SUBJECTS: Intergenerational Report, superannuation, Competition Review, productivity, company profits, inflation, tax reform, Qatar Airways, referendum on the Voice, China.
JIM CHALMERS, TREASURER: I'm really pleased to be here with Andrew Leigh, the Assistant Minister in the Treasury portfolio, to make an announcement today about competition policy. But before I hand you over to Andy, I wanted to say a few things about the IGR tomorrow, and really the connection between what we're talking about today, the context of superannuation and competition policy, and what that means for the type of economy that we want to build into the future.
The Intergenerational Report will be an important opportunity for Australians to understand where the country is headed, and how we position ourselves to make our people the major beneficiaries of change, rather than victims of that change. The IGR is all about how we maximise our advantages in a world of churn and change. And one of the big advantages that we have is our superannuation system. And I think quite a stunning fact that you'll see in the Intergenerational Report is that we expect the number of people of retirement age to double, at the same time as Commonwealth spending on the pension defines as a share of GDP. A lot of countries have got ageing populations, not many have been able to provide the kinds of retirement incomes which takes such pressure off pensions. Spending on the Age Pension and Service Pension will go down from about 2.3 per cent of the economy last year, to around 2 per cent at the end of the IGR period. That's an absolutely stunning outcome when you consider the ageing of our population. So the number of people of retirement age doubling over that period, at the same time as the amount of people on the pension down by 15 percentage points and spending on the pension declining because more people have access to a dignified retirement. This is the intergenerational genius of superannuation at work - providing decent retirement incomes for people at the same time as we take the pressure off the pension. This is obviously one of the things that we can be incredibly proud of in the Intergenerational Report that I release tomorrow in Canberra at the National Press Club.
In order to own the future, we need to make our economy more productive, more dynamic, and more competitive. And today, with Andrew Leigh, we are announcing that we will undertake a review of competition policy settings that help build that more dynamic, more competitive economy that we need to deliver higher living standards for our people well into the future. I think everybody now understands that Australia's productivity growth has been a challenge in our economy. The decade to 2020 was the worst for productivity growth in 60 years or so that we've measured it in this way. It is a big pressing challenge that will take some time to turn around. We give ourselves the best chance of making our economy more productive and more dynamic if we make it more competitive at the same time, and that's what today is all about. If we are to make the most of the big trends and transitions in our economy into the future - whether it's digitalisation, the growth in services, the net zero transformation - at the same time as we deal with the cost-of-living pressures that people are facing in the economy, we give ourselves the best chance to prosper in the future. So the priorities for this Competition Review is to find ways and define reforms that will increase productivity in our economy, reduce the cost of living for Australians, and boost wages as well. We have assembled a crack team in the Treasury. We've tapped the best minds in Danielle Wood and Rod Sims - and we're also very fortunate to be able to unleash the expertise and the enthusiasm of Andrew Leigh as well - who have spent a career thinking about these sorts of issues in our economy. It's a real pleasure to work with him and the Treasury and the external experts on this really important task. And I'll ask him to say a few words now before we take your questions.
ANDREW LEIGH, ASSISTANT MINISTER FOR COMPETITION, CHARITIES AND TREASURY: Thanks, Jim, and it's a pleasure to be working with the Treasurer so committed to building a more dynamic and more productive economy. The story of the Matildas - it really is a story of how competition can drive achievement. Sam Kerr and the squad have succeeded on the playing field because they have played against the very best in the world. The achievements of the Matildas are testament to what you get when you bring the very best to Australia, and you test what you can do against the competition. On the sporting fields, Australians intuitively 'get' the value of competition. We love sporting competition, in which the team that ends up with a wooden spoon one year can still be a shot the next year round. In which achievement and excellence go together as a result of testing yourself against the best in the tournament. But yet, if we look at our business sector, we haven't seen the same degree of dynamism that the Matildas show on the sporting field.
Over the last couple of decades, we've seen a rise in market concentration. We've seen an increase in markets, the gap between cost and prices. We've seen a fall in the share of Australians that switch jobs and get the benefits in higher earnings that come from moving to a new job. We've seen a decline too in the startup rate, as measured by the number of employing small businesses that start up each year as a share of the total business sector. All of this suggests the Australian economy may have become less dynamic. And that indeed may be a reason why, as Jim just pointed out, the last decade was the lousiest decade of productivity growth that we've mentioned in the post war era. What we're announcing today is a Competition Review, which will look broadly across the board at the challenges in competition policy. Think of this as less Harper bringing down a doorstopper report, and more Hilmar looking at practical reforms that can be implemented immediately. We're inspired by the human work initiated by Paul Keating in 1992 because of the evidence as to what that did to Australian living standards. The Productivity Commission in 2005 estimated that the Hilmar competition reforms helped to spur a strong decade of productivity growth during the 1990s - and delivered a permanent 2.5 per cent increase in Australian incomes, translating in today's dollars to around $5,000 for every Australian household. We seek to achieve the same sets of goals with this Competition Review, to find practical measures in which we can improve the competitive nature of the Australian economy. We understand that when there's not enough competition, it's the most vulnerable who suffer. The most disadvantaged who may not have a car to drive to another suburb for a better deal. If you've got a dodgy internet connection, it may be hard to shop around. And so in ensuring that we have a more productive economy, we're also looking after some of the most vulnerable in Australia. We're looking after workers too, because increasing evidence on monopsony power suggests that increased power in firms can hurt workers. More competition is good for consumers, good for workers, good for farmers, good for small businesses, and good for Australia. We're really looking forward to seeing what this crack team of experts is able to uncover in terms of productivity boosting ideas, working in collaboration with the business sector, states, territories and experts.
JOURNALIST: Treasurer, we've seen today Woolworths results showed an increase in their net margins - an indication perhaps of some of that market power that the Taskforce is looking to address. Is this Taskforce then, a recognition that excess market power is hurting consumers and also keeping inflation higher than it would otherwise be?
CHALMERS: Well, a couple of things about that - a key focus of this Competition Review will be to put downward pressure on the cost of living, in addition to all of the other ways that we're acting, to ease some of these cost-of-living pressures in ways that take the edge off inflation rather than add to it. As businesses costs moderate, we want to see their prices moderate too, and we've made that clear on a number of occasions. The composition of our inflation challenge is changing, some of the issues which were bedevilling the retail sector around shipping and other import costs have come off quite considerably in the last six or nine months. And we want to see those passed on to consumers, to Australians more broadly, when that happens. So when costs moderate, we want to see prices moderate as well. Key focus with this Competition Review is the cost of living, in addition to - not instead of - all of the other ways that we're acting. Dealing with, or taking some of the edge off these cost-of-living pressures is the Albanese Government's highest priority. We're doing a lot of other things at the same time, but rolling out billions of dollars in cost-of-living help, and coming up with the best possible competition policy settings to put downward pressure on prices is part of that as well.
JOURNALIST: There have been calls for major tax reform to find extra revenue, will you confirm whether you'll consider major tax reform in this term of parliament?
CHALMERS: We are in the middle of implementing meaningful tax reform across multinational taxes, the PRRT, high balanced superannuation and when it comes to tax compliance. And the tax reforms that we already have in train are making a substantial difference to the budget position. They are one of the reasons why we've been able to get the budget in much better nick to face the uncertainty ahead. So we've got a tax reform program, we've made that clear. We're in the process of implementing that and legislating that, and that's our focus.
JOURNALIST: If we're promoting competition why did the Government block Qatar's proposal to bring more flights into Australia?
CHALMERS: The reasons for that decision, I think, have been made public by colleagues, I think Catherine King has perhaps answered that question before. Our job here in this competition review that we are talking about is making sure we've got the broader settings right, and the sorts of priorities that we're talking about are things like looking at the kinds of merger proposals put forward by the ACCC, working with the states and territories through the treasurers’ forum that I chair. Andrew has made it clear that one of the priorities here are the non-compete clauses, having a look at them. These are the sorts of things that we're talking about today. Some of those other decisions have been explained in the past.
JOURNALIST: Sorry, Treasurer. Just following on from that, the only explanation Minister King has given with regards to the rejection of Qatar Airways has been that it wasn't in the national interest. Can you please explain how that is the case given that it would have put significant downward pressure on fares and eased the burden of the cost of flights for Australians?
CHALMERS: That's the Government's position and that's the relevant minister to put the Government's position. What we're talking about is the broader settings.
JOURNALIST: Treasurer, if I could ask you about the broader international environment, how concerned are you about China's emerging economic slump [inaudible]
CHALMERS: I think the softening of the Chinese economy is a substantial risk to the global economy and the economic conditions in China are some of the things that we monitor most closely as we contemplate the global economic uncertainty that we're anticipating over the course of the next year or two. The global economy is really this tug of war right now between resilience and risk. On the resilience side, the American economy has held up especially well, the banking system has held up better than many expected, inflation is moderating. But there are risks as well - some of those are geopolitical - Russia and Ukraine. Core inflation is more persistent in some parts of the world. But the softening of the Chinese economy is one of the risks that certainly were most attentive to and that the global economy is watching most closely.
JOURNALIST: Obviously, with the competition reform you'll be taking a look at mergers. Is there any risk if people perceive Australia as rejecting too many mergers, will people see Australia as a riskier place to invest?
LEIGH: We always need to get the balance right on merger reform. The ACCC's proposals first put forward by Rod Sims but then also by Gina Cass-Gottlieb are serious proposals deserving of careful scrutiny. So we will look through those in the national interest, recognising that this is always a balancing act, and driven with a clear eyed goal of improving productivity and putting downward pressure on cost of living for Australians.
JOURNALIST: How will you balance the concerns of say the startup community who are often building businesses to sell to bigger businesses, or ending up in a situation say where the United States Government was looking at Facebook and going well, they've got too much of Instagram, WhatsApp, Facebook, etcetera?
LEIGH: You want to make sure that you've got a dynamic startup community and some startups may well look to have an aspiration of being acquired by a major but that shouldn't be the only goal of starting up a firm. Some of the international evidence suggests that large firms have been building so called moats around them, which makes it difficult for competitors to take them on. One of the heartening things to me is seeing Australian startups like Atlassian and Canva, who were clearly aiming to dominate a sector, not simply to be acquired down the track. We'd like to see more of those emerging.
JOURNALIST: So Minister Leigh given you've got that career behind you looking at competition, plus bestselling books, etcetera, along with that -
CHALMERS: Did you put him up to this? [laughs]
JOURNALIST: Is there really a need to have a taskforce that's going to report over two years, aren't there decisions efforts you could actually introduce today, yesterday, whenever, rather than wait for a taskforce to report back?
LEIGH: We haven't been waiting. When we came to office, we raised the penalties on anti-competitive conduct, which have long been called for by the regulator and banned unfair contract terms, which induces more competition in the market and improves the balance between small business and large business in the supply chain. We're open to new ideas. And certainly, we don't claim to have a monopoly on wisdom. We want to see a market of ideas flourishing, as we set about improving competition in the interest of Australians.
CHALMERS: Could I add to that briefly, we're not we're not asking for a report at the end of the two-year period. We want to work through these issues in an iterative way. We believe in working through the issues right across our economic policy, but particularly in this case, in a methodical and sequenced way. And if there are proposals that come from this taskforce and this review, which we are able to progress within that two-year window, then obviously we'll consider that subject to the usual kind of Cabinet considerations as well. But this is not going to be, as Andrew said before, a two-year process where there's nothing for two years, and then a big report at the end of it, it will be iterative, it will be methodical, we'll work through the issues in a sequenced way. If we need to bolster the people that we point to the expert panel, we're prepared to do that. Where there are opportunities to do parts of this agenda sooner rather than later, we're open to that as well.
JOURNALIST: Are incremental tax changes going to be enough to solve the problem outlined in the Intergenerational Report and will there be a need for major tax reform down the track?
CHALMERS: We need to make the budget more sustainable and that is obviously one of the main conclusions of the Intergenerational Report, and we have shown really quite remarkable progress in the 15 months or so that we've been in office across two budgets. We have been able to avoid a huge amount of gross debt and interest paid on that gross debt with a combination of three sets of measures. Firstly, when we get these upward revisions to revenue, letting them flow through to the bottom line. Secondly, finding $40 billion in savings compared to $0 in savings in the last Coalition budget. And meaningful tax reform across the areas I mentioned a moment ago - multinationals, PRRT, superannuation, compliance, and in areas like cigarettes as well. What the Intergenerational Report will show is that the tax base will change over time. We hope to not be collecting much tax on cigarettes in the future. Obviously, the take up of electric vehicles poses challenges to excises in the revenue base as well. So clearly, over the course of the next 40 years, we need ongoing vigilance when it comes to the budget position. I think we've shown in 15 months our bona fides. We've turned around a deficit of $78 billion into a surplus north of $20 billion. That is helpful but the pressures on the budget are intensifying rather than easing into the future: aged care, health care, the NDIS, defence and interest costs on our debt. They're all growing very fast. And so some combination of those three sets of things: spending, restraint, savings and tax reform, like what we are implementing are legislating at the moment, they will all be important parts of the puzzle.
JOURNALIST: As the most senior Queensland Labor minister, do you believe that your state will defy the polls and vote yes in the Voice referendum.
CHALMERS: I'm confident that we can get the right outcome here when it comes to the Voice referendum, but it'll be really hard, and I think it will be especially hard in Queensland, and I've never pretended otherwise. This is an important change but it's a simple change. It's about constitutional recognition and it's about listening better so that we get better outcomes. Queenslanders and Australians are pragmatic and practical people who believe in the fair go and this opportunity combines all of those things. It would be a pragmatic change, listening better to get better outcomes for people in our local communities. So it's an important opportunity. And I don't think anybody knows this far out what the outcomes of the referendum are going to be. It is still in the balance, and it's still in the balance in Queensland.
JOURNALIST: Turning to those international pressures coming out of the Chinese economy, do you think a pivot to Southeast Asia would help safeguard against any kind of blowback that might come from that emerging slump in China?
CHALMERS: We want to maximise our opportunities, and one of the big opportunities that we have is our geography. We want to get geopolitical and technological advantages out of the fact that we've got geological, geographical and meteorological advantages. And in the Intergenerational Report, one of the big trends and transitions that we spend a lot of time building our policy agenda on is the fact that we are shifting from what we saw as globalisation to something that looks a bit more like fragmentation. And in that world, what we need to do is to de-risk our supply chains without decoupling from the world. And part of that is making sure that we've got deep and broad markets. We've got this once-in-a-century opportunity in critical minerals, but also in other areas where we've got industrial advantages, and we'd be mad not to make the most of them in our region. And what we learned during COVID was that our supply chains and our trading relationships weren't resilient or robust or reliable enough to sustain the kind of pressure that they came under. And so I think every country, certainly investors, the business community here in Australia, are trying to work out how do we have the best version of relationships with China, but also with the region more broadly, so that we can prosper in the years ahead. Thanks very much.