FRAN KELLY: Prime Minister Malcolm Turnbull has called Australia’s top, business, union and civil society leaders to Canberra today for a snap summit to plot a new direction for economic reform. He says he wants to achieve a broad consensus quote on “the most pressing economic and social reform issues facing Australia” in a bid to lift growth and living standards and he’s signalled that everything is on the table including changes to the wages system, superannuation tax breaks, the GST. Let’s find out. This summit has been called amid darkening prospects for our economy though. The IMF has warned this week that commodity exporting countries like Australia face a further economic slow down if commodity prices keep falling. The Prime Minister’s in our Parliament House studios. Prime Minister welcome to RN Breakfast.
PRIME MINISTER: It’s great to be with you Fran.
FRAN KELLY: You set aside three hours today for these direct talks with eight leaders from business, community and union groups. What do you hope to achieve by the end of this meeting?
PRIME MINISTER: Well as you know, last month The Australian newspaper and the Australian Financial Review convened a summit of business and unions and civil society groups like ACOSS and the Youth Alliance, you know the ACTU, the Business Council of Australia and so forth, to discuss these big economic issues and they achieved a remarkable degree of consensus at least on the problems that we’re facing and the objectives that we need to achieve; greater productivity being the prime one. It seemed to me that it was important for me and my economic Ministers to meet with the leading groups from that summit. We are not holding a summit we are having a meeting, to meet with them so they can tell us what they concluded and have a good free flowing discussion – we’ve allocated three hours for it – so we’ll have that discussion and really explore the issues and the solutions that each of them are proposing so this is an exercise from my part and the Government’s part in listening and engaging. It is part of being a modern, consultative, 21st century Government that engages with the whole of the community.
FRAN KELLY: Being modern and consultative is positive and everyone’s welcoming that. You said when you took on the top job that you would be better than your predecessor in explaining to the public why we’re needing economic reform. But the reality is that no one can really understand and sign on to the need for reform unless they do have some details to try and understand what they’re talking about. So, on tax for instance, how soon will the tax green paper come out?
PRIME MINISTER: The tax green paper will be coming out shortly. But let me just say to you Fran, it’s important to remember that the objective of economic reform is to improve productivity, improve living standards, ensure that we remain and improve, become enhanced if you like, as a prosperous first world economy with high wages and a generous social welfare net. There are a lot of elements in economic reform. The tax system is one of them. It is probably the single biggest lever that the Federal Government has on the economy. It provides incentives and it provides disincentives and getting it calibrated so that you raise the money you need but raise it in the most efficient way possible and ensure that you are, as far as possible, incentivising business activity, incentivising people to work, incentivising people to invest and hire people, you know that’s the goal. You can raise a given amount of money inefficiently in a way that deadens economic activity, or efficiently in a way that actually incentivises economic activity. So the design of the tax system, it’s not just a question of raising more money or less money, it’s a question of getting right.
FRAN KELLY: I think everyone understands that an efficient, incentivising tax system is the Holy Grail and at the Economic Reform Summit last month, the groups agreed on that and they agreed that all policies in terms of tax should be on the table, including for instance perhaps curbing generous, high-end super tax concessions, even looking at increasing or broadening the base of the GST. Can you be clear with us now – as you look at drawing up an efficient, incentivised tax system – are those options, just to be clear here, now back on the table for consideration because they were ruled out under the Abbott Government.
PRIME MINISTER: Fran, everything is on the table. And can I just say to you, this is a very important role that you have to play as one of our leading journalists and broadcasters setting an example for everyone else. Can I just make this point to you, there has been a really counterproductive culture in the political debate and political discourse; this rule-in, rule-out culture where people, politicians are backed up against a wall and said rule this in and rule that out, and if you don’t rule something out, then immediately they say, ‘oh, well you’re going to do it’. What we need to have is an orderly, thoughtful, consultative process to come up with the right answers. If you turn this into sort of a ‘gotcha debate’ you end up whittling people away until they’ve got no options left. You can ask me to rule in or rule out as much as you like and I won’t oblige you.
It’s really important I think for all of us to understand that we’ve all got a vested interest in there being an open debate, all things being on the table, nobody assuming that they’ve got the right answer. Everybody’s theory or proposition will undoubtedly be improved by discussion. Then of course, at the end of the day, the Government has to make some decisions. We then have to say, ‘ok here are the problems we face’, which is declining productivity, and our economic growth will be not driven not by a future commodities boom, it will be driven by productivity; everyone accepts that. These are the measures we believe are the best ones to drive that productivity into the future to benefit everybody in Australia. Then we’ve got to make that case, that’s our job.
FRAN KELLY: I understand that and I agree with you. I think a rule-in rule-out game is really vacuous and not much use. But, at some point the Government does have to make the case and we have been talking about these issues for a while now. Those at the Reform Summit say they want something to come out of this that was doable. I’m wondering, trying to get a sense for everyone that’s listening, when the Government has got a timetable for making that case. When will we get the tax green paper? Will voters have a say on your tax reform plans at the next election? Is that your plan?
PRIME MINISTER: Fran let me just say this. Obviously there will be a tax green paper published shortly. I’m not going to set out a timetable. I’m not going to lock myself into a timetable. You will understand that we’re not going to conclude this meeting at 1pm today and come out say ‘right, we’ve decided to do X,Y, and Z’ I am leading a traditional Cabinet Government and we are going to make decisions carefully, consultatively, and listening – not just talking to – listening to as many people as we can and the Cabinet will make these decisions and we will present them in the course of the next year between now and the election. But with great respect, I’m not going to be locked into any particular timetable at present. I think you know that I’m not somebody that drags his feet and I’m an activist, but I’m a thoughtful and considered activist. I’m expeditious, but I’m not rash.
FRAN KELLY: Our guest is Prime Minister Malcolm Turnbull. On the economy more broadly Prime Minister, this week the IMF issued us a warning for commodity exporting countries like ours that growth could be brought to a standstill if commodity prices keep falling. The ratings agency Standard and Poor’s said yesterday a quote “Australia’s the loser from China’s slow down, what was a blessing before is now a curse”. Now I guess that’s self-evident, but should you be telling Australians now to brace for some rough times ahead?
PRIME MINISTER: Well I think there’s always a danger in talking about economic matters in metaphorical or overly colourful language – let’s be quite plain. What happened in China was that when the GFC struck in 2008, the Chinese embarked on a massive stimulus – massive government stimulus to fund infrastructure, to fund real-estate development. They did that in a number of ways, most particularly by keeping money very cheap by process of financial repression. So what all that meant was that China had an enormous demand for the makings of steel, iron ore and coal. Clearly so demand for iron ore in particular just skyrocketed – it’s not like making iPhones or televisions, you can’t just switch on additional production instantly. So the supply response took some time and prices went through the roof. Ok, that always happens with commodity booms. A lot of investment followed and that was fantastic for us.
FRAN KELLY: And now the prices come off and we’re at the end of the mining boom and I think everyone can see that.
PRIME MINISTER: That’s right. This is all part of the natural order of things. You have to be realistic about this, there was always going to be a mining construction boom, there was always going to be a decline in the rate of growth for steel and hence iron ore and coal in China, and there was always going to be a big supply response, so you have demand growth slowing, supply increasing, so prices come back.
But you know something? The good thing is from Australia’s point of view, we dominate the seaborne iron ore trade. We’ve had many, many billions of dollars of investment in Australia, our mining infrastructure has been refreshed. We are undoubtedly winners. Nobody, seriously, could have imagined that those sky high iron ore prices were going to continue forever. What has happened frankly, has been entirely predictable and entirely predicted.
The good news is, because of the economic reforms of years past, because of a floating dollar, because of an independent Reserve Bank, what we’ve seen is a very big adjustment to this change in our terms of trade, and I’m not suggesting it has been easy, but we have not seen the massive unemployment or the massive inflation that we used to in transitions of this kind in years past.
So the benefits of economic reform of past years are being seen today and it’s a great credit, including to my former colleague Peter Costello, an architect of a number of those reforms, and of course Paul Keating before him.
FRAN KELLY: And new challenges come all the time and talking about big adjustments the alarm bells seem to be going off everywhere at the moment about the potential financial risk of climate change, earlier in the program we heard of the bank of England chief Mark Carney who yesterday warned climate change could threaten financial resilience and longer term prosperity. BHP Billiton is testing how it can withstand global action on climate change, communist China is turning to a market mechanism in the form of an ETS. You understand the financial risks I know that. Are you certain Australia is doing enough to mitigate those risks?
PRIME MINISTER: Well I’m satisfied that the target of reductions by 2030 that we have committed to, that is to say 26-28% reduction from our levels in 2005 is an appropriate one and comparable to similarly situated countries. It’s a very big reduction by the way on a per capita basis which is arguably the best way to measure it, because we have you know a higher level of population growth than most other countries. So I think the target is perfectly defensible and as I say it’s absolutely a reasonable one. I can understand people saying it should be higher or lower but I think we’ve struck the right spot.
Now in terms of the means of achieving those emissions, Greg Hunt has put together a series of measures, the hall mark of which or the centre piece of which is the emissions reduction fund and that has been achieving very significant reductions in greenhouse gas emissions at a, I wouldn’t say a low cost, but a relatively low cost compared to – well it’s about $14 a tonne. That’s pretty good going.
I’m satisfied that we can achieve those reductions by the mechanisms we have in place. I know people say, well you and John Howard supported an emissions trading scheme in the past and that’s true. Emissions trading schemes are a valid mechanism. I have to be honest and say that they have to date worked better in theory than in practice but the object is to cut emissions and the means you use to do it and there are many different means is really a secondary consideration.
Does our government take climate change serious? Absolutely. Are we committed to reducing emissions? Absolutely. Do we have the means to reduce those emissions? I believe we do and so far Greg’s worked has proved to be successful. The mechanism will be reviewed in 2017 and obviously if there are elements of it that are not working as well as they should they can be tweaked or amended and so forth. We are an agile Government, I just want to stress this. You will see that when we announce policies, I’ve always done this in the past in previous roles. We tell you and say, this is the best approach we believe available to us in the circumstances. If however we find it doesn’t work then we will do something different. If we feel it can be improved, we will improve it, we will learn from it. We’re not writing the laws of the Medes and the Persians here; that there can never be changed. This is a 21st century government we are agile, we are dynamic. We are constantly learning and prepared to change to achieve our objectives sooner, cheaper, better.
FRAN KELLY: Prime Minister, in the interest of agility, can I go quickly to a couple of other issues beyond the economy? This week’s 7:30 told the harrowing story of a woman on Nauru alleging she’d been raped, she had been granted refugee status – she was living outside the detention centre. We also heard on the programme this week from a former Nauru magistrate that the justice system and police system there are neither equipped nor inclined to protect these women and to bring the perpetrators to justice. Now you’ve said clearly people on Nauru will not be settled in Australia. So what is your plan to keep women like this, and others in Nauru, safe?
PRIME MINISTER: Fran, we are absolutely committed to supporting the Nauru Government to provide a safe environment for all the transferees and refugees on Nauru. FRAN KELLY: But that’s not happening and that’s not what we’re hearing, quite clearly.
PRIME MINISTER: Let me go on. The story on 7:30 on Monday night did reveal, as you said, a very alarming issue of safety for women there and we take that very seriously. So we’re taking a number of steps to work closely with the Nauru Government to ensure the safety and security of all the refugees living in that community. We fund the deployment of the AFP officers to support and mentor the Nauru police in their basic investigations; in their policing and dealing with child abuse and sexual assault matters. So we are very committed to this. The Nauru government has recently established a gender violence and child protection unit within their Department of Home Affairs. The Minister Mr Dutton – the whole government – is very committed to ensuring that women, that all of the transferees and refugees – but in this context, women and children – are absolutely safe in that environment.
FRAN KELLY: But there is no plan… you say these women can’t come here, but there’s no plan to resettle them anywhere else. Is Australia working actively with other countries to try and take the women and children?
PRIME MINISTER: We certainly are working actively and of course a number of them are in a position – quite a number of them are in a position who have not been granted refugee status – are in a position to return home from whence they came.
FRAN KELLY: I’m talking about the ones that are refugees.
PRIME MINISTER: We are working actively to achieve resettlement for them. I just have to say – if I just get back to the fundamental issue of unauthorised arrivals; people-smuggled arrivals. We don’t theorise about this any longer. You will recall that John Howard’s policies worked; the boats had stopped. Kevin Rudd became PM – I remember it extremely well because I was the opposition leader at the time – and Kevin said, ‘it doesn’t really matter what our domestic policy is, it’s only the external policies’. My argument on the contrary, I said ‘don’t touch what works, Kevin. Leave it as it is. The domestic policies are like a gate valve. You change them, and the arrivals will start again; the people smuggling will start.’ Well, he did it. This was a billions-of-dollars… tragically, hundreds of lives. We don’t actually know how many lives and of course tens of thousands of arrivals so the one thing that we know is that our policies, tough though they are, harsh though they are in many respects, actually do work. They save lives. And this not a theoretical exercise anymore. Sadly I wish Rudd hadn’t done it but he…
FRAN KELLY: Well this isn’t theoretical either, that the women living in Nauru feel terrorised.
PRIME MINISTER: I understand that and that is why we’re taking the steps I described, to ensure that they’re protected. That’s our commitment.
FRAN KELLY: Just briefly, I know you’ve got a busy day, but on the China Free Trade Agreement – it’s reported in the Fin Review today that the ALP will insist the legislation – the Migration Legislation Act – be changed to mandate labour market testing before foreign workers can be brought in, but without any special mention there of the China FTA, so it leaves the agreement separate and this would apply to all Free Trade Agreements. Would that compromise be acceptable to the Government?
PRIME MINISTER: I saw that story in the Financial Review. There is a bill in the house – the Labor Party of course is free to an amendment – if they’ve got a specific proposal clearly they’re free to make it. But can I just say this; that Mr Shorten is the only Labor leader, past or present of note, that is opposed to the China-Australia Free Trade Agreement or does not want to get it passed as soon as possible. All the rest of the leading figures in his party want it passed.
FRAN KELLY: And now they’re putting a plan to you to try and get it passed.
PRIME MINISTER: So I read in the paper, but I haven’t seen it. I’m not sure whether Mr Shorten wants to communicate with me through the Financial Review, [inaudible] journal though it is. Can I just say though that Mr Shorten’s problem is that he has allowed the CFMEU to run a very, very virulent and extreme campaign – and exaggerated and dishonest campaign – against the Free Trade Agreement with China, which is a fundamental building block for our future prosperity and by his silence, he has endorsed it. You’ve got this extraordinary situation where the alternative Prime Minister of Australia, the Leader of the Opposition, the leader of the Parliamentary Labor Party, is bobbing along like a cork in the slipstream of the CFMEU. And there is no other Labor leader that is being so passive and supine.
If Shorten has got some proposals, then he should make them and not through briefing a newspaper – assuming that briefing was correct – there is a proper mechanism to do that. He could do it in the Parliament. He could make a proposal to me, he could make a proposal to Andrew Robb but I think if Labor has got a proposal to change the arrangements re: the Free Trade Agreement then they should make them because at the moment everybody quite reasonable assumes that the CFMEU position in all of those ads which are just designed to frighten us all into poverty; the CFMEU position is Bill Shorten’s position and he’s only got himself to blame for that.
FRAN KELLY: Prime Minister thank you so much for joining us for breakfast.
PRIME MINISTER: Thank you so much.
Ends