HAMISH MACDONALD:
Good to have you here Josh.
JOSH FRYDENBERG:
Good morning Hamish.
HAMISH MACDONALD:
Let’s start though with the GST because that’s making news headlines this morning. Essentially WA is going to getting a better deal out of this. You’re allocating a lot more money, billions more, where does that money come from?
JOSH FRYDENBERG:
Well, it comes from the Government’s budget and we have made an allocation for this increased money – not just for Western Australia, but for all states and territories. All states and territories will be better off as a result of these reforms. We have listened to the Productivity Commission, we’ve recognised that the way the GST formula is currently based is not sustainable into the long term because you had people in Western Australia, Hamish, who are getting just 30 cents in the dollar from the GST.
HAMISH MACDONALD:
But it’s by far the biggest jump for WA.
JOSH FRYDENBERG:
It is.
HAMISH MACDONALD:
Compared with the rest of the states and territories.
JOSH FRYDENBERG:
Because they’ve been the hardest done by.
HAMISH MACDONALD:
$9 billion, is that the amount that you’re having to set aside?
JOSH FRYDENBERG:
Correct.
HAMISH MACDONALD:
Where does that actually come from? Where do you cut it from?
JOSH FRYDENBERG:
We obviously are ensuring that we have fiscal discipline and as you know, the Australian economy is growing at its fastest rate since the height of the mining boom in 2012. We’ve just had our AAA credit rating reaffirmed by Standard and Poor’s, and we’ve just released the data for the Budget of 2017-18 which was the lowest deficit in a decade. So the economy is strong, there is more revenue coming in…
HAMISH MACDONALD:
Sure, but there’s still a deficit as you say, so that money has to come from somewhere. Can’t you just give us a simple explanation of where you’re getting $9 billion from?
JOSH FRYDENBERG:
Look, there’s been improvements on both the receipt side and the payments. Receipts, because more people are in jobs. We’ve created over a thousand jobs a day, but also less payments – particularly in the welfare space as more people find jobs and don’t need that additional income support.
HAMISH MACDONALD:
And nothing’s being cut from anywhere, it’s just better receipts?
JOSH FRYDENBERG:
We have budget rules which we’re sticking to which…
HAMISH MACDONALD:
So where do the cuts come from? Come on, let’s be honest about this.
JOSH FRYDENBERG:
Hamish, let’s be honest. The Australian economy is growing and we’ve seen improvements on the receipts side, but we’ve also seen lower payments. Now, the last time the Labor Party delivered a budget surplus, the Berlin Wall was still standing. We have a track record…
HAMISH MACDONALD:
When was the last time your Party delivered a surplus?
JOSH FRYDENBERG:
Well when John Howard and Peter Costello…
HAMISH MACDONALD:
It was a long time ago as well….
JOSH FRYDENBERG:
Well they only did ten of those surpluses, a record that hasn’t been surpassed.
HAMISH MACDONALD:
Can you just be clear though – will anything be cut to fund these changes to the GST?
JOSH FRYDENBERG:
Oh look, we will run the economy in a fiscally disciplined way, there will be savings…
HAMISH MACDONALD:
So there will be cuts?
JOSH FRYDENBERG:
There will be savings where it is appropriate to do so, but what…
HAMISH MACDONALD:
But what will they be?
JOSH FRYDENBERG:
Well you’d love me to reveal on TV today Hamish, the Mid Year Economic and Fiscal Outlook, but you’ll have to wait until December for that.
HAMISH MACDONALD:
Alright. Let’s talk about the banking Royal Commission. It’s unclear whether the Government has a role in extending it or not, at this point, based on what Scott Morrison is saying. If the Commissioner asks for extra time…
JOSH FRYDENBERG:
He’s got it.
HAMISH MACDONALD:
He’s got it?
JOSH FRYDENBERG:
Correct.
HAMISH MACDONALD:
Why not just say that you’re going to extend it?
JOSH FRYDENBERG:
Well Bill Shorten thinks he knows better than the Commissioner. If you’ve read the 1000 page interim report, you’re left with no doubt about how rigorous, professional, considered and forensic the Commissioner is. There’s been 9000 plus submissions, they’ve all been read and they’ve all been taken into account and he’ll continue to take further submissions up to the end of October.
HAMISH MACDONALD:
Do you think it is important though that a lot of those people who have missed out on being heard at the Royal Commission have that opportunity?
JOSH FRYDENBERG:
Well, obviously they have an opportunity to put their views and the Commissioner is still taking
submissions, he’s been very rigorous to date…
HAMISH MACDONALD:
I mean we’ve all heard stories of people who have turned up to the hearings, feel very disappointed. All the farmers who went to Brisbane for example were bitterly disappointed that they didn’t have their opportunity. Do you personally think it is important that as a part of this process, that happens?
JOSH FRYDENBERG:
Well Hamish what I do think is important is that people have an opportunity to put their story to the Commissioner. He’s taking further submissions like he has taken 9000 plus submissions already. But he has made it very clear that it is important for the stability of the financial system and the confidence in the financial system to do his job promptly and that is what he’s doing but he is leaving no stone unturned in producing a very rigorous assessment of the culture, the compliance and the conduct of the sector which he has found wanting.
HAMISH MACDONALD:
So we haven’t seen what recommendations he’s going to make but already the Government is making noises about how the world might be different for this sector after the Royal Commission. Can you explain simply what will change for the banking and financial services sector?
JOSH FRYDENBERG:
Well for me, there were two takeout’s from the report. The first was that the banks were putting profits before people, that greed was their motive and that basic standards of fairness and decency went out the door. Now that’s got to change…
HAMISH MACDONALD:
How do you do that?
JOSH FRYDENBERG:
You do that, not by legislating morality, but by enforcing the law. And this was the second takeout: that ASIC as the regulator was preferring negotiation over litigation even though it had a greater than 90 per cent success rate when taking cases to court. So what I have already discussed with ASIC, what they’re very conscious of – and they’re conducting their own internal review and they have greater resources to do that, and a new special prosecutor – is to actually take these cases further than just simply an infringement notice or a press release?
HAMISH MACDONALD:
So are we going to see an end to these negotiated outcomes between ASIC and the big banks, for example?
JOSH FRYDENBERG:
I think it’s fair to say that going forward, ASIC will be less timid and more forthright in prosecuting those cases…
HAMISH MACDONALD:
But does that mean those negotiated outcomes will still occur? Because that seems to have surprised so many people that when there’s been serious wrongdoing, ASIC’s just sat down with banks or financial services companies and reached an agreement.
JOSH FRYDENBERG:
Yeah, and Hamish, it was the tail wagging the dog. Because what was happening here, was that those financial entities that were in the focus, in the gun, were actually deciding how they obeyed the law as opposed to being dictated to by the Parliaments, by the courts and by ASIC.
HAMISH MACDONALD:
So are you going to give more money to ASIC?
JOSH FRYDENBERG:
Well we have already and…
HAMISH MACDONALD:
But going forward? Will there be more money forward?
JOSH FRYDENBERG:
Well, they will have the resources that they need but what we put also in place, Hamish, is a
system for industry funding so that those who are regulated actually are contributing to that process.
HAMISH MACDONALD:
There’s some suggestion that there could be someone regulating the regulator. Is that something that you think needs to happen to ensure that ASIC itself is going after these wrongdoings?
JOSH FRYDENBERG:
Well firstly, I don’t want to pre-empt the findings of the Royal Commissioner and we’ve said obviously that we will look very closely and favourable at his recommendations…
HAMISH MACDONALD:
But are you open to that idea?
JOSH FRYDENBERG:
Well, what I’m open to is having a more effective system of compliance. But let’s not forget what the Commissioner…
HAMISH MACDONALD:
But does that mean regulating the regulator or not?
JOSH FRYDENBERG:
But Hamish, the regulator needs to do its job. I think that’s the starting point.
HAMISH MACDONALD:
But how do you force them to? Having a regulator looking at what they’re doing?
JOSH FRYDENBERG:
No, by actually having a recognition on their part, which I think has seeped it, that what they’ve been doing in the past has not been good enough. But what the Royal Commissioner has made very clear in his report, is that simply adding another layer of complexity to an already complex regime with more regulation is not necessarily the answer.
What we need is a simplified legal system which makes it very clear – you need to obey the law, you can’t mislead or deceive, you need to provide products and services that are fit for purpose, and you need to act with reasonable care and skill. That is what the Australian people expect of their financial institutions. These financial institutions, Hamish, are in a position of trust and that trust needs to be restored and the Government will do everything possible so that the Australian people have the confidence and trust in the financial system that they expect.
HAMISH MACDONALD:
Josh Frydenberg, thank you very much for coming in.
JOSH FRYDENBERG:
Good to be with you Hamish.