24 October 2017
Transcript - #2017205, 2017

Interview with Fran Kelly, ABC RN Breakfast

SUBJECTS: 5 Year Productivity Review; National Broadband Network

FRAN KELLY:

Scott Morrison joins us in our Parliament House studios. Treasurer, welcome back to Breakfast.

TREASURER:

G'day, Fran.

KELLY:

Australia's productivity is currently growing at about 1.8 per cent – that's not enough to maintain living standards. We need to shift it up to 2.5 per cent. How does rejigging health, education and our cities make us all more productive?

TREASURER:

I think you summarised it in your introduction. It's not to say that the old agendas on productivity are no longer relevant. There is still unfinished business on a number of those and the Commission will highlight that in the report today, but as you say, we're moving towards an economy which is increasingly service based, which relies more and more on our people and the healthier they are, the better equipped and more proficient they are, and the system supports them to achieve that in the workplace through our education system, makes them more able to take advantage of the rapid advances in technology and other tools that they have in front of them, and it accelerates the gains that can be made from those things. The first time we had a big shift in productivity was pre-iPhone, pre-the the Cloud, pre-AI, all of these sorts of things, and they are now present today and as I said, the healthier we are and the more proficient we are in these things, the more productive we'll be.

KELLY:

I'll drill down a bit more on the Productivity Commission's recommendations as I understand them, we haven't seen the report but we do have your speech and you've earmarked health, education and cities as the key areas. Not really a mention of everyone working harder or labour market reform or tax cuts even – the traditional approaches, I've said, to boost productivity. Are you embracing, in effect, Labor's policy of inclusive growth as the best way to reduce inequality and lift our living standards? Are you two on the same page as this?

TREASURER:

Whether they're on the same page as the Government, well, it's for them to decide, but the Productivity Commission has produced this piece of work and the reason I initiated it was I wanted a – if you like – a sister publication to the Intergenerational Report and that looks at the big pressures on the Budget over the next 50 years and the things that drive living standards, boost more and better paid jobs really falls to productivity and I believed it was time that we had a close look at the things that would drive that. Now, as I said in my previous answer, the traditional areas where we've seen productivity growth lift in the past, they remain relevant and tax cuts still remain vital to boosting wages because we know that the more capital there is invested per worker, then we know the better wages that are paid – I mean, that's the clear analysis from Treasury and the data that's available to us. So, it's all of the above, Fran. The Coalition has always been supporting health and education. It has always been a part of our Budgets and what we've always said is it's not about how much money you spend, the Commission has said, "It's how you spend it". And so, they're not recommending more needs to be spent, they're saying it has to be spent better, and the last time I've looked, the Labor Party was never that good at spending money.

KELLY:

Well, indeed it says that if we cut out waste and duplication in healthcare we can save $200 billion of the next 20 years. How does a leaner, more efficient health system lift output across the economy or is it just spending cuts dressed up as something more noble?

TREASURER:

No, it's not spending cuts at all. It's actually making sure that how we deploy right across the country, working together with the states, remembering this is a report…

KELLY:

We try this every couple of years, don't we? How to shift the blame…

TREASURER:

Hang on, Fran, I thought I might finish my answer to the last question. Right across the states, this is a report to the states as much as this is a report to the Commonwealth and what the Productivity Commission is arguing is the old to-do list which then goes through the usual exercise of 'rule this in, rule that out', that is saying that that's not the way to achieve this, that there has to be an understanding of the direction we need to move in and that states working together with the Commonwealth need to try to move there together. Now, I think that's a very adult approach, I think it's a more enlightened approach and I would hope that's the spirit in which the report is received.

KELLY:

It shines a light, according to your speech, on the health of Australians. Now, we are living longer but we are living sicker through some of that than some of our OECD equivalents. In fact, I think you say it's equivalent to an entire decade spent on the sickbed, are we a nation of people who take sickies. How do you lift that and change that?

TREASURER:

It's one of the more interesting observations they've made in the report. As you say, we are living longer and we've made great strides in so many areas of health, but the acute health conditions are the ones that linger, the ones that debilitate us. That has been a real impact on the system now for some time, now Minister Hunt, Greg Hunt, is addressing this through a range of initiatives that he's pursuing, but dealing with chronic disease is one of the things which we need to collectively address as a Commonwealth with the states and there are programs which exist, but the other thing that we need to do is remove unnecessary hospitalisations, make sure that specialists and GPs are on the same page – and one of the other startling figures in there is that around 96 per cent of GPs are actually using technology, computers and so on, as part of their everyday life, and that's not surprising but when you're looking at specialists and others, many of them are still working on the fax machine. So, there are some strange inconsistencies between how the system uses technology, and what that does is it removes opportunities for collaboration and information sharing and data being able to be best used to look after patients and put them at the centre of care.

KELLY:

Higher education is another focus, unemployment among graduates has surged to more than 20 per cent which is a pretty shocking statistic really. One recommendation is to link university funding to the success of the students – to those outcomes, not to the research capabilities – and the Commission calls it "a gladiatorial obsession" amongst universities to hire the best researchers, increase the global ranking of the university based on that research effort and so attract more cashed-up foreign students. In other words, it's about the cash, not the best education outcome. Is that the key to turning our graduates more job-ready?

TREASURER:

I think you've summarised what the Commission has said well and they also make the point that it's not just about competency, it's about proficiency. Whether someone can do something is one thing, whether they can do it well and keep getting better at it and a system that recognises that is also really important, but at the end of the day, there are two people that pay for education in this country: the students and the taxpayers, and what we're wanting out of this system is those students to be better educated and more proficient in what they're doing, and that currently hasn't been as much part of the success criteria for these organisations. There's the 'publish or perish' type of attitude and that does tend to skew where resources go and where the focus goes. The focus should be on the student, educations – yes, they're about the creation and the building of the knowledge base, that's been the historical role going back centuries – but certainly, surely better teaching for better student outcomes, learning more, more engagement, that surely has to be on the top of the list.

KELLY:

A lot of people listening to this interview might think if you want to lift Australia's productivity, why not start with the National Broadband Network? What's the Government going to do about lifting the NBN's performance? Which is woeful for one in every four customers that connect to it currently – that's according to the NBN CEO Bill Morrow on this program yesterday.

TREASURER:

We're going to keep rolling it out. We inherited – as the Prime Minister said yesterday – an unholy mess. The Labor Party connected more people to the people smuggling network than they did to the National Broadband Network…

KELLY:

Well, it's a star-up, come on…

TREASURER:

They barely put anybody on it over six years and they had $30 billion in additional costs which we have been able to strip out of the system by delivering a program which is actually getting put on the ground far quicker than it would have ever happened under the Labor Party…

KELLY:

But nobody wants it, it's on the ground running past homes and people aren't connecting to it or they are connecting to it and they're complaining about it.

TREASURER:

What you've got is now millions of people, Fran, who are now connected up to the Network…

KELLY:

And unhappy.

TREASURER:

…and connecting to it and you've got a proportion of those who have had difficulties working with their service provider and it's important that the service providers actually deal with those customer issues on the ground. Now, if there was nobody connected which was the case under the Labor Party then there would be nobody complaining. When you roll out a big program there would be issues…

KELLY:

Well, as it gets built, more people will connect – as you say – and there will be more complaints as well. But yesterday the Prime Minister described it as inherited by the Coalition as a "calamitous train wreck"…

TREASURER:

It's true.

KELLY:

You still intend to sell this network once the roll-out is complete in 2020 – which is not far out. How do you expect to get a good price for the NBN which you're so intent on trashing it, it would seem?

TREASURER:

Well, Fran, there's still a long way to go on this project and it will continue to improve its performance and it will continue to work out the issues that have been identified rightly by customers and then resolved both by the service providers, and in many cases these are issues with the service providers not the NBN per se, it's the service they're getting from the company who's delivering the service to them at the end of the day. Remember, the NBN is not the retailer in all of this…

KELLY:

No, no, no. The retailer says they can't provide a better service because it costs too much. Basically by demanding a reasonable rate of return, are you just pushing the NBN into a cost death spiral? Because as it charges retailers more so that it can pay the Government, they lift their charges to customers just to get the money to give back to you.

TREASURER:

No, I wouldn't agree with that assessment…

KELLY:

I'm sure you wouldn't but that is a criticism made by the providers.

TREASURER:

They will make that argument but at the end of the day, they're their customers and they need to service their customers and the NBN will continue to work to its business plan model and will continue to roll it out. They're rolling out at a rate which we do in a week what the Labor Party wasn't doing in years so we'll continue to get this out, we'll continue to work closely and listen carefully to customers around the country and put the pressure where it needs to be placed – whether it's on the NBN or particularly on the retail end of the system – to make sure people get what they paid for and that they're getting the services that they're looking for.

KELLY:

But the NBN is losing money, it's not giving returns to you anywhere close to commercial returns. If this is such an important piece of national infrastructure, why not bring it back onto the Budget, treat it as an expenditure like we might have had major transport projects in the past, and let's get on with it?

TREASURER:

There's no requirement to do that. The model that's currently in place is there to deliver the services that are needed and that's the model we'll continue to pursue. I could tell you this, Fran, if the Labor Party had their way then there wouldn't be a return for the NBN at all. It would just be going backwards and it would be on the balance sheet because it wouldn't be hitting the rates of return that are required to keep it off balance sheet where the Labor Party placed it, it was their decision to put that model together and the Government has continued that model and there's nothing…

KELLY:

The Government has altered the model so that people are getting…

TREASURER:

…before us that would suggest to change that.

KELLY:

…fibre to the node…

TREASURER:

Not the financial model, Fran. We haven't changed the corporate model, it's exactly what the Labor Party set up.

KELLY:

Well, part of the financial model is those who do sign up and having enough customers signing up and this is the point that Kevin Rudd was making last night, that you altered the delivery standard so that people can't be bothered signing up.

TREASURER:

Kevin's dreaming. He always was. He was always dreaming about the NBN and he basically fantasized about what he thought his thing was going to do and more importantly how much it was going to cost, and basically reality had to kick in and that's what the Government has done. The project had to be brought back to earth in a deliverable format and we had to get on with the hard job of delivering. Labor comes up with all sorts of marvellous, wonderful programs which they never work out how to deliver or pay for – the NDIS is another one of those, they go out there and they promise the world and they can't pay for it and then Coalition Governments get elected and have to sort out their mess and we've done that on NBN, continue to do it on the NBN, we've had to do it on border protection, we're having to do it on Budget repair. I mean, we've spent the last four years and we'll spend more years cleaning up Labor's mess. That's what Labor Governments do, they just create an absolute mess.

KELLY:

Treasurer, thank you very much for joining us.

TREASURER:

Thanks very much, Fran.