TREASURER:
Today’s March quarter National Accounts confirm there is strong and broad-based momentum in the Australian economy. Real economic growth rose by 0.9 per cent in the quarter to be 2.3 per cent higher over the past year. This exceeds market expectations. This builds on growth, 0.3 per cent in the September quarter and 0.5 per cent in the December quarter last year. This is a good, solid result. It is completely consistent with our measured and appropriate Budget forecasts including our expectation of 2 ½ per cent GDP growth for this financial year. It's worth noting that this strong economic growth occurred prior to the 2015 Budget which will build further momentum in this area. This growth is broad-based. Growth in exports, household spending, services and new dwellings confirms that the Government's economic plan is working. Indeed, Australia’s 0.9 per cent growth in the March quarter makes us one of the fastest growing economies in the developed world and faster than any of the G7 in the quarter. Exports continue to support our economy, growing by 5 per cent and this is the strongest quarterly result in 15 years. In part, they highlight the dividends Australia is reaping from the mining investment boom. More and more resource projects are hitting full production, resulting in record-breaking mining exports. But there is a more important story in these figures. On numerous occasions I have highlighted the huge potential of our services sector, which represents 70 per cent of our economy but just 17 per cent of our exports. Significantly, services exports are up 8 per cent over the past year in line with rising demand from Asia. This is the fastest growth since 2007. There is growth in areas such as tourism, education and professional services, which are set to become increasingly important drivers of growth in the future and will be supported by our free-trade agreements with China, Japan and Korea. Once again I say our economic plan is working. The transition in our economy is being managed well. Consumer spending is continuing to strengthen, rising by another 0.5 per cent in the quarter. Higher household spending is being supported by low interest rates and rising household wealth. The biggest post Budget bounce in consumer sentiment since 2007 suggests the outlook for household spending remains bright. And while business investment fell 3.5 per cent in the quarter, this was largely driven by expected decline in mining investment. That said, we are seeing encouraging new investment in housing supply nationally, with housing investment rising by a strong 4.7 per cent in the quarter and 9.2 per cent over the past 12 months. So there is clear evidence of a construction response to elevated house prices. This additional supply is expected to continue with a large pipeline of housing approvals and record low interest rates. The transition in our economy is obviously still in progress. As expected, the terms of trade declined by a further 2.9 per cent in the March quarter, the fifth fall in a row and one of the biggest consecutive falls in history. Labour productivity was also flat in the quarter, reflecting stronger employment outcomes. That said, improving productivity and creating jobs remains central to our economic plan and our Budget strategy. Almost a quarter of a million new jobs have been created since we came to office. So today's National Accounts show the deep resilience of the Australian economy. A rebalancing of growth is taking place with roadblocks being removed. New markets are being opened and our economic plan is working. These numbers confirm that Australia is rising to the challenge. Questions?
QUESTION:
Treasurer, why do you think wages have fallen? Wage income is down?
TREASURER:
Well, wages aren't falling…
QUESTION:
…wage income is down…
TREASURER:
…I think obviously at the moment we're seeing strong employment growth. I think that's coming through. We're seeing strong employment growth. The economy is still below the 20-year average. But I also think you're starting to see the impact of the fall in terms of trade, that's having some impact as well. There's multiple factors at play and there is inflation at very manageable levels.
QUESTION:
Just wondering, how would you explain the fact that the income measures in these numbers is still very, very weak, and are you expecting that to improve any time soon?
TREASURER:
Well, we've been dealing with the biggest fall in the terms of trade probably on record, and the movement from mining production and - sorry, from mining construction into mining production is well under way. Export volumes are strong, but commodity prices are down. Having said that, in our Budget we forecast around $48 a tonne for iron ore, prices are above that and are holding above that. But what's most encouraging, I think, is the diversity of the strength, the broadening of the growth story in the Australian economy, particularly in services. As I said, to see constant improvements in the level of services exports, particularly into Asia, is very encouraging.
QUESTION:
Treasurer, the WA SFD figures are particularly poor, [inaudible] they're down the best part of 10 per cent since September '12. How do you see the West Australian economy rebuilding or reshaping itself even though we’ve got the production side but the construction side of the post mining boom is pretty poor?
TREASURER:
Well bear in mind that the state figures exclude exports. So, you've got to take that into account. So, to suggest that any state is in recession is wrong because the numbers in the National Accounts exclude exports. So, from my perspective, I think Western Australia is coping quite well. It still has comparatively low unemployment. There is strong investment by the State Government in infrastructure, the Commonwealth Government is also assisting in that regard. There's no doubt that the transition has had an impact on Western Australia from mining construction to mining production, as it has had a big impact in Queensland. But having said that, you know, there are other parts of the economy that are growing and I have absolute faith in the capacity of the Western Australia economy to grow.
QUESTION:
What do you think Victoria's doing so right? 1.3 per cent state final demand in the quarter, easily the highest in the country [inaudible]
TREASURER:
Well obviously there is some benefit in having a lower Australian dollar, particularly for manufacturing in Victoria and also for South Australia I might add. It is encouraging, you know, the Australian dollar is still at a relatively elevated level but that's obviously linked to speculation about where the US dollar is going but having said that, having the Australian dollar come down from previous levels is actually a big help for manufacturing in Victoria and South Australia but also education services in those states as well.
QUESTION:
Treasurer, I understand the ERC yesterday knocked off an idea to allow change to [inaudible] rules for Northern Australia. What was the thinking there and why did you change your mind from initially supporting this proposal from Andrew Robb?
TREASURER:
Well, I don't talk about discussions in ERC or Cabinet, as you know.
QUESTION:
Do you deny that you changed your mind?
TREASURER:
No, I don't deny I changed my mind.
QUESTION:
The support for your views on retirement income from Rowan Ramsey has stayed in the Party Room and David Murray today has also saying you've got the prospect of looking at superannuation taxes in the broader context in time. Has Tony Abbott overpromised ahead of the next election on this?
TREASURER:
No. Rowan Ramsey's comments were completely taken out of context and twisted, and their interpretation was wrong.
QUESTION:
[inaudible] David Murray?
TREASURER:
David Murray, I’ve had a very good chat with him about the Murray Inquiry just last week and we will be responding to the Financial System Inquiry in the next few weeks.
QUESTION:
What was the interpretation of Rowan Ramsey's comments then?
TREASURER:
I'm not going to give commentary on commentary. We've had a terrific set of numbers that came out today and those numbers have proven that there are some clowns out there that are talking about recession and dark clouds on the horizon. They’ve been proven to be looking foolish, those people, and we should be focusing on what is before us which is raw data that says the Australian economy is in the last quarter, one of the fastest growing economies in the developed world. How good is that?
QUESTION:
[inaudible] an investigation into credit card interest rates?
TREASURER:
Well, it's something that I've been discussing with key regulators at any rate. There is a very, there's a huge number of credit card providers. It is - it would need to be a very sophisticated analysis and I'm speaking to officials about that at the moment. From memory there's well over a hundred providers out there and of course they've got hybrid products. Some products have, you know, frequent-flyer points, others you can get a free toaster if you fly to Brisbane, you know, there's lots of hybrid products that have interest free repayment periods and so on and consumers are responding to those products.
QUESTION:
Can you explain to us what a come to Jesus moment is? Have you had one?
TREASURER:
Only in the confines of my home [laughter].
QUESTION:
Treasurer, you said that housing supply is responding to elevated house prices, but given the number of very senior economic figures, Treasury, David Murray, Malcolm Edey, who talked about Sydney house prices, some have used the bubble word, some have said that they were elevated. Is it sufficient to just say anybody who talks about that issue just wants home owner’s prices to go, you know, home values to go down, or should we have a proper conversation about housing affordability?
TREASURER:
Well Mr Shorten is playing catch up. As I said yesterday in Parliament, I spoke to the State Treasurers about this in April. We've got a taskforce looking at how to improve supply. If I can make some observations here, market fundamentals matter, right, so what we're seeing is strong demand in certain cities but we're also seeing as the National Accounts illustrate, a significant increase in supply. Significant increase in supply. Now, you have particular troubles in markets where supply exceeds demand. That's when you have troubles. Exhibit A China, exhibit B Ireland, exhibit C the United States. That's where supply exceeds demand. Well, what we are seeing is that supply is actually increasing to meet demand, but the very low vacancy rates in a number of cities, particularly in Sydney, illustrates there's some way to go.
QUESTION:
Labor offered a chance to pass the tax amendments for small business very quickly. While the Senate is not sitting yet, wouldn't passing them today without debate have allowed you to move onto other Budget measures which you say are so urgent?
TREASURER:
Can I say to you, this was just a complete stunt from Bill Shorten so please don't respond to the political stunts of Bill Shorten. Everyone has the right to have a say, the big test for Bill Shorten will be whether he will facilitate fast passage through the Senate in the first sitting week of the Senate. So it will pass through the Parliament, the House of Representatives today as was foreshadowed. All of our colleagues will have the opportunity to speak on what is very important legislation for their communities so it will happen today. The Senate does not meet for two weeks. The real test for Bill Shorten will be whether he will accelerate it through the Senate in the first meeting of the Senate without sending it off to a committee that then has submissions and travels around the country or delays the process in the Senate. That's the test. So please do not be distracted by Bill Shorten's games.
QUESTION:
Mr Hockey could you just give a small clarification on this question of retirement income. I think Josh Frydenberg is saying if people have got suggestions that should go into the Tax Inquiry, [inaudible] made some comments in the past. Also, just to go back to the point about the Party Room question, that is not Cabinet, we’re briefed on those questions. Could you clarify what sort of [inaudible]
TREASURER:
Well, I wasn't at the briefing, as you know…
QUESTION:
…you were at the Party Room?
TREASURER:
…I was at the Party Room and I'm not passing comment on what was said to me in the Party Room or anywhere else. In relation to the first part which was...
QUESTION:
Clarifying...
TREASURER:
Yeah, the retirement – look, we have a Tax Discussion Paper out there as part of our Taxation White Paper process. It includes issues relating to a whole range of things, a whole range of things. You remember, we went through an election campaign saying that there was nothing that was excluded from the Tax Discussion Paper. We honoured our word and there is nothing excluded from that paper…
QUESTION:
[inaudible]
TREASURER:
Obviously superannuation is part of that, savings and the taxation of savings is part of that. We have a process where people are entitled to give their feedback, put submissions back to us. I think there has been extensions given to around 50, so people are taking it very seriously and want more time to respond to the Taxation Discussion Paper. Obviously David Murray and the Financial System Inquiry also touched on retirement savings and superannuation. But the suggestion that we are going to impose a new tax on superannuation like Bill Shorten, is ridiculous. We are not doing that. Quite frankly, as I said on a number of other occasions at the moment we have our hands full with a range of reviews. We have got a taxation review, we have a Federation White Paper review, we are responding to the Murray Inquiry. We are responding to the Harper Inquiry. Frankly, I think, you know, to call for another review on top of those that are already out there is a little disingenuous at this stage.
QUESTION:
Treasurer, it’s true you have included all those things in the discussion paper on tax, that you have included those things but the Government has ruled out taking any action on superannuation, on GST, on negative gearing. What's the point in having a discussion in a White Paper when you have already specifically ruled all those things out?
TREASURER:
Well, obviously you’re looking over the horizon as part of the Taxation Discussion Paper. As I said before, this is about the new Australian economy, the economy that is coming to us. It's part of our economic plan to prepare for the future. Now our tax system was overwhelmingly designed in the 1950s. Frankly, we need to make it much more contemporary and future-proof the taxation system. That's why there are a number of initiatives that look over the horizon in the Tax Paper. But, the suggestion somehow that for the next 50 years there's an element of tax that you're never going to change, I mean that’s just word games.
QUESTION:
But wasn’t that Rowan Ramsey’s point Treasurer? That was Rowan Ramsey’s point.
TREASURER:
Well you’ll need to ask him, and [inaudible]
QUESTION:
Treasurer, the Government started a conversation about citizenship. What’s your view of the legality or reality of revoking citizenship for sole Australian nationals?
TREASURER:
Well David, we’re introducing legislation in relation to dual-citizens. There is a discussion paper out there. I’m a member of the Cabinet, I’m a team player and you know, I support the discussion paper that is out there. I’m focused on the National Accounts, I’m focused on the economy and job creation.
QUESTION:
Just on the business, small business package. When would we expect to see the benefit of that in the economy and how do you think it’s going to appear in the numbers? Which quarter should we be seeing as…
TREASURER:
Well, you can see it in consumer and business confidence numbers already. That is hugely important, and as you can see they’re the strongest recovery since – response to a Budget since I think 2007, so they’re encouraging. The second thing is in relation to sales of particular product lines but obviously, if small business is re-tooling that’s to be encouraged. It will flow through. Our Budget was carefully calibrated to the economy and you can see it right here in these National Accounts. Look at the detail of the National Accounts, see how our Budget was calibrated and you can see we are right on track, right on track, which is very encouraging.
QUESTION:
Mr Hockey, in the new Labor documentary that starts next week, the Killing Season, Kevin Rudd is praised in the first series for his handling of the GFC. [inaudible] says that he was – had a deep firm grasp of the [inaudible]. Gordon Brown said he was absolutely instrumental in the G20 response. Did you underrate Rudd’s performance? You’ve been very critical of their handling of the GFC, do you think you were overly critical toward the former Labor Government?
TREASURER:
No.
QUESTION:
So do you think [inaudible]
TREASURER:
No I didn’t say that at the time.
QUESTION:
Well what did you [inaudible]
TREASURER:
Well you can go and look at my words at the time. We said the stimulus was too large at the time and it was poorly targeted. $900 cheques to dead people is an example of that, overpriced school halls was an example of that. Completely screwing the pink batt industry was an example of that and it cost lives. Any other questions actually on the National Accounts?
QUESTION:
Treasurer, going back to Lenore’s question and the warnings that you got from John Fraser and Malcolm Edey this week. Do you think it would be better for the Australian economy if the rate of house price growth in Sydney and [inaudible] Melbourne was to slow?
TREASURER:
Well, the market is the market. If there is a concern about elevated house prices, Sydney or parts of Melbourne, then the best way to respond is with increased supply. There are also a number of macroprudential initiatives that have been undertaken by APRA. But overwhelmingly, what you’re seeing in the National Accounts is clear evidence that there is a significant increase in the supply of housing and that’s to be welcomed. So the market is responding. I don’t know why Labor wants to continually smother markets, why it wants to continually interfere in markets. What we’re seeing is a response to the demand and that’s to be encouraged and that is encouraging. Because that shows that the Australian economy is flexible and adaptable to whatever circumstances might be including [inaudible].
QUESTION:
[inaudible] to the iron ore market?
TREASURER:
We are responding, we are responding.
QUESTION:
[inaudible]
TREASURER:
Yes, I am satisfied that APRA is doing it.
QUESTION:
Would you say that APRA’s actions are also market interference though?
TREASURER:
No. Okay, thanks very much.