TREASURER: Good morning everyone. I am pleased today to release the seventh Statement on the Conduct of Monetary Policy as agreed to by myself as Treasurer and the new Governor of the Reserve Bank, Dr Lowe who starts work today in that new role. The new memorandum of understanding updates the previous settings to take account of the contemporary environment in which we now find ourselves. It provides further and necessary flexibility highlighting the importance of effective management of inflation. It seeks to ensure that inflation is low and stable which are the phrases used, over time. A very specific phrase also used. And it takes also into consideration the need to be ensuring financial stability. Stability and certainty is important wherever we can provide it in the global economy and in this domestic economy. Wherever we can do that, we certainly do. That is what we've done today in the memorandum of understanding and the statement that I'm releasing.
The Governor and I agree that now is not the time to be making any major changes in the composition of this statement nor is it the time to be engaging in any monetary policy setting experiments. Both previous governors were able to successfully manage the inflation target within the band of between 2 per cent and 3 per cent – right on it actually at 2. 5 per cent. That remains the band within the flexible arrangements that I've outlined. The environment for achieving this going forward will be different to that than previous governors have faced but our goal remains the same in the way it has been set today.
Now, the other issue that I make note of today is that I have acted further on the divestment of a number of additional properties today in relation to residential owned investment. This is a further 16 Australian residential properties which I've ordered divestment. It totals some 46 properties we've ordered divestments of to the value of around $92 million. Of the 16 properties the combined purchase price was over $14 million and they were in New South Wales, Victoria, Queensland and Western Australia. They ranged in value from $200,000 up to $2 million. Those nationalities that were involved were from a range including the United Kingdom, Malaysia, China and Canada.
This shows once again the increased compliance measures that have been put in place under the Government transferring responsibility for following up compliance particularly to the ATO is working. There have been some 2,200 matters that have been referred for investigation and there are some 400 cases remaining under active investigation. Since the new penalty regime was introduced some 179 penalties notices have been issued totalling some $900,000 in fines. So, it is important to have a foreign investment regime where the rules are set and the rules are enforced. That is what this Government is doing, whether it is in residential property or elsewhere and this investment takes place in accordance with the national interest.
QUESTION: Treasurer, apart from the sale of those properties what penalties will they face and do we have a strong enough disincentive for people to not do it?
TREASURER: We've ordered a divestment. So, they have to divest the property. That is what these powers provide for and that is what has been done.
QUESTION: Are there any other penalties attached to it – fines?
TREASURER: There are fines. As I said there have been 179 penalty notices issued so far.
QUESTION: How many are still under investigation? The number of those [inaudible]
TREASURER: We'll have to see how those cases pan out. What is clear is this Government enforces the rules when it comes to foreign investment, that’s backed up both in the penalty notices and the very significant divestments that we've ordered.
QUESTION: If the property is sold, and there has been a massive capital gain increase on it – do they get the money?
TREASURER: There are penalty provisions in place and there are divestment orders that are required under the current legislation. That's what we act on.
QUESTION: What's the message you are sending, Treasurer?
TREASURER: The message we are sending is simply this - that foreign investment in Australia occurs on Australia's terms. All those who would seek to engage under those rules have to follow those rules because what this does is provide more of a level playing field for Australians seeking to own their first home. Own a new home. To ensure they can fulfil their ambition to be able to participate in the Australian housing market. Our control of foreign investment in residential real estate is a critical part of supporting that ambition of Australians.
QUESTION: Treasurer, you said on our terms, are you happy with Australia's terms given the fact that relatively the types of house prices here are moderate, they are not the big end of town? The question is whether there are a large number of foreign nationals coming to Australia and buying properties perhaps on relatively easy terms. In other words is the door open too wide?
TREASURER: I don't think so, Ross. What the spread of prices for some of these properties demonstrates is that Australians who are buying in that mid-range and where we're seeing foreign investors acting against the rules, we're acting in that space. This isn't just something that happens on waterfront properties. This isn't just something that happens in Toorak or those types of higher priced suburbs. This is something that can happen in the most modest suburbs in any of our capital cities or indeed outside our capital cities. Our message is we're watching all of them and we have tasked the tax office to follow through. They are having a lot of success in doing that. So, our foreign investment laws are designed to ensure people act in accordance with Australian Government policy and where they don't, we will follow through.
QUESTION: Do you anticipate this will lower the house prices [inaudible]?
TREASURER: The foreign investment rules are one of many other controls in the system that seek to protect Australian house buyers. You will know that APRA some years ago, instigated new prudential controls which very much reduced the rate of growth in investor participation in the housing market. That was acknowledged by the former governor of the Reserve Bank as being a very effective policy intervention in taking the heat out of the top end of the investment market. Now that's what you do when you are engaging in these issues constructively and responsibly. What you don't do is just run around with a sledgehammer trying to appease political interests in this area. That's not a way to sensibly manage the pressures that are in the housing market. That has certainly been an approach which I think our opponents have been more attracted too. What we've done is work with the regulators to ensure, particularly through APRA, that there are appropriate lending controls in place. When you have interest rates as low as they are at the moment, and the banks understand this as well, you have got to have some pretty strict lending criteria because money is less expensive. You need to ensure that people are not getting in over their head and are able to be able to service those debts going forward. Just because interest rates are low doesn't mean you don't have to repay back the principle. That applies as much to someone buying a home as it does to a government seeking to raise borrowings for its own activities. This is why I've been so focused on the issue of arresting the debt we have. Debt is not free, even when rates are very low. So, it's a combination of factors, Alex. I think the foreign investment controls are very important, one of the other stabilisers and impactors on the housing market and what we are demonstrating in these actions is that we're on that job and we're delivering on that job.
QUESTION: On the issue of the backpacker's tax, growers are saying...
TREASURER: Are there any questions on the statement of monetary policy?
QUESTION: Yes, can I ask just ask my question on that?
TREASURER: It’s a fairly significant matter.
QUESTION: Yes it is a fairly significant one. I do notice you mentioned there the inflation target remains as does also the issue of our financial stability. Just about full employment, which has always been part of the basic way in which the RBA operates, does that remain also in place?
TREASURER: Yes, I will go to the statement itself: “the objectives allow the Reserve Bank to focus on price, currency and stability which is a crucial pre-condition for long-term economic growth and employment while taking account of the implications of monetary policy for activity and the levels of employment in the short term”. So, employment obviously remains part of the broader landscape of what the Reserve Bank is seeking to address. I think what is important to understand about this statement, and it is similar to previous statements, this statement, I think, has built into it flexibility which I think has been under-recognised by some commentators, maybe those less familiar with the Australian situation and it is important that the Reserve Bank does have this flexibility. They've demonstrated, I think, certainly under Governor Stevens and I'm sure undoubtedly under Governor Lowe they have stayed their course, they have kept their nerve. I think they’ve demonstrated to the Australian people the ability to keep all that in balance. As the Government we need to give that independent Reserve Bank that room to move and to not put them into too tight a jacket, if you like. That's what this statement doe, again.
QUESTION: You also said there would be no policy experiments. Does that mean, for example, quantitative easing would not be something the Reserve Bank would be considering any time soon?
TREASURER: The Reserve Bank can engage in operations that are consistent with their objective. What I'm referring to is there have been suggestions that we should move to other forms of targeting and trialling out new systems that have not been trialled anywhere else in the world. The Governor and my view is that now is not the time to engage in that type of new paradigm. It's important to provide stability in the settings that we have. Now, there is nothing to suggest from the RBA that they are going down the path that you've suggested. I would be surprised if that were the case. I think what our central bank has shown to its great credit is a real sense of nerve in all of these conditions over the last 20 years. I think it is a testimony to past governors and a great note of guidance to the current governor. The pay-off that exists for showing that level of what I described about Governor Stevens the other day as his greatest skill, his ability to exert strategic patience in these matters and I've no doubt Dr Lowe ably assisted by Dr Debelle and the board will continue on that path.
QUESTION: Treasurer, was there any thought to reducing the inflation target 2 to 3 per cent because it is a realistic target [inaudible]?
TREASURER: No, I think the target has commended itself over 20 years of operation and more. There has been no view to move away from that. I think we do want to set inflation expectations in a range that the target sets out. It's important that we see a bit more activity in the economy. You would have seen the speech I gave on Friday which outlined the importance to boost incomes and I think getting inflation back into that target is a worthy goal. I think that will support that outcome.
QUESTION: The economists from Domain and AMP have said today that our foreign investment laws will be factored in as a cost of doing business. That these sales and fines will just be factored in. Do you think that's the case or do you think they need to be strengthened further?
TREASURER: Any policy setting, any set of regulation, any tax laws, any laws, immigration laws, residency laws, which also apply in this, would also be factored into people's understanding. You would hope that they would be factored into their understanding. Whether it is in agricultural land or other assets which foreign investment is permitted under particular circumstances, the point is for regulatory and legislative conditions to be factor into people's decisions. That should provide some sort of temperance on their behaviour.
QUESTION: Treasurer, have you received an update on the ASX glitch this morning?
TREASURER: I've received the same that everyone else has received in terms of the statements from the ASX and they assure us that they are working away on that. The opening of the equities market, they say, has been delayed due to an issue with a component that allows the ASX to manage individual stocks and the ASX is working to rectify the issue and open the market in an orderly manner as soon as possible. That is the advice that they have given to the Government and it's a matter, obviously, entirely for the ASX. I look forward to them rectifying those issues.
QUESTION: On the backpacker tax, Queensland farmers are saying that they have delayed planting crops because they don't know what the outcome is going to be. When can you give them some assurance about what will happen?
TREASURER: As you know, soon after the Budget, the Government announced that over the next six months from when it was originally intended to be introduced, that the matter would be resolved. We've held good discussions with colleagues in the last week again. I've had some very good representations from the backbench committee which is led by Tony Pasin, the Liberal Member from South Australia. We'll continue to work through those issues. We will certainly act within the time frame we said we would and wherever possible, if we can land that sooner, we will. As you saw from the superannuation arrangement that I announced last week, in all of these cases we need to keep a steady eye on what the fiscal task is. If there are changes that have been made and we announced that we would have a review of that and if there are changes to be made, then certainly my view as Treasurer is that they will be made in a way that does not disadvantage the Budget.
QUESTION: Have you spoken to George Christensen on his view of the backpacker tax? He apparently threatened to quit if it isn’t…
TREASURER: I have spoken to George many times about this. George says the statements that were attributed to him on the weekend were statements he made well before the election. Well before the election and they weren't contemporary comments that he made in the life of this Parliament. So, I will leave that to George and the journalist.
QUESTION: Are you confident that any new proposal would be enough to quell any unrest on the backbench over this?
TREASURER: I have a record of working through issues and getting to resolutions. That is certainly what I will seek to do on this occasion.
QUESTION: Regarding the ASX, given the fact that there has quite clearly been a problem in terms of the census previously, now the ASX, the Government would be only too well aware that key pieces of infrastructure such as this going down to technical failure is potentially a significant risk for the nation as a whole. Are there ways in which the Government can be helping to overcome these problems?
TREASURER: It's a little early for me to comment on what is happening at the ASX because I wouldn’t have been briefed on the specifics of what is occurring there. That's a matter for them to work on and I'm sure in the next little while the ASX will have the opportunity, within the normal realms of what they would disclose in these situations, to take me through what has happened this morning. It is one of the issues of dealing in a 21st century economy, that we are more reliant on these systems than we probably ever have been. It's important that the redundancy and capacity and procedures and processes for responding to the events when they occur, I think it's difficult to say in this area that things can never be ruled out from occurring. That is the nature of things. When people go on to buy tickets for a concert sometimes the system doesn't perform to expectations. Banks understand this. Airlines understand it. It is something consumers are becoming familiar with. At the same time something as serious as the ASX is a whole other order and I'm sure they will be working to land this as quickly as possible. I think you raise a good point, Ross, and I think it is something to be properly pursued with the ASX and other important institutions. I meet regularly with the head of APRA and the Reserve Bank Governor and others about these sorts of things. It is important for us to have a good collective view about how we can provide stability and certainty in these circumstances.
QUESTION: Treasurer, it is reported today that you spoke out against reforms of [inaudible]?
TREASURER: Against what, sorry?
QUESTION: The reforms to the [inaudible] it is reported in The Australian today.
TREASURER: You wouldn't expect me to comment on someone’s speculation in a speculative report. So, I am not about to do that here.
QUESTION: Don’t you think it is [inaudible]?
TREASURER: I think I just answered your question I am not going to speculate on someone's speculation about something I was allegedly speculating on. I'm happy to dismiss that.
QUESTION: On the mistaken air raid in Syria, do you believe that Australia needs to conduct its own review? Andrew Wilkie [inaudible].
TREASURER: The Defence Minister has already answered that question this morning. The coalition will be undertaking their review of these matters which I am sure we'll participate in. That's a matter for the Defence Minister. That's where the process will start. I, like other ministers, express our deepest sympathy for the families of those affected by these incidents. I think we just need to proceed through this very carefully, very methodically and in concert with our partners as we've done on many other issues. I mean, these are very difficult issues to manage these conflicts. I also want to provide my support to all of those Australians who are over there serving in our name, in our uniform and under our flag as part of this initiative. It's a very difficult job for them, it’s a very difficult job for their families and it is important that we remember their families who are at home at the moment as we work through this issue. I'm always very proud of what our armed services and particularly the people who serve in those services, how they put themselves forward. Now, this incident is obviously a very complex incident. I'm sure the Defence Minister will be working closely with our Coalition allies in this initiative to work through all the various details.
Thank you very much.