29 February 2016
Transcript - #2016023, 2016

Doorstop interview, Shanghai

SUBJECTS: Turnbull Government’s National Innovation and Science Agenda, Turnbull Government backing Australian FinTech in Asia, G20 Finance Ministers and Central Bank Governors Meeting (Shanghai), negative gearing, Mal Brough, Defence White Paper

TREASURER:

(audio begins)…part of the National Innovation and Science Agenda to assist Australian entrepreneurs enter into this market but also what we have announced today is teaming up with the New South Wales Government to team up with stone & Chalk which over the last six months has proved to be a remarkable success in engaging FinTech entrepreneurs and innovators in Australia and allowing them to incubate what they are identifying and then to bring that to market up here. But it goes both ways. This is the really exciting thing and the reason we are so keen to back Alex Scandurra and the team at Stone & Chalk in – it is also about seeing that interest come back the other way, into Australia.

The combination of talking about Fintech here over the next few days, and yesterday I was in Hong Kong doing exactly the same thing, is its potential to disrupt how financial systems work globally and it is something I am sure you would all appreciate. As governments we need to understand how we can facilitate it, how we can enable it, to understand what sort of protections need to be in place but it is very much moving to a potentially very different form of regulation and it means different skills for our regulators, a different understanding because how they will facilitate commerce and how that impacts on how all those businesses operate is an enormous opportunity for Australia. We want to be at the forefront of that. Now other jurisdictions are doing some really interesting things and I will be catching up with UK Chancellor George Osborne while I am here and they are doing some interesting things. I have been listening to what has been happening here in Hong Kong and here in China and I am taking out some really good lessons. I will continue working on that and will take that message back to my colleagues but FinTech is a very important part of our innovation agenda. It is, I think, one of the biggest opportunities to drive productivity in the Australian economy based on the competition that it can unleash in almost every sector, if not every sector of our economy.

Our challenge as a country is to be more productive. Every dollar in the budget has to carry its weight. Every tax arrangement has to achieve its mark and do its job in the same way our exchange rate mechanism does its job in our economy, in the same way our monetary policy does its job – every inch of progress we make economically is going to be dependent on all of these aspects working well together. Competition policy will be as much driven by the innovations we can drive in FinTech as it will in any other area of regulatory action.

QUESTION:

Treasurer, can I ask you about the G20, Christine Lagarde just talked about the need to be bold, broad and coordinated in members actions in driving global growth. What’s your view on the need for greater fiscal expansion across the globe and what role can Australia play in that?

TREASURER:

Well our government, and I outlined this the other week, we believe a dollar in the private sector’s hand is always going to be spent well and efficiently and quickly where they have the opportunity to do that. I think it is not just about where government spends its money. Government has to spend its money well. It is not about how much money you spend, it is about how well you spend it and what you spend it on. In Australia we learnt the lesson about not spending money well and the sort of debt burden that can generate and the intergenerational liability that comes from that. So it is about spending money the best way you possibly can and that’s what this government is going to do. But it is also about how you can liberate the private sector. They are the ones who have more investment-ready programs than government does in terms of delivery of major projects or assets that will be acquired and developed and businesses being created. As a group of economies it really is about how we can empower and energise the private sector because they are the ones who will be best able to meet demand.

QUESTION:

So you don’t think there is a need for a sort of co-ordinated response from the G20 to boost global growth?

TREASURER:

That’s not what I said. What I said was that response needs to find ways to energise and liberate the private sector to drive growth.

QUESTION:

Treasurer, just on a domestic front, do you feel reassured today after Prime Minister Malcolm Turnbull came out and said you had his full confidence?

TREASURER:

I have always enjoyed his confidence over a long period of time. So there is no change on that score.

QUESTION:

But there has been a little bit of growing dissent isn’t there? There was a story on AM this morning saying that backbenchers do not agree with negative gearing changes and saying Malcom Turnbull should reign you in, is that a concern?

TREASURER:

I am focused on the Budget coming up in a few months’ time, focused on trying to land a process that was commenced some time ago around the White Paper and to achieve what is achievable and my goal in that has always been to see what I can do to relieve the tax burden on average wage earners in Australia and on businesses. My goal is to relieve that burden on people who are out there going to work every day earning and paying taxes, whether that is in a business or as a wage earner. That is the focus. Now in a constrained fiscal environment like the one we have got, Labor did not leave us a surplus to fund this from, the global economy is not delivering the high rates of nominal GDP growth that others have had, or the rising commodity prices we have seen in the past to fund these types of things. That means you have very constrained options if you are serious about trying to relieve that burden and adjust where the burden of taxation falls in this country. So we will continue to work through all of those options. I will work closely with colleagues. We have a backbench committee that meets every Monday when we are sitting and I attend that, I only think I have missed one because of other commitments in the House. So there is always the opportunity to raise those issues. Where people have savings proposals and thoughts on how we can better make the tax system more growth friendly, I am all ears.

QUESTION:

What is your view though more specifically on that backbench sort of push to try and prevent negative gearing? Do you think they should maybe calm down a little bit or…

TREASURER:

That is your reporting and I am not going to comment on reporting of someone else’s speculation.

QUESTION:

Treasurer, Mal Brough has said he is not recontesting the election, is this another sign that there is a sprain in the Coalition?

TREASURER:

No. I wish Mal well and his family and thank him for his contribution.

QUESTION:

Treasurer, could you comment on what you think the yen depreciation may have on the Australian economy and the impact of the Chinese slowdown, are you guys concerned about it?

TREASURER:

Look I will have a bit more to say about that at the lunch today but China will deal with their challenges, like any other country, as they see them and in the way they think best addresses those challenges. They are complex. Like all countries they have to balance short term and long term necessities and objectives and they have levers available to them in the way the economy is run here that other countries don’t and I think the role of good partners like Australia is to understand that, to support them because we are all trying to get to the same place and I have no doubt about that. China is committed to growth and that is good news for Australia and we need to support them in the way they are seeking to achieve that.

QUESTION:

How hard is it though given the uncertainty surrounding China and its economic outlook for you as Treasurer to frame the federal Budget?

TREASURER:

Well I am far more optimistic than your question might suggest you may be. What I am seeing is a positive transitioning of the Chinese economy and I am seeing a positive transitioning of the Australian economy and in many ways these are synchronised. As they are moving from a production to a consumption based economy we are moving from the peak of a once in a generation, if not more, commodities boom and an investment cycle of that commodities boom to a diversified, more sophisticated economy with innovation and services driving a lot of that trade. The parts of our economy that really benefited from the production phase of the Chinese economy are continuing to benefit. They are expending market share, not at the same prices but the volumes and production continue. But our services sector – more than one million Chinese coming to Australia now. Last time I was here I was Tourism Australia chief over a decade ago. Now there were not a million Chinese coming to Australia back then. That shows the great success of what is happening in that area, the emerging coming up to a billion who will move into the middle class as it is defined relatively. These are all things I think provide great opportunities for Australia. So yes I know there will be bumps along the road. We shouldn’t be surprised by that. We shouldn’t be surprised when Chinese institutions and regulators maybe take a different approach than our institutions and regulators instinctively take because we are different countries and are at different phases of our institutional and regulatory development and dealing with different paces at which we have had to deal with things over our history. So I think the response is to be patient, respectful and supportive.

QUESTION:

Are you concerned Treasurer that there has been so much change in Chinese equity markets this year. We saw Shanghai fall six per cent yesterday, down 25 per cent over the first few months of this year. Is that a risk do you think, is that a macro-risk that is warranted?

TREASURER:

The way that Chinese equity markets work and their significance in the Chinese economy is very different to what US equity markets or European or Japanese equity markets are or the UK’s or Australia’s for that matter. So it is different. It has a different impact and its scope and scale of impact is not as significant as what we have seen in say all those other economies. Now it is true that the volatility and uncertainty in other global equity markets obviously has an impact on us. Australia, despite all those headwinds continues to do very well – 2.5 per cent through the year growth. We have National Accounts coming up in a few days and will see what that says and will make further statements at that time. Now I am not expecting every set of numbers to be as strong as you will like them to be, we will see what happens on Wednesday, the last set were encouraging. But Australians are not unaware of all of this volatility and this uncertainty but what I find constantly encouraging is they aren’t intimidated by it either. That’s why I think the steady, stable hand of government, ensuring expenditure is as low as it can be given the needs that we have to meet, that means taxes can be as low as they can be over time and we go about the hard, steady work of ensuring that the Budget returns to balance. There is nothing terribly flashy about our approach. It is the steady, sober approach which I think marks us out and you see it when you come to an event like this. This is my first opportunity to be at these events. As you know I have been a very domestically focused Treasurer. This is the first opportunity I have had to come to one of these events but you see it when you talk to people here that Australia is really well-placed. But we can’t take that for granted. That is why I am spending so much of my time talking about the issues of productivity and innovation here in Shanghai and Hong Kong.

QUESTION:

Just quickly on a different question, we have had the Defence White Paper come out this week and China was quite critical yesterday in its comments about the South China Sea and pretty much again told Australia to stay out of it. What’s your take on that?

TREASURER:

I think the Foreign Minister has already dealt with those issues as has the Prime Minister and Defence Minister. I don’t have anything further to add to what they have said, only to endorse what they have said. Our relationship with China has many dimensions and those dimensions you have referred to have been extremely well handled in the relationship we have by our ambassadors both previous who just left and now who have just joined us. That will be well managed in the relationship. The exciting thing about why I am here is our economic relationship with China. I am optimistic about it, I am not naïve about it, I am realistic about it. We know the challenges that are there and I think these meetings give us a good opportunity to build our understanding.

QUESTION:

Sorry, just back on the G20, could you just sketch out if there is a sort of push to have sort of more coordinated action on fiscal policy or to boost growth. I mean what would your –

TREASURER:

We will have those discussions in the next few days but one of the others things frankly the G20 will continue to focus on is the work we have already started…

QUESTION:

You guys set the growth targets so…

TREASURER:

Sure but what I am also referring to is the work around Base Erosion and Profit Shifting. We have legislated. We have put in place Multinational Anti Avoidance Legislation on tax. We have introduced  legislation on digital services, we are moving forward on the low value threshold. We are enforcing these laws and that remains a very important agenda within the G20 and I am a very practical person and I want to continue to see the practical implementation of principles previously agreed actually worked out across all these economies because Australia, acting in isolation as we are on Multinational Anti Avoidance on tax, will not get the global benefit that I think is needed.

QUESTION:

So you think they can do more, the G20 members could do more on this?

TREASURER:

I am looking forward to the implementation on what we agreed to do. Australia is certainly acting on it, other counties have acted on it, the UK has been acting on it, so we look forward to all of the parties continuing to do that, not just those where multinationals operate but those countries where multinationals are hosted as home countries.

QUESTION:

Sorry just again on the backbench push on negative gearing,..

TREASURER:

Well that is your report.

QUESTION:

Well is that unhelpful or..

TREASURER:

Well that is conjecture.

QUESTION:

Can you just give us a view? Do they need to calm down? Is that unhelpful to your sort of agenda?

TREASURER:

I am not going to respond to media conjecture.