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QUESTION: Prime Minister, it’s such a pleasure to have you here at Bloomberg and in conversation with the Asia Society today after what’s been a great day of debate and conversation. I want to pick up on, you started off your speech talking about the importance of the traditional allegiance and Alliance with the United States for Australia.
As you head into summit season at ASEAN and at APEC there’s going to be one elephant in the room which is the absence of President Trump. Does that disappoint you, the sort of perceived lack of engagement or pivot away from Asia that Washington is demonstrating, by not being there?
PRIME MINISTER: Well, I wouldn’t agree with that assessment. I mean, given what is occurring in the United States with where things are at in terms of their own calendar of events, in relation to their midterms and others, I’m not drawing that conclusion. I’m not encouraging others to draw that conclusion either and I’m looking forward to seeing Vice President Pence. He’s demonstrated I think, a keen interest and commitment to the region and I think that will more than demonstrate I think the US’s keen interest with their allies and partners in the region, but I think their longer term interest.
QUESTION: Does there need to be a more robust presence from the United States demonstrated in this part of the world, given that you’re thinking about perhaps a more, retreat in Washington versus a more outwardly assertive and aggressive Beijing?
PRIME MINISTER: Well again I don’t think I’d agree with the analysis there. I don’t think it’s about them retreating at all. I think in the remarks I’ve just made it is about continuing to encourage their engagement. I mean we all have our spheres of direct and first responsibility engagement. What I have sought to set out today is that one of those for us, is absolutely the Pacific. When I think of our neighbours in the Pacific, and say PNG, I mean we are the single largest provider of ODA to PNG and have been for a very long time. We have a special relationship there and a special responsibility. But not far from there obviously in Indonesia, we’re still committing each year $300 million a year in ODA, $1.2 billion over the forwards. So we are exercising our responsibilities and our friendships and partnerships in a way we believe we should and that can plug in with whether it’s the States or others, who we’re partnering with in the region.
QUESTION: In our geopolitics panel this morning we spoke a great deal about this idea that one of the panellists said; we’re about 10 per cent into the new Cold War between China and the US. Is Canberra forced to make a decision to take a side about our most important trading partner or our traditional ally? How does Australia navigate these trickier waters?
PRIME MINISTER: Well the short answer is no, we don’t. We don’t feel like that at all and it’s one of those old maxims in politics; things are never as bad or never as good as you think they are. And I think that that summarises these issues as well.
I think we sort of have to often look beyond the immediate operations and look to, I suppose the broader long-term objectives. Does the United States want to have, at the end of the day I think an open, more free trade environment where they can engage in the global economy? My honest answer to that is yes. Does China equally want to see prosperity in the region and the prosperity of their people? Of course they do. So you start there and you work back from that.
QUESTION: I think it was former prime minister Kevin Rudd who said; “We need to find, for Australia, a strategy on China that’s somewhere between kowtowing to Beijing and complete conflict”. Do you think you’ve managed to strike that balance? What’s the strategy?
PRIME MINISTER: Well I think Australia has been doing this for a very long time. The reason we’ve been able to do it is we know where we live. I think it was Ryan Stokes was once asked this question, that was the time when the Stokes family had that significant interest in Caterpillar, they had the Caterpillar franchise up in China. He was asked a similar question and the question was: “Is China a friend or a foe?” And he said: “Well to me, they’re a customer”.
QUESTION: Very transactional isn’t it?
PRIME MINISTER: I thought that was, well he was in the transactional business. But my point about it is that the relationships with the countries are different. I mean, John Howard used to talk about the relationship with the United States and the UK as one which was very much centered in those deep values that I spoke of. That’s true and our relationship with China is different, but it is strategic, it is important, and we seek to meet on the common ground where we can share those interests and the prosperity and stability of our region are things that I think we hold very much in a consensus.
QUESTION: What will be your priority in the conversations you will have President XI in the coming weeks?
PRIME MINISTER: I think it is to assure to provide a confidence that Australia and China can get on with business as usual. That the way we run our show is, we have clear rules. We welcome investment. I mean, there is no country in this part of the world that has a more liberal and open investment environment than Australia. You cannot invest as an Australian in the rest of our region like the rest of our region can invest in Australia and we do that not just because we’re charming and welcoming. But we do it because it’s in our interest to be like that. We have been an open trading nation for thousands of years, going back before European settlement in Australia, to modern Australia, that has always been our way. So we want that to continue. But I think what is important in managing that relationship is just that we’ve got to be really clear about where the lines are, where the rules are, how we make decisions and do that, I think, in a very courteous and engaging way.
QUESTION: There’s not a great deal of consensus, it seems, when it comes to finding a regional answer to that on how to deal with China, where the lines are. I’m talking about the pod group, India, Japan, the US and Australia. The talks have been sporadic, kind of stop-start. Why do you think it’s so difficult to get a regional collective sense of how to approach this?
PRIME MINISTER: Well it’s complicated. I think that’s the honest answer and you have countries and nations coming at this from different interests with different stakes. That’s why I think in many cases what you’ll end up getting is the amalgam of their individual responses. Now whether they can overlap and align in these forms, well, well and good, I think that’s excellent. But these fora are good and important and we participate in them, but they’re not a leave pass to actually engage in these questions and work out your own answers as individual nations.
QUESTION: Are you worried about smaller countries in particular in the region being forced or really being obliged to accept aid and infrastructure rollouts from China?
PRIME MINISTER: I think we have an important responsibility in forums, say the G20, where we will be in a few weeks’ time and where I have had quite an involvement previously as Treasurer because the G20 as you know was originally set up as a finance ministers meeting and the leaders got invited later. And the treasurers and finance ministers still feel very parochial about their forum I can assure you. But one of the things we talked about when I was last there in Buenos Aires was we talked about ensuring greater transparency about the rules and the reporting around how finance and debt was being placed in a lot of smaller countries. I mean, we don’t want countries who are in these sort of early to mid phases of their development getting caught in the debt trap. We want them to be able to make conscious, positive decisions and understand what they’re getting into and for there to be many options and for there to be transparency around these things. So I think there is a lot of work that we can do to ensure that countries don’t find themselves in a compromised position.
QUESTION: To that end, should Australia be redirecting more funding toward some of these big-ticket Chinese projects like [inaudible]?
PRIME MINISTER: Well on the AIB we were a founding shareholder and partner and we are on the board and continue - that’s why we got into that project and our Government initiated our participation in that. Where there are projects that are consistent with our interest we’ll be involved with them. Otherwise we have our own sort of program of investment, and whether that’s through ODA or whether that’s through infrastructure plans or indeed other financial arrangements we’ve entered into with countries, particularly within our part of the world from time to time which previously included some significant financial arrangements with Indonesia.
QUESTION: In the panel this morning, there was an overwhelming - in our audience poll actually - the audience overwhelmingly voted not to push back against Beijing when it comes to it’s attempts to create more military strategic influence in some parts of the world such as the South China Sea and some of those activities. Should Australia be rethinking the way that it uses its’ foreign aid budget to create more of a presence given that Beijing is trying to?
PRIME MINISTER: Well I’m a bit of a purist on this. This is why I said while I want to see us have a more effective relationship with the Pacific, because they’re family, we should be doing it for those reasons. And we are, I believe, the preferred partner, whether on security, or the economy or any other set of measures, with our friends in the Pacific and I believe with many ASEAN countries as well. We’ve been there a long time. I mean, people I’m sure know but you think on Myanmar. Australia is the only country to have consistently had a diplomatic presence in Myanmar for that entire period. Everyone else left. We were there the entire time, and remain there. We stick at things. We stay around and we do it because of not some short-term transactional opportunity, we do it because we just think it’s the right thing to do.
Our record is looking to the long-term and sometimes you don’t know how that’s going to play out. But that’s why your interests and your values and your beliefs keeps you in those roles. So yes, there are these things that have to be considered and contemplated. But first principles. You know, why are we getting in this arrangement with the partners? I mean, it’s been a long-standing relationship between us and PNG and these areas, going back over decades and decades. So it’s just a natural, I think, extension of what we’ve been about for a long time. It does play, I think, into some of the issues you’ve addressed but first principles is what has to drive our decisions.
QUESTION: In your speech before you spoke about the importance of open markets and the Liberal-National Coalition is traditionally known as being business-friendly. There’s been some, I think you could say uncharacteristic interventions in the markets. Restricting LNG exports, forced divestiture of energy assets just to name a couple, does that line up or does that align with the ethos of what the Party is meant to be all about?
PRIME MINISTER: Where we have indicated I think a more interventionist approach, it’s been very targeted. I remember last time I was here with my Treasurer’s hat on, we talked a fair bit about this and in the energy markets - as indeed in the banking and financial sector - these are heavily regulated parts of the Australian economy. Long before I turned up or others did, that is an ongoing position of consensus that people can expect to be there. But the problem is, when you’ve seen the regulation operating like that in particular sectors for so long, then it can produce some quite uncompetitive, anti-consumer behavior. So what you have to do as a Government is seek to have interventions which try and reproduce what you’d want to be there at the initial competitiveness effect. Which has clearly been lacking when you look at the outcomes for customers, it’s clearly been lacking. So whether it’s been the financial sector or indeed the in the energy sector, you won’t find me having those sorts of conversations in other areas of the economy where there is, I think a pretty fair dinkum market economy operating. In those places where those other distortions are not already built in, then our Party has always been about ensuring that they should be able to get on with it and we should be able to get out of the way.
QUESTION: You’re about six months out from a federal election, does policy paralysis worry you, about Australia being able to get anything done before then?
PRIME MINISTER: No because we keep getting things done. Last week we were able to legislate – sorry, week before, we didn’t need two weeks, we only needed one – small business taxes cut down to 25 per cent and legislated. That was done within weeks of it coming through our own Cabinet. So we are constantly identifying and moving on issues and that will happen all the way up to the next election and you’ll continue to see legislation passed, you’ll continue to see new initiatives taken whether it’s in the areas that you’ve talked about today which have been very significant commitments that we’re making up in PNG and there will be others to follow.
I talked about what would be happening with the [inaudible] report. Defence, I mean I was at the commissioning of the HMAS Brisbane just on the weekend. You know, the ships will keep rolling out and the military equipment will continue to be invested in and built, largely here in Australia too which has been a critical success story for us in transitioning our economy say from the vehicle industry, which for market reasons obviously wasn’t sustainable. But what we have seen is a transformation in our economy which is seeing manufacturing jobs created in new parts of the economy. Our medical industry is incredibly exciting and the research investment that we’re putting in, the research infrastructure for our medical industry will see jobs in that space, whether it’s in aged care, human services, these are the big job creating areas in our economy now and they’re also becoming important parts of our service exports. I mean one of the most exciting things about the China-Australia Free Trade Agreement was I think, the deal that was done which means we can run aged care facilities in China and we’re good at them. I know we have a royal commission into residential aged care, that’s not because we’re not good at it, it just means that we’re always wanting to do better and I think that’s recognized from both a service delivery point of view as well as a training point of view.
QUESTION: [Inaudible] push is actually quite interesting because I was looking at some numbers earlier and even though we all know as part of a narrative, Australia is part of the Asia Pacific and that’s certainly what we kind of grow up with, less than ten percent of Australian businesses actually invest beyond our borders. Is that a problem? And how do you as a Government encourage more engagement and willingness to –
PRIME MINISTER: Well I think that’s an astute observation. When I was in Indonesia recently I was talking to [inaudible], the Finance Minister Mathias Cormann is up there with him all this week. I know that’s one of the frustrations for Indonesia, in seeing more Australian investment go into Indonesia. Part of it is an understanding of systems, part of it relates to how contracts and rule of law operates in the legal system and there’s some uncertainty around those things, or the communication and educational issues that has to occur with Australian investors, that can occur whether it’s Indonesia or other parts of ASEAN. They’re things that we need to be that we need to demystify because we do see investment – whether it’s going out or coming in – as a mutually beneficial exercise. I think whether it’s the Asia Society, where we are here today, or the many other different forums that exists, the APEC business forums, all of those groups, I think that’s their task; is to try to demystify and smooth the movement of capital between them, across borders.
QUESTION: As Treasurer I think we had this conversation [inaudible] Australia has gone 26 years without a recession.
PRIME MINISTER: 27, but who’s counting?
QUESTION: Is that good fortune or good policy?
PRIME MINISTER: I think it’s both because you know, there are plenty of countries who have plenty of luck and they’re not in the position we are. I think it has been the product of good policy and taking advantage of our good fortune through good policy. This is something we can never ever take for granted. It has been a hard road for us over the last five years. The global financial crisis was not the economic shock to the Australian economy, it was the comedown of the top of the mining and investment boom. That ripped $80 billion out of our of the Australian economy. The global financial crisis, because of the strength of our banking and financial system, enabled banks to continue to lend through all of that. It wasn’t the economic crisis it was in the northern hemisphere and the North Atlantic. It was quite different here and we were well situated on the uplift, going into the mining investment boom at the time of the GFC and also China’s own boom. So there were a lot of things that cushioned those effects at that time, but when, you know, the music stopped at the end of the mining investment boom and we saw that massive dislocation hit our economy, we kept growing. We kept growing through that period and that was I think, when we faced our toughest financial test and we not only kept the growth and the job creation occurring, but we also maintained our AAA credit rating. We’re one of only ten countries to do so anywhere in the world with all three major agencies. So the answer is the good fortune helps, but the good policy is what delivers.
QUESTION: Is the good policy now more important that ever? Given that a big chunk of that good fortune which has been the rise of China, is seeing a structural slowdown as well as by virtue of however this trade war turns out? Is Australia going to get caught out or will we somehow spin this to be a beneficiary?
PRIME MINISTER: Well the sort answer to the first part of your question is “yes”. Of course it’s important, it’s more important than ever before. In times of uncertainty you need consistent, trusted economic management and economic policies. Otherwise it all goes pear-shaped pretty quickly, we’ve seen that before and we have to avoid that. That’s basically the argument that I and Marise and Josh Frydenberg and the whole team will be arguing to the Australia people at the next election; a strong economy cannot be taken for granted and a strong economy is not an end in itself. A strong economy is the reason that you can invest $200 billion in your Defence Force capability. It’s the reason why you can have a Medicare system which you can pay for. It’s the reason you have pensions, it’s the reason we have affordable medicines. That is what the strong economy delivers and if you take that for granted then you risk those other essentials that Australians rely on.
QUESTION: As you brought up the election –
Zero to 100, how do like your chances of forming a government?
PRIME MINISTER: Well I’m already leading one. But on the other side of the election, I believe at the end of the day Australians will exercise some common sense judgement about what the strength of the economy means to them. I think they will exercise judgement about the beliefs that we hold as a Government, as a Party, that have I think been so essential to that economic success and the things that they rely on. At the end of the day people want to know what you believe. They know where our record is. We’ll be back in surplus next year, one year ahead of schedule and we’ve turned the corner on debt last year. We continue to have record investment in schools and hospitals and all of these things . We’ve protected Australians, we’ve kept Australians safe. We’re keeping Australians together, but all of that happens because of what we believe. I think this election will be very much about some of those core beliefs. A key one for us is you don’t bring people up by pulling other people down. That’s not how we see it. That very much goes against our beliefs and our policies. Fairness is about everyone doing better. It’s not about trying to even out a score across a whole population, trying to level everybody out. We want to see everyone achieve, just like we want to see all the countries of our region achieve.
PRIME MINISTER: You’ve probably heard most of it.
QUESTION: [Inaudible] common sense [inaudible] is that what happened in Wentworth?
PRIME MINISTER: Look Wentworth was a pretty unique set of circumstances when you have a very popular member who went through what was a very, very dislocating set of events. Voters were very angry about that. That was a very high transaction cost for our Party.
QUESTION: Yes, [inaudible] really?
PRIME MINISTER: No I didn’t say that.
QUESTION: Where are you going to be focused on at this upcoming election campaign?
PRIME MINISTER: What, which seats?
QUESTION: Where are you putting your resources?
PRIME MINISTER: Look we’re putting them right across the country and the reason for that is, I think, the message that we have and that is that we want a stronger economy. We want a safer Australia and we want a more united Australia. Strong, safe and united, I think that’s what Australians want to see. They don’t want to see Australia go back to the time of conflict and they don’t want to see a return to the sort of industrial divisions that once crippled our economy. They don’t want to see that come back. They don’t want to see the parents of kids that go to non-Government schools, non-state schools, being pitted against the parents of kids who go to state schools. They don’t want to see employers set against employees, they don’t want to see one Australian set against another because they earn more or they earn less. They don’t want to see that, Australians very much have an ambition towards harmony as a people. That is why we are the most successful immigration country on earth. I mean we do it better than anyone else in the world and sure, we’re not perfect. We’re not, but our commitment I think, to that harmony and that cohesiveness is what Australians want to see. That’s what I’ll be presenting to the next election on behalf of our Government.
QUESTION: Do they want to see kids out of detention and a coherent climate change policy as well.
PRIME MINISTER: They do and so do I and that’s what I’m delivering.
QUESTION: Would you care to elaborate on that final point?
PRIME MINISTER: Well our Government took 8,000 children out of detention. We closed 17 detention centres. We have had no one put into detention now since 2014. Under our predecessors, they were turning up at the rate of thousands every single month. The number of children in detention now is less than 40, some weeks ago or some months ago, that figure was over 100. So, we’ve been getting about this quietly. We haven’t been showboating about it. We’ve been doing it consistent with our policies. There has been no change to our policies whatsoever, we’ve just been doing it consistently with our policies and our alliances. As you know, we have an arrangement with the United States and so we’ve been doing that. That’s exactly what we’ve been doing.
On climate solutions, we have our commitments, we’ll meet those commitments. We’re a country that keeps our commitments. We smashed Kyoto 1 and we’ll beat Kyoto 2 and as I keep saying, we’ll beat 2030, I think in a canter.
QUESTION: Prime Minister it’s been a pleasure.
PRIME MINISTER: Thank you very much.