Treasurer Scott Morrison talks about the money laundering allegations against the Commonwealth Bank, and the outcome of today’s energy meeting in Canberra
Interview with Scott Morrison, Treasurer
Ross Greenwood: Let’s now go to the Treasurer Scott Morrison, who is on the line right now. Many thanks for your time, treasurer.
Scott Morrison: Happy to be with you as always, Ross.
Ross Greenwood: The June quarter, our national accounts came out today. It showed that economic growth is slowly picking up, 1.8 percent annual growth. Nobody would call that robust but from where it’s been it is certainly showing signs of improving. You’re happy with these numbers?
Scott Morrison: Well, at no point 8 percent to the quarter, that was more than two and a half times — that was two and half times what we saw in March so, a definite pick up. But the bit that has really got my attention in these numbers, apart from the fact that we saw what was paid out and wages go up, particularly over the course of the year by more than two percent, was the increase in investment. We’re seeing three quarters now where private new investment has been positive, and this is the first time for many years we have seen private investment over the full year also be positive at one and a half percent. That was particularly in machinery and equipment, and that’s backed in by the strong levels of public investment. I mean, public investment over the year was up 9%, and a big component of that was actually defense spending. I mean, in the last quarter, it was up over 26%. Our investments in defense, our investments in infrastructure, the more competitive tax environment, particularly for smaller companies, this is getting the results we want it to get, and that is increased investment. Because that’s what will drive the growth and, of course, the employment and, ultimately, the high wages that we aspire to.
Ross Greenwood: Okay. That’s also part of the narrative of the Reserve Bank as well. Just one question. I mean, we do understand– just to explain to people. Look, if there is a lack of investment from the private sector quite often the government will step in. In this case, as you point out, it is defense but it’s also state government spending, in particular New South Wales, Victoria, Queensland to a certain extent–.
Scott Morrison: Which we fund as well, as you know.
Ross Greenwood: On infrastructure, which the federal government also does. The big issue is that that raises the debts of those governments. Is that reasonable to do at this particular time, given the fact that there has been very much a quest to try to control the level of government in this nation?
Scott Morrison: Well, a big message we had in this year’s budget was the difference between good debt and bad debt. For the first time, from the 1st of July next year, we will not be borrowing money as a Commonwealth government to pay for every day expenditure, pensions and things like that. The only money we’ll be borrowing, new, after the 1st of July next year is to pay for infrastructure works, things that build value over a generation: airports, railways, ports, roads and so on. But on top of that, it’s to finance the biggest recapitalization of our defense capability that we’ve seen in generations, and that is also a building capacity. With rates at the level that they are and our ability to borrow at sub 3%, that really does puts us in a position of advantage to do those things. Something that both Reserve Bank governors, former and current, have said positive things about, and to use that phase of the cycles to actually support increases in the economic infrastructure and capacity, that lists productivity, which ultimately leads to high wages.
Ross Greenwood: You, as the treasurer, are emboldened and encouraged by the fact that even last week when the Office of Financial Management, Department of Finance come out and indicate that the actual budget deficit or loss that the government has incurred over the past financial year, 30 billion dollars give or take, was around eight billion dollars better than what the budget had previously forecast. In other words, it did not lose as much money to the tune of eight billion dollars as was expected in the budget.
Scott Morrison: Well, that was those figures as at that month, that wasn’t a full year’s figures. But, as I said today, we are expecting a better final year outcome than what I’d said back in May for the last financial year. We are expecting that to be better, and how much better? we’ll be in a position to say probably before the end of the month.
Ross Greenwood: Does the current energy debate worry you in regards to economic growth? Because one thing we continue to hear here when we’ve spoken to chief executives during the course of the earnings period over the past month, so many of those with big industrial concerns have said they’re very worried about the fact that their energy bills have doubled or tripled in some cases, and they’re looking overseas at options. They’re also concerned about energy security in this country, particularly if they’ve got big smelting operations, refineries, whatever it might be. If they have outages it causes very serious disruptions to their competitiveness and even to the actual damage to their plants, that’s like owing jobs. Surely, that must be something, as treasurer, that you must have waked up with cold sweats about.
Scott Morrison: Yes. In short answer to all of that is yes, and that’s why it’s very important that we keep our existing coal-fired power stations open and running for as long as possible. The government is absolutely about thing that occur to ensure that we don’t have any shortfall over the medium term which would create sort of supply shortages that would spike prices. Now, I’m concerned about this from the point of view of families, households who are under increasing pressure. The power bill is not an optional bill, it’s — you can decide whether or not you’re going to buy– go down to Gerry’s, who had a good last year, as you had him on the program the other day, I was listening, and he had a good– Gerry Hobby. But discretion whether you go and buy the furniture or the electrical appliance, but the power bill, that’s one you got to pay. Whether it’s for households– and for the lowest 20% of income of households they would pay of their disposable income, the surveys tell us, about 6% of the disposable income on those sorts of things. That’s obviously less to people on higher incomes. The point you put your figure on, Ross, is really important, and that is for businesses. Particularly businesses that are energy intensive. This can be a real game breaker for them and–.
Ross Greenwood: Because you saw Portland last year and, of course, when the outage occurred there, 250 million dollars worth of damage was done to try and bail out that particular plant. Now, in that situation they could have just wrapped up stumps and said, “Well, that’s it we mothball it and that’s the end of the story.” You don’t want that happening to Tomago, near Newcastle, you don’t want that happening to Portland I mean, this could be a disaster for the nation.
Scott Morrison: When Hazelwood closed down, many in the energy sector thought the answer was for Portland to shut down. When we stepped in there — just like we’ve stepped in and we’re providing the support down there to keep these jobs in place, which we think is incredibly important for a transitioning economy is, people are working in those jobs that are the ones that get crunched in the transition, and we are stepping in to support them. Just like it’s important that we see these coal-fired power stations like up in Liddell and I was very disappointed to see Joel Fritz given in particular run up the white flag on Liddell, I mean, he’d done it before breakfast this morning. The Prime Minister even called him no-coal Joel today. That’s very disappointing together with all those labor members up there in the Hunter Valley, and you’ll have listeners to the program up there, I’m sure. You can’t just write those things off. I mean, these coal-fire power assets currently will generate– I mean, if you want to go and build a new one, that’d generate power at a cost twice, two and a half times what these older ones are currently generating it for.
Ross Greenwood: Okay. AGL says it’s at the end of its useful life in 2022. It’s determined it wants it to close unless somebody turns up to buy. The question is whether, ultimately, whether the taxpayer in some way shape or form have to subsidize whomever buys it because quite clearly they’ve got to get a reasonable return on that investment.
Scott Morrison: Yes, well, what they call the effective life and what others would call the effective life, I mean, there’ll be different opinions about that. I mean, Liddell is not like Hazelwood. Liddell is in far better than Hazelwood. In Hazelwood it was over. the other problem with Hazelwood is that it all came a bit late at the end, and there was a massive remediation bill on that plant. Liddell, there is time for other investors to come in and take a position on this and to ensure that we get a continuity supply out of that station for a lot longer than as currently planned under the current owners. Now, I was in the room when Andy made the point that the idea was open to selling it to a responsible buyer, who they defined that is–.
Ross Greenwood: What you’re saying is, he actually said this, he said, “We are prepared to sell it to a responsible buyer”? Because it’s not the tone that has come out in the tweets that he’s put out subsequently.
Scott Morrison: Well, I don’t understand that. Look, I’m not looking to get into a bite with Andy about this, I mean, we’ll be working closely with IGO on the retail policies and to try and get people a better deal, and so I’m not having a crack at it. All right? He’s running his business and he’s got his shareholders, and I understand all of that.
Ross Greenwood: But you were in the room.
Scott Morrison: I know what he said, but not just me. I mean, Barnaby was in there and as was, of course, Malcolm and Josh but, also, all the heads of the major retail companies, so it was an open conversation that, well, it wasn’t done in secret, not just passed between people under the table.
Ross Greenwood: All right. One last one before I let you go, and that is Australian households. We have talked about them today. The level of savings that they are putting aside at the moment is shrinking. Now it’s quite clearly energy bills, is private health insurance premiums, there’s a range of costs that you’ve talked about that are really enforced upon families that they can’t avoid that are going up at significant rates and faster than their wages. Given the fact that you can see the level of the savings ratio in families declining at the moment, does that give you some cause for pause, does it make you concerned about the state of Australian families?
Scott Morrison: Well, I think there’s a lot of misunderstanding about this household savings ratio. Today’s figures had at 4.6% Now, it shot up to 10.9% at a time when people wanted to get into their cave, and that was after the GFC. Now, at 4.6% that is higher than what it was for pretty much all of the period of the Howard Costello government which were known as good economic years. When the savings ratio comes down, it doesn’t mean necessarily that people are actually losing confidence. In many respects it shows they’re gaining in confidence. At 4.6% that is still higher than what it was prior to the spike after the GFC. A savings ratio decline doesn’t mean people aren’t saving; they’re not dipping into savings. What they’re doing is reducing the amount they are saving. They’re spending more in the economy.
Now, when you have low interest rates, the whole point of that monetary policy setting is that there isn’t as greater incentive to put the money in the bank. There’s more incentive to go out there and spend it in the economy. That’s what it’s designed to do, and I think that’s what we’ve been seeing. That’s supported things like the household consumption figures today. Those figures over the year, where in year average terms at 2.4% But we also saw a very strong quarter on those household, say that household consumption figure of 0.7% to the quarter, and 2.6 through the year on the other measures.
We’re seeing the economy, I think, show a lot of resilience but, as I said, that the investment figure was really strong, Ross. That is– we’ve been waiting for those non-mining investments figures, those investment figures in the private sector to be kicking in now for the last couple of years. I remember having the same conversations with Glenn Stevens and they were the figures that we were looking to see move. We want that to see the dial move on those things. That’s why we set the policies in place that we have, particularly around the tax environment and infrastructure spending, and we are now starting to see that happen. That’s a good– that’s really good news for Australians.
Ross Greenwood: I’ll tell you what, also, the economy, we should remind people, now in its 27th year consecutively without a recession, which is a world record, and that certainly says something about the resilience of the economy as well. Treasurer Scott Morrison, as always, we appreciate your time here on the program.
Treasurer Scott Morrison: Thanks a lot, Ross. Good on you, mate.
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