HAMISH MACDONALD: Trade Minister Steve Ciobo was at the forum, he's now in Hong Kong, where later today he'll launch negotiations for a free trade agreement with Australia. Good morning, and welcome to RN Breakfast.
STEVEN CIOBO: Good morning, Hamish.
HAMISH MACDONALD: I want to get to the Belt and Road project, but the big news I guess politically in Australia today is some comments made by Ken Henry that I do want to put to you. He has, I guess lashed the Government over the bank tax, he's attacked it saying that it's making the banks dip into their reserves to pay tax, the Government's harming the work done by the regulator, APRA, to strengthen the banks in case of another financial shock. Ken Henry is very respected, long serving Secretary of the Treasury, now Chairman of the NAB. Do you take note of what someone like him says about this?
STEVEN CIOBO: Look, Ken Henry is certainly well intentioned; however, he's also not infallible. Ken Henry of course designed the first iteration of the mining tax which would have seen taxpayers refunding coal miners and iron ore miners for losses in recent years, so I think that there's some policy work historically that hasn't been ideal. But look, let's get back to what the principal issue is here. The Government has to be realistic; we have to be pragmatic about the way in which we address the effort required around fiscal consolidation for Australia. We've had to do that through a number of different alternatives, because we've had a Senate that has typically been saying no when it comes to savings initiatives that the Coalition's tried to put in place to instil better fiscal discipline. What we're talking about here is a very modest contribution from Australia's Big Five banks, the four majors that everyone of course knows about at a retail level, plus Macquarie Bank.
HAMISH MACDONALD: I'd just ask you to deal with the substance though, of what he's saying, which is that the Government is effectively asking the banks to dip into their reserves, which are obviously so crucial if there's another financial shock. Given that the Government is saying, well the banks have to absorb it, that is true, isn't it?
STEVEN CIOBO: Well, I mean, it's not true. And the reason it's not true is because the banks, in particular of course the four major banks, have very substantial returns, they have a social licence that's granted to them on behalf of the Australian people, and we're requiring them to make a modest contribution towards the ongoing effort that Australia needs to make in order to return to a budget position of surplus, and real strength. So it's simply incorrect to make the suggestion that there is not enough buffer for Australia's four major retail banks, plus Macquarie to be able to absorb this cost.
HAMISH MACDONALD: Alright. Let's talk about One Belt, One Road. You've been there looking at it up close, or at least the plans for it. What in your view is the broader strategic objective of the Chinese Government in pursuing this project?
STEVEN CIOBO: Well, I don't really believe actually that I'm a commentator who should be commenting about China's broad strategic objective. What I can speak to –
HAMISH MACDONALD: Well, you've observed it, and you're obviously analysing it on behalf of the Australian Government. What do you think the purpose of it is?
STEVEN CIOBO: Well, Hamish, look at it in terms of Australia's national interest. Now, China's made it very clear that it intends to use the Belt Road initiative as an opportunity to build infrastructure not only domestically in China, but to also link together economies across the region and into Europe. That presents very profound opportunity for Australia. We of course have a long track record of success when it comes to both the financing, but also the design and construction of infrastructure. There's much that we can do in a collaborative sense between Australia, China and other third countries that are part of the Belt and Road corridor, and I believe that it represents a significant commercial opportunity for Australia given our very strong relationship with China and also surrounding countries.
HAMISH MACDONALD: So what would be our involvement in it? Are we signing up to be part of this project, or are we looking at something slightly more removed?
STEVEN CIOBO: Well, I attended of course, the Belt Road Initiative Forum, which took place on Sunday along with a host of a number of other countries that participated as well. We've got to see over the coming months and years ahead, the role that Australia can play. There clearly are commercial opportunities. I'll be making some additional announcements in the region as well today, with Hong Kong around a free trade agreement. This is all part of ongoing efforts to continue engaging what is the fastest growing part of the world, and this does present terrific opportunity for Australia to be involved over the coming years, as we get more clarity on the pipeline of projects, and exactly what it is that Australia can bring to the table.
HAMISH MACDONALD: So interpreting what you're saying, it sounds like we won't be a full participant, but we might be willing to take up some of the contract opportunities that come further down the line. Is that a correct analysis of what you're saying?
STEVEN CIOBO: No, because I don't really believe, I know there tends to be a bit of a media preoccupation about what is a full participant and what is not –
HAMISH MACDONALD: Well, it's a relevant question. It is a relevant question.
STEVEN CIOBO: No, well, China is our major trading partner. Australia certainly brings much to the table when it comes to experience, as I said, around financing, around the design and construction of infrastructure, and I have no doubt that Australian businesses will be able to play their role in coming years. Now that sounds like very substantial participation to me, and that's, I absolutely believe, based on conversations I've had in Beijing, as well as in surrounding countries, that absolutely represents terrific opportunity for Australia to be very involved.
HAMISH MACDONALD: There has, it is said, been an opportunity for Australia to connect our development, our infrastructure scheme in northern Australia to the One Belt One Road project. Will that happen?
STEVEN CIOBO: Well, our northern Australia initiative is about what's great for Australia, what's in Australia's national interest. The Government has got a clear eyed vision about what it is that we want to achieve through northern Australia. Now some would say, well there's a linkage there to the Belt Road initiative that China's undertaking. The Government's view is that these are complementary projects, but they are obviously quite separate. We had the genesis of our idea about the development of northern Australia based upon what's in Australia's national interest. So, you know, from an Australian Government perspective, there are separate interests, but there are, of course, significant complementarities there. The same can be said about other initiatives that countries are taking throughout the region.
HAMISH MACDONALD: Sure. I'm just not clear on why it's not in Australia's interest to connect what we're doing in northern Australia to a $1.8 trillion project happening slightly further afield. Why is that not in our national interest?
STEVEN CIOBO: Well, I think Australians understand that the Australian Government takes initiatives based upon what's in our national interest, and the initiative that we're undertaking with respect to northern Australia wasn't because we sat around said, ‘Look there's this Belt Road initiative that the Chinese Government's undertaking, and how do we make that happen in Australia?’ That's obviously not the process. What we looked at was opportunities for Australia to continue its economic advancement, was opportunities for Australia to maximise our economic potential, and most importantly, to create jobs for Australians. That's what driving this initiative in Australia. That's what was behind the formulation of the White Paper on northern Australia. Having now taken those decisions, as I said, there clearly are complementarities there with the initiative that the Chinese Government is undertaking.
HAMISH MACDONALD: Right. And so what is Australia's national interest with regards to the One Belt, One Road project then?
STEVEN CIOBO: I think it's to look at ways in which we can get our business community to be involved. I think it's opportunities around financing of infrastructure, opportunities around the design and ultimately the construction of infrastructure. As countries put forward projects, there'll be opportunities for collaboration. There, for example, will be projects that China will be undertaking within its mainland that Australian businesses could be involved with. It might be on the financing side, on the design side, or on the construction side. Over the coming months and years ahead, we'll find opportunities to continue to be better engaged around this initiative and I think that is what represents Australia's national interest when it comes to the Belt Road initiative.
HAMISH MACDONALD: So given all of that, why not just sign up to it? Why not become a full participant in the broader project? There's so much money available, it would seem, if we are part of it.
STEVEN CIOBO: Well, again, I think there's a distinction that is falsely being made between Australia not being a full participant, and it is, and I'm not really sure that even in the media's eye that there's clarity around exactly what that distinction is. I've made it clear that when it comes to, for example, initiatives like the northern Australia initiative – we’re pursuing that based upon what's best for Australia. Australian businesses, I have no doubt, will be involved in the Belt Road initiative. Now that sounds, as I said, like a very healthy amount of participation to me.
HAMISH MACDONALD: You are in Hong Kong now, launching negotiations for a free trade agreement. Hong Tong tariffs are already at zero. What's the potential benefit to Australia of an FTA?
STEVEN CIOBO: I am in Hong Kong, and look, Hong Kong is our eighth biggest export market and represents terrific opportunity for Australia to continue to engage with Asia and to continue to build upon the very strong gains that we've made recently with the free trade agreements we put in place with China, with Korea, and with Japan. Yes, whilst goods tariffs are at zero, there are tremendous opportunities around services and also for better facilitation when it comes to investment. Services, are of course, basically four-fifths of the Australian economy. It represents only 22 per cent or thereabouts of our national exports. So services exports, in particular, education, tourism, but also more broadly, health services, architectural services, legal services, and others - these are all new opportunities for modern economies to be able to export, and that's what I want to tap into here in Hong Kong.
HAMISH MACDONALD: Steve Ciobo, thank you very much for your time this morning.
STEVEN CIOBO: A pleasure. Thank you.
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