Transcript
19 May 2009
Interview - ABC Lateline Business
Subjects: discussions on China's latest production figures and the effect China has on our economy.
ALI MOORE: Simon Crean, welcome to Lateline Business.
SIMON CREAN: Thanks, Ali.
ALI MOORE: Today we got more confirmation, if we needed it, of the importance of China to our economy, with both the Reserve Bank board and others referring to the resurgence in Chinese industrial output. And of course, a lot of our growth will depend in the future on how China rebounds. I wonder though today, with both Ken Henry and Glenn Stevens defending the Budget assumptions, why those Budget forecasts are not supported by the IMF?
SIMON CREAN: Well, we back the - what the Treasury has given us by way of the forecasts, and I think there are a couple of reasons why that's valid. I mean, Ken has outlined a number of reasons historically why it might be the case. But we have really been significantly injecting into the fiscal - into the economy. We've been encouraging consumption, which clearly has had an important impact in terms of retail sales, and that's significant in terms of the economy and job opportunity. We've also invested heavily in infrastructure, Ali. Nations that invested...
ALI MOORE: But none of that accounts for the difference...
SIMON CREAN: No, no...
ALI MOORE: ... in the forecast between the IMF and the Budget. The Budget says that we'll be at four and a half per cent by 2011 and again four and a half per cent of GDP growth in 2012. The IMF says we'll get 1.9 per cent in 2011, 2.8 per cent in 2012 and three per cent, but not till 2014. They're very different assumptions.
SIMON CREAN: Well, except I think - you've asked me the question why we think we're confident and I'm going through the analysis. I mean, if you look at what we have done compared to what other countries have done. It isn't just consumption, important as that is, it's also investing in our future. It's not just saying, let's build schools because it creates jobs now. It's because we need better facilities to train and develop the skill base for the nation and the education capacity of the nation long term. In the event...
ALI MOORE: But the IMF can see that. Obviously, the IMF knows what you've spent. They've got the calculations.
SIMON CREAN: Well, I think...
ALI MOORE: I'm just wondering...
SIMON CREAN: I don't know.
ALI MOORE: ... why they're wrong and you're right?
SIMON CREAN: Well, because I don't think they do see it in that sense yet. And I think we do have more of a job to convince them of the type of input and impact that we say we're going to have.
But I think there's another dimension to this, Ali, and that is our relationship in terms of this region and the importance of this region to our economic growth. China clearly is important. But so too is India, Indonesia, Vietnam - all forecast to grow positively this year and next year.
We've just done the free trade agreement with all of the ASEAN countries. We're in the process of concluding one with China. We've commenced another one, in terms of Korea. And if you look at China, China is fantastic opportunity, and it...
ALI MOORE: But let me ask you, because that's an interesting choice of words: we're in the process of concluding a free trade agreement with China. How close are we to concluding that agreement?
SIMON CREAN: Well, I can come to the difficulties associated with that, but I believe the political will exists and I think yesterday's talks with Korea shows what political will can do if it's injected.
ALI MOORE: But we've had four years, we've had 13 rounds. Can you point to real progress and when's the next round?
SIMON CREAN: Well, we've had four years, but we've only been involved in them for one of those four, Ali, and I think that we've seen a lifted and significant improvement in the short - relative shorter time. There's still a way to go. But we're not just waiting for the FTA with China. My recent visit, I've been out into the regions, out into Yunnan in the south-west of China, into the Hubei Province in central China. There is enormous activity going here. Don't have to wait for the free trade agreement. What are the opportunities for Australian businesses to get in now and forge commercial relationships? They're in...
ALI MOORE: But this is very much a shift of emphasis, isn't it? Because when we heard just in November last year, after our Prime Minister met his Chinese counterpart Hu Jintao, that there was going to be a renewed emphasis and an acceleration of the talks. Now you're talking about looking - we don't have to wait for it, we can look at what's happening in regional China. Are you starting to give up?
SIMON CREAN: No, never give up. Never give up. Understand that about me, Ali. I won't give up ...
ALI MOORE: Is it tempting though?
SIMON CREAN: We - no, it's not. It's not tempting, because it's too important a relationship to give up on. But what we've also got to do is to find new avenues to drive it forward. And if we simply sat round and said, oh, well, they're not talking, let's just hope that they will, you know, we could do that. That's the lazy approach. That's the excuse approach.
Now, of course, we have to continue to maintain the pressure at the political level, strengthen it, do all those sorts of things, but why shouldn't we be looking at the opportunities...
ALI MOORE: But I just wonder i...
SIMON CREAN: ... regionally based, where they exist?
ALI MOORE: In the context of the man who's led these negotiations for pretty much since they started, Ric Wells, he's now been, as I understand it, promoted within the department. But in a Senate estimates hearing - I know it was two years ago, but I imagine things haven't changed enormously - he made a very, I would've thought, succinct comment. He said the Chinese Government does not want the free trade agreement. They have no interest in doing that. He's a man who clearly is trusted by the Government, a man of a great deal of credibility, and you couldn't put it plainer than that.
SIMON CREAN: Yeah, I think he was dealing with circumstances under a different government, though if it was two years ago. I mean...
ALI MOORE: Do you think it's changed?
SIMON CREAN: ... I have a very - I do think it's changed. And I know that Ric believes it's changed. It's changed because with the change of government here, we've injected a new political will and engaged the leadership politically. The other big thing that's changed is that China has become more interested in investing in this country. Now, we need to understand that and not fear it.
ALI MOORE: But, indeed, how has that complicated the relationship, if you like? If you've got free trade agreement or negotiations on the one hand, but you've also got, I suppose, not just the plethora of investment that China now has in this country, particularly in mining, but when you've got deals like Chinalco sitting very clearly on the table, do you think that Chinalco, and particularly if they're knocked back, will have implications for free trade negotiations?
SIMON CREAN: It doesn't complicate it at all. It reinforces the interdependency between our two economies.
Now the question of Chinalco, it's a matter for the Foreign Investment Review Board, having regard to the national interest. The broader question of the investment relationship between Australia and China is a two-way street. It's not only about Chinese investment interests in Australia, it's about our companies wanting to invest more in China. And take the - take...
ALI MOORE: And indeed isn't that the point, Minister, they can't?
SIMON CREAN: Well, that's not right. I mean, take the Chinalco deal, as I understand it, what's proposed in terms of the Chinalco deal, if it goes ahead, if it's approved, is the real opportunity for Rio to be able to get in, explore, develop and invest in resources in China. Now, wouldn't that - isn't that the two-way street?
ALI MOORE: Can I ask you very specifically where we have made progress, because also in that Senate estimate hearing, again, as you pointed out two years ago, Ric Wells talked about the areas where China was baulking. He said they've got reservations about the need for separate chapters on education, telecommunications, financial services investment, electronic commerce, government procurement and competition policy. On any of those areas, do we now have agreement?
SIMON CREAN: We don't have agreement, but we've made progress. And there's acceptance and we've made it clear, particularly with things like you've mentioned - financial services, education services - these are all high priorities for us in terms of commercial outcomes. But it would be far better if what we could do was to develop a framework that encouraged the development and the - if you like, the complementarity between us and them.
ALI MOORE: Two years is...
SIMON CREAN: That's why we've got to take every opportunity.
ALI MOORE: If two years is well out of date, which I accept, can you tell me how much longer it will be until we do have a free trade agreement with China?
SIMON CREAN: I'd like to. I'd like to be able to do that with some precision, but I won't set a time because that becomes the benchmark. I'm not going to fall into that trap. But what I can guarantee you is that, not only won't we give up, we're going to redouble the effort, because all that the evidence shows me is that China is growing. It's going to be important to our growth forecasts and what's important for us is to not just wait for them to come to us, we should be going to them.
ALI MOORE: Minister, many thanks for talking to us.
SIMON CREAN: Thanks, Ali.
ENDS
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