Topics: Arrium, banking sector, Victoria roads infrastructure funding, fiscal responsibility, Budget.
E&OE…
GREG JENNETT
Now, that issue, Bill Shorten’s royal commission promise and also the PM’s roads announcement in Victoria were among the topics we spoke to earlier today when we brought together Government Victorian Senator Scott Ryan and Labor’s shadow Assistant Treasurer Andrew Leigh. We canvassed a range of topics but bear in mind as we spoke about the political developments of the week, it was before that announcement we just heard.
**start of segment**
Scott Ryan and Andrew Leigh, thank you for joining us today. We kept observing through this week we were in a bit of a hiatus before the Parliament comes back, maybe even a phoney campaigning week. But some substantial issues were thrown up, especially by the end of it. We have had that steel development in South Australia. Scott Ryan to you first of all, is actual cash, a government injection or co-investment, into Arrium there in South Australia a real option?
MINISTER RYAN
That sort of approach is one that Australia moved away from decades ago. And some of the things Kim Carr has said overnight and yesterday I’ve read are outrageous. It’s nothing short of economic xenophobia, if Kim Carr had had his way we wouldn’t have even had the Hawke and Keating reforms. It is important that we have policies that ensure our companies can compete. It’s important to remove every possible hurdle on Australian companies and that is why the removal of the carbon tax was so important for the steel industry, and it’s important that we ensure workers have opportunities to re-train where necessary. But this economic Hansonism of Kim Carr saying imported steel is dangerous, it is unprecedented to have a senior Shadow Minister saying things like that.
JENNETT
Andrew Leigh, let’s pick up on that. There are some questions to ask you too about co-investment which your leader is talking about. Let’s go to the safety issue. Kim Carr is using words like risk of catastrophe, catastrophic failures in presumably buildings and bridges. Now, if that were true, these things would have collapsed by now, wouldn’t they?
ANDREW LEIGH
Greg, the point that Senator Carr is making is that we need to be absolutely sure that steel is of high quality. Maintain those safety standards matters and I heard Christopher Pyne this morning making a similar point. With Arrium we have a company that was spun out of BHP in the year 2000, then a domestic steel manufacturer, expanded its exports and had a good period through the 2000s, but has now struck that situation of a world steel glut. We don’t know whether China has reached peak steel or not but there is plenty of steel around and global steel prices fell about 20% last year.
JENNETT
This is the problem isn’t it, your leader Bill Shorten is talking about making a co-investment. That is then taxpayers money going on the line in an environment which by your own admission Australia can’t seem to influence or control China’s behaviour in these markets.
LEIGH
Bill hasn’t ruled out the notion of co-investment. He wrote to the PM back in February warning that Arrium was on the skids and that it was important for the Federal Government to think through carefully how it could sustain a strong domestic steel industry. If the refinery at Whyalla goes, there would be only be one steel refinery in Australia, the one in Wollongong. So making sure those 10,000 jobs are protected is an important role for the Federal Government.
JENNETT
Scott, your colleague Christopher Pyne is talking about the glut of work in steel fabrication that is coming – shipbuilding and submarines. Is he suggesting there that you might try to mandate some Australian content rules into those projects?
RYAN
I think what Christopher is referring to is the fact that the Federal Government advanced an order for the Tarcoola rail line to ensure the Arrium plant has medium and long term orders and gives it a degree of business certainty. Also pointing out that with the Government spending on infrastructure and other issues moving in coming years that there will be the opportunity to place further orders, and for Arrium to win those contracts. But I think we shouldn’t move away from what Kim Carr said. What Kim Carr said is basically doing is undertaking economic Hansonism by trying to raise the fears. He is not being rational, as Andrew tries to outline. He is saying everyone should be scared of foreign steel. That is an outrageous thing. There are thousands of Australians who work with imported products. There are thousands whose jobs rely on international trade. And Kim Carr is threatening them.
JENNETT
Is there a Government view, an orthodoxy in government, that there is no role any longer for bail-outs and prop-ups? We saw with it the car industry. Does that same principle apply in this case, Scott?
RYAN
There used to be economic orthodoxy on both sides of politics in Australia, and this shows you how far Kim Carr and Bill Shorten are moving the Labor Party away from the policies of Hawke and Keating. If Kim Carr and Bill Shorten had their way, we wouldn’t have had the reforms of the ’80s and we wouldn’t have had 25 years of uninterrupted the economic growth, which is world leading. And that is what they are threatening with this fear campaign that threatens the jobs of thousands of Australians in other sectors.
JENNETT
Andrew Leigh, Labor is as committed to free trade tariff reduction, open borders as the Coalition or it has been historically. There is a point to be made here, that someone like Kim Carr if he had his way would wind the clock right back.
LEIGH
We’re free marketeers and certainly the reforms of the Hawke and Keating governments were important in terms of being open in the economy. Many of the reforms were done on the teeth of Liberal opposition.
RYAN
Virtually none of them had Liberal opposition Andrew, none of them.
LEIGH
In the 1980s there was a steel plan that accompanied the tariff reductions. And the importance of recognising that industry assistance has a place either with their significant spill-overs or where there’s a regional concentration of jobs. In the case of cars, we recognised that it was important to maintain an Australian automotive sector and it was the Coalition that goaded Holden to leave. For all this talk about infrastructure investment, Scott seems to be forgetting that public sector capital investment according to the Bureau of Statistics figures has been falling since the Coalition came to office.
JENNETT
You’re comfortable, are you, Andrew Leigh, with mandating levels of Australian steel content in to publicly funded infrastructure projects? Are you comfortable that that sits alongside free trade agreements okay?
LEIGH
We need to abide by our free trade agreement but it is one of the issues on the table. Australia benefits from open markets. We’re a small country or a medium-sized country, heavily engaged with the world. But it is vital that we look at ways of thinking creatively about maintaining these jobs. Australia needs to have a good base of blue-collar jobs in the economy. It needs to recognise the transition costs have been wrenching. These big changes and steel prices that I talked about before have had a significant impact on Arrium. As has the fact that it’s a vertically integrated business.
JENNETT
Let’s move on to other forms of government intervention that are being discussed this week. Specifically the banking industry. Scott Ryan, some on your backbench are talking about putting a royal commission onto those four pillars that really hold up the economy. That would have a very detrimental impact on the share price of the big four banks?
RYAN
I am not so much worried about that, that is a private matter. What I’m worried about is again this unrestrained Labor populism. And a royal commission into the banks, what does that say to all the people around the world who invest in Australia and people in Australia who undertake personal and public investments that we’re going to announce a royal commission into our banks. It’s purely an electoral stunt. The Prime Minister made a very important speech during the week when he addressed the Westpac 200th anniversary commencement. He made it clear the behaviour of the banks has not lived up to the standard we expect. They got the support of the Australian taxpayer during the global financial crisis. We know that having stronger banks actually saved thousands of jobs, thousands of businesses and thousands of homes. But at the same time their behaviour hasn’t lived up to the standards we expect because people have taken advantage of others, and there’s been a culture in some areas of profit above ethics. The Prime Minister was the first one to ever make that speech at a bank as the Prime Minister but there are regulatory mechanisms in place, ASIC is working, it has announced legal action against a couple of the banks. We don’t need a royal commission which is just a tens of millions of dollars in lawyers’ fees all to make Labor look like it cares about an issue as part of their unrestrained, risky populism.
JENNETT
Andrew, your leader didn’t actually call for a royal commission but he freely bagged the Prime Minister and the Coalition for having ruled one out. So where does this stand in Labor policy? Something you are actively interested in pursuing or just a talking point yesterday?
LEIGH
Royal commissions are by definition a matter for governments. But I was surprised the Government was so quick to rule one out. We know that Australian banks need to be strong. Almost uniquely in the world, our banks go to the international markets every year looking for around $500 billion worth of funding. They get that funding because they are regarded as beyond reproach. The Caesars’ wife test needs to apply to our banks and the recent scandals – the Comminsure scandal, the alleged manipulation of the bank bill swap rate, some of these suggestions of getting mum and dad investors into margin lending for forestry schemes is coming off the back of past scandals in Storm and Trio and do raise significant concerns about the degree to which the vertical integration in our banking sector has taken banks away from their core lending business.
JENNETT
Is there a precedent for putting a very powerful organisation like a royal commission into top 10, blue chip company that, let’s face of it all of them yield large amounts of corporate tax and are the pillars of our economy? Is there any precedent for an inquiry of that nature?
LEIGH
The Government was very quick to put into place a royal commission into the unions but very slow to put in place – think about any sort of inquiry into the big end of town.
JENNETT
Scott, do you want to pick up on that? I want to take you to the general dynamics and polling figures that came out this week.
RYAN
Despite the slogans by Andrew there, it is government by red ink under Labor, it is government by increased debt, increased taxes….
(Interrupted)
LEIGH
How is that deficit going for you Scott?
RYAN
Labor has got more than $50 billion in unfunded promise and Bill Shorten spent last night promising more with absolutely no plan to actually pay for it. The last Labor government broke the budget, we are still fixing it and we’re still fixing it and all Bill Shorten seems to want to do is actually break it further.
JENNETT
Just briefing on pre-election spending, Scott you’re going to have the Prime Minister in Melbourne unleashing some funds on roadworks which have really been looked away in a dispute with Daniel Andrews. Can you just assure us that this is not part of the start of a big infrastructure boondoggle?
RYAN
Daniel Andrews, supported by Bill Shorten spent $1.1 billion not to build a road, unprecedented decision in infrastructure in this country. So, the Victorian Government has had more than $1.5 billion from the Commonwealth that was paid for the East-West Link and what the Commonwealth has done is to say that this needs to be released, this needs to be spent, including on a project that the Victorian Government recently asked for money for, the Murray Basin Rail Project. So this is simply ensuring that Victoria gets the infrastructure it needs, and with the cancellation of the East-West Link the Monash Freeway desperately needs to be upgraded as the major east-west link across Melbourne.
JENNETT
Do you think this is a welcome development, Andrew, that the money will at last come out of the locked box and be put towards some use?
LEIGH
The East-West Link returns 50 cents to the Australian economy for every dollar we spent on it. Any time you have a benefit cost ratio below one that just tells you you shouldn’t be doing the project. That is why the Andrews government didn’t go ahead with it. I strongly support more infrastructure spending, as I said before infrastructure spending has been falling under this Government. And we do need to make sure we’re investing in productive road and rail and opportunities. They need to be carefully assessed by Infrastructure Australia.
JENNETT
Much has been made since the COAG meeting last week that the Prime Minister and the government generally, Scott Ryan, may be coming across as wishy-washy, and then this week we get a public read-out on that by Newspoll, which for the first time puts Labor ahead two-party preferred. Did that touch off any concern in the Coalition that something is just not cutting through with the decisiveness of the Turnbull administration?
RYAN
As I’ve said before, I have been here when polls have said one thing and when they’ve said another. The point that we made is over the last couple of months we said we would conduct our tax and economic debate publicly. The old idea of getting a group of people, usually men in a room and suits and deciding on tax policy and dumping it on the population as Labor did with the Henry Review and cherry picking it is not going to work anymore. We have conducted our tax policy debate in public. We have explained why we have ruled out certain things. And then we are going to announce in the budget what it is we will do.
JENNETT
But you are stretching the patience of the public in that slow and methodical conduct aren’t you?
RYAN
The important point is what do we say in the Budget, and that is what we will be measured by. This week – this week what became very clear with Labor’s unfunded promises is that this is the oldest debate in politics. Labor is the party of higher tax, higher deficits, all of their promises are unfunded. Even Jay Weatherill has said their Gonski promises don’t pass muster, that he is suspicious of the funding. What the Coalition is doing is making sure we’re living within our means. We will increase hospitals and schools spending, but we are going to do it in an affordable way.
JENNETT
Andrew there is a point to be made there about Budget repair. Sure Labor has identified some saves and some spends but we still don’t know what the bottom line might look like as you divvy up those saves.
LEIGH
You certainly have to make sure you have the fiscal responsibility in place. Since coming to office the Government has doubled the deficit and that means that debt in Australia will peak closer to 20 per cent than 10 per cent as it was projected to do when the Government came to office. Labor believes that we need to make some tough decisions and this is why we’ve announced over $100 billion of saves. We don’t believe it is appropriate to spend money on helicopter fairs to lunatic hotel or an expensive marriage equality plebiscite. We believe that direct action is a waste of money and we don’t believe that bringing back the baby bonus is fiscally responsible.
JENNETT
I guess next month’s May Budget and the Opposition Leader’s speech in reply will allow us to further spear into that. For this look back on the week that was, Andrew Leigh and Scott Ryan thank you.
LEIGH
Thank you.
RYAN
Thank you.
(ENDS)