Is Australia’s economy in good shape?

Ross Greenwood speaks to Treasurer Scott Morrison about the national accounts and why weaker exports have “taken the shine” off new economic growth figures.

Introduction: Is Australia’s economy in good shape?

Ross Greenwood:   Let’s start with the national economy. It’s growing. It continues to grow, 2.4%, but this was partly because of a very poor net trade result. One of the worst since 2012. The Reserve Bank had forecast economic growth in 2017 at two and a half percent. It came in at 2.4%. So they’re pretty close. They expect this year it will pick up and will be going at an even faster clip.

Let’s go to the federal treasurer, Scott Morrison, who’s on the line right now. Many thanks for your time, treasurer.

Interview with: Scott Morrison, Treasurer

Scott Morrison: Ross, good to be here.

Ross Greenwood:   Are you pleased with these numbers?

Scott Morrison:  Yes, I think they’re encouraging numbers. I mean, you’ve described them accurately. The net exports position really took the shine off them, I think, but what that hides is what was a very strong result for the domestic economy. The consumption was up. The total amount paid out and wages was up, and I should stress that a third of that increase in what has happened on the wages bill came from higher average wages and 2/3 of it came from more jobs. As you know, last year we had record employment growth 403,100 jobs, the strongest year of jobs growth we’ve ever had as a country on economic record.

On the exports, one thing I think we need to understand about those export numbers, there are a couple of quite significant things that underpin them, which I know you’d been seeing them, I’m sure your listeners would, too. What we had is a pretty big growth, but that was in previous numbers, and so the AG exports were coming down off a pretty high level. That’s faded into that negative number today.

The other part was, you’ve got the closure of the motor vehicle manufacturing. That is now impacting in those numbers now and that will obviously be flushed out of the system over the next 12 months. But that’s obviously had the impact it was always going to have when that came about. Look, then there are sort of minor issues that go into those numbers.

Ross Greenwood:   You would prefer the economy, right? They had to be growing at a faster rate of 2.4%, wouldn’t you?

Scott Morrison:  I’ve always wanted to be growing faster. I think the encouraging news here is what we’ve seen in private investment. Now, while we’re rolling down now the big construction phase of the LNG projects, when you take that out of the system, what we’ve seen is a really big turnaround in what’s happening in non-mining investment.

Now, that non-mining investment in the private sector is up 12.4% through the year. That is a very strong figure. When you look at investment in new machinery, plant, and equipment, that has turned around a 10.7% decline two years ago to an 8.4% increased today as a growth rate. Now, that’s the best we’ve seen since the middle of 2012 at the peak of the mining boom.

The numbers that are in there today, if you look at the top line figures, I agree. People would have expected that they’re a bit bigger, but when you take this sort of net exports position out of it, there’s some really strong signs of what’s happening in our economy, people spending more, the wages bill is bigger, the private investment is picking up, and the public sector is doing, what we– Our job.

Ross Greenwood:   Well, it is true to say that the Reserve Bank says that the economic growth rate is forecasting this calendar year, three and a quarter percent, next calendar year, three and a half percent. So it does pick up and also makes a presumption that the unemployment rate will remain relatively steady during that period of time.

But just one thing, today in your press release, I note you said, “It is why we need to lower taxes to remain competitive.” A lot of people would say, “Yes, well, okay, that sounds absolutely right.” Problem is, it would appear to me at least that your company tax rate cuts are pretty much dead and buried, Pauline Hanson not supporting them and says the government persists in the false claim that company tax rates drive business and investment. She’s quite unequivocally said that one nation will not support the tax cuts. Does that really mean you can’t get them through?

Scott Morrison:  No, we’re a persistent bunch, Ross. We don’t walk away from these things like that. We know that they’re important to drive investment in the economy. I’ve just got ran through the numbers of what we’ve done already. The instant asset write-off for small businesses, lowering the small business company tax rate, increasing the definition of the small business from 2 million to 10 million.

Ross Greenwood:   If the company tax is in Pauline Hanson, if she doesn’t support them, it’s going to be pretty tough to get across the line.

Scott Morrison:  There’s a lot of sitting weeks to go before now and the next election.

Ross Greenwood:   Are you telling me you can convince Pauline Hanson to change her mind?

Scott Morrison:  Well, certainly, I’m not giving up. [laughs] I’m absolutely not giving up because I’m not going to give up on people’s jobs. I’m not going to give up on the wages that can come from businesses investing more. Businesses are now investing more because there’s things we’ve done already. We want to do more of those things. So we will continue to see sustained profit increases, which lead to higher wages.

Ross Greenwood:   Is part of the problem of the Barnaby Joyce situation that’s happened over the past few weeks that really it’s taken the government’s mind and even the public’s mind of what is not a bad economic story. As you point out, at the beginning of this year, you did get a bit of fresh air, 400,000 jobs created. You’ve got the economy rolling along. You’ve got economic growth coming this year to have distractions and significant distractions like such as the loss of a Deputy Prime Minister, which is no inconsequential thing. It really just takes away from the story that the government could otherwise be telling.

Scott Morrison:  That is true and that is frustrating and that’s deeply regrettable. Those matters have now passed. Today, we’re able to speak of the exact things that you’re talking about on your program, and I’m happy to be on your program talking about. We can focus on now with those distractions put behind us because this is the main issue.

Ross Greenwood:   Is this the point of worrying inside the parties? The reason I asked you these is because it seems that every time you get that little bit of fresh air, and the economy is traveling pretty well, and the jobs are being created, but it seems as though there’s a miss tip from a minister here, a miss tip from a minister there. You had Michaelia Cash last week, again, diverting attention to a separate issue. It seems as though you don’t get– You, other ministers don’t get the space to be able to tell the story that Australia is going okay.

Scott Morrison:  Well, again, it’s frustrating, but you don’t allow these things to distract you as a minister, as a treasurer, and as a government. You stay focused on making the decisions that keep that economy growing strongly. Look, we’ve been doing this now for a number of years. When I talked about the jobs and growth plan over two years ago, we’re sticking to that plan, and it’s delivering. The risk is, that if you go off in a different direction as the Labor Party are suggesting, well, you put all that at risk. The hard yards have been put in on this plan, and we’re really starting to see those key indicators turning the jobs growth figures last year. We all know now, more 1,100 jobs a day. Now, that’s great news. As I outlined today, that’s had a really big impact on our economy. We can expect that to continue and now lead to, I would expect, better wage outcomes as long as businesses keep investing and businesses can keep remaining competitive.

Ross Greenwood:   Will Australia continue to be mates with the United States? Malcolm Turnbull returned from the US and said that we’d had 100 years of mateship with the US. If the US imposes those tariffs that does not carve out any exemptions for Australian businesses, will the mateship remain?

Scott Morrison:  Well, I think we’ll always be friends with countries with whom we have a deep history and shared values. That survives all administrations. But what I think is also important to understand is the Prime Minister has worked incredibly hard on this relationship with the president and the administration.

I would say there’s arguably not another leader around the world today who would probably have a better insight into what’s happening there and which enables us to deal with it as we need to. But what we’ve been saying today, I think is the right response and that is keep a cool head, keep a calm head, stick to our plan for the economy. There’s no use jumping at shadows.

I heard Bill Shorten, apparently, he said today, “Oh, we stand ready to act in retribution with the government.” Well, you don’t want that sort of a hot-headed response. It’s in the same went to one of the second that the US decided not to get on to the trade to the TPP, said was a waste of time, started telling dead parrot jokes about it, and then we’re able to ensure that the deal was landed. The Prime Minister demonstrated the constancy and the patience and the maturity in this relationship, which will stand Australian good setting in what is clearly a bit of a challenging time.

Ross Greenwood:   Okay. In hindsight, being hindsight, should’ve the government done more to have prevented the merger between the CFMEU and the Maritime Union of Australia?

Scott Morrison:  Look, to be honest, I’m not too across that story. I’ve been focused on a few other things, Ross.

Ross Greenwood:   Understood.

Scott Morrison:  I’m going to refer you to Michaelia on that one. It’s not one that had my focus of attention as you expect on comparing.

[crosstalk]

Ross Greenwood:   But you would be concerned about a concentration of union power?

Scott Morrison:  Of course, I am.

Ross Greenwood:   On one that can potentially hold up the country in regards to construction and also with us.

Scott Morrison:  This is why we put the Australian Building Construction Commission in place. This is something the Labor Party opposed is doing tooth and nail. We had to take it to a double dissolution election along with the registered organization’s Act, which basically wanted unions that behave like companies have to behave and observe the same sorts of protocols and codes that they do. The Labor Party give the Union a blank check on these things, and we know what damage that would do to our economy. Look, I’m sure my colleagues are looking at that closely, but you’re not going to see from the coalition green lights given to militant unions like Bill Shorten will.

Ross Greenwood:   I’ll tell you what, it was good to have you in the program. Treasurer Scott Morrison, the economic growth numbers, not too bad, and they are expected to pick up even more during 2018, and we appreciate your time.

Scott Morrison:  Thanks a lot, Ross. Always good to be with you. Cheers.

 

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Image source: 2GB 

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