4 April 2018
Transcript - #2018035, 2018

AFR Banking and Wealth Summit, Q and A session

Subjects: company tax cuts, STEM education; Financial Services Royal Commission; Greens’ ‘people’s bank’ proposal; Liddell Power Station; National Energy Guarantee

MICHAEL STUTCHBURY:

You talk about, and the theme of your last Budget was ‘Better Times [sic] Ahead’, which was no doubt predicated on partly, the global upswing and the policy measures you take here. You’ve got, seemingly, one hold out Senator against the company tax, cutting the company tax rate, who is seemingly calling for wider tax reform and is mentioning the Henry Tax Review. Is your inclination in the upcoming Budget to try and satisfy the Senator and actually deliver some wider tax reform or will you seek to dissuade him from that view?

TREASURER:

Well there are four Senators, not two or one for that matter [inaudible] as to where they might go and Senator Cormann my colleague, the Finance Minister, has been diligently working through all the issues with all those four Senators and we have been drawing to their attention to the significant work we’ve already done in a lot of these areas. I’ve mentioned many of those already this morning, particularly when it comes to early stage investing, to venture capital, to angel investing, to the tax cuts we’ve already delivered and those we continue to want to deliver. So, this is a government that has not been shy in making changes in the tax area. But we’ve had to do it in the context of the political environment in which we operate and we’ll continue to do that. We would love to see those things changed, and we’ve worked hard to try and deliver that over the last two years. We’ll continue to seek to do that.

STUTCHBURY:

But would you use this as an opportunity to perhaps get in some of the bigger tax reform measures that previously had been on the table but taken off?

TREASURER:

Our agenda on those issues I think has been pretty clear. We’ve been getting about implementing them and we’ll continue to do that.

STUTCHBURY:

Quickly from the floor.

QUESTION:

Hi, my name is Felicia [inaudible] from ANZ Bank. Thank you for your speech, really interesting and some quite compelling statistics. I’m interested in learning a little bit more about your economic growth plan, the growth plan around jobs. You speak about some pretty significant uptick in over 55 men, which is great for my Dad and my boss, but you also speak about women in STEM as well. As a female technologist and an innovation technologist, I’d like to hear more specifically what you’re doing about some of the persistent issues around diversity in areas like science and tech as well as venture capital.

TREASURER:

Well, a couple of things. First of all, more than half of those jobs I referred to obviously, went to women. We now have the highest participation rate of women in the workforce on record. Women have been the big surges in terms of employment growth here in Australia over the past 12 months and account for more than the lion’s share of the jobs that have been created, and that is welcome. That is absolutely welcome and measures that we’ve been putting in place, whether its affordable child care – particularly for those on middle to low incomes – that is a very big change. The fact that previously, you would have not got an 85 per cent rebate on the cost of child care if you were a low to middle income earner, that changes now under the new reforms that we’re putting in place, where that price point, where that pressure for women who want to be back in the workforce, frankly who must be back in the workforce because of the pressures on their household budgets, it is essential to deliver them that affordable child care and that’s what our package delivers particularly for women in that most sensitive part of the economy, where the economic necessity in that household is so prevalent. The women in STEM programmes, the girls in STEM programmes, the specific initiatives for the scholarships and support, they were all set out in the National Innovation and Science Agenda. All of those measures have been implemented. We are seeing improvement in those areas. A lot of the change is cultural, as you would be particularly aware. When you say those one in five jobs for males aged over 55, that was not a point to say that it’s not important that we pursue job opportunities right across the spectrum for all Australians. It was just simply to make the point that the most common criticism against focusing on science and technology is, ‘oh that’s alright but if you’re an older white male, you’re not going to have a job’. Well I think the evidence of the last 12 months runs counter to that and I find that really encouraging, really encouraging, because that says our economy is adaptive. If it’s adaptive to re-employ those who have come out of older industry jobs and move into new industry jobs, then it’s also true that it’s an adaptive economy that will continue to embrace people right across the economic spectrum, but particularly women who are focused on and engaged in STEM-type careers. I have two daughters of my own, one of them is particularly interested in science. When you see the Australian of the Year championed in the way she should be, I think a lot of it is cultural and those sorts of changes, that sort of awareness being created is positive to see it further developed. One of the first initiatives of the Prime Minister was to champion science and technology, and he copped a lot of flack for that. He copped a lot of flack for saying that science and technology was critical to our nation’s economic future, for driving jobs and growth. What I’m telling you today is that we haven’t stepped back an inch from that. In fact we’ve stepped forward, and we’re going to keep stepping forward, and you’ll see that in the Budget.

STUTCHBURY:

Treasurer, we are running a bit over time so can I quickly get your response on just a couple of points. You and the government resisted the calling of a Royal Commission into banks and other financial institutions. Have you been surprised, personally, by the evidence that’s been presented at the first two weeks of the hearings of the Royal Commission and does this in some way justify those who have been pushing for such an inquiry?

TREASURER:

The evidence we’ve seen are things that have happened and were known to have happened. I think Commissioner Hayne is doing an outstanding job in keeping this very business focused – very business-like focused – getting through what needs to be addressed and moving towards completing the commission in the time frame that has been set aside and I have no doubt that he’ll do everything he can to achieve that. That is why we started addressing the issues that have already been raised in the Royal Commission two years ago and more. It is why the BEAR regime is in, it is why we have taken the measures we have in open banking to create more competition. It is why we have taken the calls that we have to try and free up the mutuals sector so they can raise capital, as a result of the Hammond Review, to ensure this can happen. It is why we have been so dynamic and focused on freeing up the opportunities for FinTech operators. Greater competition, greater accountability but continuing to focus on ensuring stability in the system remains critical. We can do all of these things and are. So the Royal Commission will go and do its job. I hope the reputational impact overseas is not realised as many fear it might. That was always one of the big risks of doing this, particularly when you are getting on and dealing with the problems in any event.

STUTCHBURY:

So are you saying that notwithstanding what the Royal Commission is doing now, most of those issues have already been addressed by the government and agencies?

TREASURER:

Well other agencies certainly have addressed many of the issues that have been raised. What is happening through the Royal Commission is they are all being raised at the same time, a sort of a job lot. Obviously I think that would directly impact on the public consciousness of these things. But these are not things the government was not aware of. That is why we are already taking the strong action – boosting the resources for ASIC, the new Chair of ASIC has been very focused on these issues and ensuring you don’t just have laws but enforce them. And the accountability regime, particularly the BEAR which I saw as essential as a culture changer in the banking and financial system, that is now legislated. Imagine if we waited for the Royal Commission to end. Well it wouldn’t be in place. It is there now, right now. The additional resources of ASIC are there now. The additional powers for ASIC are there now. Open Banking is on its way now. We are not waiting, we are getting on with it.

STUCHBURY:

And there are suggestions this morning from the Greens that the Reserve Bank set up a people’s bank…

TREASURER:

A people’s bank for Toorak, where you have got to have 60 per cent LVR to get a loan.

STUTCHBURY:

And lend at 3.5 per cent and provide some competition to the banks. Your response, a free kick response on that one.

TREASURER:

I was shocked that a Victorian would ever suggest that there be a government owned bank ever again. Maybe the South Australians will suggest it as well, certainly not under the new Liberal Government. That was an idea that was deeply discredited by financial experience in this country and god forbid we ever go back to those bad old days. Have they forgotten how many people were injured and hurt and how many businesses were destroyed by the folly of government intervention of that scale? The way to address affordability of loans, the way to address the innovation that is necessary to give customers the products they need is the path we are on – greater innovation, greater competition, freeing up from the shackles that are holding back mutuals and FinTechs and getting capital to those which disrupt and collaborate and provide customers with what they need in the banking sector. I mean Senator Di Natale is basically, post the Batman by-election, playing to his crowd in inner city Melbourne and at 60 per cent LVR it would probably be only people on quite high incomes living in quite pleasant parts of Melbourne and the inner city who would be able to get a loan from the bank in this situation. And let’s not forget what the impact would be if all those low risk loans are going to be taken up with low rates to higher income earners, well who is going to fund for everyone else? What’s it going to do to the risk of those loans and price of those loans for everyone else? It is a very ill considered not surprising idea from the Greens. Let’s just see if Labor back it. The way they are going with taxes and everything else they probably will.

STUTCHBURY:

Would you support moves to pressure AGL to sell the Liddell coal fired power station to another potential buyer such as Alinta or in the extreme should the government move in and buy it and operate a coal-fired power station?

TREASURER:

I welcome what Alinta has done. I would be hoping that AGL, and I know the Prime Minister has spoken with them, will be giving this proposal every possible consideration. It is not ours to sell, it is AGL’s asset. We don’t own it but I would be expecting them to act not only in accordance with their own interests but the broader interests of the Australian economy and not be misusing any sort of market position they have to prevent what is potentially a very good arrangement proceeding. It highlights one particular point, if you don’t mind me saying Stutch, there is a difference between old coal and new coal. Old coal bids into the energy grid at around about $30 per megawatt hour wholesale up to $40. It can be lower than that. A new HELE plant, five, six or seven years down the track it is estimated it would be bidding at around $70 or $80. So it is false to think that a new coal fired power station will generate electricity at the same price as old coal fired power stations for the obvious reason that the asset has already been written off. So you don’t just open up one down the road and all of a sudden it is producing power at the same price as Bayswater or any of the others. That is just not an economic fact. I have spoken to a number of these investors. That is why I am not surprised Alinta and others are looking at buying an existing one not to build a new one as others already have and they have at Vales Point and other places. What they do in looking at a new one is they need a payback over 15/20 years and so they are going to need a have a guaranteed lock-in price at that much higher level for a much longer period of time. So the risk of that is consumers will either pay more or taxpayers will have to pay more in higher subsidies. Now I, nor the Prime Minister or Government, are subsidising anything ,any source of energy. The days of subsidies in energy are over, whether it is for coal, wind, solar, any of them. That is the way I think you get the best functioning energy market with the lowest possible price for businesses and for households and that is what the National Energy Guarantee and our energy policies are deigned to achieve.

STUTCHBURY:

Treasurer, thank you very much for addressing us today.