Interview with Tony Jones

Lateline

Thursday, 16 November 2006

SUBJECTS: G-20, climate change, aid, tax, Cabinet

JONES:

With global warming, global energy security and global poverty all on the G-20 agenda, what’s the view of the man who’ll be chairing the meeting in Melbourne? I spoke to the Treasurer earlier this evening. Peter Costello thanks for joining us.

TREASURER:

Thanks, Tony.

JONES:

Now Al Gore says Australia’s proposal for a new Kyoto will fail. What’s your fallback position if it

does?

TREASURER:

Well, I think that when we get to the end of Kyoto, which is 2008, 2012, there’s going to have to be some serious discussions about the next decade, the next phase if you like. Some of those discussions are going on now in Nairobi, Kenya. But I expect over time between now and then, that progress will be made on the next phase. It has to be made otherwise the Kyoto will come to an end and it won’t be replaced by anything.

JONES:

Well, Mr Gore says that America will inevitably sign up to the Kyoto process, that’s his view anyway. If it does, will Australia follow?

TREASURER:

My view is that Australia will be part of anything that has global reach. I don’t think it’s just enough for America to be part of it. You’ve got to have countries like China and India. China will probably be rivalling America in terms of emissions pretty shortly. So I’d want to see something that was pretty comprehensive. If it were comprehensive, therefore if it treated all countries fairly, if emissions were in the same basket no matter where they came from, then it would be much more appealing to the world and to Australia.

JONES:

You’re the chairman of the meeting of the G-20 starting this Saturday. You’ve got a unique opportunity here because both China and India, or the main delegates running their economies will be there. Are you going to be talking to them about this? Suggesting to them that it’s time to abandon the old Kyoto arrangements and join a new Kyoto system in which they suffer penalties for the carbon they emit?

TREASURER:

Well, we’ve placed energy front and square on the agenda and any discussion of energy is going to involve resource security. It’s also going to involve pricing and once you get into pricing you get into carbon pricing. So, of course, these issues will come up and this is one of the advantages of the G-20. G-20 is 85 per cent of global GDP amongst 19 countries, plus the European Union. Everybody at the table, Australia is the smallest country by population. We have 0.3 per cent of the world’s population. Here we are chairing the global forum that has 85 per cent of global GDP and it gives us an opportunity under the issue of energy security and energy prices to canvass these issues and they will be canvassed.

JONES:

So will you be trying to convince the representatives from China and India that they ought to sign on to a system some time soon as Australia is proposing, which entails penalties on them for emitting carbon?

TREASURER:

No, what we’ll be doing is we’ll be discussing about the way in which countries get resource security and how it’s priced and the likely effect of carbon trading systems on pricing and that, of course, will lead countries back to a consideration of their own positions.

JONES:

But why would India and China want to join Australia’s style of carbon trading scheme when they’re already part of a global one under the Kyoto Protocols?

TREASURER:

Well, they’re not part of the Kyoto Protocols and the AP6 initiative, which Australia has already started, is an attempt to bring them in. The AP6 is an attempt to bring together Asia Pacific countries that have big emissions and to get them engaged in all of these things.

JONES:

But Treasurer, China is part of what they call the clean development mechanism under the Kyoto Protocol through which they’re able to carbon trade, which is actually how they managed to build that giant wind farm in northern China and get carbon credits for it.

TREASURER:

You can’t carbon trade until everybody knows what the global emissions are and everybody knows what each country’s emissions are, because until you’ve actually got some idea as to where your emissions can go you don’t actually know how much you’re going to need by way of credits. You can trade between countries who do have those limits but you can’t get global reach with countries that don’t have those limits.

JONES:

Well, three years ago, for example, a Dutch company set up the first carbon trading arrangement with China. They set up a wind farm in northern China and they’re going to be paying China credits for the use of that wind farm.

TREASURER:

 Absolutely.

JONES:

So they’re part of a trading scheme that we’re not part of, are they not?

TREASURER:

What you’ll in fact find, by the way, is that this will be characterised as an aid project, that is you’re giving aid for energy and then the person that’s setting it up actually gets the right to buy back a credit. But the country in which that’s located if it doesn’t have an emissions target and doesn’t have a price on carbon won’t be buying credits itself. So it has the ability actually to have unlimited increase in energy which uses carbon.

JONES:

Which is why it’s attractive to them at the moment. So how are you going to convince them to give up something that’s economically attractive to them under the present system and adopt something which Australia is proposing, which is economically costly to them?

TREASURER:

You see, Tony, this is the point, if you were to say to China, look, we want you to limit your use of energy. We want you to limit your use of emissions, a country that’s going through massive industrialisation, you know what China would say to you? It would say to you, “Well, you having gone through your industrial revolution and added to carbon in the atmosphere are now telling us before we’ve gone through ours that we can’t do what you did.” That’s the way a developing economy looks at this particular issue. To which – and there’s a lot of truth in that – to which the answer has got to be, well, in the overall global interest taking into account the fact that your economy is at a different stage to ours, sharing all of the costs, we can move forward. But this has got to be done delicately and well and it will take time. It’s all very well for industrialised economies, particularly European economies that have done their industrialisation and done their carbon emissions and had their coal mines and gone through it, to say this to other countries but other countries are going to look at this from a different perspective.

JONES:

Treasurer, that is exactly the point that Al Gore makes about the Kyoto Protocols and the need to sign up to them. He says since World War II every global treaty has been made on the same basis that wealthy countries go first and then after a period of time those with lower per capita incomes come along in the second phase. It’s the second phase of Kyoto that’s being negotiated but Australia is not part of it.

TREASURER:

Australia is part of the AP6 which is a negotiation with these countries. Australia is currently at Nairobi. Australia has a position which is global reach. As I’ve said earlier and I’ll say it again, if the world moves to a carbon trading system, Australia will be part of it.

JONES:

Even if it’s under the Kyoto Protocols?

TREASURER:

I don’t care whether you call it Kyoto or Tokyo or Nairobi. The important thing is that it’s global. The important thing is that it will make a difference and bring key emitters in, and the important thing is that all countries move towards it together.

JONES:

That is a significant shift though, isn’t it? That is precisely what the Kyoto process is meant to be doing and you’re now saying you more or less agree with it?

TREASURER:

No. You want to know where Australia stands on this – we’re going to meet our Kyoto target. That’s our policy.

JONES:

I’m actually talking about being part of the Kyoto Protocol system and the agreement which as you just stated you may actually sign up to?

TREASURER:

We’re going to meet our Kyoto target.

JONES:

And remain outside it?

TREASURER:

And we are going to press for wider coverage of Kyoto. You can call that new Kyoto or Tokyo, or New York or Nairobi, I’m not going to get into a semantic argument with you, but the limitation of the current agreement is that the current agreement doesn’t bring in the key emitters and, therefore, the current agreement is incomplete. The current agreement won’t work well. If you can get an agreement that works better then I believe Australia will, as part of a global trading system, will come in.

JONES:

Your key focus at this meeting is energy security. Will you be attempting to convince energy producers, especially oil rich countries like Saudi Arabia, to agree on stabilising prices over the long term? Is that possible?

TREASURER:

I think the key thing here is that we need a lot more information in international energy markets. We need to know what’s in inventories. We need to know what investment is going in. We need to know what additional supply can be generated over what timeframes. From a supplier’s point of view they’d like to know consuming countries inventories consuming countries demands so that if they engage in new investment they have certainty of supply. And my feeling is in the oil market – but not just the oil market, in the international energy market generally – there is not enough transparency. People are wary. There is a suspicion that there is cartel activity going on and monopolistic practices and to the degree that we can reduce cartelisation, monopolisation, improve transparency, we’ll get better supply and we’ll get better prices.

JONES:

Now global poverty is also on the G-20 agenda. Your own brother Tim has been scathing of Australia’s aid contribution as a percentage of gross national income or GDP as we would call it. Here’s what he told us last night:

TIM COSTELLO: Even when we get to what Peter’s promised, the doubling of aid by 2010, we will still only be at 0.38 per cent whereas the average for all the developed countries today is 0.45 cents. So we are way off the mark, even by 2010 we’ll be off the mark and no timetable to get there whereas all the European countries have a budget timetable to be at 0.7 per cent by 2015. Lots of figures, but basically all those figures say is we’ve gone under the radar. We’ve followed not led, a bit like climate change and other issues, and G-20 is our moment to say, yep, the big serious issue, the morally serious issue is the 30,000 kids that die each day. We’re going to do our bit.

JONES:

Your brother says Australia is falling behind comparable countries. Can I ask if that figure of 0.7 per cent of GDP or GNI is still a goal you’re aiming to reach?

TREASURER:

I think what the Government has said in the past is it’s an aspiration. It has been I think for 20 years or so. There aren’t many countries of the world that meet it. But here’s the point about Australia, Tony, and we ought to have the facts on the table. Since 2000 we have increased our aid budget 81 per cent. People can always say oh, well, only 81 per cent, you should have increased it by 90 or 100. But this year we are paying $3,000 million in foreign aid and we’ll pay more than that next year and more than that the year after and we’ve budgeted for $4,000 million in 2010. That’s a pretty significant increase.

JONES:

But your own brother is making a very persuasive argument. He’s saying even if you double aid, even when you do by 2010 it only reaches 0.38 per cent of gross national product or GNI. You’ll have to double it again in the next five years to reach the goal of 0.7 per cent or the aspiration. Is that possible?

TREASURER:

Well, you see this is where you’ve got to be very careful because when you’re looking at percentages it’s not just how much aid you give it’s what your GNI is. I’m not entirely sure what our GNI will be in 2010, let alone 2015. But I can assure you of this, we have had a very, very considerable increase in aid in this country. It’s now at $3 billion per annum. I’ve set aside $4 billion by 2010. Budgeting through to 2015, well, Tony I hope it’s not me. That will probably fall to somebody else.

JONES:

What, you hope you’re not in Government at that point? That’s a strange admission to be making for a Treasurer who wants to be Prime Minister?

TREASURER:

Having done 11 Budgets, I don’t think I’ll be bringing down my 21st in 2015.

JONES:

All right. Will you take up your brother’s offer to speak to Bono, the man he describes as a “global prophet”?

TREASURER:

If Bono wants to see me of course I’d be very happy to see him.

JONES:

A quick look at domestic tax before we go. You’ll have heard Rupert Murdoch saying it’s outrageous that people earning $100,000 are so highly taxed in Australia at a time when the Government is sitting on big surpluses?

TREASURER:

You don’t go on the top tax rate in Australia until you’re over $150,000, that’s the change I brought in this year’s Budget. There are only two per cent of Australians that are on the top tax rate.

JONES:

You’re saying that Rupert Murdoch hasn’t got a point?

TREASURER:

I’m making my points and my points are that you’re not on the top tax rate until you’re over $150,000. My other point, by the way, is that company taxes in Australia are lower than they are in America. We cut the company tax rate to 30 cents here in the dollar. In America it’s 39, it’s about a third higher again and people forget this. We have dividend imputation. You get a credit on your personal tax if the dividend has been paid by a company that’s paid tax. In America you don’t. You have doubt taxation. The company pays tax and you pay full tax on the dividend, as well. For companies in Australia the tax system is much better than it is in America.

JONES:

Let’s just look at one other thing before we go. There’s a universal expectation of a Cabinet reshuffle coming up. Is it time to bring in new talent into the Cabinet and in particular, is it time to formalise what appears to be a de facto Cabinet position that Malcolm Turnbull is already occupying?

TREASURER:

There’s a lot of talented people in the Liberal Party. I would support a Cabinet on talent. The trouble is for each person you bring in there’s got to be another person who goes out. I won’t put numbers on it. There are some good parliamentary secretaries at the moment; Andrew Robb, Christopher Pyne, Christopher Pearce, Malcolm Turnbull. There’s a lot of people around and they’re all vying for promotion. The only difficulty is that the Cabinet is also very talented and it’s hard to see many people in the Cabinet who want to stand down.

JONES:

It doesn’t usually happen that they want to stand down, does it? When new blood comes in it usually happens by way of executive fiat. Are you expecting that?

TREASURER:

I think there will be a reshuffle at some point.

JONES:

Before the election presumably?

TREASURER:

As you know Tony, I don’t do it. It’s not really my place to call it. As somebody who’s in the Cabinet and watches these things closely, not only do we have good Cabinet ministers but we have good outer ministers and good parliamentary secretaries. So in the Liberal Party the difficulty is really not deciding who comes in, but who you can afford to leave out.

JONES:

Peter Costello, that’s where we’ll have to leave you for tonight and sadly for this year. Hopefully we’ll see you again in the New Year, 2007.

TREASURER:

Thanks, Tony.