21 January 2016
Transcript - #2016003, 2016

Bloomberg Trending Business

SUBJECTS: Chinese economy, Australian economy, election

RISHAAD SALAMAT:

Treasurer Scott Morrison joins us exclusively from Canberra. Treasurer, thank you so much for joining us today. People should keep cool heads here, well is there a sense of panic do you think with China slowing down?

TREASURER:

No not in Australia because our relationship with China both economically and more broadly has been one of long standing and I think what we are seeing at the moment is not unanticipated. There has been a bit of ‘forecasting the sunrise’ I think in all of this. I mean of course we are seeing China go through a transitioning economy, Australia is also going through a transition from the mining boom phase, with the construction phase of that into its production phase, and we are seeing a very strong growth in our services sector not unlike what they are seeing in China. So there is somewhat of a synchronisation taking place between the Australian economy and the Chinese economy and where other parts of our economy may have benefitting strongly from the previous strong periods of growth in China, new parts of our economy are participating in the growth in the new areas of the Chinese economy as it moves into a more consumer based economy rather than a production one.

SALAMAT:

You are moving from the mining boom as you said to services like farm to table as well and all that. How do you make the shortfall – what do you do to address people in parts of Queensland and definitely of course in Western Australia as we have seen this mining boom – I mean to say it has petered out would be the understatement of the year?

TREASURER:

Well the Australian economy is not one dimensional and what we are seeing now is strong growth rates particularly in NSW our biggest state and our powerhouse state and in Victoria we are seeing very strong movement there. That is really offsetting what we are seeing in Queensland and Western Australia where of course at some stage we were going to move from the construction phase of the mining boom into its production phase and we are seeing those production volumes increase. That was also all part of the plan. But what we are now doing is seeing the growth in services, we are very well placed particularly in terms of the growth not only in China but throughout the region and of course also with the United States with our trade agenda - it has been the most ambitious and most successful trade agenda we are have had as a country in a very long time and certainly in living memory. Our trade agreement with China is a first in terms of what it was able to encompass but that comes off the back off very strong agreements with Korea and Japan.

SALAMAT:

Absolutely and the thing is here it is also coming against this backdrop of an Australian dollar which continues to weaken. I mean it is at 69 it has been down to as low as 67 US cents. You must be delighted by that?

TREASURER:

Well it is obviously very good for our tourism industries. Tourism is a very strong part of our economy and particularly whether it is China or the US or other places that obviously makes us very competitive. We are a fantastic tourism product of course but I think the world knows that very well but we are also a very affordable one and that is a positive. Equally with our export industries feeding into these new trade agreements that we have it also makes us far more competitive. So Tasmania for example, one of our smaller states, has done extremely well of working off the back of those movements in exchange rates. Our economy is broadening, it is diversifying, this is very important. Our economy in the future and even now will be less dependent on one market, one commodity, one part of what we do. It is a much more diversified economy and that is why our employment growth I think has been strong and that is why our growth outlook over the next few years is an improving one.

SALAMAT:

Absolutely and of course your boss Mr Turnbull is very keen also for economic reform this year. But it must be pretty tricky given the turbulence we have already seen this year so far, not just on financial markets but perhaps also when it comes to some of these economies as well, in framing that right especially during a year when you have an election?

TREASURER:

Well you have got to focus on the things you can do something about and you have got to understand the things that you can do nothing about and frame your policies accordingly. Late last year we announced our Innovation Statement and that is a recognition of the fact that as our services and other FinTech sectors and others expand then we need the tax systems and the incentive systems in place which will see that grow. That was a very ambitious statement but I think it is one which has been very well received in the IT sector and the technology sector more broadly. That is an important part of making us a more agile economy going forward. We are looking also at strong changes in our tax system as we run into an election later this year and that is all about trying to reduce the burden of personal income taxes and to the extent it is possible company taxes to make us more competitive again. Structural reforms are critical to achieving the growth forecasts we are hoping to achieve.

SALAMAT:

Treasurer, it is going to be key of course here for when this election is too. So a lot of talk about it being called early, can you confirm that?

TREASURER:

The Prime Minister has said that the government will go full term and that is what we will be doing and the reason for that is right now certainly there is volatility, that is of course concerning in the wealth effects for independent retirees in the short term, but we are getting about the business of governing, putting forward our economic plans as we are going into the next election. As I said tax will be an important part of that but we have also got important productivity reforms that will also support the growth outlook we have. I mean more than 300,000 jobs were created in Australia last year, that’s the highest it was since 2006 I think and that is really driving a better level of sentiment in this country.

SALAMAT:

Scott Morrison, thank you so much for joining us and indeed do visit us when you come to Hong Kong next time.