Insiders, Sunday 2 February 2020

David Speers interviews Treasurer Josh Frydenberg

DAVID SPEERS, PRESENTER: Treasurer Josh Frydenberg, welcome.

JOSH FRYDENBERG, TREASURER: Good morning.

SPEERS: This is a big step to close the border, essentially, with those visitors from China. Why have you taken this step?

FRYDENBERG: This is a precautionary measure to protect Australians based on the best medical advice that we have from the Chief Medical Officer.

SPEERS: Has that changed from a week ago?

FRYDENBERG: It has. It's evolved, just as the virus has evolved. There's around 12,000 people that have been infected now. 40% of those are outside Wuhan. So it's a very serious virus, but Australians should not panic. We should support the Australian-Chinese community, and we should know that as a Government, as a country, we are very well prepared. We've mobilised the incident response centre. We've mobilised our medical response teams and have good cooperation with the states. The National Security Committee has met four times in the last week, and importantly, David, our top medical researchers like at the Doherty Institute for Immunity and Infection here in Melbourne are working with the University of Queensland and the CSIRO on a vaccine.

SPEERS: Does it mean though this step that’s now been announced, does it mean that if a Chinese student or a tourist arrives in Sydney or Melbourne, they will be turned around and put back on a plane?

FRYDENBERG: Normal detention arrangements will apply. If they've provided false information, then they'll go either into quarantine or put back on a plane from where they came.

SPEERS: I want to come to the economic impact of this in a moment. But just a couple of other logistical issues here. The Government's plan to evacuate Australians who are trapped in Wuhan and take them to Christmas Island - has China given permission for this to go ahead yet?

FRYDENBERG: We're still talking to the Chinese, we hope approval is imminent.

SPEERRS: This has taken a few days now?

FRYDENBERG: It has.

SPEERS: Would you like to have the agreement approved already?

FRYDENBERG: Of course, we'd like to have Australians and have this assisted departure.

SPEERS: Is there some hold-up with Beijing?

FRYDENBERG: We're working through these issues, but we hope that approval is imminent. And obviously, this is the support that the Australian Government is providing.

SPEERS: What about the plan to charge them $1,000 each for the flight to Christmas Island. Why do you have to do that?

FRYDENBERG: Well we're not.

SPEERS: You're not going to do that?

FRYDENBERG: We're not doing that. The Department of Foreign Affairs have said publicly that they provided the incorrect information originally, particularly about the arrangements that were in place when people came out of Cairo during the Arab Spring.

SPEERS: The Prime Minister was saying this just the other day at a press conference that this is the standard rule - that this is what happened when people were evacuated from the Middle East. So he was wrong?

FRYDENBERG: He was provided with incorrect advice about the commercial arrangements. We won't be charging those people to come to Australia without a cost incurred.

SPEERS: Because it is not just the Prime Minister, just on Friday, Peter Dutton, your colleague this morning on TV, said that they'd still be charged.

FRYDENBERG: They're not going to be charged.

SPEERS: So that decision has just been announced?

FRYDENBERG: No, it's very clear that the advice that we got originally was incorrect.

SPEERS: How does that happen, though? It sounds like a stuff-up?

FRYDENBERG: They do a fantastic job, the Department of Foreign Affairs. We had an NSC meeting.

SPEERS: This is their fault?

FRYDENBERG: And in light of that information, the correct information, there won't be a charge.

SPEERS: Alright, let's talk about the economic impact of the coronavirus. It is going to have a significant impact on tourism and obviously higher education as well. Are you able to say what the economic impact is likely to be?

FRYDENBERG: Obviously, China is a critical economic partner for us. They're the greatest source of foreign students - over 200,000 into Australia. 1.4 million tourists. Together, those two sectors provide about $16 billion to the Australian economy. And they are the recipients of around 30% of our trade. But it's too early to give a definite view about the economic impact because we don't know how severe and how sustained the virus outbreak is. But if you look back at SARS, which is obviously from the family, the same family as the coronavirus, and about 8,000 people were infected then, what we did see was that the student numbers came down. But also that the tourist numbers fell about 11% in the June quarter. We also, back in 2003, saw trade numbers affected, but it rebounded in subsequent quarters.

SPEERS: That was a long time ago, SARS. Nowadays we are a lot more intertwined with the Chinese economy. Is there any estimate at the moment around a percentage hit this might mean for the economy?

FRYDENBERG: The Department of Treasury is looking through this. They are looking at low and high impact scenarios

SPEERS: What are they telling you?

FRYDENBERG: That it is too early to tell because we don't know what the impact direct and subsequent impact could be.

SPEERS: Could we see a negative quarter of growth?

FRYDENBERG: I'm not going to speculate on that, other than to say that the economy has been sustained. But you'll see both direct and indirect...

SPEERS: Sorry, the economy is, the economy is weakening Treasurer. The economy in your own numbers in the midyear budget update shows that it is weakening before all of this.

FRYDENBERG: The economy has been very resilient through pretty tough circumstance that we can’t necessarily control. But the key point here is that you'll see direct impacts. So trade, tourism, students. You'll see indirect impacts.

SPEERS: What I'm asking is that we could see a negative quarter here?

FRYDENBERG: I'll leave that for you to commentate on?

SPEERS: You're the Treasurer?

FRYDENBERG: And I’m not going to speculate about that. There are things that we can control and things that we can't control. When it comes to the outbreak of the virus, when it comes to the fires, when it comes to the floods. When it comes to the trade tensions between the United States and China, we can't control those factors. But it does underline the importance of our disciplined economic management.

SPEERS: Let's talk about that.

FRYDENBERG: Going into this crisis, having balanced the budget, not with a $48.5 billion deficit like we inherited.

SPEERS: So on the budget, are we still going to have a surplus?

FRYDENBERG: The forecasts are updated twice a year at MYEFO and on budget night.

SPEERS: The MYEFO was a $5 billion surplus for this financial year?

FRYDENBERG: It was, but as you know, we've made significant commitments since then in terms of the fire response. We don't know what the impact will be on household consumption and what the full impact will be on trade. And in fact, investment as well as a result of the uncertainty of these crises.

SPEERS: Well, you're talking a lot about uncertainty and unknowns. But can I remind you what you said on budget night. "Tonight, I announce that the budget is back in the black." Was that a little premature?

FRYDENBERG: Well, our first and primary focus is on delivering the support to the Australians who need it. And as you said in your introduction, David, we've had a devastating summer with these fires.

SPEERS: But you said on budget night, "It is back in the black." Is that wrong?

FRYDENBERG: Well, we've got a balanced budget, and that's the first time in 11 years. As for delivering the surplus, our first focus is on delivering the support to the people who need it most. That's why the Prime Minister in an unprecedented response...

SPEERS: I know that, but I'm asking you, were you a bit carried away in the lead-up to an election in saying, "The budget is back in the black?"

FRYDENBERG: In terms of having a balanced budget, that's a significant achievement. In terms of a surplus, you'll have to tune in on budget night.

SPEERS: So no guarantees that we're going to see the surplus?

FRYDENBERG: What we do know is that these events outside of our control are going to have a significant impact on the Australian economy.

SPEERS: Let's turn to climate change Treasurer. The Prime Minister wants a greater focus on adaptation and land clearing and so on, and fair enough. But a lot of this is the realm of the states. Can I ask you about emissions reduction. You're the guy who designed the National Energy Guarantee. You accept the need to do our bit on emissions. Should Australia do more than achieving the target that Tony Abbott set five years ago?

FRYDENBERG: Well, it's important to understand our 26% to 28% target to reduce our emissions by 2030 on 2005 levels is a floor, not a cap. And we hope to beat our target.

SPEERS: Could you lift the target?

FRYDENBERG: Well, when we took to the Australian people a very clear target, so we're not about to lift that target. What we are endeavouring to do is to meet our commitments. Now, if you look around the world, Australia has been performing well. We've reduced our emissions by nearly 13% on 2005 levels. At the same time, David, Canada has only reduced their emissions by 2%. New Zealand have increased it by 4%. China by 67% and India by 77%.

SPEERS: Let me tell you about what your own Government, the department is saying about emissions right now. It's saying that emissions this year will be 534 megatonnes. In 2030, they'll be 518 megatonnes. That doesn't sound like a big reduction?

FRYDENBERG: When we came to Government in 2013, they said that we'd miss the 2020 target by 700 million tonnes. Now the department is saying that we'll beat it by 400 million tonnes.

SPEERS: A lot of that is thanks to Labor's efforts, though, isn't it?

FRYDENBERG: No.

SPEERS: A price on carbon?

FRYDENBERG: And increasing electricity prices.

SPEERS: But talking about emissions, that's when they came down and then they plateaued when you got rid of the carbon....

FRYDENBERG: One of the success stories has been the transition to more renewable energy. So the estimate is that we'll get a 26% reduction in the electricity sector which is a third of the overall carbon footprint for the country by 2022, eight years ahead of schedule. But can I just say - it's really important for the Australian people to understand how significant the uptake of renewables has been in this country. We saw over $7 billion invested last year.

SPEERS: But investment halved last year?

FRYDENBERG: On a per capita basis, it's more than the US, more than the UK, more than Japan and double that of France.

SPEERS: On a per capita basis Treasurer, emissions were 21 tonnes last year and under the Government's own projections will still be 17 tonnes per capita in 2030. 17 is not half of 21.

FRYDENBERG: Emissions are on average 50 million tonnes lower per year under us than they were under the Labor Party.

SPEERS: On average across Labor’s years. But they inherited high emissions and did a lot to reduce it.

FRYDENBERG: David, about one million tonnes is the equivalent of taking 300,000 cars off the road. But I want to make the point that our emissions policies are not set and forget. We're investing...

SPEERS: Can I ask you this - these fires are brought enormous destructions and sharpened people's minds on this. Do you think that we're facing a climate emergency?

FRYDENBERG: I think we're facing a significant climate challenge, we need to be part, that's not the terminology I would use.

SPEERS: You wouldn't say that we're facing a climate emergency despite what we’ve just witnessed?

FRYDENBERG: I think Climate change is a significant challenge, a global challenge that needs a global solution. We're doing our bit and we're also working on the international stage.

SPEERS: How is this not an emergency?

FRYDENBERG: It's an important issue. But as the Prime Minister has outlined, there are a lot of things that we can do with mitigation and adaptation to try to reduce the impact of climate change on the Australian community.

SPEERS: Let's move on to the sports rorts saga. Do you admit that the Government misused taxpayer money for blatant pork-barreling with the sports grant scheme?

FRYDENBERG: We take the Auditor-General's report very seriously. The minister had a discretion to make the approval of grants. That's set out very clearly in the guidelines. The matter has been referred, as you know, to the secretary of the Prime Minister and Cabinet. So I'm not going to pre-empt that inquiry.

SPEERS: But we don’t even have to wait to see what the Auditor-General found. The Auditor-General, let me just read from his report: "The award of funding reflected the approach documented from the Minister’s office focusing on marginal electorates held by the Coalition as well as those to be targeted by the Coalition. Applications from projects located in these electorates were more successful at being awarded funding than if the funding was located on the basis of merit."

FRYDENBERG: It might be an inconvenient truth for you to know that of the recommended projects by Sports Australia, 66% in Coalition seats. What ended up happening is it was reduced to 60% and in Labor seats, it was recommended by Sports Australia to 26% and it went up to 35%.

SPEERS: Labor seats you were trying to win. Treasurer, I'll just bring you back to what the Auditor-General said. 73% of the approved projects had not been recommended by Sport Australia. Will you, now, admit this was wrong?

FRYDENBERG: Well, what I will say is that the Auditor-General made it very clear in their four recommendations that things need to change. The Government has accepted those recommendations, so what it will mean going forward...

SPEERS: Including pork-barrelling?

FRYDENBERG: What it will mean for the Government going forward is that when you have a corporate Commonwealth entity like Sports Australia and the decision maker is the minister then the reasons will have to be documented for decisions, and that includes reasons for approving projects that weren't recommended.

SPEERS: So that would stop this happening again? What you're talking about here - the minister, if they're approving grants, has to document the reasons for them? Would that stop a repeat of this?

FRYDENBERG: Well, it will be a very different approach to what we've seen here. And I think that it will increase transparency.

SPEERS: But you still won’t concede that there was wrongdoing here?

FRYDENBERG: We've got a report...

SPEERS: Why can't you do this?

FRYDENBERG: Because there's a report that’s coming out from the secretary of the Prime Minister and Cabinet.

SPEERS: We don't need to wait for that to see what the Auditor-General found. The Auditor-General found this was pork-barrelling, right?

FRYDENBERG: Well, the Auditor-General found that there was a lack of transparency and accountability around this.

SPEERS: Is this what you had in mind in the expenditure of the committee when you approved the grants scheme?

FRYDENBERG: What we had in mind was to support community projects that are in need. What we saw in the first round of the...

SPEERS: Did you have in mind that they would be targeted at marginal electorates like this?

FRYDENBERG: We had in mind that they would go to community that is were in need. The program was.....

SPEERS: But not based on political need?

FRYDENBERG: The program was 13 times over subscribed. In the Auditor-General's report, they make the case of real social and economic benefit going to community-funded sporting projects. What we've seen across the country is a large number of eligible projects receiving grants.

SPEERS: This was used for political purposes, taxpayer money used for political purposes in the lead-up to an election?

FRYDENBERG: This was to support eligible projects where there was real need. Now the criteria was set out...

SPEERS: I've read to you what the Auditor-General found. This is what I'm asking - this was a pork-barrel.

FRYDENBERG: This was focusing on directing support to the projects across the country.

SPEERS: Sorry, Treasurer, you don't think that voters see what has happened here and would appreciate a bit of honesty?

FRYDENBERG: Well, what they would appreciate I think is more transparency and accountability following up the recommendations of the Auditor-General's report, and as I've said, we've

accepted those recommendations.

SPEERS: What about the clubs who missed out? The once found by Sport Australia to be deserving, actually meritorious, in need of this money? Will they see any funding?

FRYDENBERG: Well, we're not going to fund unsuccessful projects in this particular program.

SPEERS: So you're not going to do that?

FRYDENBERG: We're not going to do that. What the Prime Minister has foreshadowed is, given the strong community need and the importance of supporting these sporting organisations, we would, in the context of the budget, revisit a program of this type.

SPEERS: Another grants program?

FRYDENBERG: A support... To support the actual sport one.

SPEERS: Would that be run like this was run?

FRYDENBERG: Like I said, we'll be accepting the Auditor-General's recommendations, which would mean that there would be a change in the process where there is a discretion from a minister, and it also involves a corporate Commonwealth entity such as Sports Australia.

SPEERS: So, that will clean up these sorts of problems?

FRYDENBERG: You will see more accountability, more transparency, more explanation of reasons, and they will be documented.

SPEERS: What about Bridget McKenzie? Should she survive?

FRYDENBERG: Again, the report from the Secretary of the Prime Minister's Department will be with the Prime Minister, and of course...

SPEERS: Today, will that be with him today?

FRYDENBERG: Look, I don't know the exact timing of that. One would assume it will be shortly.

SPEERS: If she does go, can you think of a good replacement?

FRYDENBERG: Asking a deputy leader of the Liberal Party to opine on who should be the leader of the National Party is a bit like asking a rabbi to be in the conclave choosing the Pope! I don't think that that is going to happen.

SPEERS: OK, Treasurer Josh Frydenberg thank you.

FRYDENBERG: Thank you.