17 September 2018
Transcript - #2018011, 2018

Interview with Fran Kelly, RN Breakfast, ABC Radio National

Subjects: Aged Royal Commission Aged Care; Royal Commission into Misconduct in the Banking, Superannuation and Financial Services; wages growth; National Energy Guarantee and the Emissions Reduction Fund.

FRAN KELLY:

Josh Frydenberg, welcome to Breakfast.

JOSH FRYDENBERG:

Good morning to you, Fran.

FRAN KELLY:

Can we go to the Aged Care Royal Commission first. There's been several major enquiries and investigations into this sector, the Government's already putting a tough cop on the beat to maintain standards, it's the new body called the Australian Aged Care Quality and Safety Commission. So why launch a Royal Commission now?

JOSH FRYDENBERG:

Well as the Prime Minister made very clear in his briefings upon taking this new role, there was evidence of much greater examples of non-compliance; more sanctions being issued on these providers than ever before and more services identified with serious risk. And at the same time, there have been closures at the rate of one per month of these providers who haven't been up to the standards that the public would expect.

So given that record, the Prime Minister rightly saw it as appropriate to undertake this Royal Commission.

FRAN KELLY:

Yet, even your own Aged Care Minister, Ken Wyatt, has told Four Corners, in a program that goes to air tonight that a Royal Commission would be a waste of time and money; the money would be better spent on the frontline and the new body should be allowed to do their job. Why the change of heart?

JOSH FRYDENBERG:

This Royal Commission will be funded, not from money that would otherwise go to frontline services and that is the key point.

And Ken Wyatt made it very clear yesterday that he supports the Royal Commission and it builds on the activities and efforts that we currently have underway - increasing funding by more than $1 billion a year, introducing these new quality standards as you say, a Quality and Safety Commission, and in Scott Morrison's last Budget, he announced 20,000 new homecare places.

FRAN KELLY:

How much of the timing of this announcement has to do with Four Corners going to air tonight with a two-parter?

JOSH FRYDENBERG:

Well the Prime Minister has made it clear that this is not related per se to the Four Corners program, but greater examples and evidence of non-compliance across the sector and the feedback that he was hearing from his senior officials about what was occurring in the sector.

FRAN KELLY:

You're the Treasurer of Australia; we spoke with Ian Yates from the Council of the Ageing earlier. He says this Royal Commission will have one certain outcome – it will hand the Government a significant bill to fix the problem which is being exacerbated by an ageing population and rising numbers of dementia patients. Are you prepared to pay that bill?

JOSH FRYDENBERG:

Well, we are certainly prepared to invest heavily in this sector because that is what the public and senior Australians deserve. Currently, funding for aged care is around $18.6 billion, over the next five years it will jump to $23.6 billion.

So, it is quite a significant contribution that we are already making, but of course we stand ready to support the sector as needed.

FRAN KELLY:

And do you agree it inevitably will mean that? Because we already know the calls for greater care means greater staffing, better training of staffing and more - as is more funding to look after dementia patients properly.

JOSH FRYDENBERG:

Well look, I don't want to pre-empt the findings of a commission that hasn't even been set up yet, but what is clear Fran is that we don't have to just think about the present but we also have to plan for the future.

And there are more people who are staying home for longer so that when they enter residential care, they're entering with more acute needs and this is a real challenge for our residential aged care model.

At the same time we've got an ageing population with the number of people in Australia who are over 85 years of age increasing four-fold over the next four decades and this is going to put real pressure on our system, which will require to be funded.

FRAN KELLY:

Okay, as Federal Treasurer, you are looking closely already at another Royal Commission – the one into the banking and financial services sector. Week after week, it's revealed bad behaviour and rip-offs. Do you lay the blame at the feet of the corporate regulators who didn't manage to stop the worst occurring?

JOSH FRYDENBERG:

Well there's certainly a case to answer here for the regulators because a lot of these activities they were aware of. I mean there's been fees for no service, fees to dead people, examples of lying to regulators and at the same time we saw just last week, 300,000 alleged breaches by a company providing unsolicited insurance advice to the public.

Now this is certainly not good enough. I want to understand why ASIC did not stamp out this bad behaviour and didn't engender a better culture within the financial services sector.

FRAN KELLY:

Well speaking of 300,000; we learnt last week too that ASIC allowed the Commonwealth Bank to pay a $300,000 donation to charity as a penalty for a series of misleading advertisements by its insurance arm, CommInsure. So in doing that, the bank escaped the maximum penalty of $8 million. Were you satisfied with that fine and does that sort of ring a bell here that the regulator is too close and too soft on the regulated?

JOSH FRYDENBERG:

Well again, clearly there is a case to answer. Clearly we need to understand better why the regulators didn't take harder, more definitive action against these companies. Now we have got a Royal Commissioner who is doing an outstanding job. He has been very professional, very deliberate.

The Government awaits his interim report which is due at the end of this month and then his formal report in February. I have said that if he would like more time to undertake his report and his activities, then the Government will favourably consider that. But we will leave no stone unturned in getting a better financial system, which is better customer focused, for the Australian people.

FRAN KELLY:

You're flagging new powers for ASIC already. What more does it need in its armoury to clean up the banking and financial sectors beyond these remediation powers when it comes to faster compensation?

JOSH FRYDENBERG:

Well remediation powers are important because we don't want the public to be short changed for any longer period than they have been by some of these companies. But also reports of breaches that the banks may have undertaken, they need to report them earlier to the relevant authorities than they have been doing today.

There was an ASIC enforcement taskforce that came down at the end of last year. Obviously we are waiting on the Royal Commission findings and all of that will be considered by the Government in due course.

FRAN KELLY:

You are listening to RN Breakfast. It is 17 minutes to 8. Our guest is the Federal Treasurer, Josh Frydenberg. Josh Frydenberg, you told a newspaper in an interview on the weekend that you are confident wage rises are on the way due to ongoing jobs growth and the strength of the economy.

When? Because jobs growth has been strong for a while, corporate profits are incredibly strong at the moment, productivity is strong – when and why will workers finally start to see more money in their pay packets?

JOSH FRYDENBERG:

Well we're absolutely right that key wages growth is a product of strong jobs growth because the tide of the labour market Fran, the greater the competition is for workers. Now we've been creating more than 1,000 jobs a day.

And what we saw in the recent National Accounts figures was that the wages bill for the economy was up 4.8 per cent through the year, which is very strong.

FRAN KELLY:

I thought wages growth for the major sector was 1.6 per cent?

JOSH FRYDENBERG:

What was really significantly up was the wages bill across the economy which takes into account the number of jobs that have been created.

Now, the Wages Price Index was up 2.1 per cent, but you have no less of an authority than the Reserve Bank saying that as the economy continues to grow and more competition for labour ensues, that real wages will increase. And they are already seeing a tightening, in some sectors, like the healthcare sector.

Now, the biggest threat to wages growth comes from our political opponents because they will increase the taxes and they will increase people's cost of living.

FRAN KELLY:

Well, well just before I let you finish this, I think people listening will go, "Well when? When will we see our wages start to grow? When will we start to see that tightening kick in to higher wages?"

JOSH FRYDENBERG:

Well the Reserve Bank in their announcement just a week and a bit ago, said that the outlook for the labour market was positive and that the real wages growth will come and that will come gradually, but it will continue to increase.

FRAN KELLY:

Okay, the Federal Government's decision to dump the National Energy Guarantee, which you spent more than a year of your life working on means that the main vehicle left to cut carbon now is the Abbott era Emissions Reduction Fund.

There's only about $250 million left, I think, in that original $2.5 billion budget. The new Environment Minister, Melissa Price wants a funding top up. Is that going to happen? You going to top that up at budget time and that's going to be how we bring down emissions?

JOSH FRYDENBERG:

Well as you would know, I am not going to pre-empt any decisions by the budget processes and Expenditure Review Committee. But what I would say is, that program – the Emissions Reduction Fund has been very cost effective because it's seen over 190 million tonnes of abatement at an average cost of around $13 a tonne.

Now, 1 million tonnes of abatement is equivalent to taking 300,000 cars off the road for the year. So it is an important policy but it is not the only one we have in place Fran. We have got a National Energy Productivity Plan, which is boosting productivity by 40 per cent by 2030 as well as a series of other policies.

FRAN KELLY:

Just on the emissions reduction fund though, it is generally agreed that that $13 a tonne was because it picked the low hanging fruit; it picked the tonnes of emissions that were- could be dealt with more easily and cheaply in the agriculture sector, for instance. Is it fair to say that if that's our ongoing major emissions reduction fund that carbon reduction purchase in the future will be getting more expensive?

JOSH FRYDENBERG:

Well look, we saw a slight up-tick, but not a great up-tick in subsequent auctions under the Emissions Reduction Fund. But when you speak to people in the sector they do think that there is continued demand and good demand for that program.

So let's just wait and see. But like I said, it's not our only policy, but when it comes to Bill Shorten, he never reached out to try to land the NEG. In fact he called it a, "Frankenstein's monster," so it's pretty typical of him - one minute to be calling it a, "Frankenstein's monster," and the next minute wanting to embrace it…

FRAN KELLY:

Well hang on that's not why the NEG failed though. The Prime Minister at the time was pretty clear it failed because you didn't have the numbers – the arithmetic in your own party room to support it.

JOSH FRYDENBERG:

But he never made the attempt to try to reach across the political divide to land a policy. It does remind me of one of his famous zingers when he said, "if you don't know where you're going, any road will get you there," because he's only been interested in the politics of this issue, not actually about landing durable policy.

FRAN KELLY:

Treasurer, thank you very much for joining us.

JOSH FRYDENBERG:

Always good to be with you.