FRAN KELLY: The Treasurer, Josh Frydenberg, joins me now in our Parliament House studios. Treasurer, welcome back to breakfast.
JOSH FRYDENBERG: Nice to be with you Fran.
FRAN KELLY: The Government talks a big game when it comes to potential savings here, spruiking $830 cut to annual power bills under default contracts. The review of retail power prices by the ACCC found the savings much more modest; somewhere between $105 and $165 a year.
Isn’t the fact that households will only achieve the biggest saving if they switch from the very highest price offer in the market to the very lowest and how many will that be?
JOSH FRYDENBERG: Well, the first thing to say to you Fran is actually, wholesale prices come down around 25 per cent this year and we saw retail prices across Queensland, New South Wales and South Australia come down from the 1st of July this year.
Now, we tasked the ACCC to do a deep dive into the energy market to compel thousands of documents that otherwise would not have seen the light and based on Rod Sims’ recommendations, we are taking forward these various recommendations.
FRAN KELLY: Sure, but you’re also claiming it could save people up to $832 a year. Now, will that be 10 people, 100 people or will most people get the $105 that the ACCC says?
JOSH FRYDENBERG: Well, actually there’s 1.2 million people that have been on standing offers and these standing offers are the highest offers in the market. So, what we are seeking to do is to end the confusion, to create what is a default price, or a standard price from which the discounts can be made.
You see, if you are getting a 40 per cent discount on 30 cents a kilowatt hour on your power, that’s not as big a saving as getting a 20 per cent…
FRAN KELLY: Sure, so you think a million could be $800 a year better off?
JOSH FRYDENBERG: Well, we think they could be hundreds of dollars better off and Rod Sims talked in his report, in some cases of $400 better off. It depends on the state; South Australia has seen the people on standing offers that are higher than some of the other states for example.
FRAN KELLY: I’m going to stick with this for a while because as the Treasurer, you’ll be the person with the power to force companies to divest their assets if they don’t cut their prices. The PM called that a very big stick, Labor says it’s more like a toothpick and they say you wield it to punish renewables and give a leg-up to coal.
If divestment is such a good idea, why wasn’t it recommended by the ACCC?
JOSH FRYDENBERG: Well, it is just one of the measures that we will be looking at. But we want to have everything in our arsenal; some of the things that could also be used are enforceable undertakings, fines and divestment would be the last resort.
But just simply having that there, as an option for the Government, is likely to lead to greater compliance and less price gouging by the companies.
FRAN KELLY: Well, let’s follow that lesson to its natural conclusion; why not threaten divestment in other areas like banks?
JOSH FRYDENBERG: Well, in this case I think we have seen behaviour that is being very problematic…
FRAN KELLY: And we haven’t in the banks?
JOSH FRYDENBERG: In the case of the banks we have, obviously, a Royal Commission that is reporting into the behaviour and let’s wait and see what the Royal Commissioner actually recommends. But to date, as you know, the Royal Commissioner has been pretty scathing and frank about what he has seen in the financial services sector.
FRAN KELLY: The fourth point of the Prime Minister’s energy plan to get prices down was underwriting- the Government underwriting new power generation, either by providing loans or being the buyer of last resort for energy produced; again, going beyond the ACCC recommendations.
This could mean loans to build new coal-fired power stations or retrofitting existing ones, that’s what the Prime Minister seemed to indicate yesterday, it could be used for that. Didn’t the Government hear the message from the voters of Wentworth, not to mention the market? People want more action on climate change, more clean energy, not more fossil fuels. Isn’t that one of the messages?
JOSH FRYDENBERG: I think the key message is that people want lower power prices. They want that above all else. When it comes to the ACCC in these recommendations, we’ve actually followed it. What we’re talking about here…
FRAN KELLY: They didn’t talk about loans…
JOSH FRYDENBERG: But what we actually- no, what they did talk about is using the Government’s balance sheet to ensure that those builders of new generation assets that were firm regardless of what type of technology was used, could help them get that reliability, get that confidence to get the banking finance and get the financial support…
FRAN KELLY: But that’s different to a loan.
JOSH FRYDENBERG: Well, it’s actually the Government’s standing behind the generator to ensure they can get the money to build these new assets to deal with market failure, which focusses on industrial customers; the large users of power, whether they’re in the mining sector, whether in plastics, paper, chemical manufacturing…
FRAN KELLY: So that’s nothing like a government loan to retrofit an existing coal-fired power station is it? That’s nothing like that.
JOSH FRYDENBERG: Well, we’re looking at all the options because we’re focussed on outcomes, not inputs and I think that’s the key message for your listeners; is that power prices have been too high in Australia.
There’s been plenty of missteps, we know the Labor Party ignored the warnings on gas restrictions, we know the Labor Party failed to rein in the power of the networks, whereas we’ve passed legislation to do that and we know that the Labor Party failed to provide the storage to firm up the increased renewables that were coming in…
FRAN KELLY: That’s a very long time ago now. Now, we’ve got your plan. Jennifer Westacott from the BCA says that with these measures, you’re sending a signal to the rest of the world that quote, ad hoc intervention in the energy market will send a signal to the world that investing in Australia comes with considerable risks, this will only result in less investment in energy generation, less reliable energy and ultimately, higher prices.
JOSH FRYDENBERG: Well, I prefer Jennifer Westacott’s comment that Labor’s 45 per cent emissions reduction target was economy wrecking. Now, the reality is we tasked the ACCC to look deeply into the behaviour of the companies…
FRAN KELLY: And they didn’t recommend divestment or government loans.
JOSH FRYDENBERG: Well, what they- yeah, they actually did recommend that we stand behind the financing of these companies. That’s not right, and that’s what we’re seeking to do. When it comes to divestment, we’ve got an extra big stick there to use with the energy companies to get a better outcome for consumers. You see, we’re on the consumers’ side, so is the ACCC.
FRAN KELLY: Then why didn’t you stick with the NEG? You said that was going to save consumers $550.
JOSH FRYDENBERG: Because with the NEG, we took a decision not to proceed with one element of it but we are pursuing the reliability side of the guarantee and that’s what Angus Taylor is discussing with the states and that’s what’s urgent and needed, particularly coming up to a summer where, in Victoria, they’re going to be very challenged with the reliability of supply.
FRAN KELLY: There’s much to talk about on this, beyond this. So, we’ll move it before I do, some moderates in your party room are demanding another $1 billion be tipped into the Emissions Reduction Fund so you at least have some policy there to reduce emissions. Is that on the cards?
JOSH FRYDENBERG: I disagree with…
FRAN KELLY: You’re the Treasurer.
JOSH FRYDENBERG: I disagree with the premise of your question, again Fran. I mean, when you say some policy to be there, we currently have $250 million in the ERF…
FRAN KELLY: Which isn’t much compared to the $2.5 billion that were there.
JOSH FRYDENBERG: Well, actually it’s been very successful because we’ve contracted for over 190 million tonnes of abatement at average costs of $12 a tonne and when you consider 1 million tonnes of abatement, of co2 abatement, there’s the equivalent of taking 300,000 cars off the road, that’s a pretty damn good achievement.
We’ve also got the National Energy Productivity Plan which is focused on a 40 per cent increase to efficiency by 2030. We’ve also go the Renewable Energy Target and a series of policies. When it comes to the ERF that will be dealt with through the Budget process as any other similar decision would be taken.
FRAN KELLY: You’re listening to RN Breakfast, our guest is the Federal Treasurer, Josh Frydenberg. The Government just can’t seem to stop fighting with itself. The latest skirmish is over Malcolm Turnbull, chosen to lead an Australian delegation at an oceans conference in Bali next week.
Barnaby Joyce says you should rethink that, makes no sense. Is Malcolm Turnbull an asset to the Liberal Party or a liability in your view? Because clearly Baranby Joyce thinks he’s a liability.
JOSH FRYDENBERG: Well, I respect Malcolm Turnbull, he is the former Prime Minister and as a party we should respect our former Prime Ministers. Now, this decision was taken weeks ago. The Prime Minister discussed it directly with President Widodo in Indonesia.
We know that Malcolm Turnbull had a very good relationship with the President of Indonesia, this is an important summit for them focussing on oceans and it’s only appropriate that Malcolm Turnbull is there to help cement and strengthen the relationship between Australia and Indonesia, as he did when he was the Prime Minister.
FRAN KELLY: The economy is in good health. The housing sector though…
JOSH FRYDENBERG: Thank you for acknowledging that.
FRAN KELLY: …has weakened in recent months. The Master Builders Association has modelled Labor’s proposed changes to negative gearing and the capital gains tax come up with a $12 billion hit to the housing sector. But isn’t that at odds with advice from Treasury that the impact on housing would only be modest?
JOSH FRYDENBERG: Well, I’ve actually mentioned that to you before Fran, which is what Treasury’s modelling showed is that there could be downward pressure on housing prices as a result of Labor’s changes to negative gearing and they said particularly, particularly if it occurred in a market that was weakening.
Now, when Labor came up with this policy Fran, we had a different housing market than we’ve had today. For 12 consecutive months prices have come down across the capital cities. We’ve seen Standard & Poor’s talk about an orderly unwind in the housing sector. We’ve heard the Reserve Bank of Australia say that the housing market is coming back to a sustainable level.
This will cost jobs, this will push up rents and Labor’s policy will see the value of the family home go down.
FRAN KELLY: Yeah, but do you accept this $12 billion is overblown given that Labor’s policy on negative gearing applies to existing properties, not new ones? It’s the new homes that generate all the jobs and construction.
JOSH FRYDENBERG: Well, the point is it’s about going forward. This is a phoney argument from the Labor Party. What this modelling does show is that 32,000 jobs will be lost, 42,000 homes that would’ve been built will not be built and across the economy we will see those with negative gearing houses, those who are looking to do so into the future, punished because of Labor’s tax and grab policy.
FRAN KELLY: Okay, can’t let you go, Treasurer, without asking you about asylum seekers and offshore detention. The Prime Minister has knocked back Labor’s offer of a compromise of a transfer of asylum seekers from Nauru to New Zealand.
He says he doesn’t want to horse trade on border protection. But it was the Prime Minister who put the settlement deal, this legislation, back on the table last week. He elevated it. Did he simply do that to get the Government through the Wentworth by-election? Or is the Government committed to this idea, if it can get it through the Parliament, of negotiating a deal with New Zealand.
JOSH FRYDENBERG: Well, the legislation is there before the Parliament. We welcome the Labor Party actually supporting it as is, not changing their position by the day.
FRAN KELLY: So, if they support it, if you get the numbers to support it [inaudible].
JOSH FRYDENBERG: No, that is- there’s a couple of different issues here. The first is there have been- we have got 200 children off Nauru. Now there are now 52 minors on Nauru. But we are doing- they’re coming off but without the press release and the grandstanding…
FRAN KELLY: Well just bring them off now, just bring them home now.
JOSH FRYDENBERG: Because what we don’t want Fran, and I think Australians don’t want is a perverse incentive placed for those people smugglers and those people waiting in Indonesia to come to Australia by boat; if they put the children on the boat, if they risk their lives, then they are more likely to get resettled offshore. That’s what…
FRAN KELLY: I think five years is a pretty big disincentive, five years stuck on Nauru.
JOSH FRYDENBERG: Well, we’ve got 52 minors there. There are 65 medical professionals. On the advice of the chief medical officer, we will take medical transfers as we have been doing in the past. But what we will not do is put up the white flag to the people smugglers and start that process which was so destructive under Labor.
FRAN KELLY: Treasurer, thank you very much for joining us.
JOSH FRYDENBERG: Thank you.