Q&A at the Australian Financial Review Business Summit International Convention Centre, Sydney

Transcript
07 Mar 2018
Sydney, NSW
Prime Minister
Steel, North Korea, Tax Cuts, Next election, Adani Mine
International and Trade, Environment and Energy

PHILLIP COOREY:

I’d like to start if I could Prime Minister, with where you finished, on trade. It’s the topic de jour at the moment, are you any clearer as we sit here, where Donald Trump’s thinking is, or where the US may have landed on tariffs and especially pertaining to a possible exemption?

PRIME MINISTER:

On steel? Yeah okay. Well you know that we believe, we’re satisfied we’ve made a very strong case - we make that case all the time. We’ve spent quite a bit of time today on it already, but we've made a very strong case for Australia's exports not to be affected by this.

If I could just deal with BlueScope as by way of example. Mr Mark Vassella -  is he here from BlueScope?

PHILLIP COOREY:

Down the back.

PRIME MINISTER:

Down the back there, hey how are you?

Look as he can confirm, BlueScope sells steel - ships steel from Australia to its plants on the West Coast of the United States to make into, essentially, roofing products. I've discussed these in considerable detail with the President, with Wilbur Ross, with Mnuchin, Steve Mnuchin, Gary Cohn and others.

They are, the West Coast market - because of the high cost of freight from the East Coast imports its steel, for the most part. There's not a history of shipping steel from the East Coast to the West Coast.

So this is a market that supports hundreds of jobs, I think it’s over 700 direct jobs in BlueScope’s operations on the West Coast. The consequence of imposing a tariff on Australian steel to the West Coast, would be simply one of putting up a price of building in California. It’s at the expense of Californians and other people and other West Coast states and it would also run the risk, of course, of demand destruction, that people would substitute other products for those steel roofing products.

So there is literally nothing to be gained in the United States at all, from imposing a tariff on Australian steel exports. So we've made a very strong case and we are continuing to make it.

PHILLIP COOREY:

You first made that case in Hamburg last year at the Group of 20 Leaders’ Summit and the Financial Review reported that you both, you and Mathias Cormann, left that summit confident that there would be a carve out. Then we’re all together in Washington again last week and I don't think you left so confident. If Trump doesn't give us an exemption, I’m sure you’ll attract some inevitable criticism of the alliance, of the “mateship” theme of last week. What's your response to that? I mean, would you feel let down by Donald Trump, given that he gave you assurance?

PRIME MINISTER:

Look, I think what I'll do is continue to make our case, both publicly as I have in the United States, as I have in many forums. But also we’ll continue the very intense private engagement.

I think Australians know very well - everyone knows - that I am very staunch advocate of Australia's interests, regardless of who we're dealing with.

PHILLIP COOREY:

One of the consequences, obviously, which you warned about, is the potential for a trade war. Dr Lowe just said previously that the best course of action is one of restraint, for everyone to sit still and do nothing, if these steel tariffs go ahead –

PRIME MINISTER:

Phil I wouldn’t -

PHILLIP COOREY:

just sort of escalating the situation?

PRIME MINISTER:

From my point of view, as Australia's chief advocate - and I've been I've been representing Australia in tough negotiations for some years now and spent much of my life, most of my life representing others in tough negotiations - I'll continue to focus on the goal; which is to ensure that Australia, as far as we can, that Australian exports are not affected. But there is literally nothing to be gained - even theoretically - in the US, from imposing a tariff on Australian exports of steel. It’s the case we've talked about here, for the reasons that I've described and again, we've had that discussion extensively whether it was in Hamburg last year or in Washington ten days or so ago.

PHILLIP COOREY:

If we just remain overseas for a minute, there was news last night, or this morning our time, about the possibility of some détente if you like, between South Korea and North Korea. President Trump has expressed, or cautiously welcomed it as a development. Are you briefed on the situation? Are you optimistic.

PRIME MINISTER:

Well I'm kept very closely briefed on the developing situation on the Korean Peninsula. I would respond in the same way other leaders have, which is with cautious, extremely cautious optimism. Perhaps I should rephrase that -  I’d say I welcome it, but cautiously, because we have had these glimmers of light before, only to be disappointed. The one thing that we must be very clear about, is there must be absolutely no relenting in the economic sanctions against North Korea. It is vital that they are enforced and enforced strictly in accordance with their terms. That is the only means, in my judgment and I believe, our allies, our judgment, that we will see North Korea move towards denuclearization. That’s the only lever that we have, short of the obviously catastrophic consequences of a conflict.

PHILLIP COOREY:

And next weekend here in Sydney you'll be hosting the special ASEAN Summit, you announced that back Hangzhou I think, year before last at the G20.

I guess it’s been described as a “breakthrough” role if you like, just getting everyone round to talk. Are you disappointed that President Duterte from the Philippines has pulled out? Is there any suspicion as to why?

PRIME MINISTER:

Well President Duterte always said that he wasn't coming, right? So of course we would love him to be here. We very much welcome his presence. But he had always indicated he was not going to attend. He's not - I would say - he's not enthusiastic attendee at international conferences.

PHILLIP COOREY:

We’ll move to investment Prime Minister. In your speech, you spoke about wages growth. You took a shot at Bill Shorten, basically what you’re saying is – and this is one of the significant, I guess, gripes out there amongst the punters about slow wages growth, it’s been flat for a long time. But you’re essentially telling us today that the choice in the short term at least is either modest wages growth or longer employment queues?

PRIME MINISTER:

No, the point I'm making is that Labor does not have one policy, that would encourage one company to invest an extra dollar or hire an extra employee, right? They don't even claim to.

I mean this is the big change. In 2007, Kevin Rudd ran as a John Howard lite. He said he was an economic conservative, he criticised Howard for spending too much money. He went from boardroom to boardroom proclaiming his love and deep affection for the business sector.

Shorten on the other hand is running a thoroughly anti-business agenda. He wants to increase taxes on businesses large and small and on individuals and on family trusts. He has no policies that would encourage investment. As far as wages are concerned, he wants to support the ACTU increase, dramatic increases in the minimum wage, which we all know would have the result of less employment.

So you know the big point of difference is this; it’s that we know - as used to be the bipartisan common sense understanding, because it is common sense -  we know that the key to stronger wages growth, is stronger economic growth. That's exactly the point. I don’t know whether Phil Lowe made it in precisely those terms this morning, but he’s made it many other times. It's common sense. You get more demand for labour, you get more investment, higher productivity, higher wages. It’s like labour shortages; people have to pay up to get [inaudible], many employers in this room would know exactly what I'm talking about.

That is the key.

Now if you try to deny that on some sort of populist, ultra-left bandwagon – which is what Shorten seems to be committed to, insofar as he can be consistent on anything - the result of that, is going to be fewer people in work, less demand for labour and ultimately, lower wages.

Everyone says political contests are choices, and they are, but the choice hasn’t been this stark for generations. I think going back to the Whitlam era, as some people do, you’re starting to get literally into a different era.

In the recent times, this is the first time we have seen the Labor Party move far off to the left on an anti-business agenda. It is one that would be absolutely destructive of investment and of employment, of jobs and wages growth. So it is a big gap.

PHILLIP COOREY:

I’m mindful that the GDP figures are out in a couple of hours, when do you think people could expect strong wages growth, when will moderate become strong?

PRIME MINISTER:

As long as economic growth continues, you will see – and demand for labour continues – as long as you get increasing investment, you will get – because the laws of supply and demand have not been suspended you'll get growth and stronger growth and wages and of course you'll get higher productivity. The more investment you get the more productive labour will become, therefore it will command higher reward.

PHILLIP COOREY:

If we look at the opinion polls it appears that populism seems to be working. I mean you – I don't think you’ll get an argument with your policy approach with many people in this room but out in the broader – the broader electorate. You know we've come around to 30 negative Newspolls, which one of the metrics you cited the time. Whatever Shorten seems to be doing is possibly working or might be a combination of some of the distractions with your government. What's your message to your colleagues and probably the electorate at large in a month's time when I assume we’re going to hit 30 negative polls, barring some miraculous shift in sentiment which don’t happen often. Why should they stick with Malcolm Turnbull’s leadership and policy direction?

PRIME MINISTER:

Well because it's working. 403,000 jobs last year.

When I became Prime Minister I said that I would deliver strong economic leadership.

How do you measure that? Jobs growth, I would think would probably be the key indicator, wouldn’t it? That's what it's all about.

We’ve had 403,000 jobs delivered, created last year, the largest in our history. The longest monthly run of jobs growth in our history. You know these are – that’s you know you talk about people outside this room. You talk about you know, the whole Australian community. If we're not talking about jobs what are we talking about?

So much of what is written in the political media and political commentary is of interest only to the press gallery and I suppose political tragics who lap it up.

If you go out - walk out of this conference centre and you walk down this street, get the train, get the bus, go on and chat to some people in a cafe or a street corner. You will find that the big issues remain the economy, jobs. Will I keep my job, or will I get away with my business that I'm planning to start, is this is the right time to start it. Will my kids be able to get a job, my son-in-law’s lost his job, will he able to get another one. These are the issues that are of the most salient importance and that is why our laser like focus on the economy - Jobs and growth – you’ve heard me say it before. That is the key, and that’s what we’re delivering and that’s the answer. We are delivering on that commitment.

PHILLIP COOREY:

So if I could have from a political sense, how do you distil that message, if you're talking to a family on $80,000 a year who are generally aware that there’s an upswing in the economy and things are generally looking better but they're not feeling it. Now these are the people it's easy to target. Kevin Rudd targeted those families in 2007, even though the economy was going gangbusters still then. How do you distil that message to a personal level to someone who's really doing it hard, you know 80 grand combined family income. How do you personalise-

PRIME MINISTER:

Well Phil there are two things - there are many aspects to this but two key ones. One is cost of living. One is ensuring that there is more money in the pockets of hardworking Australian families, we’ve already delivered one middle income tax cut as you know, when we shifted the 80,000 threshold to $87,000. That provided tax relief to a half million middle income taxpayers.

That is our focus for the future, is to provide tax relief for middle income Australians. Of course as I've said many times the scale and timing of that is dependent on our budgetary circumstances. We're not going to compromise our return to surplus.

PHILLIP COOREY:

But will they know when they when they go to the polling booth in the next 12 months, when they will get that tax cut?

PRIME MINISTER:

People will be very well informed on all of our economic agenda by the time they go to the polling booth in 2019.

But I want to just say also, you look at energy prices. We have made some massive changes to energy.

You know we have secured, ensured that we have adequate supply of gas on the East Coast. That has been a critical – that’s protected 60,000 jobs in energy intensive manufacturing alone. We’ve seen the wholesale price of gas come down. Don't take my word for it take Rod Sims’ word for it – the ACCC.

We're starting to see cost of electricity coming down as more supply comes into the market as the price of gas comes down. As that sets the price at the margin. We've got a host of reforms abolishing Limited Merits Reviews and so forth. Relieves some of the price pressures in the future on polls and wires costs.

So our focus is on ensuring the strong growth, more jobs, better jobs, better paid jobs, everything drives to that. The tax cuts, the trade deals, the big investment in infrastructure and wherever we can we want to put downward pressure on cost of living. The cost of living and energy is a very good example of that.

PHILLIP COOREY:

Terrific, okay well we’ve run a bit over time. But if I could just ask you one final question Prime Minister. Do you support the Adani Coal Mine and why?

PRIME MINISTER:

Well the development of that mine - the answer is yes, put simply.

But let me just be quite clear about this. This is a project that has gone through extensive environmental permit. Both at the state level and the federal level. Mostly state level. All of that permitting has been done, it’s taken a very long time. They are entitled to develop it in accordance with those permits.

And so when Bill Shorten goes up to Queensland and he says ‘I'm in favour the mine’ but then goes down to inner city Melbourne and says ‘no I'm against it’. You can see what a risk he is to investment, to jobs, to the economic future and security of Australia because he is completely two faced.

The reality is this. We have high environmental standards in Australia. Yes, so we should. If people want to develop mines in Australia they've got to get through those environmental hurdles. If you do that and you get those permits then you should be entitled to develop your project.

And it doesn't matter whether it's a coal mine or an iron ore mine or a lithium mine, or bauxite mine. You should be entitled to get on with it.

Now as to whether, you know it is financially or commercially viable that's a matter for the company.

You know that is their concern. They've got to determine what their internal rate of return is, what they need to satisfy their investors and so forth - that's their concern.

But you know what Bill Shorten is doing - He’s not just threatening that project. He's threatening every other project. And he’s threatening future projects, because what he's saying is, that he is prepared to cancel a project, to do as he promised to Geoff Cousins, use some arcane legal argument to overthrow a project for which hundreds of millions if not billions of dollars have been committed already. Overthrow that in order to win a by-election in an inner city electorate in Melbourne.

I mean he will have a shocking, chilling effect on jobs and investment in Australia.

And you know the difficulty is he's contradicted himself. He said one thing in Queensland and another thing in Melbourne. He demonstrates that he lacks all conviction on this. It’s this two faced uncertainty that is going to be an enormous threat to jobs.

So that's why it's going to be very important when the election comes next year that we win it and that we are able to continue that reliable, certain, considered, pro-business, pro-investment, pro-jobs policies that we've been undertaking.

And which, just in case you were nodding off earlier, have resulted in 403,100 jobs created last year!

[Laughter]

PHILLIP COOREY:

And the election will definitely be next year?

PRIME MINISTER:

Yes, the election will be next year, 2019.

PHILLIP COOREY:

Cross your heart!

[Laughter]

PRIME MINISTER:

Yes.

PHILLIP COOREY:

Okay.

PRIME MINISTER:

Well Phil, the election will be next year I can assure you, there is no plan, intention or consideration given to doing anything other than having an election at the usual time, which will be in the first half of 2019.

PHILLIP COOREY:

Okay fortunately we’ve hit time, but thank you very much Mr Turnbull for your time, and round of applause for the Prime Minister.

PRIME MINISTER:

Thank you.

[ENDS]