18 March 2017
Transcript - #2017037, 2017

Interview, Bloomberg

SUBJECTS: G20 Finance Ministers and Central Bank Governors Meeting, Germany; global economic outlook; global trade; US administration

QUESTION:

Thank you very much for joining us Mr Treasurer. We have understood that the conversations have basically come down to sort of a G19 plus one. How would you describe the day?

TREASURER:

Not like that. Things are better today than they were a year ago, the last time we met. I think that is a key message coming out of this meeting, that the world economy is improving. There are still fragilities and downside risks but the upside is looking a lot better and I think that is important for people all around in all of the economies to know. I think that does give people a sense of hope. But the question is how do you keep that going - these green shoots and how they develop. There is no doubt that trade is critical to that. That was acknowledged by all and a participatory approach, a reciprocal nature to trade, a fairness to trade, I think these were very good points made by the Treasury Secretary from the United States, Mr Mnuchin, and I think we will find a way through.

QUESTION:

What is the hang-up on trade? What is it that all sides can't agree on?

TREASURER:

I don't know if there is a hang-up on it. There are many ways to pursue it. From Australia's point of view we echo what our kiwi cousins say – you don't make any money selling things to yourself. So whether it is multilateral, tri-lateral, bi lateral, whichever 'lateral' you want to put in front of the word trade, it is all good, it is all positive. We need to have an open approach to trade but there has to be, as the US has been arguing I think, reciprocity to that trade. There has to be a win-win outcome and you can't have agreements without that

QUESTION:

Can you have a disagreement with US views on whether tariffs, protectionism, should be used as a weapon?

TREASURER:

I don't think anyone is arguing that. The trading system that has been built up over many, many years has delivered economic benefits, lifted incomes all around the world and the idea that any economy that sits around that table is going to be able to find prosperity in the future without global trade is kidding themselves. Certainly that's Australia's view and I think a common view around the room. But the specificity of that, how you work it out on the ground, is another challenge, particularly in a global environment like this.

QUESTION:

Is there enough disagreement that you won't have a trade section in the communique?

TREASURER:

I believe we will and I believe we should. I think if we don't that would not reflect well on what we are doing here and I don't think it would reflect the will of the economies that have gathered here.

QUESTION:

What would Australia like to see as the language used?

TREASURER:

Trade will do. Trade. That is the point. There are many views about how you achieve it but it is our view and I think the collective view that it has to be at the centre of a prosperity strategy for the global economy. The challenge here for us as participants in this is we are seeing the global economy improve and trade is part of how you see it continue to improve, just as structural reform is, just as ensuring you work against things that would try and lock down capital markets or disrupt more stable financial architectures and these sorts of things. These are important issues being discussed as well. But trade, open trade, reciprocal trade, that has got to be on the agenda and is.

QUESTION:

Fair trade? We have heard the word fair is one of the sticking points, that the US would like to have fair trade, the Chinese do not like that language.

TREASURER:

I will leave that to the diplomats and officials. What matters is that economies around the world understand that trade is part of the answer and that trade has to be done in a way where everyone can engage in it and benefit from it. There is a company in Australia that has just been set up that basically, using financial technology and other means, bespoke builds sporting equipment. It just finds the best producers of every element of that piece of sporting equipment and brings it together in one product, cuts out the middle men and delivers a great product for the customer. That goes around all of the things we are talking about. That is trade, that is a global supply chain that is happening virtually. That is what is happening in our economy today. One of the key challenges of the G20 whether on issues of trade or issues of taxation; we have talked very much about pro-growth taxes as part of that discussion. all of this has got to understand that the global economy is changing. But the great thing is the global economy is growing again and growing better than it was a year ago.

QUESTION:

One of the key things everybody looks at when the communique comes out is the language on currencies. Do you expect any change from previous G20 communiques on currencies?

TREASURER:

I think there is a common commitment and I don't think an unchanged commitment – I think it is as strong as it ever has been – that devolving into a race to the bottom on currency manipulation isn't looked well upon by anyone. Trade needs to be based on a currency system which is reflecting the true price in the market. One of the reasons the Australian economy has been so successful – we are in our 26th year of consecutive growth and at the end of the September quarter it would be the longest run of consecutive growth in recorded economic history – one of the reasons we have been able to grow through GFCs, the Asian Financial Crisis and drought and floods and these sorts of things has been the flexibility of our economy and our systems, particularly our exchange rate and how we have been able to adapt.

QUESTION:

Is there any dispute over the language that will come out of this...

TREASURER:

Not on that issue, no I don't believe so. There is a clear commitment that currency manipulation is not good for growth.

QUESTION:

What about climate change? That was added last year. This year we are told it will be dropped from the communique.

TREASURER:

This is principally an economic forum. It is focused on how do you drive growth and ensure financial stability. That is its key focus. Those issues are dealt with in other international forums, and well Australia has signed up to the Paris Accords and those issues are well canvassed there. What we talk about here has to accept those international agreements and then pursue our economic reforms and our economic policies in the full knowledge of those.

QUESTION:

If it is not in the communique is it on the agenda here? Are you discussing it?

TREASURER:

In the context that I just said. It is a constant. It is a given. It is part of an existing international set of arrangements which we are all working to. What we are focusing on here is, given that, how are we growing our economies, how are we providing the financial stability, what has happened in ensuring our tax systems better accommodate the modern digital economy, how we ensure that those tax systems also embrace those changes. Those are the issues we have to focus on.

QUESTION:

What about financial regulation? That was the last big topic everybody was focused on.

TREASURER:

In our economy we have worked very hard in reducing the amount of regulation and red tape we are putting on our economy. We have cut billions in compliance costs out of our business sector because of financial and other regulations that exist at a federal level. Regulation can be quite sclerotic on growth but when it comes to having good regulation that protects the stability of the financial system then everybody is in favour of that. One of the reasons Australia was able to grow through what we call the GFC was the incredible resilience of our banking and financial system and that was the product of positive regulation put in place by the Howard and Costello Government. Regulation can be positive but so long as it isn't excessive.

QUESTION:

Before we let you go what is the mood like among the Ministers this year? Is it different from what we have seen?

TREASURER:

Well it is far more upbeat I have to say. In the meeting we had in Shanghai a year ago there was talk going into it of the necessity for fiscal response packages and things of that nature. There is no discussion of that sort of thing in this meeting because we are seeing those green shoots in the economy. We are seeing a much better outlook now and that is cause for real uplift. That mood is far more optimistic and that is good news for people looking on around the world.

QUESTION:

And yet we hear there is more tension in the room.

TREASURER:

Well that's what you might hear but all I know is, being in the room, there is optimism about where the global economy is heading and ensuring that issues like trade, currency manipulation and these sorts of things are dealt with appropriately. But trade is part of the growth story and we want to see the growth story continue.

QUESTION:

A lot of focus on Steve Mnuchin here, how is he performing?

TREASURER:

Very well. I had the chance to catch up with him very briefly. We will have another catch up tomorrow. He is getting around, getting to know his colleagues and I think he sent some very positive messages in the room today in terms of engaging with all the economies. The thing about the G20 is that it is large economies from all around the world, it is not from one club or another club, it is really drawing from developing, advanced economies and all parts of the world. This is a great opportunity for him to engage and I think he is off to a good start.

QUESTION:

Has he come in with specific proposals and specific decisions that the US would like?

TREASURER:

I think he has come in with very open ears which is a very good thing but equally making it clear they have some important jobs to do, particularly in terms of making their tax system more competitive and a strong focus on infrastructure. Now on both of these issues, particularly on infrastructure, that is music to many people's ears, including Australia's.

QUESTION:

Thank you very much for joining us.

TREASURER:

Thank you.