ABC Radio National

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 freetrade 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, butthe big news I guess politically in Australia today is some comments made byKen Henry that I do want to put to you. He has, I guess lashed the Governmentover the bank tax, he's attacked it saying that it's making the banks dip intotheir reserves to pay tax, the Government's harming the work done by theregulator, APRA, to strengthen the banks in case of another financial shock.Ken Henry is very respected, long serving Secretary of the Treasury, now Chairmanof 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 firstiteration of the mining tax which would have seen taxpayers refunding coalminers and iron ore miners for losses in recent years, so I think that there'ssome policy work historically that hasn't been ideal. But look, let's get backto what the principal issue is here. The Government has to be realistic; wehave to be pragmatic about the way in which we address the effort requiredaround fiscal consolidation for Australia. We've had to do that through anumber of different alternatives, because we've had a Senate that has typicallybeen saying no when it comes to savings initiatives that the Coalition's triedto put in place to instil better fiscal discipline. What we're talking abouthere is a very modest contribution from Australia's Big Five banks, the fourmajors that everyone of course knows about at a retail level, plus MacquarieBank.

HAMISH MACDONALD: I'd just ask you to deal with the substancethough, of what he's saying, which is that the Government is effectively askingthe banks to dip into their reserves, which are obviously so crucial if there'sanother financial shock. Given that the Government is saying, well the bankshave to absorb it, that is true, isn't it?

STEVEN CIOBO: Well, I mean, it's not true. And the reason it'snot 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 tothem on behalf of the Australian people, and we're requiring them to make amodest contribution towards the ongoing effort that Australia needs to make inorder to return to a budget position of surplus, and real strength. So it'ssimply incorrect to make the suggestion that there is not enough buffer forAustralia's four major retail banks, plus Macquarie to be able to absorb thiscost.

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 inyour view is the broader strategic objective of the Chinese Government inpursuing this project?

STEVEN CIOBO: Well, I don't really believe actually that I'm acommentator 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 obviouslyanalysing it on behalf of the Australian Government. What do you think the purposeof it is?

STEVEN CIOBO: Well, Hamish, look at it in terms of Australia'snational interest. Now, China's made it very clear that it intends to use theBelt Road initiative as an opportunity to build infrastructure not onlydomestically in China, but to also link together economies across the regionand into Europe. That presents very profound opportunity for Australia. We ofcourse 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 wecan do in a collaborative sense between Australia, China and other thirdcountries that are part of the Belt and Road corridor, and I believe that itrepresents a significant commercial opportunity for Australia given our very strongrelationship with China and also surrounding countries.

HAMISH MACDONALD: So what would be our involvement in it? Are wesigning up to be part of this project, or are we looking at something slightlymore removed?

STEVEN CIOBO: Well, I attended of course, the Belt RoadInitiative Forum, which took place on Sunday along with a host of a number ofother countries that participated as well. We've got to see over the comingmonths and years ahead, the role that Australia can play. There clearly arecommercial opportunities. I'll be making some additional announcements in theregion as well today, with Hong Kong around a free trade agreement. This is allpart of ongoing efforts to continue engaging what is the fastest growing partof the world, and this does present terrific opportunity for Australia to beinvolved over the coming years, as we get more clarity on the pipeline ofprojects, and exactly what it is that Australia can bring to the table.

HAMISH MACDONALD: So interpreting what you're saying, it soundslike we won't be a full participant, but we might be willing to take up some ofthe contract opportunities that come further down the line. Is that a correctanalysis of what you're saying?

STEVEN CIOBO: No, because I don't really believe, I know theretends to be a bit of a media preoccupation about what is a full participant andwhat is not –

HAMISH MACDONALD: Well, it's a relevant question. It is a relevantquestion.

STEVEN CIOBO: No, well, China is our major trading partner.Australia certainly brings much to the table when it comes to experience, as Isaid, around financing, around the design and construction of infrastructure,and I have no doubt that Australian businesses will be able to play their role incoming years. Now that sounds like very substantial participation to me, andthat's, I absolutely believe, based on conversations I've had in Beijing, aswell as in surrounding countries, that absolutely represents terrificopportunity for Australia to be very involved.

HAMISH MACDONALD: There has, it is said, been an opportunity forAustralia to connect our development, our infrastructure scheme in northernAustralia to the One Belt One Road project. Will that happen?

STEVEN CIOBO: Well, our northern Australia initiative is aboutwhat's great for Australia, what's in Australia's national interest. TheGovernment has got a clear eyed vision about what it is that we want to achievethrough northern Australia. Now some would say, well there's a linkage there tothe Belt Road initiative that China's undertaking. The Government's view isthat these are complementary projects, but they are obviously quite separate.We had the genesis of our idea about the development of northern Australiabased upon what's in Australia's national interest. So, you know, from anAustralian Government perspective, there are separate interests, but there are,of course, significant complementarities there. The same can be said aboutother initiatives that countries are taking throughout the region.

HAMISH MACDONALD: Sure. I'm just not clear on why it's not inAustralia'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 ournational interest?

STEVEN CIOBO: Well, I think Australians understand that theAustralian Government takes initiatives based upon what's in our nationalinterest, and the initiative that we're undertaking with respect to northernAustralia wasn't because we sat around said, 'Look there's this Belt Roadinitiative that the Chinese Government's undertaking, and how do we make thathappen in Australia?' That's obviously not the process. What we looked at wasopportunities for Australia to continue its economic advancement, was opportunitiesfor Australia to maximise our economic potential, and most importantly, tocreate jobs for Australians. That's what driving this initiative in Australia.That's what was behind the formulation of the White Paper on northernAustralia. Having now taken those decisions, as I said, there clearly arecomplementarities there with the initiative that the Chinese Government isundertaking.

HAMISH MACDONALD: Right. And so what is Australia's nationalinterest with regards to the One Belt, One Road project then?

STEVEN CIOBO: I think it's to look at ways in which we can getour business community to be involved. I think it's opportunities aroundfinancing of infrastructure, opportunities around the design and ultimately theconstruction of infrastructure. As countries put forward projects, there'll beopportunities for collaboration. There, for example, will be projects thatChina will be undertaking within its mainland that Australian businesses couldbe involved with. It might be on the financing side, on the design side, or onthe construction side. Over the coming months and years ahead, we'll findopportunities to continue to be better engaged around this initiative and Ithink that is what represents Australia's national interest when it comes tothe Belt Road initiative.

HAMISH MACDONALD: So given all of that, why not just sign up toit? Why not become a full participant in the broader project? There's so muchmoney available, it would seem, if we are part of it.

STEVEN CIOBO: Well, again, I think there's a distinction thatis falsely being made between Australia not being a full participant, and itis, and I'm not really sure that even in the media's eye that there's clarityaround exactly what that distinction is. I've made it clear that when it comes to,for example, initiatives like the northern Australia initiative – we'repursuing that based upon what's best for Australia. Australian businesses, Ihave 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 negotiationsfor a free trade agreement. Hong Tong tariffs are already at zero. What's thepotential benefit to Australia of an FTA?

STEVEN CIOBO: I am in Hong Kong, and look, Hong Kong is oureighth biggest export market and represents terrific opportunity for Australiato continue to engage with Asia and to continue to build upon the very stronggains that we've made recently with the free trade agreements we put in placewith China, with Korea, and with Japan. Yes, whilst goods tariffs are at zero,there are tremendous opportunities around services and also for betterfacilitation when it comes to investment. Services, are of course, basicallyfour-fifths of the Australian economy. It represents only 22 per cent orthereabouts of our national exports. So services exports, in particular,education, tourism, but also more broadly, health services, architecturalservices, legal services, and others - these are all new opportunities formodern economies to be able to export, and that's what I want to tap into herein Hong Kong.

HAMISH MACDONALD: Steve Ciobo, thank you very much for your timethis morning.

STEVEN CIOBO: A pleasure. Thank you.