14 June 2017
Transcript - #2017118, 2017

Interview with Sabra Lane, AM

SUBJECTS: Energy policy; debt; foreign donations.

SABRA LANE:

We’re joined by the Treasurer, Scott Morrison. Good morning and welcome to the program.

TREASURER:

Good morning, Sabra.

LANE:

How would you describe the tenor of last night's meeting?

TREASURER:

I thought it was a good discussion. I mean, we're in the middle of a process and Dr Finkel provided his report to COAG last Friday – it was just last Friday – and so we've begun our process in liaising with colleagues. I think there were two very important acknowledgments in yesterday's meeting. One, firstly, is that business as usual doesn't help power prices, doesn't help business, doesn't help households. And so, a business as usual model is not something that I think anybody believes, in our party room, is a good idea. And the second point is there was a lot of acknowledgement for the Minister's work in engaging with colleagues, not just at the meeting but before the meeting. So, we're in the middle of a good process, Sabra, and that process will continue.

LANE:

The target itself, it's been described as a magic pudding and as a tax on carbon according to Tony Abbott. What do you think of the idea?

TREASURER:

Well, I reject both of those suggestions. I mean, remember, it was the clean energy target that was actually first put forward by John Howard. So, look, we need to find new ways to deal with this. I mean, the idea that we just go on with politics as usual to deliver business as usual when it comes to energy means that people will pay more and businesses will pay more. And what does concern me as Treasurer is those rising costs, not just for households but for businesses as well who are looking at quite steep increases. And one of the key reasons for that is the lack of system stability and lack of system certainty which is needed to drive investment, whether it's investment in traditional sources, such as coal, or renewable sources.

LANE:

That idea that was floated by George Christensen, building the so-called high energy low emissions coal-fired stations, is that something that you would look into, agree with?

TREASURER:

A business as usual model will see coal-fired power stations shut down perhaps earlier than they should. It won't see those assets sweated for longer. It won't see new coal-fired power stations built if that is what investment can support. And I think what Dr Finkel has done is highlight this. I mean, if you have an interest in seeing our traditional energy advantage continued, then don't back the status quo. And I think what Dr Finkel has put forward, and people know I'm not shy about my views about traditional sources of energy, then you've got to move towards a different model that provides certainty for investment in whatever resource base that is directed at.

LANE:

This policy of a clean energy target, if it doesn't succeed, what does that say about Malcolm Turnbull's leadership?

TREASURER:

Well, I just think those sorts of issues being raised at this point, Sabra, I think is very premature. I mean, we got the Finkel report last Friday, we're engaged with our colleagues across the Government as of the party room meeting yesterday. It was the first discussion, not the last discussion on this, and there'll be many more. And there was also a discussion between Dr Finkel himself and members of the backbench committee and I think that was very constructive. I mean, understandably, colleagues will want to go through the data, they'll want to ask the questions, they'll want to work through the issues, just as many of us in Cabinet have been working through on the energy subcommittee. So, there's some really good work here, but what I do know is politics as usual will give you business as usual, which is not a good outcome for households, it's not a good outcome for businesses.

LANE:

And you're in a tricky spot because Labor has said that it will, it's prepared to be bipartisan on this, but if the Government embraces a policy that embraces further coal development it won't stand alongside you, and business has said that it definitely wants to see a bipartisan policy on this for certainty.

TREASURER:

Well, that really is a question for Bill Shorten. I mean, what you've just explained to me is a Leader of the Opposition who is going to play politics as usual on energy. If he wants to play wedge politics on energy, well, he's going to drive up prices for households and businesses. If he's…

LANE:

But it's also, sorry, about if the Government does embrace a policy that sees further new coal plants developed around the country.

TREASURER:

But his objection to that has only got things to do with ideology. I mean, if that source of power and energy can be accommodated in the system and make things more sustainable, more affordable and more certain, why would you oppose it? I mean, why would Bill Shorten be backing an arrangement that actually made prices more expensive and made power less secure and worked against a system that could actually get the consensus that we're seeking to achieve? I mean, consensus only on Bill Shorten's terms is not consensus – that's the old politics. That's just politics as usual.

LANE:

And can you have new coal-fired plants and still reach a 28 per cent reduction in emissions by 2030?

TREASURER:

Well, that's certainly the advice we're getting from Dr Finkel. I mean, what Dr Finkel's advice says is that the existing assets that we have will be able to work for us for longer. Now, that's a good thing. And the sort of retro-fitting and further investment that will be required to achieve that is more possible under the scheme that he's put forward. Now, if there are better alternatives, well by all means, put them up. But what's important is that we get that trifecta of the stability and certainty of the system, the affordability and the sustainability because that's what will drive investment. If you don't drive investment in the sector, whether it's in renewables or whether it's in traditional sources like coal or whether it's in pumped hydro and storage, if you don't get that investment the prices are going to go up.

LANE:

Gross debt reaches a record this week – you'll be the Treasurer who wears the badge of half a trillion dollars in gross debt. How does that feel?

TREASURER:

Well, there's a couple of points about this. Firstly, gross debt will continue to increase from 2018-19 not to pay for pensions, not to pay for operational funding in schools and hospitals. For the first time in a decade, new Commonwealth Government securities that are issued in 2018-19 will be paying for infrastructure, it'll be paying for defence capital. And, importantly, it will be ensuring that we don't draw down on the Future Fund. So, that's how gross debt is being used by this Government in 2018-19 and beyond. Now, for those who want to go down a different path, well, they have to understand that that means you can't fund that infrastructure, you can't fund that defence capital, you can't fund the submarines, you can't fund the frigates, and you certainly have to raid the Future Fund, which is not something that we're going to be doing. But under our Government…

LANE:

But still, it goes up and up and up. When the Coalition was in opposition you prosecuted a very powerful argument against Labor. When debt hit $300 billion then it was described as chaos, incompetence and an emergency.

TREASURER:

And what debt was doing then was funding pensions, what debt was doing then was funding everyday expenditure, and that's why debt was rising. Now, under us, what will be happening from 2018-19 and forward is net debt will be falling, and it will fall for 8.5 per cent of GDP over the next 10 years. So, net debt falls – remember it was net debt that was reduced to zero by the Howard Government, not gross debt. And where gross debt is being used after 2018-19, it's being used to build infrastructure, to build submarines, to support Australian industry through those important defence industry procurements and, as I said, not to raid the Future Fund. So, you can't have it both ways. I made the distinction as you will recall, Sabra, in the Budget, about good debt and bad debt, and you've got to have good projects for good debt, and we're certainly focusing on that as well. But our debt growth has fallen by over a third, by two-thirds I should say under our Government. I mean, they had about a 470 per cent increase in debt under Labor.

LANE:

And some would argue that it helped us get through a global financial crisis without a recession. Australia last week notched up the longest run in the world without a recession. Does Australia's future living standards depend on the Government getting things through Parliament like the bank levy and like the Medicare levy increase?

TREASURER:

I think the Government living within its means is what we set out in the Budget and we're calling on the Parliament to support that. I think it is very much a middle ground proposal that we've set out to bring the budget back to balance.

LANE:

Do our living standards depend on it?

TREASURER:

Well, it always depends on good financial management. That's definitely the case. But I don't accept the position that you put earlier, Sabra. The reason we survived the global financial crisis was our financial system was strong. Building over-priced school halls and setting fire to people's rooves with pink batts I don't think was why we were able to get ourselves through the global financial crisis.

LANE:

There are calls this morning for the Foreign Intelligence Committee here to have an open inquiry about foreign interference and attempts to influence politics here. How serious do you view this issue and do you back a public inquiry?

TREASURER:

We'll be introducing legislation later this year to deal with the whole foreign donations issue, but we already take this issue very seriously. I mean, I appointed the former head of ASIO as Chairman of the Foreign Investment Review Board. I put him on the board first, and then I made David Irvine the Chair of it. Look, I take, as the Government does, these issues incredibly seriously. We listen carefully to ASIO and the other agencies that advise us on these issues and we're very watchful on how, you know, we act as a Government. And I'm not aware of any suggestion – any suggestion anywhere – that the Government has acted in any way inappropriately or been the subject of undue influence on any decision we've made. We've been very watchful and we'll continue to be.

LANE:

The Government may not be, but there was an event in Melbourne last year, a fundraiser for the Liberal Party, with a Chinese translator. An audience with the Prime Minister was an auction prize – it went for more than $100,000 and no one in the Liberal Party knows who won it or can tell us who won it.

TREASURER:

I wasn't at the event but, the point remains as I've just outlined it, Sabra. Our Government keeps a very close watch on these things, listens very carefully to the security agencies – the same security agencies that we've restored funding to as a Government. The same agencies that we've built up. The same agencies that have guided us through what has been a very difficult path with the national security issues that we face. And I think they've done an outstanding job. I mean, the fact that 12 separate terrorist incidents have been averted as a result of their work. Intelligence is the key to how we continue in our fight on this topic and to keep Australians safe, and we invest in it, and we listen to it.

LANE:

Treasurer, we're out of time. Thank you very much for talking to AM this morning.

TREASURER:

Thanks, Sabra, good to be with you.