Topics: New Morrison Government Ministry; Brexit; TPP-11; IACEPA; US-China trade dispute; legislating tax cuts.
Simon Birmingham: I will be happy to serve in the Trade portfolio or however else the Prime Minister chooses.
David Speers: Fair enough but would you be disappointed though if a couple of your colleagues notably Melissa Price and Mitch Fifield were dropped?
Simon Birmingham: These are never easy decisions for Prime Minister’s in terms of crafting the best cabinet for the future, and I know that Scott Morrison has been taking his time this last week to think about the structure and the personalities and the people, best placed to take the country forward. It is a serious responsibility for all of us sitting around the cabinet table, and of course I feel for any colleague who may miss out in such a process, but the PM has to do what is right for the government and for the nation, and I am confident that is what he will do today.
David Speers: Can you just clarify with Christopher Pyne now gone, are you Simon Birmingham now the leader of the moderates in the Liberal Party?
Simon Birmingham: David, look we don’t have formalised factions in the Liberal Party, my approach is that I seek to engage with my colleagues as broadly, as widely, as possible. Of course the Liberal Party is, as is well recognised, a custodian of a conservative strain of thinking and liberal strain of thinking in terms of historical approaches. Scott Morrison is a leader that brings that together, governing strongly from the centre, reflecting and representing all different strands of the party. Of course we each bring our own personal perspectives and values to the cabinet table, to the party room, and that’s where we can have debates about the issues that are important to Australia to ensure that we do keep governing as I think was shown during this election campaign, in the areas that unite us as a party around our economic strength, our agenda for lower taxes, and for creating opportunity for Australians to live their lives as they see fit, and that’s what unites us in our mission and mandate too.
David Speers: Okay, just back to this question, you say you have organised factional blocks, certainly looking at the leadership contest of last year we didn’t see the moderates move as a very organised block behind Scott Morrison and that gave him the Prime Ministership. So just back to this question about who is now leading that block, where do you sit in the hierarchy?
Simon Birmingham: David, I think that is form of other issues, these aren’t things that as I say are organised, tested or elected. In the end we work in a very collaborative way across the government, each of us making sure we reach out and collaborate with the colleagues who we are close to. As I say, yes of course there are differences of opinion, they are well reported on, but the issue that is most important is how we resolve those differences of opinion, and I have absolute confidence that the leadership team…
David Speers: Can you answer, did you have any consultation with the Prime Minister about the new ministry he’s announcing today?
Simon Birmingham: Look, I gave some thoughts to the PM as you would expect, I’m sure many of my colleagues did as well. Ultimately though that is his decision.
David Speers: About who is in and out?
Simon Birmingham: I’m not going to go into the content of the thoughts that I might give David, and ultimately it’s a matter for the Prime Minister, he makes these decisions, it’s his cabinet, his ministry, and it’s one that I’m sure he will have crafted in a way that takes the country forward to implement the agenda that we took to the election.
David Speers: Let’s look at your portfolio then, if you do say as expected as Trade Minister, what will be your priorities for the term ahead?
Simon Birmingham: A very busy agenda in the government in terms of the trade portfolio, first and foremost to make sure that we legislate and ratify the agreements that were finalised over the last few months with Indonesia, Hong Kong, and before that Peru. We want to make sure they come into reality and that will require support from the Labor Party, and I hope that given particularly the significance strategically, of the Indonesian agreement, that we see that support for swift ratification of that. There’s still some processes around the Joint Standing Committee on treaties, the transparency processes, that are important to complete and to ensure they’re fully undertaken, but then we will look to bring that to the Parliament. To the future…
David Speers: Just on that, is that this year, do you expect that to be before the parliament this year?
Simon Birmingham: I would hope so David, I hope that we can bring it to the Parliament this year that we can see and finalised and ratified before the end of the year. We then want to make sure that we conclude negotiations on the Australia European Union Agreement, that’s a critical one. The EU is Australia’s second largest trading partner, that’s a very large trading bloc, and of course dependent upon what happens with Brexit, we are well placed to secure a trade agreement with the UK should they leave the EU in terms of trade terms.
David Speers: Sorry just on Brexit, just let me jump in there on the Brexit issue because we don’t know where that is going to land. But what’s Australia’s view right now, is Brexit going to be a good thing or a bad thing for Australia?
Simon Birmingham: I think we like much of the world want certainty for the future in this regard. How the UK chooses to handle the Brexit equation is a matter for the UK. I place on record my thanks and pay tribute to Theresa May for her service in what has obviously been an incredibly difficult set of circumstances to navigate. Her government has been a good one for us to work with in preparing Australia for whatever eventuality occurs. We have put in place agreements…
David Speers: If that eventuality is that Boris Johnson led government and a ‘no deal’ Brexit, would that be a good thing?
Simon Birmingham: Well we have put in place agreements already with the UK to make sure that insofar as possible, flow of trade will still be facilitated under such circumstances and in fact the UK Government has released indicative tariff lists of what would happen under a ‘no deal’ scenario, and for some parts of Australian industry such as our wine sector, parts of our beef industry, there’s some good news in elements of that. But there would clearly be disruption coming from a ‘no deal’ Brexit as well, and I know that many Australian businesses have been working to prepare themselves for that possible disruption were it to occur. But as I say, these are matters for the UK, all we can do is make sure that Australia is as well prepared as possible in whatever scenario. We’ve done that by striking contingency agreements in the event of a ‘no deal’ Brexit, in terms of the longer term, we’ve got a trade working group already in place with the UK that we could step up to instantaneous free trade agreement negotiations, which I hope we would then be able to strike and conclude very, very quickly. As countries with similar legal systems, shared cultural understandings and history, we really should be able to move swiftly if the UK leaves the EU to strike a new free trade agreement that is as comprehensive an ambitious as possible.
David Speers: The more pressing issue is the worsening US – China trade dispute at the moment, has the Australian Government done any sort of assessment as to what this is going to cost the Australian economy?
Simon Birmingham: David, there are both the costs and in some ways opportunities, dependent upon what occurs. The costs are a result of a potential slowdown in global economic activity, the escalating trade dispute between the US and China with tariffs ratcheting up potentially from current coverage of around 2 percent of global trade, up to possibly 4 percent as global trade. That would have a dampening effect on the global economy.
David Speers: Well the OECD says a dampening effect to the tune of 0.7 percent to the global economy by 2021. Is that about right?
Simon Birmingham: Well, I’m not going to argue with the OECD over those assessments, but they are assessments based on a series of assumptions and exactly what occurs is unknown to everybody. However, in terms of the flow of trading, goods in particular, but also potentially in services, there may be windows of opportunity dependent upon how particular trade flows are disrupted through such an escalation of tariffs, Australia has free trade agreements in place with both the United States struck during the Howard era, as well as with China struck during this year of the Coalition Government, and so we would make sure that through those agreements, we seize whatever opportunities are there available to Australia, and continue to manage expansion of opportunities elsewhere. I didn’t mention before the Trans-Pacific Partnership, currently eleven countries but we will be looking over the coming year or two to see where we might be able to expand the TPP and bring in further nations to expand that large regional trade bloc and that will create even further opportunities then for Australian exporters. For us the government and we’ve seen Australian exports grow to record levels, seen our trade surplus reach a record level 27 of the last 29 months, Australia has reported a trade surplus and we want to continue to expand market access for Australian exporters, so they can be insulated and be buffered from some of these global headwinds and uncertainties.
David Speers: Just on the TPP you mentioned there is there any prospect of going back to the US, given its trade dispute, trade war, with China? Is there any chance of getting the US back in the tent?
Simon Birmingham: It’s a matter for the US, but the TPP was of course largely crafted with the US in mind or the US sorry as a player at the table, during all those deliberations and negotiations. If the United States were to choose that they wanted to re-engage, then I have no doubt that TPP members would welcome that engagement and be open to it, but at present that doesn’t seem to be highly probable, and in terms of future members of the TPP, they probably exist more within our Asian part of the region of TPP coverage.
David Speers: Okay, but on this trade war, I mean I mentioned the OECD, also Morgan Stanley says if the US does or doesn’t reach an agreement in the next month with China, things are going to worsen, the US is flagging a further $300 billion worth of Chinese goods would be hit with tariffs and Morgan Stanley says this is going to send the global economy into recession. I’m not sure if you agree whether it’s going to be that grim, but is the Australian Government ready to do something about that locally, stimulate the economy further if necessary?
Simon Birmingham: David, we will respond to uncertainties I guess as they unfold. We have worked as hard as we can and outlined a clear agenda that we’ve spoke about extensively during the election campaign, about the importance of keeping the Australian economy strong. We’ve just outlined in terms of trade access how critical that is to maintain exports out into the region and the world. In terms of domestic economic activity, our tax cuts are a critical component of that, it’s about ensuring that Australians keep more of what they earn, but also then are able to invest, to have the confidence to be able to ensure they save for a house, they plan for their future and their retirement. But also that they spend and invest in ways that maintain our economic strength and it is one of the critical things, to give long-term certainty to Australian consumers and Australian businesses. We do need to see that comprehensive package of tax cuts and tax relief passed, and I hope that (indistinct) uncertainty there…
David Speers: When will that happen? A week on from the election result, are you any closer to working out when parliament can sit?
Simon Birmingham: We have to see the writs returned and of course we will bring the legislation forward at the first opportunity of the new parliament. Now, the only uncertainty about whether or not that legislation can pass swiftly, really does reside with the Labor Party’s uncertain position on it at present. It would be remarkable if the first action Anthony Albanese, as Labor leader, was to vote against tax relief for hardworking Australians. It would be a tin ear in terms of having listened to the electorate and what the electorate have said about backing in aspirational Australians, to not back those tax cuts.
David Speers: To be clear though, Labor is saying they would pass the lower, middle-income tax cuts that flow immediately. It’s the higher income tax cuts that won’t flow until the next term of parliament that they are more concerned about.
Simon Birmingham: This is the disingenuous nature of this argument though, the high income Australians in the top tax bracket, the top 5 percent of income earners in Australia currently pay around about 32 percent of Australian taxes, that top 5 per cent would find themselves paying around 36 percent of Australia’s income taxes under our reform. So their share of income tax burden increases under our reforms.
David Speers: But the point is why does that tax change need to happen now when it doesn’t take effect for some years, until the next term after the next election?
Simon Birmingham: All too often I hear from the Australian people, grumbles that governments don’t look far enough into the future and that all we do is think a year or two ahead, or down the next election. Well this about providing certainty for people to save, to plan, to invest, to make sure that it does keep our economy strong as we were talking about before, and looking at long term reform. It is a significant reform to eliminate that 32.5 cents in the dollar tax bracket, to ensure to bring that down to 30 cents, to eliminate the 37 cent in the dollar tax bracket, I should say. To get that tax bracket eliminated, so you have a circumstance where hard working Australians, earning in current terms in current dollar values, $40,000 per annum, better off under our reforms and have the incentive to take an extra shift, to take on a promotion, to work a bit harder and get some overtime, and to know they won’t be pushed up into a higher tax bracket at 37 cents in the dollar tax bracket.
David Speers: Alright Trade Minister Simon Birmingham, we’ll have to leave it there but thanks very much for joining us today.
Simon Birmingham: Thanks so much Speersy.