Doorstop Interview

Park Hyatt Hotel, Melbourne

Thursday, 26 October 2006

2.15 pm

SUBJECTS: Fair Pay Commission, global economy, G-20

JOURNALIST:

The Fair Pay Commission decision this morning, what do you think about the quantum and what does it say about the new wage settlement?

TREASURER:

Well, it is the Fair Pay Commission, it has looked at all of the evidence, it has come up with this decision, it is going to be a significant pay increase for lower paid workers and it shows that those people that were saying that the Fair Pay Commission couldn’t work or should be abolished, were wrong.  It has been independent and it has considered the evidence and it has delivered a decision that will actually help many low paid workers in our society.

JOURNALIST:

With such a big pay rise (inaudible) Reserve Bank’s (inaudible)?

TREASURER:

Well it is a large increase, it is probably larger than many people expected, it will have to be taken into account in relation to economic policy generally, but I think for lower paid people who have received that decision, they will think that the Fair Pay Commission has turned out to be a good reformer.

JOURNALIST:

Were you surprised?

TREASURER:

Well, the Government put in a different submission as you know, so that wasn’t the outcome that the critics would have expected.  Far from it proving to be a patsy for the Government, it proved itself very independent.

JOURNALIST:

Is this likely to increase the pressure on the Reserve Bank for an interest rate rise?

TREASURER:

Well I will have to have a look at all of the implications. 

JOURNALIST:

The unions say this is a slap in the face for the Government, do you think that is a fair assessment?

TREASURER:

I don’t think it is a slap in the face.  Here you have an independent commission that has an application, it hears all of the evidence, it comes to a decision, it will be welcomed by those people that are going to receive the increase and it proves this is quite independent, quite independent from government and all of the critics that said it wasn’t were proven wrong.

JOURNALIST:

(inaudible) are we making any progress (inaudible)?

TREASURER:

Well here is what I think.  If price signals are allowed in mining and energy markets, that will lead to more investment.  More investment will boost supply.  Supply will give resource security at competitive prices.  That is the way a proper market will work.  What is the alternative?  A country tries to lock up supplies, tries to use energy as a weapon against its neighbours.  Countries get into arguments with each other, or worse.  You start getting instability in the global markets.  This is how we have had very bad outbreaks of rivalry in the past and it is outbreaks of rivalry like that we have got to avoid in the future.  So what can we do?  We have got to argue the case, we have got to point out there is a much better way of going and we have got to see if we can get a global consensus around.

JOURNALIST:

You talked about the blocking (inaudible) what sort of example (inaudible)?

TREASURER:

Well I think countries should be able to buy on open markets, they should be able to buy under long term contracts, they should be assured that when they do buy under long term contracts they will be observed, these contracts will be observed, that they will be honoured, that you can be bought out of a contract if you want to sell, you can hedge if you think there is going to be a price movement, liquid open transparent markets.  This is the way to give resource security.

JOURNALIST:

(inaudible) raise AWB as a non-free market, as a monopoly, as an issue against (inaudible)?

TREASURER:

Well in the World Trade Organisation we argue for the dismantling of tariff and quota barriers.  There are other people that say that we have exporters, single desk exporters and that is a barrier.  Can I say, as far as barriers go, it is well, well, well down the list when you compare it to a tariff or a quota.  So we discuss all of these things inside of the WTO but Australia, by international standards, is a good lead ahead.

JOURNALIST:

Just on (inaudible), you made the point that (inaudible) between Africa which has had a lot of aid and (inaudible).  Are you saying that aid actually holds countries back…?

TREASURER:

I am not saying that aid causes that.  The point I am trying to make is aid will never make up for a lack of economic growth.  Aid can come in and it can help people at a particular place with food or with health, but if you want to lift millions out of poverty, what you need is economic growth.  580 million got lifted out of poverty in East Asia not because of aid, but because countries, principally China and to some degree India, opened their markets, brought in international investment, joined the world trading system, allowed free investment in capital flows.  The economy grew, people got a stake in the economy, they were lifted out of poverty and this is what is lacking in sub-Saharan Africa.  In sub-Saharan Africa is falling behind, not because of globalisation, not because they are in it but because they are out of it, and they can’t actually get into it and they can’t get the trade opportunities and the investment opportunities that it will bring and this is where we have got to help these countries come into the international system rather than being perpetually locked out.

JOURNALIST:

How concerned were you about the protesters inside?

TREASURER:

People are entitled to voice their opinions but the point is this: there is no point in demonstrating against the Group of 20, this brings together the developed and the developing world.  It gives emerging countries, countries like India and China and Brazil and Indonesia, poor countries, a seat at the table.  If you were really interested in development, if you were really interested in ending poverty, if you wanted to see a better system you would be demonstrating for the G-20, not against it.

JOURNALIST:

Are you worried you are going to see more of that next month?

TREASURER:

Well there are some groups that want to disrupt proceedings, but they are however extremists and can I just say to them that this is a wonderful opportunity for Melbourne, for Australia, it is a wonderful opportunity to get developing (inaudible) a say and I would urge them to have a look carefully at what I said today because if they do, if they are fair and open-minded, I think they will change their view.

JOURNALIST:

Treasurer, most economists are…

TREASURER:

Last question.

JOURNALIST:

…at least one if not two more interest rate rises, do you see that (inaudible)?

TREASURER:

I never comment on future movements on monetary policy.  Thank you.