JOSH FRYDENBERG:
Good morning. It’s wonderful to welcome 1000 investors here to Melbourne for the Sohn’s Hearts & Minds conference, the third such conference, which brings together investors and fund managers together with the not-for-profit sector to support medical research.
Today, I told the audience how important it was to continue their investments in Australia, that we were enjoying our 27th year of consecutive economic growth, a growing economy with unemployment falling, with wages rising and with Australia’s position on the doorstep of the big growth economies in Asia.
Today, the Government has also made a number of other significant announcements. We’ve announced more than $50 million in funding for the Commonwealth DPP and for the Federal Court to ensure that those people who are engaged in financial misconduct face the full force of the law and obviously, the Hayne Royal Commission made a scathing assessment of the culture and lack of compliance in the financial services sector and this readies the Commonwealth DPP and the Federal Court for the work ahead.
We’ve also announced that we are cutting some $300 million of red tape for small business by changing the thresholds that haven’t changed since 2007 for the requirements of providing directors’ reports, for auditor reports to ASIC. This is important in ensuring that the companies are able to deploy their resources to grow their business, to employ more people, not necessarily to line the pockets of lawyers and accountants.
And finally, the Reserve Bank has again sent a very strong message about the housing market. We know that prices have come down quite substantially in capital cities over the last 12 months. This is a result of work that APRA has done, supported by the Government to ensure that housing is at a more sustainable level and that the dynamic in the housing market moves from investor led growth to owner occupier led growth.
But the sustainability in the housing sector and its stability is put at risk by Labor’s plan to abolish negative gearing as we know it and to change the capital gains tax discount from 50 per cent down to 25 per cent. We’ve heard from economists, that if you own your home, under Labor’s policy, it’ll be worth less. And if you rent your home, under Labor’s policy, you will pay more.
Labor devised this policy at a time when the housing market was rising. Now, the housing market has been falling. Labor should abandon this policy, cut its losses, suck it up and recognise that the Australian people do not want to see the value of their home fall. Thank you. Any questions?
JOURNALIST:
On the funding boost for the courts today, how long do you expect it to take before all cases are dealt with? How long before prosecutions occur?
JOSH FRYDENBERG:
Well, ASIC already has a number of cases that it’s been working on and it’s working closely with the DPP. But this additional funding will be able to shorten the time between getting these cases ready for court and actually taking them to court and I think that’s very important.
What the Royal Commissioner did point out was that ASIC has been very successful, more than a 90 per cent success rate when it actually moves to litigation. But it was preferring negotiation over litigation. These additional resources will also help them develop their cases and ensure that people face the full force of the law.
JOURNALIST:
Is the funding for cases that come out of the Royal Commission? Because I think ASIC has already pointed to an increased amount of cases coming through the pipeline already and the funding up to date didn’t account for cases that were going to come out of the Royal Commission?
JOSH FRYDENBERG:
This is for both. This is for cases that are currently afoot, as well as for cases that are coming forward. But I reiterate that the Government’s stands ready to provide all the resources necessary to our regulatory agencies.
We’ve recently boosted the funding for APRA and we’ve recently boosted the funding for ASIC by $70 million as well as ensuring that we have a new Deputy Chair of ASIC whose responsibility is effectively as a special prosecutor, Daniel Crennan QC.
We’ve also reappointed Wayne Byres as the head of APRA and that is important, as well as reappointing Rod Sims as the head of the ACCC. So, our regulatory agencies are ready to act, they know what their job is, the Hayne Royal Commission has sent them a very strong message and I think you’ll see more aggressive positioning by our regulators to ensure that this culture of non-compliance is rubbed out.
JOURNALIST:
You’re still going to have to look at the criminal jurisdiction of the Federal Court, that funding doesn’t even include that part?
JOSH FRYDENBERG:
No, there is actually support there for a review of the Federal Court with respect to looking at a criminal jurisdiction for it. As you know, it deals with the civil cases, predominately with the civil cases and we’re appointing two extra judges to be able to move that backlog of civil cases.
JOURNALIST:
On the embassy issue, what do you make of the Malaysian Prime Minister’s comments of an Israeli embassy move adding to the terror threat?
JOSH FRYDENBERG:
Well, the Malaysian Prime Minister, Dr Mahathir has form. He has called Jews hook-nosed people. He has questioned the number of people that had been killed in the Holocaust. He banned Schindler’s List as a movie from being shown, even though it showed the amazing story of a righteous gentile who saved many people from persecution.
My point is that Australia will make its own decisions in its own national interest. And Scott Morrison was absolutely right to begin a process, no one is pre-empting the outcome of that process, but to begin a process to look at where our embassy is located.
Australia already recognises Israel’s sovereignty over West Jerusalem. It’s where the Israeli Parliament is, it’s where the Australian Ambassador presents his or her credentials. It will be the capital of Israel under any two-state solution. People who say do not put the embassy in Jerusalem are making the point that we need to maintain more leverage over the negotiations between Israel and the Palestinians.
But the reality is, those negotiations have frozen and as long as a terrorist group, Hamas, a listed terrorist group here in Australia, is in control of the Gaza Strip, and in the West Bank, you’ve got Abbas, who’s 15 years into a four year term there, as long as those two parties are not talking to each other, Israel doesn’t have a negotiating partner at the table.
Israel is the only country in the world where Australia doesn’t put its embassy in that nation’s capital. It stands alone. And there seems to be a double standard within parts of the United Nations and the Human Rights Council when it comes to Israel and when it comes to other countries.
The UN General Assembly has passed more anti-Israel resolutions than nearly all resolutions against other individual countries combined. The UN Human Rights Council has passed more anti-Israel resolutions than against North Korea, Syria, Burma, Iran and where other human rights violations have occurred combined.
The reality is, Indonesia is an absolutely vital and critical friend and partner of Australia. But Indonesia doesn’t have diplomatic relations with Israel, it doesn’t recognise it. But next year, Australia is enjoying 70 years of diplomatic ties with Israel. Of course we’re going to have a different view about that relationship.
So, Scott Morrison is absolutely right. I support his announcement wholeheartedly. The Government is going through a process. But we have to remember that it is Australian governments that determine our national interest and where we place our embassies and the posture and the direction of our foreign policy. And I think 25 million Australians would agree with us on that.
JOURNALIST:
In terms of the substance of his comments though, could the move increase the terror threat?
JOSH FRYDENBERG:
Look, that is an issue that will be worked through as part of any process, taking into account the views of relevant agencies. But again, Australia will determine the position of its embassies, its foreign policy posture based on our national interest.
No other country tells Australia what its foreign policy should be and it seems that Bill Shorten is saying don’t move the embassy because it might upset another country, who don’t even have relations with Israel. That’s not acting in Australia’s interests.
JOURNALIST:
Further to that small business package that was announced recently. Would the Government look at changing risk weights for the banks to make it more attractive for them to invest and lend to small businesses?
JOSH FRYDENBERG:
Well, APRA is the body that makes decisions about the capital adequacy ratios and how equity, for example, is going to be treated on the books of the banks. We did make an announcement that we supported a business growth fund.
This is modelled on what we’ve seen in both Canada and in the United Kingdom, which could make it more attractive for banks for other investors to place equity in small businesses instead of those businesses having to seek out more debt to fund their expansion plans.
This has been welcomed, it would be government funded- sorry, it will be funded and led by the private sector, not by the Government and APRA have said that they’re going to review the various prudential and regulatory rules that would apply.
JOURNALIST:
Treasurer, the big bank bosses next week and their chairs will be in the Royal Commission. What’s your expectation in terms of their evidence and the way they’ll conduct themselves next week?
JOSH FRYDENBERG:
Well, I’m sure they’ll conduct themselves professionally. Let’s remember that our banks are absolutely critical to the health of the Australian economy and we have a very stable banking system that has served us well through difficult times like the Global Financial Crisis.
That being said, I think bank CEOs would be the first to recognise that the culture of non-compliance, the fact that profits are being put ahead of people has not been in the best interests of Australian consumers. So, we will obviously watch closely what their evidence is and how that testimony goes.
But the banks themselves need to recognise that they do need to change their behaviour, I think they have acknowledged that and we all await the final recommendations out of the Royal Commission, which is due in February.
JOURNALIST:
Bob Carr has come out and criticised the Government’s position on Malaysia. Do you have a response to this?
JOSH FRYDENBERG:
Well, Bob Carr is the least well-regarded Foreign Minister in Australia’s history. Bob Carr is better known for his steel cut oats and his first class pyjamas and flying around the world, picking up anecdotes for his own memoirs than for anything he did as Foreign Minister.
He’s a forgettable Foreign Minister, Bob Carr, who comes to the role with his own prejudices. It’s up to Bob Carr to tell us, what doesn’t he agree with Dr Mahathir’s comments? Does he agree with Dr Mahathir that less than six million Jews were killed in the Holocaust? Does he agree with Dr Mahathir that Jews are hook-nosed people? Does he agree with Dr Mahathir that Schindler’s List shouldn’t have been shown in Malaysia?
Let’s hear Bob Carr answer those questions. He really is someone who’s suffering from a relevance deprivation syndrome.
JOURNALIST:
Who’s conducting the review of the embassy decision and will it end up going to Cabinet?
JOSH FRYDENBERG:
Look, I’ll leave that to the Prime Minister Scott Morrison. But we are seeking the advice and the input of our senior officials through this process.
JOURNALIST:
Treasurer, you talked about, as for Hearts & Minds, you talked about Solly Lew and him being instrumental in the conference being in Melbourne this year. Have you had a conversation with him and some of his peers to try and make that happen again for next year?
JOSH FRYDENBERG:
Look, I’ll leave those things up to Solly. No, I haven’t asked him where it’s going to be next year. But he was recognised by the organisers as someone who has helped bring it to Melbourne and the fact that we’ve got a 1000 investors coming to Melbourne from around the world is an important opportunity for us to showcase our wonderful state but also showcase the country and the investment opportunities.
Because we want more people to invest in Australian companies, in their ideas and their people. We’ve a very good story to tell. Our economy is growing strongly and we continue to create more jobs and lower taxes.
JOURNALIST:
The Royal Commission is being conducted by a bunch of lawyers. They are, surprisingly, recommending that there should be more court-based enforcement. We’ve had two major cases come through the Federal Court in the last week or two where ASIC’s case has been thrown out. So, can we really rely on the courts system to the extent that the Royal Commission wants us to?
JOSH FRYDENBERG:
Well, I think what the Royal Commissioner was pointing out was two points. Firstly, that ASIC needs to be leaning in a bit more, if you like, and his words were predominantly focused on ASIC but he also talked about APRA as well, need to be leaning in, preferring litigation over negotiation.
He pointed out that ASIC have had a more than 90 per cent success rate when it comes to taking cases through the courts. So rather than a fine or an enforceable undertaking, it may be more appropriate to ensure that the case is taken through the courts. So that would be a decision made by the independent authorities.
But the second point, that the Hayne Royal Commission pointed out, is that there is already laws that are in place that maybe need to be simplified but not necessarily new laws put in place to get the outcomes that we need. That’s an important observation from the Royal Commissioner that we have seen. That laws haven’t been enforced, even though they exist and obviously, that’s something that the regulators will be watching closely from here on. Thank you.