17 August 2016
Transcript - #2016106, 2016

Press conference, Melbourne

SUBJECTS: Moody's affirms Australia's triple-A credit rating; $6.5 billion in Government savings measures taken to election by Labor; Glenn Stevens; Budget repair; foreign investment; immigration portfolio; Parliamentary procedure

TREASURER:

Good morning everyone. It is good to be here in Melbourne today. The Government welcomes the decision of Moody's to confirm Australia's triple-A stable credit rating. The Australian economy is resilient, it is strong but there is no doubt that there is more work to be done with the challenges that are ahead. These are the key messages that come out of the decision by Moody's today.

The Government welcomes it but by no means is the Government complacent about the significance of the economic challenge that still lies ahead. The resilience of our economy was stressed very strongly in the Moody's statement today. I want to refer to a number of sections of their statement, when they talk about Australia's large size, high income levels, competitiveness, flexibility and growth record combining to offer exceptional economic strength which supports the triple-A rating. It goes on to talk about how Australia's economy is successfully transitioning through from the mining investment boom and the terms of trade peak, through to the period of lower commodity prices and the diversification into a broader based economy today. This is a remarkable achievement of the Australian people, of Australian business and of the resourcefulness of the Australian economy. These are things that we can continue to build on but they are things we cannot take for granted. In addition to that, the report refers to the strong institutional framework that we have in our economy. Of, course, that refers to the Reserve Bank's performance, particularly under the retiring Governor Glenn Stevens, and there will be plenty of opportunities in the weeks ahead to pay our tributes to Glenn. But also, the work of APRA and the strong regulatory and financial systems arrangements we have around our banking and financial system.

Our banking and financial system is one of the core pillars of our economy that underlie our prosperity into the future. You don't go and play politics with that. You don't go messing around with the banking and financial system to make cheap political points. What you do is you take action to further improve the confidence and strength in our financial system to ensure that it can continue to play the extremely positive role that it does to underpin growth and jobs in our economy. Moody's statement today, I think, underscores the point about the strong institutional framework and I would extend that to the broader performance of the banking and financial system.

The third area that is highlighted in the report today, are the risks in terms of ongoing fiscal management. Now, just as is the case with S&P when they made their report and put Australia on the watch that it has, they stressed the importance of the Parliament working together with the Government to keep Australia on the right track to fiscal balance. The Government will continue to pursue the very responsible fiscal measures, the savings measures on payments, the revenue measures that were set out in the Budget and in the recalibration of measures that had previously been to the parliament to ensure that Australia remains on the right track.

The agencies are sending a very consistent message about the trajectory that sits in the Government's Budget. The challenge is to see that Budget supported by the Parliament. We are having very constructive discussions with new crossbench senators and in particular in recent weeks I have had lengthy discussions with Senator Hanson and Senator Xenophon and his team and we will continue to engage in that process.

As welcome as this result is today, and it is, we cannot take these things for granted going forward. The resilience, the strength, the performance of our economy which provides the jobs and supports the important services in health, and education, depend on us working together as a Government, as a Parliament, as a people, as an economy to ensure that these strengths remain strengths going into the future.

It is a tough global environment out there. Australia's growth rate is the envy of the advanced world. It will only continue to be that should we be able to stay on this right track of fiscal strengthening, of further underscoring the resilience of our banking and our financial system to ensure that remains a strength and an asset both in perception and in reality and of course to continue on with the policies that support investment, that support business, particularly small and medium sized businesses to go out there, to invest in their future and create the jobs and support the jobs that already exist.

Happy to take questions.

QUESTION:

Treasurer, you say there are a number of challenges moving ahead. What are the most significant financial challenges facing the country at the moment and how are you going to deal with those challenges?

TREASURER:

The most significant challenge facing the economy is to encourage investment. It is investment that actually creates jobs and supports the jobs that already exist. That is why we took a plan to the last election, a plan that was focused on particularly supporting small and medium sized businesses to get better support through the tax system to support them investing and reinvesting in their own businesses. Supporting investment in our economy is critical and it is not just a problem that Australia has, it is shared by the world's economies. China, the United Kingdom, the United States, across Europe, South-East Asia. All of these countries face similar challenges in providing an environment where investment can be boosted and strengthen the economy further and its resilience. So investment is the number one challenge from the economy's point of view. But that has to be supported by a strong Commonwealth balance sheet. The Commonwealth balance sheet and the underlying cash balance has to be improved over the next four or five years, as we have set it out in the Budget, to ensure Australia gets back into balance. One of the issues that ratings agencies constantly look at, is the issue of current account deficit and fiscal deficit. Australia is not like many of those countries in that we have a current account deficit. That is obviously and will always attract the attention of ratings agencies and that only requires us to double down and be even more vigilant when it comes to our fiscal performance. We don't have the room that many other countries have because they don't have that current account challenge. That has always been Australia's position. There is no change to that. The current account deficit has been around as long as we have been assessing it. Managing the Budget, encouraging investment, supporting that strong plan for jobs and growth that we outlined at the election and implementing it through the Parliament and getting that commonality of purpose, I think, is the challenge we face today. The Prime Minister will speak more about that today here in Melbourne and I will join him for that later today.

But, first off the bat, there is $6.5 billion of measures that the Labor party put in their forward estimates which they took to the people at the last election. I am not fond of quoting Sam Dastyari but I will on this occasion. Because it was Sam Dastyari who said "the measures that we took to this election, we intend to be passing through the Senate. He said, "of course we will support the measures that we took to the election". He told Tony Jones that on Q&A. I noted it down when he said it. There is $6.5 billion of measures they had in their forward estimates that they are honour bound to pass.

QUESTION:

Treasurer, how does passing $6.5 billion in Budget savings protect the triple-A credit rating? One commentator has said those savings are essentially a drop in the ocean.

TREASURER:

Anyone who has sought to try and pass measures through Senates would not call $6.5 billion a drop in the ocean and I certainly don't think Australians would consider $6.5 billion in those terms. It is one of many steps that we have to take. There is $6.5 billion in savings measures that Labor have said they would support through what they put to the Australian people. But you are right, that is not enough. There is some $18 billion of various other measures net that are necessary to attract support to ensure we maintain the trajectory set out in our Budget. Labor wilfully continues to oppose some $6.5 billion or thereabouts in social services savings. Social services savings that $3.5 billion of which will help us to invest in more affordable child care for Australian families. They resist this. Bill Shorten says he wants to be working together. The test of that will be in the Parliament and at the moment, he seems intent on playing political games.

QUESTION:

Have you spoken to Chris Bowen about these problems, these conflicts and why they aren't supporting them, to try and get it done outside of the Parliament?

TREASURER:

I have had many conversations with Chris Bowen in my time as Treasurer and at other times. I will continue to seek to work with the shadow treasurer on these matters, as I have on other bills. Unfortunately, I haven't had too much success convincing the shadow treasurer and the Labor Party of partnering in the task of fiscal reform and improving the Budget also but let's hope this parliament will see a more positive attitude from the Labor party.

QUESTION:

Just quickly on Glenn Stevens, he has spoken about the need for the right kind of foreign investment. Do you agree with him that foreign investment needs to be directed at building and creating things rather than just changing ownership? If so, do you think there needs to be some sort of legislation on that topic?

TREASURER:

Well two points. Glenn has rightly always said that when you're attracting investment capital, you want it to go into productive things. Where I commend the NSW Government is that they are seeking to realise assets in order for them to invest in productive infrastructure and so I think when you embark on a process which may change the nature of ownership of what you could describe as a passive asset, if that is freeing up capital for the NSW Government to invest in productive infrastructure, then I think they meet the Governor's test and more to that end. The Governor's outgoing comments, I think, should be very instructive and I have been paying close attention to them. I've very much appreciated the strong relationship I have had with the Governor as we talk about these issues on a regular basis. So issues about where you can get not just investment into the right productive outcomes and particularly when Governments are having to borrow, the Governor has said on many occasions, better to be borrowing to build productive infrastructure than borrowing to pay for payments. He is absolutely right about that. That is why the job of fiscal repair is so important. Every step we take to get the budget back into balance means we're a step closer that when we're actually borrowing to invest, it is to invest.

QUESTION:

[Inaudible] Does there need to be a legislative change in that regard?

TREASURER:

On foreign investment, and particularly when it comes to the protection of the national interests, the Act provides for the Government and me as Treasurer to reject any application on the fact it is not consistent with the national interest. I have heard these proposals to try and get some prescriptive limitations around this and the great risk is this - with foreign investment and particularly in the areas of national security and technology and things of this nature, things move very quickly. It hasn't been my observation that legislation keeps up with the developments that are there. So by going down such a prescriptive track, what you open yourself up to is an application coming forward that, under the current rules, would be against the national interest but the prescriptive nature of regulations or legislations could prevent a Treasurer from knocking it back. That concerns me and troubles me. As someone who looks at the entrails and details of every single one of these major investment decisions and has observed how quickly the ground can sometimes shift on these issues, I am not overly confident that a legislative arrangement, different to the one we have now which is more prescriptive, would protect Australia's national interest better.

QUESTION:

[inaudible] …on Manus Island have signed a joint statement saying they believe a Senate inquiry into Nauru is not enough and they want asylum seekers brought here to Australia. They believe evidence they previously gave hasn't been heard. How will this inquiry be any different and will the Government consider bringing asylum seekers here to Australia?

TREASURER:

I think you know the Government's policy on that and I will leave that to the Immigration Minister.

QUESTION:

On another matter Treasurer, did the Government go too far in playing hard ball in the 43rd Parliament when it comes to pairing, including for example, initially denying Craig Thompson the right to be with his wife when she gave birth?

TREASURER:

The opposition – or the Government at that time did provide pairs and pairs have always been available for legitimate sickness or health issues or family issues. That has always been I think an unwritten understanding in the Parliament. I am disappointed that Tony Burke is engaged in what seems to be a very uncooperative and a very unhelpful way to go into the next Parliament. I think Australians are sick of all that. They are sick of that. I think the way that Mr Burke has raised these issues will be seen as quite petty when people know that they have sent us all here to the Parliament. They have elected this Parliament. The Senate for the first time, we have a Senate, particularly those on the crossbench, who have been elected by a large number of votes, which is welcome. Every member in that House and every member of that Senate has been sent there by the Australian people and they've been sent there to get a job done, to work together, to ensure that our economy is strong so peoples' jobs are secure. I don't think they look terribly favourably on what I would call the bickering approach that Tony Burke wants to get this Parliament off on that foot.

Thank you.