LAURA JAYES:
Let’s go live to Melbourne now, the Treasurer, Josh Frydenberg joins us. Minister Frydenberg, thanks so much for your time. Can I first ask you about the GST? Why do you need to legislate this? Because a couple of months ago, the now Prime Minister was arguing that you could do this with an intergovernmental agreement.
JOSH FRYDENBERG:
Well, it’s very clear Laura, that the current system was not sustainable; living in Western Australia, only getting 30 cents in the dollar was a pretty raw deal. So what we are going to do; is to legislate a floor of 75 cents in the dollar, we’re going to provide an additional $9 billion and as a result we are going to see all the states and territories better off.
Now, we know that Bill Shorten, just a few weeks ago was in Western Australia talking about supporting the Government in legislating these reforms, which we can do through the federal parliament, now let’s see if he walks the talk.
LAURA JAYES:
Okay, but this looks like a naked political grab here. Why should we see this as anything but trying to sandbag seats in Western Australia in the lead up to an election?
JOSH FRYDENBERG:
Well, it actually flows from the Productivity Commission’s report, which showed that we do need a better system in place and the system that we have landed on will leave every state and every territory better off.
And we do need a more sustainable GST system. It’s more than just about WA. It’s actually about ensuring the system stays fit for purpose for decades to come and the Commonwealth is stepping up with an additional $9 billion and the states will benefit as a result.
LAURA JAYES:
So just one more time, why do you have to legislate this? Why can’t you stick to the intergovernmental agreement that you first thought was a good idea?
JOSH FRYDENBERG:
Because the legislation will give certainty; certainty going forward that this new system will leave the states and the territories better off and we won’t see a repeat, Laura, of the situation where WA got only 30 cents in the dollar - clearly an unfair system.
So a lot of work has been done through the Productivity Commission, a lot of work was done by Scott Morrison when he was Treasurer. I think he’s reached a really good outcome here and as a result the Commonwealth is taking the lead and we expect the Labor Party to follow suit.
LAURA JAYES:
So, have you written to your counterpart on Labor’s side? Have you written to Chris Bowen asking whether Labor will support this and when do you intend to put the legislation forward? Is it the first order of priority in the next sitting week?
JOSH FRYDENBERG:
Well, we certainly will be bringing it in in the next sitting period and Scott Morrison will be writing to Bill Shorten with a copy of the legislation like I will be with the State Treasurers. But let’s not forget, just a few weeks ago, Laura, Bill Shorten was saying that he will follow the Government, he will follow the Government in legislating this. So, it’d be a bit odd for him to now walk away from his comments just a few weeks ago.
LAURA JAYES:
So, you’ve adopted Labor’s policy essentially, Josh Frydenberg? Is that what you’re saying?
JOSH FRYDENBERG:
No, they adopted ours, Laura.
LAURA JAYES:
Okay, okay.
JOSH FRYDENBERG:
It was Scott Morrison as Treasurer, who came up with this reform plan and deserves a lot of credit for it. And it’s now Scott Morrison as Prime Minister, who is seeking to legislate it.
LAURA JAYES:
Let me ask you about the Royal Commission now. We saw that interim report on Friday. It was damning as we expected, I didn’t think we should be shocked by that given the evidence we’ve seen over the last couple of months.
Now, there’s focus on the extension or a need to extend the Royal Commission beyond February 1 of next year. Are you open to that? Have you given the Commissioner permission to do that? Has he said to you that he might need more time?
JOSH FRYDENBERG:
No, he hasn’t. But we’ve made very clear, the Prime Minister and I, that if the Royal Commissioner asks for more time, then he will be granted that; you would expect us to do so. At the same time, he has conducted a very rigorous, comprehensive and professional process to date.
They’ve taken more than 9,000 submissions and all of which have been read. And anybody who’s looked through this, 1,000 page interim report from the Royal Commissioner, would be left in no doubt that he has taken his role very seriously and he also wants to deal with these issues promptly.
He doesn’t want to have a situation where there’s ongoing uncertainty for the sector and we recognise that he has more important work to do, but we have already seen a very frank and scathing assessment of the culture, the compliance and the conduct in the banking system where he has made it very clear that basic standards of fairness and honesty have gone out the door in the pursuit of profits and greed.
LAURA JAYES:
Now, Josh Frydenberg, you say you don’t want to impose heavy regulation on the banks and financial institutions in the wake of this Royal Commission but from the evidence, it’s clear that maybe the banks do require that. So, how do you make sure the banks don’t do the wrong thing into the future but whilst also not putting a handbrake on the economy and dampening competition? What are your ideas in this space?
JOSH FRYDENBERG:
Well, one of the real take-outs of the report was that, of the misconduct identified, it was already in breach of existing laws. And the Royal Commissioner makes very clear, Laura, that ASIC as the regulator was not enforcing the law in the way that it should’ve.
It was pursing more negotiation as opposed to litigation even though the success rate in cases was above 90 per cent. So, the issue is not necessarily, according to the Royal Commissioner, whether we have the right laws in place.
The issue is are we enforcing the law properly and the Royal Commissioner himself says that perhaps having a simpler set of laws, which very clearly sets out what is required of those in the financial sector to follow that law may be better than adding, in his words, another layer of regulation and complexity.
So, we watch his final recommendations very closely and obviously we will do whatever is necessary to ensure that this conduct doesn’t happen again and that consumers are put first and get better outcomes in the future than they have in the past.
LAURA JAYES:
But Treasurer, things can change now before we even see this final Royal Commission report.
JOSH FRYDENBERG:
Yes.
LAURA JAYES: And I know you have put in place a number of things. But two things out of the answer that you just gave; you say that ASIC has been more willing to negotiate a settlement with those big banks doing the wrong thing rather than litigate, would you like to see ASIC change their thinking on this?
Would you like to see ASIC prosecute and go right through the legal process rather than negotiate? And what about funding? I mean, it was a previous Prime Minister who ripped out funding for ASIC. Should that be returned?
JOSH FRYDENBERG:
Actually, we’ve increased the funding for ASIC to the tune of $190 million and we’ve also given ASIC the ability to raise money from industry because those who are being regulated should help pay for that regulation. And what we want to see is ASIC be less timid and enforce the law.
That is a clear message out of this interim report. I spoke over the weekend to the ASIC head, James Shipton, he’s very conscious of what needs to be done. There is an internal review going on by the new special prosecutor, Daniel Crennan QC, to look at the way ASIC enforces the law.
But let me be very clear, ASIC will have the resources necessary to do the job to ensure that the public get better outcomes than they have to date from the financial system.
LAURA JAYES:
Treasurer, what’s your assessment of the Royal Commission and the effect it has had on the economy? Do you agree with the assessment that it has led to, I guess, tighter lending standards and therefore has pushed property prices down?
JOSH FRYDENBERG:
Well, in terms of tighter lending standards, this is a consequence of a number of things, in particular, APRA have reigned in investor loans and made it more difficult for large loans to be given to investors in the property market and that has had a subsequent impact on prices.
And we’ve seen housing prices, particularly in the capital cities of Sydney and Melbourne, come back to more sustainable levels and the RBA has said that’s a healthy outcome. But at the same time, we’ve got the Labor Party promising a new property tax with their removal of negative gearing, which will then impact more greatly on the value of people’s homes. That’s not a good outcome for Australian families either.
So, we will watch very closely what is happening in the housing market, but at the same time, watch very closely the recommendations from the Royal Commissioner and ensure they’re implemented in a way that enhances competition, that doesn’t constrict it and in a way that enhances the economy and doesn’t restrict it.
LAURA JAYES:
Treasurer, just a few quick things on the Budget, we saw the Final Budget Outcome revealed last week. They’re the best set of Budget figures in a decade. What fiscal rules are you abiding by? Are you sticking with the rules set down by Scott Morrison when he was Treasurer, any new spending will be offset by savings? Are these, you know, iron-clad rules or are they a little blurry sometimes?
JOSH FRYDENBERG:
No, the rules haven’t changes and they’ve served us well and when Ministers come to the table, they’re expected to have offsets. We have, as you say, seen a really good set of numbers.
We had the National Accounts a few weeks ago, which showed that the Australian economy was growing 3.4 per cent through the year, it was broad-based growth, Laura, with household consumption up, with dwelling construction up, with business investment up, with exports up and with government spending on infrastructure at both Commonwealth and state level...
LAURA JAYES:
In that sense then Treasurer, do you rule out an early return to surplus?
JOSH FRYDENBERG:
Well, we’ve made clear is we’re still on track for a balanced Budget with a small surplus in ‘19-20.
LAURA JAYES:
Yeah, but the story that you tell just there, Treasurer, shouldn’t that, you know, lend weight to the idea that you could hand down an early surplus if you wanted to?
JOSH FRYDENBERG:
Well, there are some challenges out there; challenges globally, but also domestically, we’ve seen a terrible drought, which is really hurting particular communities in New South Wales and Queensland with knock-on effects elsewhere and we’ve also agreed to provide more funding into the school sector and as we talked about earlier with the GST.
So, we are ensuring that needs are met across the community, but we are also growing the economy and, Laura, those National Accounts show that the Australian economy is growing at its fastest rate since the height of the mining boom in 2012.
We’ve had Standard & Poor’s reaffirm Australia’s AAA credit rating in the past week and now we’ve produced the Final Budget Outcome, which was the best in the decade.
So, we cannot afford risking this strong economy with its good momentum, with Labor’s tax and spend approach and $200 billion of new taxes and more Budget deficits and debt from the Labor Party that we’ve seen in the past, because as you know, the last time they produced a Budget surplus the Berlin Wall was still standing.
LAURA JAYES:
Okay, a bit of history there too. Josh Frydenberg, before I let you go, one final question. Tim Storer wants US style confirmation hearings for any new ABC Board members. A good idea? Will you consider it?
JOSH FRYDENBERG:
We have a comprehensive process in place and you know, I haven’t heard a powerful reason to change that.
LAURA JAYES:
So that’s a no?
JOSH FRYDENBERG:
Well I haven’t heard a powerful reason, from Tim Storer or elsewhere, to change that. We have a comprehensive system in place, but no doubt, you know, I would leave that to Mitch Fifield as the relevant Minister to expand upon.
LAURA JAYES:
But it would stop political appointments wouldn’t it?
JOSH FRYDENBERG:
But the point is, we want the best people for the job and the best people for the job have a deal of expertise from across the economy and from across the community.
LAURA JAYES:
Josh Frydenberg, thanks for your time this morning.
JOSH FRYDENBERG:
Always good to join you, Laura.