David Lipson: The Trade Minister Andrew Robb is right now in Hong Kong for a meeting of some 2000 investors who collectively control $18 trillion of credit, he claims he’s been approached several times by investors worried about sovereign risk in Australia – a result of Labor’s tactics in NSW and also the Victorian government’s attempts to scrap the East-West link contract. I spoke to the Trade Minister from Hong Kong a little earlier and asked him how seriously the sovereign risk issue is being taken.
Andrew Robb: It’s been raised with me now consistently over the last three weeks. The fact of the matter is, we’re being tarnished – our reputation as a safe haven, as a place to get a solid return, to be predictable with regulations and all of the rest – now they’re saying to me: ‘what is the paper worth on which these contracts are being signed, if premiers are going to rip-up the contracts and then potentially legislate for no compensation’.
This feeds into the sentiment; there’s a lot of attention coming to Australia, there’s been a lot of foreign investment, we need the money to take us through the run-down in the resources and energy sector construction phase, we need to have plenty of investment in all of the infrastructure that we’ve got in the pipeline in Australia.
If we don’t maintain our reputation as a predictable and safe place to invest, what we’re going to see is a risk premium put into projects. And so unwittingly, Dan Andrews for instance in Victoria, he will increase the price of any metro by a billion dollars or more, because of the risk premium that will be put into Victoria and to Australia; it will increase the cost of all sorts of finance in the future and the whole of Australia will pay for that because of the reckless, irresponsible action being taken by Dan Andrews and being suggested by Mr Foley.
David Lipson: Isn’t there also though a lesson here for coalition governments, in the case of the Victorian government, that they shouldn’t be signing major contracts for major projects in the weeks before an election when that project is so contentious, and in fact the election itself was described as a referendum on that very project.
Andrew Robb: It’s so contentious that Bill Shorten on two major occasions in previous years, had strongly supported the project. We have got a situation where that project was negotiated, discussed and pursued by a government that had been elected four years before; they had every entitlement to follow that through, it just so happened that the contract phase came towards the end of their term, but it’s not as though they made a secret of their intent to go ahead with that major piece of infrastructure – something they had promised and something they had a mandate in my view to pursue.
Put that aside, you can’t have a situation where governments don’t make decisions – potentially up to a year out from an election – just because the opposition are being reckless in terms of the politics they’re playing with these things. We’ve got to think of our dependence as a country, for the last 200 years, on foreign investment to help us maintain and grow our industries, and this is being put in jeopardy; the cost of finance is going to be significantly increased, it’s going to cost us billions of dollars on all sorts of future projects that any government in Australia enters into.
David Lipson: Specifically on the NSW election and in particular the union ads that have drawn some sort of potential for or threats – some xenophobic attack ads really – by the unions that focus on the potential danger of Chinese investment in the electricity grid, how’s that been received over there?
Andrew Robb: I’m in Hong Kong – and we’ve just struck the world leading agreement with China in the Free Trade Agreement – and people again are bemused by the xenophobic utterances from Mr Foley and his cohorts. This is very dangerous territory to go down; it’s hugely irresponsible and again people are confused about what Australians think of them, what the real opportunities are, how welcome people are to trade and investment from this part of the world.
It’s grossly irresponsible and it makes people like myself, and all the other colleagues from Australia – the business people – deeply uncomfortable because these are people they mix with every day, they’ve got strong business relationships, strong friendships and then we hear all this xenophobic nonsense and highly irresponsible proposals about cutting off investments and ensuring there’s no compensation and all this sort of nonsense that Foley has gone on with; he’s doing Australia a lot of damage with the way in which he’s conducted a most deceitful and irresponsible campaign – a xenophobic campaign and it’s reckless in the extreme.
David Lipson: Just on another matter it looks like the Australian government is drawing close to signing up to the China Infrastructure and Investment Bank, but that’s after many months of delay. Was the opportunity to drive the process and to influence the governance of the bank squibbed in any way by this equivocation by the federal government?
Andrew Robb: I don’t think so. We’ve had no pressure from China at any stage and in fact, in the interim there’s been extensive contact and discussion about the various areas of reservation that we’ve had, and I think that we’ve had a most constructive and positive response from the Chinese government. It’s all been done in good faith and I think again it reflects the new level of our relationship based on the Free Trade Agreement, and we are seeing very much, a very cooperative and understanding approach.
They have satisfied overwhelmingly the concerns or the reservations that we had. We just want to see that this body, which we think is a very important initiative – one that I think will get the positive outcome that we’re looking for – we want to see that it has the same strong governance standards of the Asian Development Bank and the World Bank, and I think that’s exactly where it’s heading and I’m very enthusiastic about the prospect.
David Lipson: Just finally Andrew Forrest’s comments this week on capping commodity production to drive up the market price, have they raised any eyebrows over there in Hong Kong?
Andrew Robb: I’ve had one or two mentions, but it’s not been something that’s dominated discussion. I was not only at the investment conference I was also at the Mines and Money conference so a lot of people from that industry are here. I think there’s an understanding that Andrew was more or less expressing a frustration, but the fact of the matter is, the high prices over recent years has encouraged a supply response around the world in iron ore, and if we don’t supply it, someone else will; if we don’t supply it, we’ll lose market share. Most of our big operators are low cost and are very well placed to hold their position and see ourselves through this down-turn and be well positioned to capitalise when things turn around some time in the future.
David Lipson: Trade Minister Andrew Robb great to talk to you, thanks for joining us.
- Trade Minister's Office: (02) 6277 7420
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