KIERAN GILBERT:
First of all, Mr Frydenberg, in relation to the consideration of moving the embassy in Israel from Tel Aviv to Jerusalem, there's been some backlash from the diplomats from Arab nations in Canberra, also out of Jakarta.
The Prime Minister's playing down the concerns in relation to the free trade agreement, but clearly there is some level of risk, isn't there, in relation to the prospects of FTA with Jakarta? Have you spoken to your Indonesian counterpart to try and ease those concerns?
JOSH FRYDENBERG:
No, I haven't. But indeed, I was in Indonesia over the weekend for a series of constructive meetings where I did meet my counterpart there. But I think this announcement by Prime Minister Scott Morrison is principled, it's positive and it will deepen ties between two great friends, Australia and Israel. And Australia has embassies…
KIERAN GILBERT:
And aggravate other ties.
JOSH FRYDENBERG:
But Australia has embassies and high commissions in over 80 capitals across the world and Israel is the anomaly. And Jerusalem is the seat of Israel's Government and West Jerusalem, where a possible Australian embassy could be in the future, would be where Israel has as its capital as part of any two-state solution.
Now, you raise Indonesia. And I would say to you that John Howard, who knows Indonesia very well and developed a great relationship with that country and five Indonesian Presidents, dealing with Suharto and Megawati and Wahid, Habibie and at the end, SBY,he's come out and strongly supported Scott Morrison's announcement yesterday, so I think that's an important intervention.
LAURA JAYES:
It is an important intervention, sure, but are you ignoring the signals that we've seen from Indonesia in recent days? Is the message to our Indonesian neighbours that Australia's pursuit of moving an embassy and the signal that sends in the Middle East is more important than a free trade agreement?
JOSH FRYDENBERG:
Well, firstly, free trade is absolutely critical to the Coalition and to Australia. And our track record is one of success Laura, whether it's our agreements with China, Korea, Japan, the Trans Pacific Partnership; they're all occurring on the Coalition's watch.
The biggest danger to a free trade agreement with Indonesia is indeed, the Labor Party, because it's gone under the radar but Jason Clare is introducing a Private Members Bill basically to reassess all our free trade agreements. I mean, what is he saying to the farmers and to the manufacturers across this country who are seeing great benefits of the $400 billion worth of exports of goods and services…
KIERAN GILBERT:
But in relation to the Jerusalem review, it's not a decision, but we're seeing this poll today which shows Dave Sharma well behind on a two-party basis, well, it's actually internal Liberal polling, are you trying to manage expectations ahead of Saturday? But can you see why some people are suspicious about the timing of this announcement in relation to the Australian embassy because of the large proportion of Jewish voters in the seat of Wentworth?
JOSH FRYDENBERG:
This is not about Jewish voters. This is actually about Australia's interests and I think any suggestion to the contrary is actually insulting because we actually…
KIERAN GILBERT:
But the timing? We're just a couple of days out, how is it insulting? A lot of people are just looking at the timing and thinking, well it's convenient.
JOSH FRYDENBERG:
Kieran, well firstly, Scott Morrison has been thinking about this for some time and it's been an issue that has been debated within Government for some time. But also Scott Morrison has explained, there is a major vote coming up at the United Nations, which has focused the attention of the Government on these very issues.
And the announcement was broader than just about the possibility of moving the embassy. The announcement was also about the Iran deal and about increasing defence ties. And, let's remember that next year, Australia and Israel will celebrate 70 years of diplomatic ties, we had Prime Minister Netanyahu visit Australia and get a very warm welcome recently.
Then Prime Minister Turnbull went to Israel to commemorate the Beersheba events and, you know, our relationships are very deep. I think this is a principled and positive decision and announcement by Scott Morrison.
LAURA JAYES:
Treasurer, we had you on the program, just a fortnight ago, before you went to the IMF meeting and you, at the time, rejected the need to legislate this guarantee of GST into legislation.
You accused Labor of playing politics at the time. Actually, you told us and I'll quote it back to you, they're wanting us to run an old set of books based on the current system and a new set of books which is based on the new system with the floor.
What's changed now that you are going to legislate that guarantee?
JOSH FRYDENBERG:
Well, what the Labor Party did on this issue was it changed its position multiple times. So, firstly it supported us, then it didn't support us, then it wanted more information. What we have reached is a sensible compromise where we will provide a guarantee for the six years of the transition to the new system, so that's from '21-22 down to '26-27.
What the Labor Party in the end, in its final position, was saying is we want a guarantee in perpetuity and we're not providing that. What we're saying is through the period of the transition, there will be a guarantee. All the evidence, all the numbers from the Productivity Commission from the states indicate that every state will be better off anyway under the new system and then we will conduct a review in '26-27.
It's been the Coalition that's actually provided this national solution, to a national problem which will leave all the states better off.
KIERAN GILBERT:
Will you be seeking to, while you're providing that guarantee on the one hand, on the other, potentially reduce funds under the partnership agreements with the states, separate to the GST?
JOSH FRYDENBERG:
We have said we are not seeking to reduce other payments to the states and, you know, I told the Treasurers…
KIERAN GILBERT:
That's a guarantee of that?
JOSH FRYDENBERG:
…I told the Treasurers that…
KIERAN GILBERT:
That's a guarantee of that?
JOSH FRYDENBERG:
Well, we've made it very clear we're not seeking to reduce the payments. That's a fact. There is no real understanding by the Labor Party and others that the integrity and the viability of the GST was being threatened by the situation with Western Australia when it was getting just 30 cents in the dollar.
LAURA JAYES:
Treasurer, you know how these things work though. By using that language, we're not seeking to, the premiers will read that as you're hedging their bets. So, do you rule it out or not?
JOSH FRYDENBERG:
Look, very clearly, we are not going to reduce the payments to the states and territories if any additional money will be provided to the states and territories through this guarantee. That's very clear.
KIERAN GILBERT:
Laura mentioned you went to the IMF in Indonesia and you discussed it earlier, I'm interested in what you picked up in terms of the broader outlook globally. We've seen the IMF reduce their growth forecasts for Australia, a number of uncertainties right now.
Were you encouraged or are you concerned in the wake of your talks with other finance ministers from around the world?
JOSH FRYDENBERG:
Well, there's certainly some headwinds globally with the economy. The US-China trade tensions has a few people concerned that it could escalate and certainly, Australia's position at this meeting was for cooler heads to prevail.
We've also seen a normalisation of US monetary policy with an increase in interest rates which has an impact on capital outflows and the debt servicing costs for emerging economies and we've also seen Argentina and Turkey see their currencies fall by half this year and high inflation rates are 25 and 35 per cent.
So, there are some headwinds. But all that being said, the global economy is growing strongly, unemployment levels globally are the lowest rates in a decade and the Australian economy is a standout. And the Australian economy doesn't run on auto-pilot.
It's been not a matter of luck that we have seen the fastest rate of growth since the height of the mining boom; it's not due to luck that we've seen our AAA credit rating reaffirmed by the rating agencies and; it's not because of luck that we have brought real spending growth down to its lowest level in 50 years.
That is why the Labor Party, Bill Shorten, who wants to put $200 billion of new taxes and increase spending is a real risk to the Australian economy.
LAURA JAYES:
But just quickly Treasurer, you outlined the headwinds there for Australia; isn't the best buffer against that an earlier than forecast return to surplus? You have the power to do that.
JOSH FRYDENBERG:
Well, what we are on track for is to return the Budget back to balance in 2019-20, with a small surplus in that year and that's a year earlier than expected. The next major economic statement will be MYEFO in December, but what we have seen is the Australian economy growing strongly and the Coalition's policies are contributing to that.
KIERAN GILBERT:
Treasurer, we appreciate your time, we'll talk to you soon.
LAURA JAYES:
Thanks.