7 June 2017
Transcript - #2017116, 2017

Interview with Ross Greenwood, 2GB

SUBJECTS: March Quarter National Accounts; foreign donations

ROSS GREENWOOD:

Just explain to me in regards to the economic growth, I think everybody would agree that it is subdued, it is below par, there are certainly reasons for that. Do you think this is something that is short-term or something that you are concerned is ongoing?

TREASURER:

You’re always concerned. You always want growth to be higher, but at the Budget, Ross, our forecasts for this current year was one-and-three-quarter, and we do it in quarter increments so, today’s figures come out of 1.7. So what the GDP figures show today is pretty much exactly what we were anticipating for this year. When I talked about there being better days ahead, I meant better days in the future. What we’re talking about today is the March quarter figures which happened before the Budget was even handed down. The data we’ve seen over the last three quarters has been what I’d call quite choppy, I mean we had one quarter which was a negative quarter growth, and then we had the next quarter in December which was over a full percentage point, which was quite strong. And then this latest quarter we’ve seen it at 0.3, so things have been moving round a bit but within all that though we have seen something very important, and that is the improvement in new business investment. Now for 12 successive quarters new business investment has been going backwards, and the last two quarters it has actually gone forward positively. That is a very welcome improvement.

GREENWOOD:

So take me through a couple of other bits and pieces here because clearly the reliance on the housing industry, and housing construction, has been an important part of the Budget. Now we do understand that cyclone Debbie will certainly cause some problems for the overall economy, will slow down the economy, in particular, coal exports, is the problem there, but given the fact that the Government, and also the banking regulators have tried to at least cool down and take some of the heat out of the housing market, that has translated into a slowdown in home building, that then plays out into these economic growth numbers which slow down. You can’t have it both ways can you in some ways?

TREASURER:

One is dealing with house prices and the other deals with construction. What we do have in dwelling investment is a good strong pipeline, building approvals, residential building approvals, have been growing now for some time, so there is a strong pipeline of work, particularly in New South Wales, where there was weather affected areas. That’s obviously going to have an impact on the actual work done in that quarter. In Western Australia, there was particularly a wet season there in the quarter, which really did impact on minerals, resources exports. We saw this some years ago, Ross, you’ll remember when the Port of Newcastle was shut there for a while because of those terrible storms. Now, that had a fairly significant impact on export growth at the time. Now, these things happen from time to time and they will affect the numbers. Cyclone Debbie will probably have more of an impact on the June quarter, because it came right at the end of March. All that means that the numbers have moved about a bit, but the good news is that we are seeing business investment starting to pick up, and the world forecasts are continuing to improve and how global organisation like the OECD, the IMF and even at home the Reserve Bank, they are all forecasting, not just the Government, a return to real growth at above 3 per cent over the next couple of years. There’s nothing startling about where Treasury is estimating where the economy is going compared to the Reserve Bank or the IMF, or the OECD or any of those organisations.

GREENWOOD:

You said today we don’t take growth for granted, that’s an important aspect of this isn’t it, because it is one of these points where you’ve got to work for the growth and you’ve got to have the innovation in place inside the society and the confidence inside the business community to invest, to create the economic growth because generally the Government does not create the true confidence in the economic growth. It only creates the environment.

TREASURER:

Businesses create growth. And Businesses have to be growing and expanding and making stronger profits, and getting their investments in place, that’s why it was frustrating for the first nine months of this financial year. Remember the tax cuts for small and medium sized businesses, they only got passed right at the end of March. So, we had the Labor Party jumping up and down about growth but then every single day in the Parliament, rallying against tax cuts for small and medium sized businesses. Now, I’m pleased that we saw that come through at the end of March, and what we saw, very soon after that, was a very strong uptick in the business confidence figures and conditions in the NAB survey, so that’s welcome. But you can’t take any of this for granted. You’re not going to see the economy grow more by taxing small businesses more. That’s why we’ve got the instant asset write-off, that’s where you can write-off $20,000 in new investment in your business, in that full tax year. That’s been extended another 12 months, and it’s for businesses up to $10 million in turnover, that’s five times the turnover it used to be.

GREENWOOD:

So in other words, you’d expect a bit of spending between now and the end of the Financial Year, given that incentive that’s out there for businesses up to a medium size.

TREASURER:

Yeah, because that extension, even for the current financial year, we couldn’t get through the Parliament until the end of March. So there was a nine-month delay, and that’s why today, I said, look we’ve got our plan which means more competitive taxes. A big infrastructure spending program over the next 10 years. We’ve got the work we’ve already been doing on innovation, start-ups, and I noticed on your report tonight Ross on Channel 9 you were talking about some of those new technology oriented financial services companies. That is an area of very strong growth, we’ve been doing a lot of work in that area to try and ensure the regulation is lighter touch, so some of these new companies can get up and going, and not be weighed down by excessive compliance costs.

GREENWOOD:

Before I go any further, I just want to take you back to one aspect of the household savings rate. Now, today, the Chief Economist of the Australian Bureau of Statistics, Bruce Hockman noted this, he did point out that the household savings ratio has fallen to 4.7 per cent in the March quarter which is half the rate it was in the March quarter of 2013, so four years ago. Does that imply to me that there is a bit of pressure inside households because we know wages aren’t growing, we know there’s underemployment out there, and as a result some householders are potentially having to dip into their savings to basically keep their lifestyle going?

TREASURER:

There’s a couple of points here, the first one is that the household savings ratio is positive, which means households are saving. They’re now saving at a rate which is about what it was before the GFC. So, Chris Bowen was making a point today that people were dipping into their savings, as if the savings ratio was negative, well it’s not. It’s actually positive. And it’s been coming down now for a number of years, but it is true people wouldn’t be saving as much as they were previously. But I wouldn’t say the savings ratio is at an alarming level, it’s at the level it was before the Global Financial Crisis. Before those storms hit. Now, when you see a financial storm hit, you’ll often see people increase their savings ratio. They’re saving for a rainy day. People will retreat into their caves. So, we’ve seen householders continue to be quite resilient in this economy and this is a good thing. The Australian economy’s performance has been quite remarkable and we saw that landmark hit today. But what matters now is what happens for the next 25 years.

GREENWOOD:

That’s true. I was going to ask you that question because a person leaving tertiary education 1991 or 1992 let’s say just after the last recession. Let’s say they were 19 or 20. They are right now 45 or 46 years old. That person or anybody younger has never worked through a recession in Australia, in our history. The question is by the time that person turns 71 or 72 which is in another 25, 26 years’ time do you think that person will have ever seen a recession during their lifetime?

TREASURER:

Well, I certainly hope not. I am sure 25years ago more people didn’t think what has happened over that period of time was possible, but it is and it has happened. I am not one of those, you have probably heard them saying it yourself, Ross. People say, all those younger people haven’t known a recession, well, they need to know one and the economy needs to go into one.

GREENWOOD:

Well, sometimes they say politically that you need a recession to get the reforms done. The big changes that you actually need to do.

TREASURER:

Who wishes a recession on Australia? That is why I find that suggestion that when people make that I shake my head and say, no, we don’t want a recession in Australia. Of course we don’t. We work hard to make sure that both the policy settings are right to ensure that that doesn’t happen and people work hard every day.

GREENWOOD:

So, explain why we don’t want a recession in Australia? Why is it that a recession would be a bad thing for this country?

TREASURER:

Because people would lose their jobs and businesses would go out of business and peoples incomes would fall and there would be very serious economic hardship. Now, you don’t wish that on the country. What you do is you seek to continue to grow the economy, as we are. Some people suggest that in terms how more quickly we should be returning the Budget to balance but I think that the fact that we have maintained a very strict program to get the Budget back to balance by 20-21. Which means we have been keeping the pace right to bring us back to balance has enabled the economy to grow in difficult times without actually undermining its performance by some of the measures that others have suggested.

GREENWOOD:

I will say, don’t you imagine sometimes that there is a bit of complacency in the overall community, in other words they will hold governments to account by voting in minor parties in the Senate and as a result you have got to navigate your legislation through those minor parties, they leave the Senate pretty much hung so you can’t really govern and make key decisions that could make Australia more productive and better into the future. Change the tax system, to do the really bold stuff that the OECD, the IMF, many others are encouraging to do. Even the last Budget was a concession that you could not get through the Senate some of those big spending cuts that the Government thought were necessary to get us to the next phase of where we need to be. Isn’t that one of the things that must frustrate you as a politician?

TREASURER:

Well, things are frustrating but that doesn’t mean you wish a recession on the country. That is, I think, is a fairly extreme reaction. What you do is you find other ways to get there which is what we did in this Budget. Yes we had to deal with the fact that $14.7 billion of measures we were trying to get through the Senate we couldn’t get through. So, we found another way to get there. So, we have made sure we have been able to bring, we are bringing the Budget back into balance in 20-21. Just as we were projecting, but we have had to go another way. What I did say today, is it is important that the Parliament sobers up to some of these issues. There was a significant cost of not going down the path we were previously going down. We have found another way to get there. We have a Budget in front of the Parliament now which we are asking them to support because we need the certainty of that. We need the certainty of having those more competitive tax rates for business to come and invest. We need the certainty around energy policy so there can be some stability in energy pricing and lower and more affordable energy bills for householders and for businesses in particular. Who are facing very steep increases. The reasons they are facing those increases is the real lack of certainty and stability about energy policy which we are working very hard to trying to achieve. We need the Labor Party, we need the state and territories, we need the Parliament to actually come to the table and agree to these sensible measures.

GREENWOOD:

It is a pretty tough game, I have got to tell you, because trying to be decisive when you have got Parliament as it is, is very difficult. Just one last one I want to leave you with, it’s off subject in regards to GDP and that is today the former US Director of National Intelligence James Clapper said he would understand if Australian spy agencies withheld intelligence from American counterparts because Donald Trump could not be trusted to keep it secret. He also talked about rising Chinese influence in Australia. Just let me play you this from James Clapper today at the National Press Club:

JAMES CLAPPER:

China is very active in intelligence activities direct against Australia, just as they are against us. And that China is increasingly aggressive in attempting to gain influence in your political processes as Russia is in ours. Australia should engage with China but with both caution and confidence – eyes wide open – when it is strategic and economic interests, never forgetting the importance of its democratic institutions and values that you share with us.

GREENWOOD:

So, Scott Morrison, as a senior member of Parliament and this would go to both sides, all sides of politics in Australia. Are you concerned about the influence of outside parties into our political processes and in particular into election campaigns?

TREASURER:

I think we are very alert to it. I would agree with everything he just said and I would strongly argue that that is the approach the Australian Government takes in relation to these issues. We are very watchful but at the same time we have a very pragmatic and positive relationship with China but we are not naive about these things at all and all members of Parliament I think have to ensure they are very wary about these sorts of issues and ensure they are behaving appropriately.

GREENWOOD:

That would mean knowing where their bills are being paid I would have thought as well.

TREASURER:

Of course. We had the issue with Senator Dastyari which has just been brought up again, and the Labor Party, he resigned and he went off to the sin bin for a little while but I tell you what, he has had a rehabilitation faster than most and I don’t know if that really reflects well that those issues have been taken as seriously by the opposition. This is a very serious issue, you have to be very guarded and mindful about it. My responsibility as Treasurer goes to the foreign investment decisions that are made and I am very careful about these things. I have been criticised heavily on occasion for knocking back investment by Chinese firms, state-owned enterprises and others. I make no apologies for that. There have been other occasions where I have made positive decisions. I can assure the Australian people that on every occasion it is the Australian national interest that is most paramount in my mind as it always must be.

GREENWOOD:

Scott Morrison our Treasurer. Always great with his time here on Money News. And Scott we appreciate it this evening.

TREASURER:

Thanks Ross, good to be with you as always mate.