16 November 2018
Transcript - #2018072, 2018

Interview with Fran Kelly, RN Breakfast, ABC Radio National

Subjects: Australian embassy in Israel; funding boost for Commonwealth Director Public Prosecutions; and housing market.

FRAN KELLY:

Treasurer, welcome back to Breakfast.

JOSH FRYDENBERG:

Good morning, nice to be with you Fran.

FRAN KELLY:

Before I come to these funds for prosecutions and changes to that, can I just get your response to another issue? The warnings yesterday, late yesterday, from the Malaysian Prime Minister, President Mahathir to Scott Morrison in Singapore yesterday, that moving our Israeli embassy from Tel Aviv to Jerusalem would fuel terrorism. Given that warning, do you still think the Government should move the embassy?

JOSH FRYDENBERG:

Well, Dr Mahathir does have form. As you know, he’s made a number of derogatory comments in the past about Jews being hook-nosed. He has questioned the number of people that have been killed in the Holocaust and he also saw the banning of Schindler’s List, the movie about the saving of millions of people by Righteous Gentiles through that horrible period in world history.

Australia will make its own decisions based on its national interest, as your listeners would expect us to do and Scott Morrison was absolutely right to commence a process to look at where Australia places it’s embassy in Israel. Australia, Fran, already recognises Israel’s jurisdiction and sovereignty over West Jerusalem.

West Jerusalem is where its Parliament is; West Jerusalem is where the Australian Ambassador and diplomats present their credentials; and West Jerusalem would be the capital of Israel under any two-state solution.

And Israel is alone as a country where Australia does not have its embassy in that nation’s capital and so we are absolutely right to commence this process and call out some of the double standards that have been applied by countries, including in our region, but also more broadly afield, against Israel and its history and its values.

FRAN KELLY:

Australia is not in the majority, not by a long shot, in terms of this, if we did make a decision to move our embassy and it’s all a part of the two-state solution and this decision, if we go with it, could come at some cost.
We have the Indonesian Trade Minister now, and the Foreign Minister both saying publically this week the Free Trade Agreement with Indonesia won’t be finalised until the embassy decision is resolved, so it’s delayed the signing. Now, this warning about increased threats of terrorism. Why would we risk this?

JOSH FRYDENBERG:

Well, firstly Indonesia and Malaysia, they don’t recognise Israel. They don’t actually have diplomatic relations with…

FRAN KELLY:

I’m not arguing the decision. I’m arguing the impact of the decision. Do you accept the controversy, and if we made the decision, it would cost us, for instance, trade in our region?

JOSH FRYDENBERG:

Well, my view is that having a good relationship with Indonesia, which is absolutely critical, they are a good friend and an important strategic and economic partner for Australia, is not mutually exclusive for making our own independent decisions about where we place our embassy.

FRAN KELLY:

Of course. Australia needs to make its own diplomatic decisions. But it needs to make them in the context of all our relationships, I suppose, too and implications, and when we make them is important. Who is reviewing the embassy policy? The Prime Minister said it’s being reviewed. He expects to have the answer by Christmas. What’s the process going on?

JOSH FRYDENBERG:

Well, the Prime Minister is working with our senior officials, ensuring that we get the best possible advice. I’ll let him expand on that. But the point is, he has made a principled decision to commence this process, let’s not pre-empt what the outcome of this process is.

But let’s remember what the Labor Party’s position is, which is effectively to say, we’re not going to move the embassy from Tel Aviv to Jerusalem because it may offend other countries who don’t have a relationship with Israel…

FRAN KELLY:

I think that’s a misrepresentation of those who are questioning the decision...

JOSH FRYDENBERG:

…you would?

FRAN KELLY:

No, no, no. That’s unfair Treasurer. I mean, it’s not just the Labor Party. Many analysts have said why would you do this? This does nothing to progress the two-state solution and in fact it could cause tensions, it could exacerbate tensions.

JOSH FRYDENBERG:

But, I mean, what you’ve identified there is the reason that people have, to date, put forward for not moving the embassy. Namely, that there is a peace process underway and we don’t want to prejudice the outcome of that peace process. But the reality is the peace process is frozen.

As long as Hamas, which is a terrorist listed organisation here in Australia, is in control of the Gaza Strip, as long as Fatah, which is in control of the West Bank and Hamas, which is in control of Gaza, do not get along and cannot agree a position, Israel will not have a negotiating partner at the table to resolve this issue.

FRAN KELLY:

Okay.

JOSH FRYDENBERG:

Now, Dr Mahathir will talk about how Israel is the source of all the woes in the Middle East. But if you look at the tragedies of Syria, if you look at the rise of Islamic Jihad, if you look at the rise of ISIS and other problems in the region, they’re not connected to Israel.

They’re connected to other issues at play, particularly the Sunni-Shiite divide that we’ve seen play out across the Middle East. So, this is a much more complex picture. Australia should maintain its position of being an independent voice that determines our own position, based on our own values, our own history, our own interests.

FRAN KELLY:

You’re listening to RN Breakfast. Its 17 minutes to 8. Our guest is the Federal Treasurer, Josh Frydenberg. Treasurer, we should get to your portfolio before we run out of time. The announcement you’re making today, of $51.5 million for the Commonwealth Director of Public Prosecutions and the Federal Court. You’re obviously expecting a lot more prosecutions of banks and other financial institutions in the wake of the Royal Commission, are you?

JOSH FRYDENBERG:

Well, the Royal Commissioner has made clear, Fran, that ASIC and other regulators, to date, have preferred negotiation over litigation, even though ASIC had a more than 90 per cent success rate when it pursued these cases of financial misconduct through the courts. I think from here on you’ll see a more aggressive stance from our regulators and that’s to be welcomed and we’ve also seen cases of financial misconduct highlighted by Commissioner Hayne.

So, in preparation for that we’re going to strengthen the resourcing of the Commonwealth DPP; we’re going to ensure that ASIC has also got more resources and we’ve already announced an additional $70 million for them; we recently announced more money for the Australian Prudential Regulator; and we’ll leave no stone unturned in ensuring better consumer outcomes.

And while we’re punishing people for their misconduct, we’re also giving ordinary Australians the opportunity to take on their financial institutions and have some of their issues resolved by providing a free service through a new financial complaints authority.

FRAN KELLY:

This money in anticipation of more action in the courts is one thing, but the results of two recent legal fights between ASIC and Westpac are a reminder there’s no guarantee of a win or even an outcome really, relying on the courts to address these problems is fraught, isn’t it?

JOSH FRYDENBERG:

Well, the courts will make their decisions based on the evidence before them and it’s not for the executive to interfere with the judiciary. But we have strengthened the penalties through legislation that is available, we are providing the resources necessary to our regulators and to our law enforcement agencies and I think that’s appropriate.

So, we’re absolutely focused on making sure consumers get a better outcome and that culture of non-compliance, misconduct and putting profits before people, that was identified by Commissioner Hayne, is brought to an end.

FRAN KELLY:

The, part of this money, almost $10 million would be going to the Federal Court over four years in anticipation of the Federal Court taking on this corporate crime. Part of that money, I think would, is earmarked to fund two new judges.

Now, I know governments need to chew gum and walk at the same time but do you think if the Government is handing out more money for judges, that chasing corporate criminals would be regarded by some as perhaps, less important than sureing up the Family Court division of the Federal Court, the Federal Circuit Court dealing with family violence, crying out for more judges, a backlog waiting times in those courts sometimes a year, eighteen months, even two years.

JOSH FRYDENBERG:

Well, Attorney General, Christian Porter, has had a lot to say about proposed improvements and streamlining of the Family Court because some of the cases have taken too long and that is absolutely a focus for us. So, what he’s proposing is quite significant reforms to that area and I’m sure he will be successful in getting a better outcome for the families who do need speedy resolution of these cases which are often very emotionally difficult.

FRAN KELLY:

And can I just ask you on the housing market in the wake of the Royal Commission, banks have toughened their lending rules, making it harder for many to get loans, that’s one of the implications, the fall out of it.

The Deputy Governor of the Reserve Bank, Guy Debell, has now warned of a protracted downturn in the housing market if banks overshoot, basically, the toughness of lending practices. It could spark a downturn. Do you share that view?

JOSH FRYDENBERG:

We certainly share the concerns about what could happen in the housing market if the wrong policy settings are put in place and that is why we’ve been very outspoken about Labor’s policy around negative gearing; abolishing it as we know it and halving the capital gains tax discount from 50 per cent to 25 per cent.

Because what we’ve heard from economists across the board is that this will drive more investors out of the market and therefore if you own your own home, it’ll be worth less, and if you rent your own home you’ll pay more as a result of this policy.

When Labor came up with their negative gearing changes, it was in a market where housing prices were on the rise. Now, housing prices over the last 12 months have come down, quite considerably in the capital cities and Labor is now claiming it’s the best time to put in their policy.

Well hang on, they claimed it was the best time when prices were going up. They can’t have it both ways, they can’t even explain their own policy. They’re not sure about the real impact it will have. But what we do know is it will take investors out of the market and it will lower prices at a time when people are watching very carefully, the value of their own home and they don’t want to go into what is called negative equity where they lose whatever original money they’ve put in to purchase their own home.

FRAN KELLY:

Treasurer, thank you very much for joining us on Breakfast.