Topics: Australia’s trade with China; manufacturing opportunities; energy prices; supply chain issues.




Ticky Fullerton: Border shutdowns, tourism smashed, supply chains threatened. Quite a lot for the Federal Trade Minister to deal with. At the end of a big week for the government I spoke with Minister Simon Birmingham from Adelaide. I asked him first what his priorities have been.


Simon Birmingham: Our number one priority has purely been business survival, because that leads to job survival and employment survival. We knew at the outset of this pandemic that there were real threats to the overall productive base of the economy. That businesses were at risk of going under if they had to fork out for redundancies that they didn’t have the cashflow to support, if they had to continue to make repayments that they didn’t have the cashflow to support, or if they had to make rental payments that they didn’t have the cashflow to support. That’s why they were three critical areas of overall support that, as a government, we together with the states and territories and the banking sector, stepped in to try and alleviate some of those rent pressures, alleviate those repayment pressures. JobKeeper critical to avoiding redundancy costs and pressures. And together that has helped to ensure that many more Australian businesses have survived to date and will survive through this crisis, than would have otherwise been the case.


Ticky Fullerton: Yeah. There’s a lot of focus around security of supply chains, Minister. What do you think of President Trump locking in, for example, vaccines, in terms of security?


Simon Birmingham: If we look at the supply chain challenges that exist it is entirely understandable that in different parts of the world steps are taken, especially as it relates to those things specific to the health crisis. We’ve intervened in terms of upscaling capacity in Australia to make face masks, to make protective equipment, to make respirators, and that’s been crucial. And we’ve also had to intervene in terms of using our diplomatic and trade network around the rest of the world to secure the supplies that are often necessary for those sorts of goods. And we’ve done that successfully. It’s a testament to the diversity and range of relationships that we have that we are able to do so.


But it’s understandable that countries will look at how they can also secure vaccines, and again Australia is a partner in a number of ventures to try to do that. But I think more broadly we see a debate about supply chain resilience and the question that many businesses, particularly global operations, will have to look at as they work through this pandemic is whether or not they had enough diversity in those supply chains. That when disruptions occurred were they able to turn to alternate sources? And that presents an opportunity for a country like Australia to make our case as to why we are a potential option for increased production, increased work in some of those areas.


Ticky Fullerton: We have of course been growing our service economy. We talk about ourselves as a service economy. That’s been smashed. Andrew Liveris’s review is sitting on the government’s desk. What are we going to hear about in this manufacturing recovery? Can it save us?


Simon Birmingham: Manufacturing can play a really important role. We need to be clear as to what that is. It’s not going to be a return to assembly-line manufacturing of decades past. This is about ensuring that the fundamentals for high-skilled advanced manufacturing are right in Australia. Energy prices are a crucial part of that and the government has been doing extensive work already to try to bring down aspects of those energy prices. And we’ve seen some of that realised in terms of real energy prices in the Australian market in the last year or two.


Ticky Fullerton: But are we going to see any more downward pressure on energy prices, Minister?


Simon Birmingham: We’re going to do everything we can to keep energy prices as low as we possibly can, to drive them lower where we can. That includes looking at the gas sector, which is a key part of Andrew Liveris’s work. They’ve identified certain regulatory steps, which I’m sure we will try to work as hard as we can at a national level and with the states and territories to open that up. We know, though, that increasing supply is a big part of that, especially in the gas area. We’ve been consistent all along about the crucial role the states and territories have to enabling that supply to increase. We hope that they can follow through in that space.


But it’s not just energy prices. Of course the work happening of bringing the trade union sector to the table together with business organisations across the five different streams of potential industrial relations improvements is a crucial piece of work as well, to try to get sufficient flexibility. But also just administrative efficiency in the IR system to help sectors like manufacturing grow. And then the skills piece of the puzzle, which we have stepped up government investment, recognising that, especially over the next year or so, there will be higher unemployment. We’re going to work as hard as we can to keep unemployment as low as we can. But there is an inevitability to that higher level of unemployment in the current circumstances. And getting targeted skills investment in the sectors that have need for the future is a big piece of the puzzle as well to get people back to jobs. But also again to make sure we’ve got the skills base in some of those areas of advanced manufacturing.


Ticky Fullerton: We’ve had the economic statement this week. Now, quite a lot of focus on the iron ore price assumptions. You’re relatively conservative, I think it’s towards the $50 a tonne by Christmas time. But we are very reliant on this China [indistinct] for our iron ore, Minister. Now, the Chinese we know think long term. No doubt they’re looking for other places for supplies from places like Africa. Are you confident that we will have the strength of relationship with China to keep our trade going long term?


Simon Birmingham: I am, because it comes down not just to the strength of relationship but also quality of product. Australia’s quality, our reputation for reliability are essential factors in terms of the trade relationship. It is why businesses demand Australian product and inputs to their operations and why consumers demand Australian products to go on their plates and to share with their families. Because safety, reliability, quality are all attributes that you get. And in the minerals and resources sector that quality of grade and that reliability of delivery is something that few countries can compete with Australia on. And of course the proximity of geography that we have relative to other potential suppliers is another important attribute there. We’ve seen the trade relationship hold up strongly. We’re committed for it to continue to do so. It’s not just in Australia’s interests. It’s in the mutual benefit of both Australia and China for it to do so. We will continue to share this place in the world. We want to see China’s continued economic prosperity as we do right across the region, and Australian inputs can play a role to that.


Ticky Fullerton: Just on the economic statement again, our AAA credit rating has been reconfirmed by credit agencies. But the Budget deficit is likely next year to be a lot higher than $184 billion. How important and how focused are you on making sure we keep that AAA rating?


Simon Birmingham: The AAA credit rating is something we have worked hard to maintain through the years, and the efforts of stabilising the Budget deficit taken over the previous six years and bringing us back to the point of the Budget being in balance prior to this crisis and entering into surplus. There were crucial aspects of that that gave us the resilience in entering this crisis where we’ve been able to invest more, been able to make sure that we deliver the support that Australian businesses and Australian families need to get through the crisis whilst still having the ratings agencies recognise the AAA status of Australia and continue that. We’ve been very focused on keeping our support time-limited. So 99 per cent of the additional expenditure government has made is within just a two year period. Now, we’ll continue to reassess that, and as I’ve said there may well be other decisions that stretch out a little bit longer. But keeping the credibility of our finances is an important part of our strategy too. So we will maintain that dialogue with the ratings agencies.


Ticky Fullerton: Lastly, Minister, the recovery means that you seem to be talking more like an Economic Minister these days than a Trade Minister. But you’re pipped as Finance Minister. That has got to be the toughest Finance Minister’s job in decades. Has Birmo got the ticker for it?


Simon Birmingham: Ticky, it would be entirely up to the Prime Minister as to how he chooses to reshape the Ministry when Mathias leaves towards the end of this year. Mathias is Australia’s longest-serving Finance Minister, has done an incredible job. But as you would know and many of your viewers and anybody who knows Mathias knows, he works at 110 per cent, he’ll be doing that right through until has last day at the office. I’ve got a huge job to keep doing as Trade and Tourism Minister, and programs like JobKeeper are so essential for our tourism operators who are suffering, and I’ll be applying 110 per cent to my job. And then what happens will be a matter for the Prime Minister as to how he thinks the team can best contribute going forward.


Ticky Fullerton: Minister, you’re very generous with your time. Thank you so much.


Simon Birmingham: Thank you, Ticky, my pleasure.