E&OE - PROOF ONLY
ALBERICI: Penny Wong, thanks for joining us.
WONG: Good to be with you, Emma.
ALBERICI: Now why are you giving a speech about Australia’s opportunities in Asia to an audience of Americans?
WONG: I am here in Washington talking to Americans and my counterparts here in America about things like the budget and honestly how much stronger our budget position is than the challenges they’re facing here.
But it’s also an important forum to talk about Australia’s place in the world and, in the Asian century, what Australia can do to position ourselves to benefit from the opportunities that that presents.
ALBERICI: Is this a pitch for US investment in Australia as a kind of way of tapping those developing nations in Asia?
WONG: Look, it’s engaging with the US about what’s happening … what’s happening in the global economy, and this is a live discussion here in the United States as well. I’ve also got a breakfast shortly after this interview with a number of US business people; we’re always keen for investment, both from Australians into the US and vice-versa but look, the big change of our times, Emma, is what’s occurring in Asia. The shift in global economic power and how we, Australia, position ourselves to most benefit from that shift.
ALBERICI: Now I understand part of the speech that you’re going to be delivering has an extract that talks about having an “open economy without an open mind handicapping businesses; the nation, and resulting in a narrower set of opportunities” – what are you getting at there?
WONG: Look, I think it’s really important, as we go through this period of change, that we understand that we have to make sure we have the capacity in our people – both at leader level, but also at business leader level, but also in our firms and in our communities more generally – to engage with Asia.
It’s not just a transaction – they’re important, obviously, we trade with Asia, we have traded with Asia for decades – but in terms of really grasping the opportunities we need to be very open in how we engage at the people-to-people and the firm-to-firm level.
That’s how you really maximise the benefits of those markets. That’s how you really maximise the opportunities you can be part of.
ALBERICI: Why would investors choose Australia, given we are a relatively high cost place to do business, especially when you look at it within the context of Asia?
WONG: Emma, because our economy is really, by relative standards, by global standards, so strong. I mean we have an economy with 5.2 per cent unemployment – here in the US it’s above 8. We’ve got an economy growing at trend, our public finances are in a very strong position.
I met yesterday with the Office of Management and Budget here in the United States. They’re looking at net debt positions of 70-80 per cent of GDP, ours has peaked at 9.6 per cent of GDP. The relative position of our economy is very strong, and we are a nation that has always received a lot of foreign investment. We’ve got a lot of foreign investment coming into our country at the moment. That means more Australian jobs.
ALBERICI: But beyond the mining boom which will eventually end, what will be the drivers of growth in Australia?
WONG: I think the drivers of growth need to be Australia tapping into the growing middle classes of Asia, selling goods and services into that very large and growing pool of consumers. That’s the big game.
I mean yes, the mining boom is extraordinarily important part of our economy at the moment, but you always have to plan for the years ahead as well, and we have to plan for making sure – whether it’s in services or whether it’s in other goods – we can sell into the markets which are going to be growing so rapidly on our doorstep.
That’s the big economic gain for this nation, and actually it’s the big economic challenge for the globe too. How do we maximise the benefit of this shift?
ALBERICI: Our manufacturing sector now only represents around 8.5 per cent of our GDP; of course we can compete, as you mentioned, with services, but we know that China, for instance, is trying desperately to compete with us.
They’re growing their education sector, they’re educating their own people increasingly at home. Where will we have an advantage to tap those 1.2 billion or so predicted middle class Chinese people?
WONG: Well, just first on the point you just raised about China’s investment in education, it really demonstrates why investing in skills and education is so important, and as you know that’s really been one of the Government’s first priorities.
If you look at how much we’ve put into education – an almost doubling or doubling school funding, increasing funding to universities, increasing funding to the vocational training sector – that’s because you’ve got to lift the skills of your people.
But in terms of where we compete, look, Australia can’t compete on cost and we shouldn’t try. We’re not an economy, we’re not a society that says we should pay people less, we should reduce our input costs so we can compete with the nations in our region on cost – we can’t do that.
What we can compete on is being highly flexible, highly adaptable, highly skilled and moving up the value chain, and what we have to do is make sure we’ve got the capacity to do that. Now ultimately that’s not about Government picking winners, it’s about Government making sure that we’ve got the circumstances – particularly the skill level in our people – that enable firms to tap those opportunities.
Obviously that change is never easy but it really is the only path we have to ensuring we grow our prosperity in the decades ahead: that is to be highly, highly skilled, highly adaptable nation that is able to find our place in the markets that are growing on our doorstep.
ALBERICI: Is your government prepared to abandon the pledge to balance the budget in order to capitalise on the Asian century; to put in the investment now to prepare for the future in education, for instance?
WONG: There is always a need for investment by governments into the drivers of growth and prosperity, but in the circumstances we find ourselves we have to make those investments by prioritising spending, and we’ve got a track record of doing that. We’ve put more money into universities than the nation ever has before, we put more money into skills than the nation ever has before, we’ve invested in participation, we’ve increased funding to child care – which obviously is an investment in particularly the participation of women in the paid workforce – and we’ve done all of these things whilst maintaining a fiscal strategy that brings the budget back to surplus this year.
It is about prioritisation; it’s not always easy but it’s the right way to manage the economy in this, the Asian century.
ALBERICI: I’m not sure that we fixed on where the drivers of growth are going to be after the mining boom?
WONG: I think I did give you an answer, and I said look, what we want to be able to do is to sell goods and services into the growing consumer classes in Asia. We’ve anticipated, as I say to my speech, to go to over 1 billion people by the end of the decade.
These are very large markets, and the challenge for Australia is how do we make sure that we don’t just sell coal and iron ore, but we also sell the goods and services that those consumers will want. And they’re very similar to the sorts of goods and services we want in Australia, and smart businesses are already positioning themselves for those opportunities.
ALBERICI: What are those goods and services that you believe we can be competitive in?
WONG: Well, the example that I’ve used before is tourism, and if you look at the number of outbound Chinese tourists and the numbers that that will grow to by the end of the decade, we have a small proportion of that market.
If we can grow that proportion by a small amount in a growing market, that will be a very large boost to that sector of the Australian economy. And that microexample can be played out in lots of areas, but look, I’m not sitting here saying this is all going to be easy, we can just sell this particular thing to people in China or people in Indonesia.
What I’m expressing to you is what’s happening at the global scale, and that is an enormous number of people over the next few years and beyond becoming more affluent and more able to purchase goods and services, and our job is to make sure we have the capacity to sell into those markets. Now what government can do is the things you and I have spoken about.
We can invest in our people, we can invest in our skills, we can ensure we have an adaptable and creative work force, harness the creativity of the Australian people. Businesses are the ones who will make the decision as to what they think they can sell into those markets.
ALBERICI: If we can just turn to today’s news about the carbon price, the budget forecasts $9.4 billion in revenue from carbon permits in 2015-16, based on a predicted price of $29 a tonne. By removing the price floor you’ve shot a hole in the budget forecasts, haven’t you?
WONG: I don’t accept that at all, and can I say something about today’s announcement: this is a great announcement. This is an announcement that really goes to the issue we started the interview, which is about open and engagement with the world.
Having linking means Australian firms can access global carbon markets – in this case the EU, but obviously there are other markets which are developing. That’s very good economic policy. It means you can source the most efficient abatement or pollution reduction elsewhere in the world.
It’s precisely the sort of efficient market mechanism that should be in place, the sort that Malcolm Turnbull previously supported, so it’s a very good announcement from Minister Combet today.
In terms of the carbon price, I see a lot of commentary about this from our opponents. These are the same people who have admitted to having to cut $70 billion of services in order to balance their books should they win government – but I would make the point that the Treasury modelling that we’re relying on was a very extensive piece of modelling.
ALBERICI: But my question was, haven’t you shot a hole in the budget that actually estimates that $9.4 billion worth of revenue will come from permits where the carbon price is set at $29 a tonne?
WONG: The revenue figure you’ve quoted to me is based on the Treasury modelling which, as I referred to in my last answer, remains the most extensive modelling on a whole range of aspects of carbon pricing including the international price.
That Treasury modelling has been proven to be pretty accurate if you look at, for example, another aspect of it, the electricity price increases that were predicted and they’ve come in pretty much bang on where Treasury estimated them to be. So the Treasury modelling still remains the best assessment.
ALBERICI: So by removing the floor price you still think in three years’ time – and you believe Treasury agrees with you – that the price of carbon internationally will be $29 a tonne?
WONG: What I’m saying is the Treasury modelling remains the most extensive modelling on that issue. What you’re asking… what you’re doing in that question, Emma, is making a guess about where markets will be in three years’ time.
Now certainly I don’t think anybody can do that with any accuracy in the stock market. The reality is we’ve got to look at the best advice we have, and the Treasury modelling remains the best advice.
ALBERICI: But the Treasury modelling doesn’t change with the removal of the floor price?
WONG: Well, remember the assessment is: where do you think carbon markets are going? And we’ve got to look at the long-term trend. Spot prices for carbon, just like spot prices for any other commodity, obviously move around in the shorter term. What we’ve got to look at is the long run assessment, that’s what the modelling does.
ALBERICI: Back in February you made the point yourself that moving the price down would put the budget at risk given the compensation to households is fixed. Come 2015, will the compensation therefore also need to be revised down?
WONG: No, we’ve made a commitment about the assistance package, and there’s a reason we’ve done that. Apart from recognising the cost of living pressures on families there’s also a very important set of tax changes in the assistance which are very good for participation.
The removal of the tax-free threshold is a very good thing, particularly for second income earners and low income earners; they get to keep more of every dollar they earn. But coming back to your question, what you were referring to was I was responding to a question about the fixed price for the first three years be removed earlier.
That’s obviously a different proposition to the one we’re talking about, which is linking from 2015, and which I’ve said to you has enormous advantages for Australian business.
ALBERICI: So the compensation won’t move?
WONG: We’ve made clear, the Prime Minister’s made clear, the household assistance – which includes the tax measures I’ve described – will remain. We’ve committed to that, and it’s a very good package, one that the Coalition oppose. They want to actually increase taxes for everybody earning under $80,000 a year, which from an economic perspective, as well as a perspective of fairness, would seem to be pretty odd.
ALBERICI: And finally, Penny Wong, you’ve met with the US Ambassador-at-Large for Global Women’s Issues. Now a lot of talk around the world about whether women can have it all. We’ve heard this from Anne-Marie Slaughter in the US where you are now and also more recently the British MP Louise Mensch who has left her high profile job to look after her family. I wanted to ask you whether you think women can have it all?
WONG: That’s a tough question, isn’t it, Emma? Balancing work and family is really hard for everybody, I think both men and women particularly men who want to have a more hands-on role with their children. And certainly from a Government perspective you can do things like we’ve done which is increased how much we’re spending on child care, introducing paid parental leave, introducing dad’s leave as well, dad and partner leave.
These are all good things, but ultimately it’s also what happened in the workplace. Whether as Federal Minister for Finance or Emma Alberici as a journalist or anybody working in the work force, whether you work in a factory or in the financial services sector, it’s always tough to try and manage your work and family responsibilities.
Sometimes, unfortunately, you’re not at home when you want to be, and that’s not easy.
ALBERICI: Penny Wong, we’ll leave it there. Thank you so much for your time.
WONG: Good to speak with you, Emma.