8 March 2018
Transcript - #2018020, 2018

Interview with Sabra Lane, ABC AM

Subjects: December quarter National Accounts, trade

SABRA LANE:

I'm joined by the Federal Treasurer Scott Morrison. Mr Morrison thanks for joining AM.

TREASURER:

Thank you, happy women's day.

LANE:

You too. What hope is there for exemptions given that recent White House statement and Ms Bishop's remark that Australia shouldn't get its hopes up?

TREASURER:

I think that was a very measured response from Julie as you'd expect. The Government is proceeding in a very calm, collected and measured way. Obviously, seeking out all the opportunities we have to secure the best outcome for Australia because that's what we do everywhere. Not just in the United States but all over the world. We will continue to do that, to open up access to markets for all of our exporters so they can create the jobs and drive the investment that we know lifts living standards in Australia.

LANE:

How worried are you by the prospect of a trade war given that the EU is now drawing up a list of retaliatory measures?

TREASURER:

I think the issue here is for everybody to keep a cool head. The broader damage that can be done here is, as Phil Lowe said yesterday, and I think the Prime Minister made very clear, is that no one wins in that sort of an exchange. That's why I think the calmness of the Prime Minister's response was exactly what's in order. The Prime Minister has worked extremely hard on that relationship and I think we are very well placed to be the best that can be possibly done for Australia.

LANE:

The Trade Minister Steve Ciobo has raised the prospect of a global recession is that language intemperate right now?

TREASURER:

I haven't heard him say that. What I think he is simply saying…

LANE:

He did say that.

TREASURER:

He is echoing what Phil Lowe has said, that is if there are these further retaliatory actions and this escalates to levels then obviously there are broader concerns, but my warning on this is for everybody to keep calm on this, and we need to focus on what is done, not what is talked about and not to get ahead of ourselves and I think to remain calm and considered and measured and use the avenues open to us which is exactly what we are doing.

LANE:

Shouldn't Australia feel betrayed given the assurances the Turnbull Government was given both at the G20 and at recent meetings in Washington?

TREASURER:

Sabra, we're all adults. Things are said by other jurisdictions in relation to trade and you have to work with what's in front of you. You can't go around taking all this terribly personally. You have just got to focus on what is in front of you and get the best outcomes for Australians. It's not about how we feel, it's about what we need to do and how we best protect Australia's interests.

LANE:

We've just notched up 100 years of mateship with the United States and a lot of grand words and gestures were given recently over that, yet this is the result.

TREASURER:

There is no actual result at this point, Sabra. That's what I'd stress.

LANE:

So the bluff and bluster coming from Washington, we should just ignore it?

TREASURER:

As the President often says, let's just see how this turns out.

LANE:

The GDP figures yesterday showed that exports were down. Combine this with possibly what might result from this tariff decision, how rough could things get for Australia?

TREASURER:

Let's look at those export outcomes yesterday, specifically. They were affected by three principal events, most of which won't be continuing into the future. One of those was coming down off the bumper crop for agricultural. Agricultural exports had been running very hot and that was going to come back and influence those numbers. The second one, we had some coal mine shutdowns for weather over the quarter. The third one is motor vehicle exports and obviously with the closing down of manufacturing of motor vehicles in Australia that was always going to have an impact on the numbers. That's what occurred. But the broader point you make is important and that is this, our companies must be competitive. They cannot be more competitive if we continue to impose what will be some of the highest company tax rates in the world. If the Labor party wants to keep putting the brakes on growth through the parliament by denying company tax changes, which will make our companies more competitive, in a world which you've made the point clearly, can be very volatile and uncertain, well I find that very disappointing. We've got a plan to deal with this, but the Parliament at the moment is not supporting that plan in its fullest measure.

LANE:

Parliament that's the key word there because it's not just Labor. The crossbench too is not convinced and there is a large portion of the Australian population too who aren't persuaded by the Government's argument.

TREASURER:

Sabra, if Labor voted for this change it would pass. So let's not let them off the hook. We wouldn't even have to talk to the crossbench if Labor actually voted for what they said themselves that they believed in. This raises the broader question, what do they believe? I have got no idea what Chris Bowen believes. He said he believes in a lot of things but when you ask him to actually vote for it, he can't do it. He is a complete flip-flop.

LANE:

The growth figures yesterday weren't as strong as economists had expected. 2017 was the fifth year in a row of sub-par growth and year on year it hasn't gone over 3 per cent. How worried are you that it is still stuck below trend?

TREASURER:

I'm optimistic because once you look past the figures which were dragged back particularly by the things I mentioned before on exports, and we also had the wind down of the LNG projects affecting the mining investment figures in that quarter, what we saw was non-mining investment figures for the year going up 12.4 percent. What we saw was investment in new plant equipment and machinery going up over the year around 10 per cent. Now these are big turnarounds in those numbers. We're seeing the investment going in. The consumption figures yesterday up by 1 per cent. That was up from a half per cent which was revised upwards from the previous quarter. So we saw people spending, we saw people investing, we see consumer confidence and both business confidence, and particularly business conditions, at very strong levels. All of that continues to give me confidence in our plan, which is to drive investment, because it's investment that grows the businesses which lifts wages, and lifts growth.

LANE:

On wage growth when you subtract population growth from the whole equation it falls to zero, the worst performance in two years. What do you say to those workers who are feeling that pinch?

TREASURER:

Well again it's the way people commentate on these numbers Sabra. That number that is referred to actually assumes that money retained in Australian businesses which have foreign shareholders, technically is exported overseas. So when you look at gross household income, what you see there is a 3 per cent increase over the year, and if you put that by per capita, it was a 1.5 per cent increase over the year for gross household disposable income. What we saw was an increase in what is paid in wages in this country, approaching 5 per cent up through the year. And a third of that came from average wage increases, not just the massive increase in employment we had last year. 403,100 jobs, an all-time record. And when you put that many jobs into the economy that has clearly been supporting a lot of economic activity. The National Accounts yesterday showed a real resilience and strength in our domestic economy. Certainly there were impacts of external events which hit the export sides of those numbers, but the strength of our domestic economy got a tick yesterday, from those accounts, particularly on those non-mining investment figures, which has been a profound turnaround.

LANE:

Treasurer, Scott Morrison, thanks for joining AM this morning.

TREASURER:

Thanks a lot Sabra, great to be with you.