those promises include repealing the carbon tax, repealing the mining tax, and getting on with the job of fixing the Budget. That is what we want to do. I ask Bill Shorten, the Labor Party, and the Greens to be responsible in accepting the mandate that we have from the Australian people, to put in place the sorts of reforms that create jobs and build stronger growth. They have got to be part of this partnership otherwise it is going to be much more difficult. I would encourage them to be part of the plan for job growth and not simply to be on the sidelines carping.
JOURNALIST:
Treasurer, you mentioned a range of things that you think has to happen to get the growth rate up. But one thing you didn’t really talk about was industrial relations and more flexible wage arrangements, which seems funny in the context of the last week’s debate about such things. How much growth can be generated, if you like, and how much slack in the labour market can be taken up by more flexible working conditions? If I could also ask you, you talked today again about Qantas. What’s your timetable for dealing with the issues facing Qantas?
TREASURER:
There are two issues there. The first is our starting point in relation to industrial relations. To get the Australian Building and Construction Commission up and running. That is vitally important because we want to roll out the infrastructure that is going to drive a more productive economy. That is our starting point. The stories, including, I think, one in your paper today from Daniel Grollo about the challenges that builders have is enormous. Quite frankly, what we need to do is roll out our agenda. Now, our agenda is to get the Australian Building and Construction Commission up and running as quickly as possible. We are going to have a proper review of the current workplace relations system. At the same time we are going to have a proper review of the taxation system. But as a starting point in our plan we have got to be able to fix the Budget and we have got to be able to start the process of micro-economic reform that is going to build the fundamentals for a stronger economy. In relation to Qantas, it is no secret what they have been facing. They were very actively engaged with the previous Government. Again, this is one of the issues that was left by the previous Government that ultimately we have to deal with. We are not afraid to deal with it and nor is Mr Joyce. Instinctively, quite obviously, we are not in the business of giving taxpayers’ money to private enterprise. I think there are some rules that need to be applied in relation to Government involvement in individual enterprises. Firstly, has the Parliament and the Government imposed restrictions on that single business that are not imposed on other businesses in the same industry? The answer in relation to Qantas is yes. Secondly, is that business fundamental to the economy, is it providing an essential service to the economy, such that if it were to have significant issues that inhibited its day to day operations, it would have a detrimental impact on the economy? In the case of Qantas, the answer is yes. The third factor that needs to be considered is; are other Governments actively supporting other players in that industry? The answer in relation to Qantas is yes. These are crucial tests we apply. The fourth hugely important test is, is the enterprise trying to fix up its own balance sheet? Quite obviously Qantas is trying to do it. We are not in the business of running individual businesses. There are lots of commentators and lots of commentary in relation to Qantas and everyone feels as though they can individually run individual enterprises. That is not our job. That is the job of the board and management. We want to see that they are undertaking change that helps themselves before they come asking us for help.
JOURNALIST:
Just back on the jobs figures today, irrespective of who is responsible for unemployment increasing, it is obviously your Government’s responsibility to do something about it. Are you planning a specific jobs package? Is that something the Government is working on? And when will we see it?
TREASURER:
Yes, the jobs package is to improve the strength of the overall economy. The bottom line is we have to lift the tide so that all boats rise. Getting rid of the carbon tax – which is a tax on energy and everyone uses energy. Getting rid of the mining tax at a time when there are significant reductions in employment in the mining industry. Quite obviously, as mining is going from the investment phase to the production phase, there is going to be a drop off in jobs. We saw evidence of that out of Western Australia in the last couple of days. Building and construction firms, engineering firms involved in the mining industry are losing work, or have not had the same flow of work. We need to help them transition to other work. The best way to do that is to create investment opportunities, facilitate investment opportunities in the non-mining side of the economy if there is a pick-up out of China, with greater demand for our resources. The G20 Finance Ministers meeting next week will be hugely important, and that has been taking up an enormous amount of my time, it is hugely important when it is held in Sydney next week, everyone is coming. As one of the more significant Finance Ministers just said to me: ‘We need to go for growth’. I said: ‘We need to go for growth globally, we need to go for growth locally and we lift the tide for everyone’. Obviously we have a focus on Victoria and South Australia in the wake of the changes out of Holden and more recently, Toyota. These are not shocks. These are not crises. The fact is, we have got to deal with them and have a sensible, mature plan for delivering the sort of growth that will help to give other new businesses opportunities.
JOURNALIST:
Specifically on Qantas, would a debt guarantee set a precedent that is worrying at all or is there already a precedent given that banks got this kind of assistance in the past and therefore it’s OK? And the broader question about the big picture on the economy, there is a school of thought that would say, ‘the up-to-date growth and the jobs figures today, we shouldn’t cut too much in the May Budget’. Is that persuasive at all? Or do you think we still need to go hard in May?
TREASURER:
The May Budget will be focused on growth. It does not mean that you cannot have some fiscal consolidation. There are many factors at play including the fact that interest rates are still comparatively low. Also, the nature of Government expenditure is hugely important. So this is something we are very actively discussing. Obviously, as data comes to the fore, we are considering it in the context of the Budget. In relation to Qantas, I do not like any of these precedents. I do not like the precedent that you put restrictions on individual companies at a time of convenience. That is one of the reasons why, in relation to foreign investment, I am loathe to place restrictions on individual foreign investment approvals because ultimately it inhibits the capacity of the company to be able to respond to an ever-changing market. If you look at my foreign investment approvals, almost all of them are without restrictions because at the end of the day it is a ball and chain around the leg of the business going forward. At the same time, there are a number of businesses in Australia that had legacy issues from previous Government decisions – Qantas and Telstra have them and various others. Now it is all well and good to place those restrictions on those entities when you sell them and they are the 800-pound-gorilla in the market, but along comes a 3000-pound-gorilla from somewhere else and all of a sudden, the restrictions that you put in place are to the great disadvantage of the country and that individual enterprise.
JOURNALIST:
If you succeed in restoring the economy to trend growth or near trend growth, where do you expect, in what sector do you think there is the potential for a significant increase in jobs. If people are looking at the job losses in the manufacturing sector, where do you think there is the potential for job growth? Just quickly also, I don’t think you’ve told us the timeframe for the decision on Qantas?
TREASURER:
We are actively considering the issue. But it is not our immediate priority at this moment. We are dealing with it. We will obviously look carefully at the results that are announced by Qantas. If you think we are being dragged kicking and screaming on this one, you are right. As for growth, if you look at the last ten years, manufacturing and agriculture are the only two industries to lose jobs, which is really part of the worldwide trend. As technology moves in and improves the productivity of individual enterprises and manufacturing, and you have got significant productivity improvements in agriculture as well, you can see that there has been a trend towards job losses. Not just in Australia, but around the world. In fact, I was reminded the other day, I think China lost 30 million manufacturing jobs between 1995 and 2002 – China. These transitions occur. In almost every other industry there has been significant job increases such as in health services and social services. Such as in financial services and IT services. As I told the party room the other day, what a great story Animal Logic is, in which 600 young Australians did all the animation for the Lego movie that has broken all these records in the US. These animation jobs, these IT jobs are highly skilled and it is a new form of manufacturing. It is coming to Australia. That is just one isolated example. There are many others in health technology, in education, in construction. A CEO of a major Australian construction company told me yesterday something I did not know, that they have just sold off a completed fourteen-storey timber apartment building, in Australia. I did not even know about it. That is our innovation and technology at play domestically. That has opened the door for them to engage in massive export opportunity elsewhere.
JOURNALIST:
You mentioned the quality of the Government spend in the Budget and the need for more targeted infrastructure, what principle priorities would you be applying to infrastructure spending when you are considering South Australia and Victoria and transport links, that is suburban transport links with say port facilities?
TREASURER:
It has to be productive infrastructure. It is also important that the States roll it out fast. We have not got time to muck around. The States are going to have to look at ways of expediting their investment. We cannot afford to have things sitting in the State environment ministers’ in-tray for two years. Greg Hunt has done a superb job in approving over $400 billion of productive output approvals so that it will last a few months. That is hugely important. Ports, railways, airports, roads, the things that add to productivity are the things that are going to attract first priority and there are plenty of opportunities. We are calling for the private sector to put up proposals. I emphasise again, there is no shortage of private sector money in Australia. I am sort of waiting for a question on asset sales - which someone can ask me hopefully.
JOURNALIST:
Just on Qantas, it sounds like you’re saying you’re sympathetic about the sale but also you just want to see how serious Qantas is about restructuring its own business before you give final commitment, is that why you’re hanging on? The other thing is on the interview that you’ve given the Wall Street Journal overnight in regards to $130 billion worth of Australian infrastructure assets up for sale. Does it make you more cautious about what you’re going to choose for what is for sale given the Qantas experience here. Given that 20 years later they’ve come back asking for Government help? How confident are you in your abilities to sell contentious things like Australia Post, given there is a campaign out there already.
TREASURER:
There are three questions there. Look, Governments around the world have run out of money. Governments around the world have assets. The private sector is loaded up with cash. In Australia, Australian superannuation funds - including the ones that the union representatives are trustees of - they are investing in infrastructure offshore because there is not enough to invest in in Australia. One of the things that has prevented them from doing it, investing in new infrastructure, or any new infrastructure anywhere, is there is no guaranteed return on investment. The Government has assets, State and Federal - primarily State Governments have assets that have guaranteed returns. What Governments have to do is recycle precious taxpayer capital from existing assets that Australian mums and dads can buy either through their superannuation or on the stock exchange. So you can recycle that precious capital into new productive investments that at the end of the day is going to grow the economy. If we do not recycle that money, then we are simply limiting our own capacity to grow the economy. This is not some ideological bent on privatisation - it is the reality that Governments have run out of money, that Australian mums and dads, through superannuation or direct investment, want to buy Australian assets to support our economy and we can make it work together. This is the thing, if you were a State government and you have to think about whether you are putting precious taxpayers money into a hospital or putting it into a government business enterprise. Well, what are you going to do? That is one of the reasons why, over the years, some assets at a State level have been run down. Now we are paying the price for it in some areas like electricity and water. Now is the time to take our savings, which were not around in the same level 20-30 years ago. Now is the time to take our super to put it into infrastructure assets that are lazy on the Government balance sheets and then use precious taxpayers’ money to go into the creation of new productive assets.
JOURNALIST:
Isn’t that exactly what Labor announced in the last Budget? There was $100 billion worth of infrastructure assets with private investment with guaranteed Government returns – the policy is already there.
TREASURER:
No. They have been very slow at rolling it out. We need to do more. Previously, the Federal Government had very little infrastructure investment. It was left to the States. The States have been financially squeezed with massive growth in expenditure in health and education along with population growth and a lack of revenue - we know that. Now we all have to do the heavy lifting in partnership. This is a call on every Australian worker - get your superannuation to invest in Australian assets. What we have got to do is facilitate that opportunity for you.
JOURNALIST:
The Victorian Government is expected to shortly announce that they have planned a $30 million lifeline for SPC Ardmona. Was that a decision that they talked to you about in the meeting earlier this week? Is that something that you condone?
TREASURER:
That is a matter for the State Government.
JOURNALIST:
What would you say to a Forge worker who was told last night, ‘you are out of work’? There is concern that many of these people will not get their last couple of weeks’ pay cheques.
TREASURER:
I have heard about that. Forge, I understand, has about 3,500 workers. It is essentially a mining and construction and engineering services company with operations not just in Australia but in various other parts of the world. Obviously we will be monitoring that particular case. I would say that we have got to build and invest in other infrastructure so there are new jobs. There has been a massive rationalisation in the number of jobs in the coal industry over the last few months. It has not made headlines, but it has been happening. There was no job growth for the last 12 months, none. This is what we have inherited, we will deal with it. Looking forward, how are we going to create those jobs? I come back to the plan. We have a plan. We have just got to be allowed by the Senate and our political opponents to get on with it.
JOURNALIST:
On that, the idea of a plan, the IMF said overnight that we are not going to get trend growth in this country probably until 2016 maybe 2017. In other words, the job market is going to get a lot worse than it is now. When do you think you can tell Australians that it will turn around?
TREASURER:
That is the IMF’s analysis on the basis of current settings - which says that the peak of unemployment is going to be 6.25% which was the same level of unemployment forecast by the previous Labor Government. We are no different on that forecast of unemployment - that is why we have to change things. The status quo is not an option. Doing nothing is not an option. That is why we have a plan and that is why we are trying to roll out our plan and that is why we want our political opponents to get on board. Our political opponents are engaging in massive overreach. There is just no credibility to the things they are claiming. In doing so, they are devaluing their currency but they are not helping us to fix the problem.
JOURNALIST:
You said that the May Budget would be focused on growth. Would it be fair to describe it as stimulatory? Has your thinking changed on that as you have been going through that early process of framing the Budget - given what you just said, for example, about there having been no jobs growth over 12 months?
TREASURER:
I know what you’re getting at - it is not going to work. The suggestion that we are going to go on a spending splurge is not right - quite obviously. We can have fiscal consolidation without harming growth. If we have better use of existing taxpayers’ money, then we can perhaps even enhance growth - it has got to be in partnership with monetary policy and it has got to be in partnership with some microeconomic reform. There are many levers here. We want to be in a position to use all of them.
JOURNALIST:
On asset sales, what other federal assets are there that could be privatised besides Medibank? Do you agree with one of your MPs that you would like to see some of the taxpayers’ subsidies recouped from the carmakers leaving Australia?
TREASURER:
I am not going to offer a sale list today. There will be plenty of others speculating on that. The Federal Government has not got a lot of assets to sell - apparently we own a lot of golf courses but they are not so…
JOURNALIST:
… There is Australia Post.
TREASURER:
Each enterprise is evaluated separately. The biggest assets available for sale are at a State level. Victoria, previously, did a lot of heavy lifting in this regard - as did South Australia. Tasmania has refused, so far, to do it. Western Australia has refused, pretty much. Queensland and New South Wales have their own issues. We are very actively looking at ways we can address some of the challenges associated with that recycling of taxpayers’ money. We are in an extensive dialogue with the States.
JOURNALIST:
On the car makers.
TREASURER:
These are things for further discussion. I know the news cycle moves much quicker than the policy cycle but there is a good reason why we should tread carefully. Obviously, if there is no domestic car manufacturing industry, then it does change the parameters of the regulation of the car industry and the taxation of the car industry. We will consider that in due course.
JOURNALIST:
Just coming back to the SPC decision in Victoria today, doesn’t this undermine your approach to corporate entitlement and bailouts? If State Governments seem to [inaudible] they would go in and offer money to these companies when the Federal Government refuses. The State then comes rattling the can to the Federal Government because they haven’t got any cash and the Federal Taxpayer has got to throw in. It’s the same result, is it not?
TREASURER:
No. There are different jurisdictions and different priorities. From our perspective…
JOURNALIST:
It is costing the States who will come to the Federal Government and ask for....
TREASURER:
Victoria’s Budget is in much better shape than the Federal Budget. They have got the capacity to do more in one sense than we do – however that is not the main driver from our perspective. The bottom line is, from our perspective - and I do not know what deal has been done between Victoria and SPC or Coca-Cola Amatil. The bottom line for us was they were asking us for $25 million to buy new plant and equipment for their factory - the factory that they bought. As I say ‘Abdul the kebab maker’ in Parramatta Mall does not ring up and ask us for a new oven or a new refrigerator for his business if he is finding that he cannot get the appropriate rate of return. Not even a loss at SPC, it was appropriate rate of return on investment. The parent company - the $9 billion Coca-Cola Amatil - has got to do the heavy lifting here. There are a lot of businesses in Australia that would love the taxpayer to come along and offer to buy their plant and equipment. The high dollar has had an impact right across the board, and we totally recognise that. Again - with the G20 on next week - one of the issues we will be talking about is tapering. It seems very removed from something like SPC or Holden, but it all has an impact, believe me. There will be a robust discussion next week at the G20 between Finance Ministers about the impact of tapering by the US Federal Reserve. From my perspective, it is absolutely right that the Federal Reserve do what is right for the US economy. If they continue on their path then it may mean a US dollar which is stronger, which will have some benefit for us. Thanks very much.