QUESTION:
In your speech today, you talked about past reform agendas and what they've delivered and you've described them as one-off and they are very sort of economic in nature in terms of how the community perceives them. The issues that you're talking about today – health, education, delivery of non-government services – all these things no doubt matter importantly to people and they would understand them in that context. How do we get the message across about their importance from a productivity perspective and as a genuine economic reform agenda? And how do we overcome concerns that ultimately this is just going to be about penny-pinching and working teachers and healthcare workers harder?
TREASURER:
I think the first step we have just taken to have the respected institution of the Productivity Commission without any indication from the Government, or any steer from the Government, about where they should have come back to us. This has been the product of their efforts. They have come to these conclusions. Peter Harris like I'm sure, many others in the room and some who aren't, people like Professor Hilmer and others – they were part of a reform rat pack over those years. They can all decide which one was Frank Sinatra and all the rest, Tony Bennett and so on, but it's the same guys. And thankfully there are more women as part of this debate today as well than there was back then. It is about evolving as an economic agenda. I haven't got up here today to talk about a new inclusion agenda, I'm talking about a productivity agenda and I think the way that these issues have been confined to an economic inclusion agenda in the past, I think has limited what their real value is and from a Liberal-National perspective, we're coming at this quite differently from our political opponents. This isn't about social justice. This is about more and better paid jobs, because I think that's the best justice for anyone and I think that's shared by my colleagues. This is about lifting living standards. We think that's the best way to improve people's lives. I'm not trying to settle scores in health and education as some sort of social justice wars. I'm just trying to lift people's wages and it's a very practical, common sense conclusion. This is not the product of ideology, it's the product of economics and the economics say pretty clearly that people are healthier and better equipped through the education system are going to do better.
QUESTION:
Hello, Ken Morrison of Property Council of Australia, thanks very much for your address, Treasurer, and the Commission for this work. Interesting to see your position on cities on this agenda, and the Government has done a lot in this area, including your housing affordability package that you put in the Budget. I'd be interested in you unpacking a little about what some of the big area issues or the longer term issues for the PC and [inaudible] Government are to look at?
TREASURER:
I outlined some of them in the presentation and they're outlined in the report but a key part of it is dealing with how congestion builds up within cities and that goes to better planning, better anticipating infrastructure needs. Not just building and planning for today, but actually building your infrastructure systems for the future. How public investment decisions are informed and then executed. How regulation impedes sclerotically the ability of the market to respond to deliver on future infrastructure needs. One of the things that the Prime Minister and I and the team have done on infrastructure, working closely with Paul Fletcher and Angus Taylor and Darren Chester, has been for the Commonwealth not to be a passive kick-money-out-the-door investor in our cities and in our infrastructure. We're involved. In Western Sydney Airport, we are running it. We are investing Commonwealth taxpayers' funds and we are pursuing that as an owner or a proprietor would, a client would, as you'll know from your sector to ensure that we get the best result out of that infrastructure spend. My time in the property industry in your fine organisation many, many years ago, one of the things that really lifted the quality of investments – private investments – in built infrastructure was that the clients got active. They got interested in the outcomes, they were more active in the contract process and in specifying the outcomes, and the Government as a big investor in public infrastructure has to be an active client in that process and that extends – if you're an active client, you care about the contracts that are being signed, you care if there is rorting going on on the building site, and you have an interest to make sure that you stamp it out, you don't just go, "Oh, well, that's all the contractors' issue." And that's why we were keen before embarking on a $75 billion infrastructure plan, that we restored the Australian Building and Construction Commission – the corruption commission – that's why we legislated to outlaw corrupt payments by businesses to unions. We don't want that stuff going on because it impedes the delivery of the infrastructure of a built environment that makes our cities healthier.
QUESTION:
You spoke about the meeting you've got this Friday with your state counterparts, I've no doubt that the Productivity Commission Chairman and his team will be very compelling…
TREASURER:
They will.
QUESTION:
…in their presentations and trying to get the states engaged but I'm interested in your view on how you're going to engage with the states and bring them along as genuine participants in this agenda?
TREASURER:
This Friday, we're not looking to sign off on the report, we're looking to be informed on the report and discuss the direction. While there are specific recommendations in the report, you may have noticed, I don't think I ever referred to in my presentation to any single one of them because what I've taken out of this report is the direction it suggests the country should move in, and the Commonwealth and states should move in. So, I don't take it as a set of prescriptions, I take it as some very deep insights that should inform where we're going as governments – whether it's on health and education, Ministers Hunt and Birmingham will be more adroit at going through the detail of what they're delivering in their portfolio areas to go in this direction, but so many of the things that we discussed there because of the nature of federation requiring the engagement of the states to reflect on these findings and respond. Now, that's up to them to do that – I can't prescribe it for them – they have to think it through, they're all elected governments in their own right with their own perspectives and I think one of the keys in the Commonwealth is in the federation, there has to be the give and take around legitimately elected governments coming from different perspectives – and we all do. But that's why you do set up independent processes, that's why you have a Productivity Commission who can just come and tell it to you straight. You may not want to do everything that's there for whatever reason, but the facts are the facts. The same with the National Energy Guarantee, the Energy Security Board was set up by COAG. The Productivity Commissioner here has said, "Listen to the experts, let them do their job and get on with it." Well, that's what the Energy Security Board has said, so it's time that we do just get on with it. Look, I'm really hopeful that this Friday when we sit down as Treasurers – Energy Ministers already had a discussion on this, there'll be many more – but I'm optimistic as Josh Frydenberg and the Prime Minister is that once the dust settles that I think the inherent wisdom in the National Energy Guarantee will be self-evident and businesses have already made that very clear and I would hope that everyone can put their swords down on this thing. The Australian public expected [inaudible], it's common sense and I think we should just get on with it.
QUESTION:
Hi, Kevin Keith from Consult Australia, just wondering, you mentioned about road user charging, it's something we've advocated for for some time. Technological changes changing the nature of that conversation. How difficult do you feel the political conversation will be with the public around some of these issues in terms of road user charging?
TREASURER:
Really difficult would be my answer to that. Really difficult but I think there are two points here that we can't avoid in the discussion. One, you've just highlighted, the conversation you could have about how those things are implemented today because of technological change are infinitely better than they were ten years ago. The way to achieve it is just far less imposing and far more practical – I think that's giving us options that we never had before which I think really probably did constrain how much progress you can make. And the other one is just the sheer revenue numbers, what is currently paying for the roads is a diminishing revenue base and so that needs to be sorted out. I think sometimes there's also – we forget what we already are paying, $1300 each to drive around Australia at the moment, I don't know if people know that, but that's what you're paying just in the taxes and charges and rego and so on, that doesn't include the fuel and maintenance of your vehicle and all these sorts of things. So, there is already a built-in road user charge right now – I think the question that Peter is posing is, "Is that the best way to collect that money?" And that in the future, that that money will keep pace with the demands of consumers and can we do it better because as he rightly says, "Look, it's covering it now. You can't be assured that's going to be the case in the future." And so that will mean changes potentially in other areas or changes in what service can be provided. That's just the practical observation, so I think it's difficult but I think the information and the technology helps us deal with it better than we could have in the past.
[INAUDIBLE QUESTION]
TREASURER:
The Deputy Prime Minister has already acted, we already are decentralising and that comes with movement of some major government agencies. One of the great things we can do is continue to invest in regional Australia and see regional economies grow, I think one of the really interesting other pieces of work that the Commissioner's done and it beats some very outstanding pieces – I particularly make reference to the data work that was done on the data liberalisation but in this area, it highlighted the diversity of what's happening in regional Australia. For the majority of us who live in cities and those particularly in Sydney and Melbourne, sometimes the narrative we get on regional Australia is that it's a basket case, that globalisation and technological change has created this scorched earth beyond the last lots of suburbia – it's not true, it's just not true at all. Go to Toowoomba, go to Tamworth, go to Bunbury, go to places where we're seeing the results of innovation, entrepreneurialism, taking up new trade opportunities and the better prices and the better trade accesses flowing through the main streets of these towns and new investment is going in. So we want to see healthier regional economies because it provides a real alternative, not a forced alternative. There are things governments can do around decentralisation of particular government agencies, even in my own government agency. In Treasury, I've been pleased at the work that John Fraser has done as to move more Treasury officials out of Canberra and have them in some of our major financial centres. That has informed particularly our thinking on infrastructure investment because they're in the market, they're engaging more frequently, and that's no reflection on being based in Canberra or anything like that, it's not. But you need the combination of these things and I think decentralisation is a – if it's part of a general policy of reinforcing the growth and the diversity that we're creating our regional economies – than that's a good thing, I think that's a really good thing.
QUESTION:
Cherelle Murphy from ANZ, the report I think has some fantastic suggestions which genuinely will raise wages in the long term as it raises labour productivity. The thing is that your Budget relies on wages rising quite quickly in the shorter term. Do you think that any of these initiatives can actually lift wages quite quickly and if not, how do you get to the wage estimates that you have in that?
TREASURER:
The wage forecast and projections – remembering that the projections are in the last two years of the out years forecast than the first two – are [inaudible] around long term averages on wages growth in this country so a returning to a longer term performance average. So I don't think that there's anything terribly remarkable about that and even in the forecast that Deloitte has put out the other day and what the RBA is saying, you don't go out as far as we do, we have seen no reason at this point to revise what we set in the Budget. The Budget revised of course in the min-year update and that will be done in December once we see those national accounts figures that come through in early December. So, at this point, the outlook I think is actually being reinforced. We are seeing the labour market contract more quickly than we had anticipated and we've been revising down our unemployment forecasts as hours worked are up and there are issues around inflation expectations and the lag coming out of the mining investment boom which has pushed those wages sideways. But as you would have seen from that chart which looked at the difference between producer and consumer wages, where they'd split apart for some period of time, they're coming back together. Now, what's important about that is that more recently labour productivity has not been driving wages growth because of the hangover from the mining investment boom. So, those distortions are starting to work their way up through the system and we would therefore anticipate that over the next two, three, four years, the distortion impact of the mining investment boom would have flown out of the system and wages would then be more supported by labour productivity which on international levels currently is pretty reasonable. But it hasn't been flowing through because of the washing out effect of the mining investment. I was in New York last week before last and in Washington for the IMF meetings, and I also got there the incredible sense of revived optimism. I was there a year before at the same meetings and it was like it was a different crew of people. The optimism about where the world economy is heading particularly in the United States and Europe is very encouraging, and there was an affirmation of the strength of what's happening in Asia, in particular in China. But at the same time, the point I was making when I was there is to understand the Australian economy is, in the Northern Hemisphere they had the Great Recession and that sideswiped their economy. That didn't occur here. I would argue because the strength of our banking and financial system courtesy of some good management, certainly by those institutions, but also the very prudential regulation introduced by Peter Costello, but on top of that, what was of bigger impact to the Australian economy affecting wages was the disruptive effect of the mining investment boom. To understand what's been happening in the Australian economy, you need to look at that and its impact on the way up and what it did with exchange rates and what it did in redirecting where labour was going and where capital was going and what happened on the other side of that. It was an unusual time. We're moving back into more usual times and that I think changes where we see wages going beyond the most recent period.