KIERAN GILBERT: Minister as a Member of Cabinet. First of all, reaction to that story. This information apparently not even shared between the White House and the US allies, let alone with the Russians. What do you make of that story this morning?
STEVEN CIOBO: Well Kieran, you'll understand I'm simply not going to buy into it. This is something that's only in its very early stages. Let's just see what happens in the US. I'm not going to start providing gratuitous commentary from Australia's perspective.
KIERAN GILBERT: As I said, you're in Hong Kong to launch those Free Trade negotiations. As I understand it, Hong Kong’s already got zero tariffs, so what are you actually hoping to achieve here?
STEVEN CIOBO: They do in terms of goods trade, but the real story in modern economies like Australia, Kieran, is about services. Four-fifths basically. 75 per cent, 76 per cent of the Australian economy is built on services and yet there are only about 22 per cent of our exports. We've got terrific opportunity to be able to boost our services exports. We've got such a creative peoples. We've got tremendous opportunity around health services, architectural services, legal services, design, a whole range of different areas. I want to make sure that, like Hong Kong, which is a very services focused economy as well, that we can put our best foot forward with what is our eighth largest export market.
KIERAN GILBERT: It is quite a big trading partner as you point out; eighth largest. It's a heavy focus of our services industry as you mentioned in terms of education and other things. But what are you hoping to do in terms of locking in the treatment of these particular companies, our services industry? What sort of things do you want locked in that they can't remove that sort of treatment into the future?
STEVEN CIOBO: Well look there's a number of benefits that could flow if we can successfully negotiate a comprehensive free trade agreement. I want to make sure that it's a very modern agreement. Services, as I said, is a key part of it, but it's also looking at opportunities around the digital economy. Increasingly, we can see Australia has got some real excellence when it comes to the digital economy and we also want to make sure that we lock in place zero tariffs on goods. We'll be able to achieve that through a well negotiated free trade agreement. Each of these initiatives can work in conjunction with each other to make sure we can maximise Australia's national interest. The other key point Kieran is that when it comes to trade agreements, they're about producing win-win outcomes. It's not about one side winning and one side losing. I'm very confident that Hong Kong, given its significance for Australia, and given the way in which historically Australia and Hong Kong have had such a good trading relationship, that we can really maximise potential here.
KIERAN GILBERT: Given that history, which goes back many years, you would think that this would be an easier FTA to secure say, compared to others like Indonesia or India?
STEVEN CIOBO: They all have their challenges Kieran. I'm not sure any of them are easy, but we'll work through it calmly, methodically. We'll work through it to make sure we can maximise the best potential outcomes for Australia. As I said, I think there's real opportunities for collaboration. There's some very broad and deep capital pools in Hong Kong. Capital pools that together with Australian knowledge and expertise, especially around for example, the provision of infrastructure. I'm very confident we'll be able to do some great things together that's going to yield good outcomes for Australia and good outcomes for Hong Kong.
KIERAN GILBERT: And what sort of time frame are you looking at to get that done and dusted?
STEVEN CIOBO: Well, I'm hopeful that we'll be able to do it fairly efficiently. Our approach going into this, Kieran, is to look and try to negotiate as comprehensive an FTA as possible over the next 12 months or thereabouts. If we can do it a little more quickly than that, that would be fantastic.
KIERAN GILBERT: You've spent a couple of days in China. You're at the Beijing Belt and Road Forum on China's initiative to revive the Silk Road, but in a modern context. USD 150 billion that the Chinese are going to spend in terms of infrastructure on that One Belt, One Road idea. Is this something that you think is more strategic from China or just as much a strategic play than it is economic?
STEVEN CIOBO: I don't really think it's for me to provide commentary on what China's strategy is. What I can talk about is what China has said. China has made it clear that from their perspective, this is about maximising opportunities to engage in the modern world around the old Silk and Maritime routes. That makes sense. Obviously, China like Australia, recognises that trade is absolutely crucial to driving economic growth. President Xi in his opening remarks at the conference made it very clear that China wants to engage in trade and wants to engage in investment around the world. And you know, that's the same thing that I try to do and that Australia’s doing. We've seen the benefits of flow to the Australian economy and by enhancing economic growth in Australia we're able to help drive job growth in Australia. So our ability to engage with China, to engage more broadly with the world, to be able to harness some of the initiatives in the BRI, that is the Belt Road Initiative, all bode very well for a stronger and more resilient economic future for Australia, which means better jobs for Australians as well.
KIERAN GILBERT: Given the economic argument out of Washington recently and concerns about globalisation and free trade, does this provide an opportunity for the Chinese to step up in terms of leadership in this space, on free trade, by their role in this One Belt, One Road initiative?
STEVEN CIOBO: President Xi's made now on two important international occasions very significant speeches around the importance of trade. That's a sentiment that I share. It's a sentiment that I think anybody who recognises that the past three, four, five decades, the big increases that we've seen in living standards, the big increases that we've seen in terms of economic opportunity, these have been delivered not solely because of trade but in very large measure because of trade investment opportunities. Now, we must continue – especially in a low growth environment – we must continue to engage in opportunities to be able to drive investment, and to drive trade, both services and goods. It's absolutely fundamental to making sure that the Australian economy can reach its full economic potential. Kieran, you know, we've got to do that, if we're going to get job opportunities for Australians and indeed for the next generation of Australians.
KIERAN GILBERT: What do you say to those with concerns about that strategic component of the Chinese ambition, though, that has been discussed at length in relation to not just this particular initiative, the One Belt, One Road, but the regional economic partnership, the Asia Infrastructure Bank, there are a whole range of ways that the Chinese are spreading their influence. Do you worry at all? What do you say to those with concerns about the strategic implications of that growth?
STEVEN CIOBO: You know, there's a whole industry up there that's all built on analysing strategy here and analysing strategy there, Kieran. I'm frankly not going to buy into it. What I'm going to focus on is pursuing Australia's national interest. I think that's what voters expect of the Government. I think it's consistent with our policy approach.
KIERAN GILBERT: The Westpac CFO has just turned to domestic politics for a moment now. The Westpac CFO's expressed concerns about the impact of the bank levy on multinational foreign banks operating in Australia and the bank levy against our five largest banks would put them at a competitive disadvantage compared to some of those multinationals from offshore who are operating here. Should the government look at that?
STEVEN CIOBO: No, Kieran, the fact is that what the bank levy does is really two key things. One is it, of course, helps us return back to a stronger and more sustainable fiscal position. That's really important, all Australians recognise that we must get the budget back into surplus so we can start paying down the absolute mountain of debt that Labor left behind. The second thing that it does, Kieran, is it encourages banks to use Australian deposits. By using Australian deposits, they'll have over time the ability to reduce their liabilities under the bank levy and that just means that we have a more resilient banking sector in Australia as well.
KIERAN GILBERT: So you don't think that's a concern if the local big banks are put at a disadvantage in that sense to multinationals who are operating here? You don't think that's something the Government should consider?
STEVEN CIOBO: I think it's the wrong characterisation. If I was the banks I'd probably be arguing that as well because they're trying to do whatever they can of course to argue that they don't want this to happen. We've taken this decision because it's an important part of bringing our budget back into a more sustainable and long term fiscal surplus. That's important, but let's be clear, Australians know the big four retail banks out there have the best footprint in Australia, that's who Australians want to bank with. And as I said, if anything, what the bank levy does is make sure that we provide maximum incentive for Australian banks to use Australian deposits. That's going to over time reduce their liabilities so I think it's actually going to do the exact opposite to what the banks are saying, which is make Australian banks more responsive and more demanding when it comes to actually wanting more Australian depositors.
KIERAN GILBERT: Finally, our last question does to the comments of Dr. Ken Henry and the financial review today in The Australian. He's made some remarks that this takes policy back to the 70s or 80s, that the Government should have been up front and not pretended there's some magic pudding that this can't be borne by customers or shareholders. He says it will be.
STEVEN CIOBO: Well, look, we think that the banks have a social license when it comes to the provision of banking services across the Australian economy and concurrent with that social license is their requirement to play their role when it comes to making sure that Australia's budget position is sustainable over the medium to long term. That's what we're asking of them to do here. Ken Henry, he's made an important contribution to Australian policy debate over many years. But let's also make it clear, Kieran, he's not infallible. This is the guy who, under the first iteration of the mining tax that he drew up, would have seen Australian taxpayers refunding coal miners and iron ore miners over the past couple of years if that policy had gone in. So, it's not that his approach is infallible. Of course, we're always mindful and respectful of the different points of view that people make but ultimately we've taken a decision here that represents the best interests of the Australian people.
KIERAN GILBERT: Okay. Steve Ciobo, Trade Minister in Hong Kong. Talk to you soon. Appreciate it.
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