KIERAN GILBERT:
Treasurer, productivity has gone backwards in recent times. How urgent is it to turn that trend around?
JOSH FRYDENBERG:
Well, this is a national task, and it requires a national conversation, and it's about putting more money into people's pockets. Productivity has helped provide more than half the economic growth that we've enjoyed over our 28 consecutive years of economic growth, but that productivity has started to slow for a number of reasons. We're still growing, but not growing as fast as we would hope. So we are putting a full-court press on when it comes to what the government can do - deregulation, tax reform, industrial relations, competition reforms.
Importantly, spending record amounts on infrastructure as well, and we're calling on the states to come to the table because they are the key service providers, and in the Productivity Commission’s Shifting the Dial Report they focused on a number of things that the states could do. I'm also calling on business to invest more in their growth strategy in research and development in new capital equipment, not just in terms of share buybacks.
KIERAN GILBERT:
So in terms of the message to businesses, what is it in terms of them being more aggressive in pursuing economic growth? Can you detail that message that you’ve given today?
JOSH FRYDENBERG:
Well, Kieran over the last 12 months, some of Australia's biggest companies have engaged in $29 billion of share buybacks and special dividends. To put that in perspective, the average over the four years prior has been around $12 billion. Now it's becoming the default option for companies to buy back their shares, whereas if it's appropriate we'd rather see that money invested in the business, in new assets, in new capital equipment, in growing and that would obviously be good news for the company and the medium and the long term, good news for shareholders and ultimately, good news for the Australian economy overall.
KIERAN GILBERT:
You're going to include productivity as a standalone item for your next meeting with
state treasurers. What more can be done in terms of getting on the same page, so to speak, with your state and territory counterparts?
JOSH FRYDENBERG:
Well, I see the states as a partner for the Commonwealth. Indeed, so is the business community, so are employees. We're all in this together and when it comes to the states, there are a number of important things that they could do. There were 28 policy recommendations from the Productivity Commission in their shifting the dial report and 22 of them were either the sole or joint responsibility of the state and territory governments. Now there are some things that they can do which the federal government can't do. Planning and zoning, for example, stamp duty changes, getting up, setting up occupational licensing and harmonising that between the states, there are things we can work with them on. There are things that just within their own remit and jurisdiction. That's a conversation that I'll be having with the states when we next meet in October. The other thing about productivity, it's not just about what you would assume- tax, industrial relations, deregulation, infrastructure. It's also about health and education. It's about the skills agenda. It's about ensuring a healthy workforce. It's about tackling mental health. I mean, the BCA has estimated, we lose six million workdays a year to mental health-related illnesses. So those issues are very much the joint responsibility of federal and state governments. So by working together, we could produce a better outcome for the Australian economy and the Australian people.
KIERAN GILBERT:
On industrial relations, how much scope is there within the guard rails that you refer to, that the Prime Minister has said, for this Government to undertake reform?
JOSH FRYDENBERG:
Well, the first thing is we have legislation before the parliament, which is all about ensuring a law-abiding workplace. And they're important pieces of legislation which we implore in the Labour opposition to support because it's important that Labour supports what the coalition government is doing in terms of building a more cooperative and a stronger law-abiding workplace. When it comes to the guard rails the Prime Minister has said, they are about having reforms that are evidence-based. They are about having reforms that produce a stronger economy. They are about protecting workers' entitlements. They are about moving the dial forward in terms of productivity. They’re the guard rails, they are the key criteria that we'll be looking at for any future reforms.
KIERAN GILBERT:
On the demand side, the trade argument that you make today - obviously, that’s been your focus in terms of free trade agreements. But that’s all been undermined right now, the whole free trade system, by one of our key allies in Donald Trump, isn’t it?
JOSH FRYDENBERG:
Well, the first thing is on the demand side, it's not just trade, it's also about tax. And as you know, we passed over $300 billion worth of tax cuts from last budget and this year's budget, and that is making its way to the pockets of Australian workers, and that's going to be very significant. We've also extended the instant asset right off. We have also brought forward company tax cuts for companies under $50 million of turnover. So that's also important on the demand side, together with trade. Now, when it comes to trade Australia's interest are clear. We are for a rules based, transparent global trading system, one in five Australian jobs Kieran, are related to trade and as a government, we've taken our free trade agreements from covering 26 per cent of our two-way trading relationships to now over 70 per cent. That's a very significant development and with more agreements to be signed in the coming period. So we understand the United States have legitimate issues in their trading relationship with China, but would ask the parties to come to the negotiating table to resolve their differences and to commit to a rules-based international trading system.
KIERAN GILBERT:
Governor Lowe said at the weekend in the United States that the political shocks are becoming economic shocks and that was, well, plain for all to see with the latest volatility on Wall Street and we’re expecting our markets to follow suit today. Do you agree with his assessment, those political shocks, including Donald Trump are having are real, tangible economic impact?
JOSH FRYDENBERG: Well, in so far as you know, the inability of China and the United States to resolve their trade differences, that is undoubtedly having an impact on global markets, including on us here, at home, and we've seen that volatility in global stock markets in recent weeks. We're also starting to see the impact on capital inflows on investment decisions being deferred and a slowdown in the growth in trade volumes. That's all an impact from the uncertainty that comes when Australia's largest trading partner, China and Australia's largest investor, the United States, are going head to head on these trade issues. So it's in nobody's interest for them to continue. As I've said before, when the protagonists get involved in these sort of activities, they're not the only ones who get hurt, it's the bystanders as well. And there's no doubt Australia is being impacted on by this negative sentiment in the global economy following the trade tensions between China and the U.S.
KIERAN GILBERT:
What's your message to investors who might be nervous to start this week off the back of the Trump tweets and the reaction on Wall Street?
JOSH FRYDENBERG:
Well, the fundamentals of the Australian economy is strong. We're seeing employment growth that is more than three times what we inherited when we came to government. We're seeing our Triple A credit rating maintain, were seeing our budgets coming back to surplus for the first time in more than a decade and the Australian economy continues to grow, and the impact of the lower interest rates and the tax cuts are starting to flow through to Australian consumers. So, invest for the medium and the long term. There is volatility, I understand that, and that can play into some of the choices that businesses make, but ultimately the Australian economy’s foundations and our fundamentals are strong and as a government we will continue to take the necessary action to ensure that our economy continues to grow and more jobs are created.
KIERAN GILBERT:
One final question, Donald Trump has slapped even higher tariffs in the latest tit-for-tat in this trade war. Are you worried that there is no sign of this being resolved? That this looks like it is just going to worsen?
JOSH FRYDENBERG:
Well, certainly we've seeing an escalation in those tensions in recent weeks, and that doesn't bide well for the global economy. But at the same time, we all do benefit from a global trade system that allows the free sale of goods and services across borders. It's in everyone's interest to have such a system. Now, where there are legitimate issues, parties should come to negotiating table and resolve them. That's Australia's message behind closed doors and also in front of the camera. We're consistent in our call for a rules-based trading system and for cool heads to prevail, including over these latest trade tensions.
KIERAN GILBERT:
Treasurer Frydenberg, appreciate your time, thanks.