24 October 2018
Transcript - #2018051, 2018

Interview with Kieran Gilbert and Laura Jayes, First Edition, Sky News

Subjects: Labor’s property tax; negative gearing; energy prices; coal; Emissions Reduction Fund; and stronger penalties for corporate & financial sector misconduct.

KIERAN GILBERT:

Let's bring in the Treasurer, Josh Frydenberg.

Your thoughts on this particular report, as I say Labor suggesting that's not a complete in the sense it does not look at their grandfathering of negative geared properties up until the start point of their policy.

JOSH FRYDENBERG:

Well this modelling from the Master Builders Association, which is from an independent economic analysis, does show how punishing and destructive Labor's changes to negative gearing will be. I mean, Labor will as a result of this policy cost tens of thousands of jobs, the independent modelling shows 32,000 jobs. It will push up rents particularly for those who probably can least afford it and it will decrease the value of the family home…

KIERAN GILBERT:

But is the modelling…

JOSH FRYDENBERG:

…which will be sold into a market with less buyers…

KIERAN GILBERT:

Are you comfortable with that modelling?...

JOSH FRYDENBERG:

Well this is a phony…

KIERAN GILBERT:

…in the sense that Labor's been very strong this morning; it's very early here in Canberra…

JOSH FRYDENBERG:

Well, it is on the back foot, Kieran…

KIERAN GILBERT:

…but they've been already very much disputing the modelling. Are you comfortable with the way that's been framed? 

JOSH FRYDENBERG:

Well, Labor's argument is a phony argument, because what this modelling is focusing on is what happens going forward. Now the Labor Party by ending negative gearing will actually see a reduction in the number of dwelling constructions, that's the main take out of this modelling. And when Labor came up with this policy, it was in a very different housing market. What we have seen over the last twelve months is prices come down each and every month in the capital cities. We have seen the number of first home buyers getting loan approvals topping over 100,000 in number, the highest since 2009. The impact of APRA's changes in the market has seen a change in the market dynamic to one which is focused on owner occupiers as opposed to investors. 

LAURA JAYES:

But Treasurer, it is not correct to say that Labor is ending negative gearing, is it?

JOSH FRYDENBERG:

Well, what they are doing is for the 1.3 million people who currently have negative gearing and all those who are looking to it into the future, will not have the same benefits that they have today, that is the fact. What they are doing is halving the capital gains tax discount and they're preventing negative gearing going into the future for so many people who would want it.

LAURA JAYES:

Well, Treasurer, is this the gold standard modelling today that we see from Master Builders or is it your own Treasury a couple of months ago, which said that this would have a minimal effect on the housing market?

JOSH FRYDENBERG:

Well, let me tell you exactly, Laura and Kieran, what Treasury's modelling said. It actually said, it could put downward pressure on housing prices as a result of Labor's policy and, this is the important point,  it said, particularly if it came at a time of a slowing housing market. And what the Reserve Bank has said, is that the housing market is now coming back to sustainable levels, what Standard & Poor's have said, is there has been an orderly unwind in the housing market. What Labor's policy is doing now into the future will be coming into a very different market than when they came up with this very bad idea and it is part of a $200 billion increased tax agenda which will slug retirees, family businesses, income earners and of course properties owners.

KIERAN GILBERT:

Up until recently, you were the Energy Minister, as we know, and the Environment Minister. When it comes to this approach of the default price, the retailers say, this could have an adverse impact in terms of the competition in the market, because it could cap the price and basically price out smaller retailers.
Do you think that that's a concern that has merit?

JOSH FRYDENBERG:

I prefer to take the advice of the ACCC and I think that would be wise to do so, Kieran, because what the energy companies have been benefiting from for too long is confusing offers. And by taking the ACCC's advice, we will have a default price off which people can see discounts. That's going to be of great benefit to households who could save hundreds of dollars, businesses over a thousand dollars as a result of this move.

KIERAN GILBERT:

You talk about confusing offers though, but what about the confusing message from the Government. Last week, Angus Taylor says, he wants to work with the retailers, this week, they're the bogey man. Which is it? Why not be more constructive with them as opposed to, sort of, comparing them to the banks?

JOSH FRYDENBERG:

Well, Kieran, we have been very consistent in this policy. When we first got the ACCC advice, we accepted this recommendation. The Labor Party is probably scrambling for a position because on their watch power prices doubled.

LAURA JAYES:

Now, big business questioned the economic underwriting of the expansion of coal fired power. What is the economic case for that, Treasurer?

JOSH FRYDENBERG:

Well, there is actually a market failure because new players into the sector can't necessarily get the long term finance that is needed, Laura, to underwrite new generation. And what the ACCC has advised, is that if the Government would step in and provide some certainty…

LAURA JAYES:

But the ACCC didn't specify coal, did it? So I guess…

JOSH FRYDENBERG:

It made a very clear that it will be firm power, that is dispatchable power and that's what is guiding us. And as you know, Laura, we are technology agnostic when it comes to these matters. We see an important role for coal, we see an important role for gas, as well as an important role for renewables as long as there is storage…

LAURA JAYES:

Do you see an important role…

JOSH FRYDENBERG:

…and what we are talking about is industrial customers.

LAURA JAYES:

Do you see an important role for the Emissions Reduction Fund going forward as well? This is a fund that will run out of money and is due to end in 2020. Moderates in your party are calling for this to be topped up $1 billion. As Treasurer, with a budget update fast approaching, are you considering that? Will you top up that fund?

JOSH FRYDENBERG:

Well look, these are issues and discussions for behind closed doors as part of a Cabinet process, but the Emissions Reduction Fund, which was created on my predecessor in that role's watch, Greg Hunt, has been very successful in contracting for more than $190 million tonnes of abatement and an average cost of around $12 or $13 dollars..

KIERAN GILBERT:

Finally, I just want to ask you about the new penalties you are announcing today on white collar crimes. Ten times the penalties for some of these, this obviously comes out of the Banking Royal Commission. You know, talk us through what sort of approach this is going to see in terms of the behaviour that has been highlighted by the commission?

JOSH FRYDENBERG:

Well, these increased penalties actually come out of a review conducted into ASIC. And this was a recommendation to the Government, which we obviously accepted, which will see a tenfold increase in the civil penalties and a doubling of the penalties for criminal action. What we have seen through the Banking Royal Commission is revelations about unacceptable conduct, whether it's mis-selling of insurance policies or misleading advice. And these new penalties, which we're introducing in legislation to the Parliament today, will make a difference in stamping out that type of behaviour and improving the culture and the conduct in the financial services sector.

LAURA JAYES:

Treasurer, we look forward to that announcement later on today. Thanks so much for your time on First Edition.

JOSH FRYDENBERG:

Good to be with you.