ANDREW PROBYN:
Now we'll go straight to our program guest this morning - and he's the Treasurer, Scott Morrison, who joins us from the Sydney studios. Good morning, Treasurer.
TREASURER:
G’day Andrew.
PROBYN:
First on the economy. The National Accounts this week offered some positive news with business investment and government spending underpinning a slightly higher than forecast growth but 1.9 per cent, it is hardly flash.
TREASURER:
You just made the point Andrew it has come in above what the forecast was just in May of this year. And so that's obviously a welcome result but the key welcome results in the figures are the ones you also mentioned - that is the pick-up in business investment. I mean, this is something we have been looking for and we have had policy driving towards now for several years. That's what our Enterprise Tax Plan is all been about. I note that these, particularly increased business investment figures, have come through after we were able to get those tax cuts through for small and medium-sized businesses in March.
PROBYN:
But we are miserable buggers in the media I must say. Pardon me for turning to some of the challenges...
TREASURER:
[laughs] You said it.
PROBYN:
Half of the growth in the June quarter was from people running down their savings. This must concern you?
TREASURER:
That’s actually not true. It's not a negative savings ratio, it's a positive savings ratio. So they’re not drawing down on what's in the bank account, they're just not saving as much as they used to be. Now when the savings ratio went up after the Global Financial Crisis, I mean that was people getting into the cave, putting the money into the bank, putting it under the bed, all those sort of things. The saving ratio today, at around 4.5 per cent, is higher than it was pretty much for the entire Howard-Costello period. The savings ratio now at 4.5 per cent, we have seen it come down, that's also a product of interest rates being set at historically low levels. The whole point of having a lower interest rate in monetary policy is that people wouldn't be putting as much aside in the bank account but they'd actually be engaging in the economy. So that is actually the purpose of that. Now, under the Howard Government it got below 2 per cent and...
PROBYN:
But they are saving less aren’t they Treasurer?
TREASURER:
They are saving less and you would expect that when wages are flat and you have got some real pressures on unavoidable cost of living, particularly in the energy sector. So those figures don't surprise me. But at 4.5 per cent, I wouldn't call that an issue to be concerned about.
But given that we have got the most indebted households it is surely not sustainable to have household consumption to be based on people spending less.
TREASURER:
This is why we're so keen to see the investment lift as we have already started to see. We're keen to see the profit growth be sustained because it's when you have those two things in place - you have got businesses putting more people into jobs, we have 240,000 jobs last fiscal year - as the labour market tightens, that's obviously going to lead over time to a boost in wages. That's what we're looking forward to. That's why I talk about the better days ahead because we can see all these things lining up - more jobs, more investment, profit performance improving, and I want to see that now flow into the household sector with them being able to see better improvements in their wages.
PROBYN:
You have been promising better years ahead for quite some time now. You mentioned...
TREASURER:
Since May.
PROBYN:
You mentioned wage growth, we're still stuck at 25 years lows. It's no wonder people are grumpy.
TREASURER:
I agree that with household incomes so flat - let’s not forget that our tax system and our welfare system are designed to protect against rising wage inequality, and that has actually been occurring. On the wealth side it is a different story, but on incomes, the tax and welfare systems have protected against that. But with incomes flat, this is why growing the economy is so important; this is why not smothering the economy in $150 billion and more in higher taxes is so important not to do. And that's why we are not going down that path. That's Labor’s path. They want to increase taxes on the Australian economy. That will throw a wet blanket not just on growth, but on wages and on investment and on jobs.
PROBYN:
Now wage growth did actually bump up a bit but it was actually because people were working more hours, not just because their conditions had improved.
TREASURER:
That's true. What we saw was a bigger wages bill because we have 240,000 people, 80 per cent full-time jobs, in work. We have people working more hours, we have seen the labour force participation rate go up, so this is why I have been talking about better days ahead Andrew. We're not there yet, but all of these signs - investment, exports, growth, jobs - we're starting to see this happen and that's a result of the pro-growth policies and the resilience and strength of Australian businesses getting out there, winning contracts, doing the work.
PROBYN:
Now the Reserve Bank’s forecasts have been consistently wrong for six years. We have a situation where low unemployment doesn't seem to guarantee any longer that we get paid more. Why?
TREASURER:
I think we are seeing this across a lot of different economies around the world today. It's not peculiarly an Australian issue. What we are seeing, whether it's in the construction sector, particularly in the engineering side and civil construction side, we are seeing in the IT security sector of the economy, we are seeing in the health sector; where those forces, where that pressure is building in the labour market, we actually are seeing higher wage rises in those sectors. So I think that gives us some encouragement about what we can expect down the line. We have had business investment now in the non-mining sector actually growing at 10 per cent over the last three years. Now, that is a welcome change.
PROBYN:
So do you want bosses to be more generous with their workers.
TREASURER:
Well, that's a matter between them and their workers. But as their profits improve, then obviously the case for wage rises obviously builds and particularly when they're putting people on. Now, I mean we have seen a change in the combination of people on awards, on enterprise agreements, and even on individual contracts, and what we have seen is more workers being on award arrangements. There have been some changes around teachers in particular now classified as being on awards rather than enterprise agreements, but now is obviously a good time with people coming off enterprise agreements for them to sit down and work out where things are heading over the next three to five years.
PROBYN:
Alright. Let’s turn to energy. The reason people might tell you that they're feeling grumpy is, of course, the horrible prices of gas and electricity.
TREASURER:
Sure.
PROBYN:
Now you guys have been in power for four years. How much of this is your fault?
TREASURER:
Well let’s take gas for example. The reason we have the gas prices going where they are is because the east coast gas market restrictions were lifted and the Labor party allowed, out of Queensland, that to go offshore without reserving what we needed here in Australia…
PROBYN:
Hang on I will stop you there because we've heard a lot about that this week. Now that was actually bipartisan policy, Liberal and Labor, east coast. The west coast did a very different thing.
TREASURER:
Well the west coast has their issue as you know and that has been a different system for some time. But you can't have it both ways though as the Labor party. When the Labor party were in government, they made that decision and they were caught out in this last week or so saying no-one knew what the impact would be. Well, they had advice saying there would be a negative impact. They went ahead with it. So we've acted on that and we've put in place the regime which will enable us to make a decision to ensure Australian gas remains for Australian use, to the extent that that's necessary. But the other thing we have been doing is particularly taking on the big retail companies and ensuring that people can be aware and put in a position to get a better deal. Now, the whole standard offer racket, which has been going on, where people have this beneficial period or discount period and then it all tapers out and they go on a higher rate, well, we have blown the whistle on that and we have been working with those energy companies to ensure they're going to give Australian customers a better deal.
PROBYN:
Alright, let’s go to Liddell, the big issue of the week. Now, the Prime Minister meets the AGL boss tomorrow, Andy Vesey, and he is saying that their company wants to transition to gas. Will you assist them?
TREASURER:
I am happy to assist to see that they actually sell Liddell to a responsible party which is what Andy said they were prepared to do when I was in the room, when we last discussed that issue. It's very important we keep Liddell open. It was bad enough Labor locked us out on gas, now they want to lock us out on existing coal-fired power stations and this remains an important part of the baseload supply that is necessary, not just for the next few years, but for decades to come.
PROBYN:
I think if I am reading it correctly, I think they also are mindful of keeping up some sort of plant in Liddell but switching to gas possibly. Will you support that?
TREASURER:
Well they are decisions they make but remember that 85 per cent of their resource comes from coal. That’s where they're currently sitting at. The commercial decisions that they have made, which has seen them in their latest profits report, they have done pretty well, they're up over $500 million this year, that is almost a $1 billion turnaround, as peoples' power prices have been going up I can see who is benefitting.
PROBYN:
So is it for sale?
TREASURER:
Well they are saying they'll sell it to a responsible party. I think that would be a good thing. There are plenty of responsible parties who I'm sure will be happy to take it on.
PROBYN:
Now I understand Liddell has been burning coal for $20 a tonne under a special deal forced on Glencore by the NSW Government and that that deal ends in 2023. Doesn’t this totally undercut your argument?
TREASURER:
No I don’t see why. You just enter into new arrangements…
PROBYN:
Because it would be 60 bucks.
TREASURER:
Well why would it be 60 bucks?
PROBYN:
Because that’s what it is now.
TREASURER:
Well that’s based on international prices and domestic prices for coal for domestic consumption are different to the international prices. You're comparing apples with pears there mate, in fact I don’t think you're comparing them with other fruit. These are different issues and the commercial negotiations, I have great confidence, would be able to ensure that a new owner would be able to make it work properly. Now, who that new owner might be, there could be any number of sources for that and I'm sure they'll take it into account. But the way AGL has been talking it sounds like it's worthless and maybe they are going to be seeling it for nothing mate.
PROBYN:
Well Liddell says that it would cost $840 million to remediate the plant. Now a future owner is not going to want to take that liability, will you?
TREASURER:
Well, I think those who are trying to shut Liddell have a vested interest in talking down what the viability of it might be. It doesn't surprise me that a big energy company wants to see a big source of supply go out of the market. I mean, that drives prices up and that benefits energy companies. Now, what if we had taken that same approach to Whyalla? We have taken a very proactive approach there in another sector where we have actually got involved, we have been able to secure a buyer and provided the right support to make that work and now there's a lot of people working down there, with the support of Rowan Ramsey, championing and keeping that steel plant open. That's the result we got there. But in the Hunter Valley, we have got no-coal coalition of all the Labor members led by Joel Fitzgibbon, ‘No Coal Joel’, saying 'here is the white flag, shut Liddell down'. Now if we had taken that approach in Whyalla, or Portland, people would be out of work and that would be the outcome of what Joel and the Labor party and Bill Shorten is doing in the Hunter Valley.
PROBYN:
Let me bring you to the crux of this, what is more important having affordable and reliable energy or meeting our emission reduction targets?
TREASURER:
Well we are meeting all three, that's our goal. Affordable and reliable…
PROBYN:
Well you are not meeting all three, clearly.
TREASURER:
Well which one are we not meeting?
PROBYN:
Well it's not affordable for a start, and you say it's not reliable.
TREASURER:
Well with coal fired power stations in the mix it will be reliable and that’s why we are keeping them in the mix. Affordability, reliability, and meeting our other obligations is the trinity of things that our policy is designed to achieve.
PROBYN:
Yeah but it's not meeting them, is it?
TREASURER:
Well that's why you have the policy to ensure it achieves them into the future.
PROBYN:
You haven’t got a policy. There’s no energy policy.
TREASURER:
Well, no, five things. You said we don’t have a policy, here are five things. First, keep gas in Australia for domestic use. Second, ensure that retail providers are giving Australians the best deal. Three, ensure that the regulatory arrangement, particularly around things like the limited merits review, are outlawed so you don't have regulations driving up prices. Four, invest billions of dollars in lower emissions and new technologies, and five, invest in production, storage...
PROBYN:
You've got no investment mechanism...
TREASURER:
Hang on, I haven't finished my points yet Andrew, you said we didn't have a policy.
PROBYN:
Alright.
TREASURER:
And five, on storage, transmission - new investment in new power sources, the biggest investment in storage we have seen in the Southern Hemisphere and the biggest one we have seen in Snowy 2.0. Now that is a five-point plan...
PROBYN:
Investment mechanism, Treasurer?
TREASURER:
Exactly, that's part of the fifth point I was just talking about and we are seeking to land that. And I tell you who's standing in the way of landing something on a new investment framework - that's the Labor party because they are putting in a no coal ban effectively on landing an agreement. So we're looking to land an agreement here but if Labor are going to remain steadfast against any, any concession towards coal, then what they're doing is putting higher prices on the Australian people.
PROBYN:
Treasurer, out of time. Thanks so much.
TREASURER:
Thanks a lot, Andrew. Good to be with you.