JON FAINE:
Josh Frydenberg, good morning to you.
JOSH FRYDENBERG:
Nice to be with you Jon.
JON FAINE:
A bank of Treasurers?
JOSH FRYDENBERG:
Well certainly they use a bank more often than most.
JON FAINE:
So the government cancels the COAG meeting, the Council of Australian Government, but then you have to get the Treasurers together. Is this effectively replacing the cancelled COAG?
JOSH FRYDENBERG:
No, because what Scott Morrison has done is created a Drought Summit, because he has made that a real priority for him and his government, as he focuses on reducing the hardship felt by communities in Queensland and New South Wales with knock on effects; dare I say to us here in Victoria and elsewhere.
JON FAINE:
Given the drought was the first item on the agenda for the Premiers, why not do the two together.
JOSH FRYDENBERG:
Well he is bringing together specific people who...
JON FAINE:
But not the Premiers?
JOSH FRYDENBERG:
Well there are leaders from other states who are going to participate. But what he is doing is bringing together specific people with first-hand knowledge as to what is occurring in those drought stricken communities...
JON FAINE:
You don‘t think the Premiers know what is going on, you don’t think they’re worth talking to them about it?
JOSH FRYDENBERG:
Well their Ministers certainly do and we have been talking to them regularly and we have announced a number of new measures. But what today‘s meeting is about, Jon, which is my focus is reaching out...
JON FAINE:
Start picking up the pieces because you didn’t have a COAG, it is unprecedented...
JOSH FRYDENBERG:
Jon, there will be a leaders COAG and there is today a meeting of Treasurers from the states and territories with us from the Commonwealth level to work through some important issues relating to GST reform and the first item of the agenda is something that we put there which is to remove the GST from feminine hygiene products.
JON FAINE:
The tampon tax and that is terrific and I hope that gets through.
Do you accept the convention that was put in place by John Howard and Peter Costello – your good friends – that you don’t change the GST carve up unless there is absolutely unanimity?
JOSH FRYDENBERG:
Well as you know the government at the federal level can legislate, it’s its responsibility to make the changes around the distribution of the GST. But when it comes to the rate or the base of the GST you need the agreement of the states and territories. So we commission the work...
JON FAINE:
The convention is you don’t tinker with it, without everyone agreeing. Do you accept that?
JOSH FRYDENBERG:
Well it has to get through the parliament and that is now going to be where the focus is, because this is an important reform.
Let’s talk about why we are here in the first place which is that the integrity and viability of the GST system was put at risk because in Western Australia, following their mining boom, they were only getting 30 cents in the dollar and Tasmania with one fifth of the population of Western Australia and Northern Territory one tenth of the population of Western Australia were getting more GST revenue than Western Australia - and that was not right.
JON FAINE:
I don’t have an answer to my question of whether you accept the convention that you don’t tinker with it unless you have got unanimity.
JOSH FRYDENBERG:
Well, we have worked closely with the states, they have provided data to the Productivity Commission, we have worked with the Productivity Commission, we have come up with a proposal, this is what the public expect of a government to provide a national solution to a national problem and we are leading.
JON FAINE:
So that convention is out the window? You will change it, even if some states say that don’t accept the changes? Is that clear? Is the answer yes?
JOSH FRYDENBERG:
Well the answer is that some states may not want this change...
JON FAINE:
But you will force it anyway?
JOSH FRYDENBERG:
But the Federal Government is pursing it through legislation and I point out today that the Labor Premier from Western Australia said to the Federal Labor Party get on and support this and let’s move on.
JON FAINE:
And Tim Pallas in the Financial Review today says how can a Victorian Treasurer dud Victoria for up to a billion dollars a year?
JOSH FRYDENBERG:
And I in the Herald Sun today outline why Victorians are better off because they are getting an extra $425 million as a result…
JON FAINE:
Through growth. Through the economy’s growth.
JOSH FRYDENBERG:
No through...
JON FAINE:
We should get 1.4 and we are only going to get 400...
JOSH FRYDENBERG:
I love coming on with you Jon, it is a great banter. But the reality is...
JON FAINE:
It’s not banter, these are vital issues...
JOSH FRYDENBERG:
These are vital issues and that is why we are leading from the front and we have put an additional $9 billion to the states and the territories, that is money out of the Commonwealth Budget which will actually see them better off. Now, let’s go to Victoria...
JON FAINE:
So you are saying Victoria will be better off, but not as well off as we would have been under the old formula?
JOSH FRYDENBERG:
No, it would be better off compared to what it would have been – that is the reality. And we are putting in billion dollars a year in perpetuity.
I mean, the reality is for Victoria, that 45 per cent of their revenue comes from Commonwealth payments, 25 per cent comes from the GST. Now the Federal Government took action to extend the GST to online purchases and undertook a number of other compliance activities. The result of which is an additional $6.5 billion to the states over the forward estimates. On top of that we are putting in an additional $9 billion, the states have never had a more generous partner than this Coalition Government.
JON FAINE:
Because the economy is growing.
Let’s turn to the Royal Commission. Scott Morrison said the other day that the Royal Commissioner hasn’t asked for an extension. S&P international ratings agency has dropped the big banks down overnight to the bottom half, they used to be the top banks in the world, it now looks as if that success was based on gouging their customers.
JOSH FRYDENBERG:
No, the banks obviously have very strong balance sheets. I do point out that S&P, the ratings agency you just quoted, reaffirmed Australia‘s AAA credit rating and praised us for our budget discipline just a few weeks ago...
JON FAINE:
Down-grading the banks, it looks as if their high ratings globally was based on gouging customers.
JOSH FRYDENBERG:
Look, the interim report from the Royal Commissioner, all 1000 pages of it, is a frank and scathing assessment of the culture, the compliance and the conduct in our financial system. There are also harsh words for our regulator particularly ASIC. We will take the necessary action, but it doesn‘t excuse those companies, and those banks need to do better.
JON FAINE:
What other explanation is there, for the down-grading of their shares on the market and their down-grading globally other than the fact that their success was based on gouging customers?
JOSH FRYDENBERG:
Well there has been upward pressure in the US for interest rates - they are probably looking at the overall global economic outlook…
JON FAINE:
That impacts all banks around the world, not just the sudden collapse of the rating of Australian banks.
So how can you possibly say it is not in the public interest to extend this Royal Commission?
JOSH FRYDENBERG:
Well, very clearly, if the Royal Commissioner asks for more time...
JON FAINE:
Even if he doesn’t, you can still have one...
JOSH FRYDENBERG:
Yeah, but see this is where Bill Shorten thinks that he knows better than the Royal Commissioner and right now...
JON FAINE:
Look, I don’t know Commissioner Haynes personally. He may not want to go on for years and years and years, but someone should do that job - if not him then someone else.
JOSH FRYDENBERG:
Jon, we have established the Australian Financial Complaints Authority, we have put in place a Banking Executive Accountability Regime, we have increased the funding for ASIC by $70 million and put in a special prosecutor...
JON FAINE:
All which will help but not as much as the Royal Commission has.
JOSH FRYDENBERG:
Thank you for acknowledging that - all of which will help.
Now what we do after receiving the recommendations from the Royal Commissioner with his report, expected in February, is only motivated by one thing, producing a better outcome for consumers and ensuring that fairness, decency and honesty is restored and the banks no longer put profits before people.
JON FAINE:
Freedom Insurance overnight more resignations and every time they turn over a rock some little crab comes...
JOSH FRYDENBERG:
It’s been shocking!
JON FAINE: Well, if you keep going you will find more and that is the whole point. It is in the public interest to keep going.
JOSH FRYDENBERG:
Jon, when you read through this report, you are left in no doubt of how comprehensive, professional, forensic and focused Commissioner Hayne is. All 9000 plus submissions have been read and he has asked for further submissions. So let’s trust his judgment, let’s not trust Bill Shorten’s politicking where he is now trying to supplant challenge the independent authority the Royal Commission.
JON FAINE:
I am not sure that they are doing that, they are calling for them to be able to do more.
Just finally, is it true the banks are lobbying you to stop this Royal Commission from being extended?
JOSH FRYDENBERG:
No.
JON FAINE:
The ABC board have come under extraordinary scrutiny and for very good reason in the last week or two. Do you have confidence in the rest of the board that are still there?
JOSH FRYDENBERG:
Yes I do, I have seen no evidence to justify broader changes. It has been a difficult period for the ABC, for its staff; I know you have been a vocal proponent of change at various points. I value the ABC; I think it plays a vitally important role in our community in a number of ways.
JON FAINE:
But, you’ve stacked the board with mates and political sword carriers.
JOSH FRYDENBERG:
C’mon – that is ridiculous.
JON FAINE:
You’ve bypassed, your party has bypassed the independent process and made a mockery of it.
JOSH FRYDENBERG:
Jon, look, that is grand standing on your behalf. What we have done is...
JON FAINE:
Mitch Fifield has plucked people out from the bottom of the list and put them up to the top.
Time and time again.
JOSH FRYDENBERG:
We appoint the best possible people to those roles. And you need people in those roles who have had a breadth of experience, not just in broadcasting or in the telecommunications industry, but from across the economy. And as you have seen, we have placed as the new deputy chair a former air force member and somebody with experience in a range in different private sector companies. So look we want the best people in these roles, whether it is on the board or as the CEO.
JON FAINE:
We will wait and see how that goes. The last week has been catastrophic and those of us who actually keeping on, putting out the content and are a little worried about what is happening at the top. I will leave to you and others to sort it out.
JOSH FRYDENBERG:
We will keep listening to the content and contributing to it.
JON FAINE:
I hope your meeting with the Treasurers goes well and thank you for your time this morning.
JOSH FRYDENBERG:
Good to be with you Jon.