25 October 2018
Transcript - #2018054, 2018

Doorstop interview, Parliament House, Canberra

Subjects: Fitch reaffirms Australia’s AAA credit rating; Labor’s housing tax; Australian embassy in Israel; Sex Discrimination Act; and energy policy.

JOSH FRYDENBERG:

Good morning. In more good news for the Australian economy, today Fitch, one of the three major credit rating agencies in the world has reaffirmed Australia's AAA credit rating and praised Australia's economic performance.

This follows the unemployment numbers last week, which saw Australia's unemployment rate fall to five per cent, its lowest level since 2012. We've also seen growth through the year of 3.4 per cent, faster than the OECD average and the Australian economy growth at its fastest rate since the height of the mining boom. We have a budget that is coming back to balance, a year earlier than expected in 2019-2020 and we've created more than a million new jobs.

Fitch also had some very interesting comments on the Australian housing market. It said that while there is an orderly transition underway, the stability of the Australian economy could be put at risk by a sharp drop in housing prices and it pointed to a large drop in investor demand as being one of those causes of a potential drop in the housing market.

This is what would occur if the Labor Party get their way with their changes to negative gearing and capital gains and their new property tax. It's a lose – lose policy. If you own your home, under Labor's property tax, it will be worth less. If you rent your home, it will cost you more.

Labor backbenchers and frontbenchers today have tied themselves in knots trying to explain their policy. The reality is it won't be long before Bill Shorten and Chris Bowen drop this policy because it's the worst possible time to impose it on a housing market which is undergoing an orderly transition. Any questions?

JOURNALIST:

That transition's undergoing- going on under your watch. You've had a 20-25 per cent fall in investor activity over the past 12 months; do you take any responsibility to say people in Sydney who have seen the value of their home fall by 75,000 over the last eight-nine months?

JOSH FRYDENBERG:

Well, the first point to make is that it's the RBA who has said that what is occurring in the housing market to date is healthy. The second point to make is the fall-back in investor demand has been as a result of APRA's changes and we have encouraged and supported those changes in the growth in investor demand in the housing market.

However, if you change, as Labor is proposing, dramatically the negative gearing tax rules and the capital gains tax rules, you will see a big drop in the housing market. Just yesterday we saw from the Master Builders Association what the impact will be; 32,000 less jobs, 42,000 fewer dwellings and big impacts across the Australian economy.

The Labor Party should drop this terrible policy. It was designed at a time of a very different housing market.  What we have seen is an orderly transition to more stability in the housing market. That's to be welcomed. But changes to negative gearing and capital gains, as proposed by the Labor Party, will certainly be very punishing.

JOURNALIST:

Treasurer, just on energy companies. The Government is talking about wielding a big stick next year if they don't bring down prices from January 1. Are you prepared to call a Royal Commission into the energy industry if they don't bring down prices?

JOSH FRYDENBERG:

Look, the Prime Minister's commented on that before and he said, that is obviously one option that is open to the Government. But what we are focusing on now is implementing the ACCC's recommendations.

Those recommendations will see a standard offer put in place to reduce the complexity and the confusion for energy customers, supporting new generation into the energy market, to deal with a market failure where companies who want to build new firm generation can't get the long-term finance that they need and pursuing with the states the reliability guarantee, which will ensure the lights stay on through some of the challenging times that occur over Australia.

JOURNALIST:

Treasurer, Marise Payne said today that she found out about the potential change of Middle East policy on the Sunday before the Monday when, I think, quite a few others were briefed. When did you find out?

JOSH FRYDENBERG:

I spoke to the Prime Minister over that weekend as well.

JOURNALIST:

When exactly? Saturday? Sunday?

JOSH FRYDENBERG:

Well, I'm not going to give you my diary and my log book. The reality is, Andrew, that as the Deputy Leader, I speak to the Prime Minister multiple times a day on a whole range of issues that affect the Government and that is one.

And I do want to point out that I strongly support the Prime Minister's announcement about the potential relocation of the embassy, about the Iran deal and about the stronger defence ties.

JOURNALIST:

Treasurer, just with your Deputy hat on, will there be a special party room meeting today to deal with changes to the Sex Discrimination Act, and if not, why not? Because the Prime Minister said that this was an urgent issue he wanted to deal with in this sitting fortnight?

JOSH FRYDENBERG:

Well, I'll leave that to the whips, the Prime Minister and the Leader of Government Business.

JOURNALIST:

Just on the embassy issue, the PM said he was open to discussions to moving the embassy. Have those discussions been had, has any progress been made to this decision? 

JOSH FRYDENBERG:

Well, he's begun a process and obviously…

JOURNALIST:

What does that mean?

JOSH FRYDENBERG:

Well, there are internal discussions going on with the Foreign Minister, the Defence Minister and other members of the Cabinet. We have discussed it at Cabinet level. But the…

JOURNALIST:

Third parties? Anyone from Israel?

JOSH FRYDENBERG:

Well, the Prime Minister has spoken to the Israeli Prime Minister.

JOURNALIST:

After the initial conversation?

JOSH FRYDENBERG:

You can talk to him about when and how many times he's spoken to foreign leaders. That's not for me to comment on. But the point is our policy has not changed about a two-state solution. That's really important to understand.

Second, no decisions have been taken about moving the embassy. The third point to make is that the fact that Australia's embassy is not in Jerusalem is an anomaly for the more than 80 high commissions and embassies that we have around the world, which are in those nation's capitals. And West Jerusalem would be the capital of Israel under any two-state solution. I think that's important to understand.

JOURNALIST:

Labor, this morning, announced that it would in fact take your National Energy Guarantee to the next election. You must be pretty happy hearing that?

JOSH FRYDENBERG:

Well, I think, you know, Bill Shorten has again shown what a flip-flopper he is. I mean, only a few weeks ago, Bill Shorten was saying that the National Energy Guarantee was a Frankenstein of a policy, now he wants to embrace it.

The reality is, he doesn't have the courage of his convictions. The reality is, he will do whatever he feels is in his political interests at a particular time. And when it comes to tax, for example, he has taken multiple positions on the issue of tax cuts for small and medium enterprises, he's taken different positions on the retirees tax.

I think it's only going to be a matter of time before he backflips on his new property tax, because what we've seen from the Housing Industry Association and what we've seen from the Master Builders Association , what we've seen from RiskWise, what we've seen from Citi, what we've seen from a whole host of commentators is a warning about the dangers of Labor's new property tax.

And today, Fitch, one of the three leading credit rating agencies in the world warns that a major drop in investor demand in the property market could contribute to a big property price drop and that is exactly what Labor's changes to negative gearing and capital gains are designed to achieve.  

JOURNALIST:

How much would it cost taxpayers to indemnify a new coal power plant against a future carbon price, and will you rule that out?

JOSH FRYDENBERG:

I don't agree with the premise of your question.

JOURNALIST:

Not withstanding your obvious support for this new policy, new Middle Eastern policy, can you comment on whether it is appropriate that such a policy change, potential policy change, be launched into without any advice from DFAT, from Defence or the wider bureaucracy? 

JOSH FRYDENBERG:

As the Prime Minister has made very clear, we have begun a process…

JOURNALIST:

That wasn't the question Treasurer.

JOSH FRYDENBERG:

Andrew, what we've done is begun a process. No decisions have been taken. Proper consultations will be had. But the fact is, Australia was being required to take a decision on a major vote at the United Nations.

This issue, as you know, has been considered within closed doors of government for some time and no decisions of yet have been taken, but a process is underway and proper consultations will be had.  Phil, last question.

JOURNALIST:

Treasurer, divestment powers for the energy sector, there's a few in the Nats and even some in the Liberals who are saying why not go the full hog on anti-trust and extend it across the business sector. Do you have a problem on that or do you want to keep it just focused on energy?

JOSH FRYDENBERG:

Well, people have asked me about for example the banking sector and financial sector and what I've said is we do have a process underway, through the Royal Commission to ensure that we strengthen the regulations, the laws, the compliance in that sector and we will await the Royal Commissioner's findings.

But just this week, I've introduced into Parliament a strengthening of the penalties that apply to white collar criminals…

JOURNALIST:

But we are talking beyond banks; supermarkets, insurance, superannuation, any sort of…

JOSH FRYDENBERG:

I think the energy sector is somewhat different to other sectors. I think the public's patience has run out with the energy companies. We are firmly on the consumer's side. It seems that the Labor Party is hedging their bets, wanting to take the side of the big energy companies, that's a mistake.

Under Labor, prices doubled in the electricity market. We've commissioned a report from the ACCC, they received a lot of confidential documents. As a result of the recommendations we are now implementing, electricity prices will come down. Our economic plan is working.