Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 19 April 2018
REPORTER: Finance Ministers and central bankers from around the world are gathering in Washington for the IMF’s spring meetings. Trade is at the top of everyone’s mind. Our own Francine Lacqua was there and she caught up with the Australian Finance Minister Mathias Cormann to get his thoughts on potential trade wars.
MATHIAS CORMANN: In Australia we are always optimistic. We believe that the world is in much better shape economically than what it was a few years ago. I have been coming to these meetings for some time now. The first three and a bit years in this job, the IMF would downgrade the global growth outlook at every meeting. We now have three upgrades in the global growth outlook, so overall things are looking up. Growth in the US is better than what it was, growth across Europe is better than what it was. From an Australian point of view, stronger growth in other parts of the world is good for us. We are a globally focused open trading economy. We do business with the rest of the world. If the rest of the world does better, we do better.
FRANCINE LACQUA: But how awkward would a trade war be because you are so heavily dependent on China, being your biggest exporting country and you are also dependent on the US.
MATHIAS CORMANN: We have a very strong economic relationship with both the United States and China. From our point of view, we are very keen to ensure that there is no such thing as a trade war. There are no winners from a trade war. We do not believe there will be a trade war. Some issues have been put on the table, in more recent times in particular by the United States. These issues will be worked through. I am very confident that things will work themselves out.
FRANCINE LACQUA: The US is in, the US is out, the US is in in TPP. What will happen between TPP and the US?
MATHIAS CORMANN: Australia again, we have pursued a very ambitious free trade agenda. We are unequivocally committed to policies supporting open markets and free trade. We believe that has contributed to 26 years of continuous growth in Australia. It has contributed to a lift in living standards around the world. It has helped us create more jobs. It has helped our consumers get access to competitively priced quality products from around the world. We are unequivocally committed to open markets and free trade. When the United States decided not to pursue the Trans Pacific Partnership agreement any further, we provided leadership to suggest to the other countries that it was a good idea for us to keep going. The Trans Pacific Partnership agreement has been finalised and signed on by the 11 remaining countries. It is good for us. If the United States down the track decided to join, we would welcome that, but that is entirely a matter for the United States.
FRANCINE LACQUA: Do you think they will re-join? What are the chances of them re-joining?
MATHIAS CORMANN: It is entirely up to the United States. We would welcome it if they decided to re-join, but it is entirely a matter for them.
FRANCINE LACQUA: What is the relationship like, how would you describe the relationship between Australia and China? China has complained that a lot of the press treat them unfairly, that some of the deals have been cautiously taken.
MATHIAS CORMANN: Some of the which?
FRANCINE LACQUA: Some of the deals, like the investment that China would want to do in Australia were taken with a little bit of scepticism.
MATHIAS CORMANN: We have a very important economic relationship with China. We value our relationship with China. It is true that in recent times there have been some misunderstandings in relation to some issues on the back of what we believe is inaccurate media reporting. These are issues that pop up from time to time. We will work our way through those and we are very confident that the relationship between Australia and China will be as strong as what it has been in the past again in the future.
FRANCINE LACQUA: I am not asking to take sides, but if you had to choose between China and the US is China going to be a more important global force in ten years given that the leader of the free world is saying I am anti-globalisation and China is saying I am pro-globalisation.
MATHIAS CORMANN: It is a not a matter of taking sides. We have an important relationship with both the United States and China. We have an important economic and strategic relationship with the United States. We have a very important economic relationship with China. China’s exposure to open markets and free trade around the world has helped China lift hundreds of millions of people in China out of poverty. We will see a continuing rise of China in the years ahead and that is going to be a reality in world dynamics that everybody has to factor into the future.
FRANCINE LACQUA: Minister your economy is pretty strong, you have very good numbers, strong employment growth, rising investments, narrowing budget deficits but actually in polls your Government keeps on coming second, it is unlikely that you will win another election. Why is that, do households not feel the benefits of what you have pushed through?
MATHIAS CORMANN: It is always very risky for journalists or commentators to predict elections before they have taken place. In Australia in between elections…interrupted
FRANCINE LACQUA: Well it is polls, it is not journalists.
MATHIAS CORMANN: If you look through history, the only thing we know for certain is what has happened in the past. What has happened in the past, during the 12 years of the Howard Government, a very long and stable period of Government, in between elections that Government was always behind in the polls. In fact it was further behind in the polls than what we are. We continue to do the best job we can to put Australia on the strongest possible economic and fiscal foundation and trajectory for the future. At the time of the next election, in the first half of next year, we will present ourselves with our record, with our plan for the future and we will point out why the alternative is not a good idea for the Australian people. We will leave it to the Australian people to decide. You are right, the economy is in good shape, in better shape than when we found it. Employment growth is strong, 3.5 per cent growth in employment, 420,000 additional jobs created over the past 12 months. To put that into an American context, if the same employment growth had been secured in America, it would have meant 5.3 million additional jobs in America instead of the 2.7 million that were created here in the same period.
FRANCINE LACQUA: Do households feel the benefits of it?
MATHIAS CORMANN: More jobs and keeping unemployment low is clearly very important for households. We are very focused on helping to ensure that families around Australia have the best possible opportunity to get ahead and on making sure that Australians today and into the future can get a job, can get a better job, can pursue a career. That is an important part of families feeling the benefit. Beyond that we are pursuing pro-growth, pro-opportunity policies that will help drive stronger wages growth into the future. If you look at wages growth in Australia, it has started to pick up. As strong employment growth continues to play out and business has to compete for fewer and fewer surplus workers that are looking for jobs, then wages growth will continue to strengthen. That is what we would expect to happen.
FRANCINE LACQUA: How crucial is it that your Budget next month actually resonates with households?
MATHIAS CORMANN: We are always focused on presenting the Budget that is in the best interest of Australia. We are always focused on doing the best we can to strengthen growth, create more jobs, and to ensure our country can be as safe and secure as possible. It will be the same in this next Budget.
FRANCINE LACQUA: Do you worry that the Fed is raising rates and that a lot of other central banks are and that Australia is not?
MATHIAS CORMANN: In the United States the official cash rate was at zero for a very long time, when in Australia is was quite a bit higher. The Fed pursuit quantitative easing for a very long time. In Australia we are in a different part of the cycle. The Reserve Bank in Australia makes is judgments independently based on its assessment of the economic data and that is the way it should be. We are very comfortable with the way these things are managed.
REPORTER: That was Francine Lacqua with Mathias Cormann, Australia’s Finance Minister.