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Wong discusses push for RBA charter review -

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Wong discusses push for RBA charter review

Broadcast: 11/04/2012

Reporter: Tony Jones

Finance Minister Penny Wong joins Lateline to discuss the RBA's monetary policy.

Transcript

TONY JONES, PRESENTER: Our top story is the push for the Reserve Bank to drop interest rates and to
help the manufacturing industry. And to discuss this proposition I was joined just a short time ago
from our Parliament House studio by the Finance Minister Penny Wong.

Penny Wong, thanks for joining us.

PENNY WONG, FINANCE MINISTER: Good to be with you again.

TONY JONES: Should the Reserve Bank be empowered to act in the national interest to keep the dollar
exchange rates under control, as well as inflation?

PENNY WONG: Well if you look at the Reserve Bank Act, it does talk about the well-being of the
Australian economy. But what I would say is this: the Reserve Bank does a very good job and it's a
very important institution and it has a very difficult job. But as an independent institution it
has to focus on exercising monetary policy in the interests of the whole economy. In terms of...

TONY JONES: Does that include the currency, the exchange rate? Because Paul Howes is saying today
should it not have an exchange rate currency mechanism?

PENNY WONG: Look, I understand Paul's concerns about a high dollar and they reflect the concerns of
a number of sectors of the economy where the high dollar is hurting competitiveness. But I think
what's important to recognise is this: you don't deal with challenges like a high dollar - which
arises from the change, effectively, in the global economy, and the change that's been occurring in
the Australian economy - you don't deal with those changes by meddling with one of the institutions
that's been a very important part of Australia's economic stability and economic success.

What you do - what you should do, what you should do is put in place policies such as the minerals
resource tax about spreading the benefits of the boom, what you should do is invest in skills, what
you should do is look at how you support manufacturing and what you should do is bring the budget
back to surplus, which gives the Reserve Bank the flexibility to move, should it see fit.

TONY JONES: What about simply bringing down interest rates to take the pressure off the very high
Australian dollar which is having a massive impact on our manufacturing industries?

PENNY WONG: The dollar has been driven by many factors and primarily it's a function of how global
currency markets perceive the dollar and perceive the Australian economy.

TONY JONES: But would you agree, though, if interest rates came down, the dollar would come down?
It just happens like that.

PENNY WONG: What I think is that we as a government should keep implementing the policies that I've
talked about, which are about reflecting the patchwork economy. The dollar is a key driver or the
key driver of that. Skills, innovation, the minerals tax - spreading the benefits of the boom - and
very importantly, a surplus budget, because that does ensure the Reserve Bank has the flexibility
to move, should it believe it's necessary to do so.

TONY JONES: Alright. Speaking about the manufacturing industry, can you explain briefly how today's
move to require Australian industry participation plans is going to help the manufacturing
industry?

PENNY WONG: Well Australian industry participation plans is one of the ways in which you can ensure
that companies in Australia who get, for example, government grants or are involved in appropriate
major projects, give the opportunity to Australian industry to compete and to participate in those
projects.

TONY JONES: But how will requiring disclosure, because I think that's all it does, from the
corporations who are doing these giant projects, how will that start them from simply deciding, "We
can get things cheaper from other countries"?

PENNY WONG: It's about a reasonable opportunity for Australian business. A reasonable opportunity
for Australian industry. We're not a protectionist government. We're not a government that believes
that you should be mandating how businesses are run and how businesses contract. And we know from
history in Australia going down that path has not served the interests of working people well.

TONY JONES: Why does it work in America with the Buy America policy and not in Australia? I mean,
that's a free enterprise economy, they do it.

PENNY WONG: Well I think buying Australian is a good thing. But I think...

TONY JONES: No, but they mandate it.

PENNY WONG: Hang on - no, what I'm saying is we want Australian firms to be able to compete. We
have never in this country built our prosperity on not being competitive. Where we've succeeded is
where we have been competitive and we can compete. This is about ensuring people have the
opportunity to compete and it's one of the ways in which this government continues to support
manufacturing.

TONY JONES: Well, Paul Howes told us last year the big miners are only currently using 10 per cent
local content in their major infrastructure projects. I mean, is that correct, to start with?

PENNY WONG: Oh, look, I don't know what the precise figure is to date. I mean, there's so much
investment going on in mining I suspect those figures would move around a fair bit as more -
billions more is poured into the mining sector. But there's no doubt we can do better and the
question is: how do we ensure we can do better? And today's announcement by Minister Combet I think
does encourage more Australian content and more Australian suppliers, it gives Australian industry
the opportunity to compete and that's what we need.

TONY JONES: These new rules about disclosure, as we said before, they're simply going to increase
red tape and paperwork without any guarantee of changing anything, aren't they?

PENNY WONG: Oh, look, I don't think that that's fair. I think what we're saying is: this policy of
an Australian industry participation plan has applied previously to a smaller proportion of firms
and what we're saying now is that we're going to expand that. What we're saying is: you should
disclose to the market how you're giving Australian firms, Australian businesses, the opportunity
to compete for the contracts that you're letting. I think that's a reasonable proposition and one
that's consistent with best practice.

TONY JONES: OK, but the increase in red tape comes at exactly the same time the business community
is demanding the Government slash what they're calling red and green tape. Now will you be offering
up, for example, tomorrow, measures to streamline environmental assessments and approvals?

PENNY WONG: Look, tomorrow we are having the Business Advisory Forum here in Canberra and we're
looking forward to it very much. Obviously it includes the states and territories as well as
Australia's business leadership and we're very pleased at the response we've had from the business
community. It's a very important opportunity, an opportunity for first ministers, Prime Minister -
the Prime Minister, premiers, me and others to listen to the views of business.

TONY JONES: But they're already putting their views out there, that's the point, and one of the key
things they're calling for is a streamlining of environmental assessments and approvals. Will be
you offering up anything in that area?

PENNY WONG: What I was going to come to is, I think one of the consistent things people are saying
is we have to reduce the compliance load. Regulation is put in place by governments, state
governments, federal governments, often for very good reasons, but sometimes the compliance load
associated with regulation is excessive. We have duplication and there are ways in which you need
to resolve that.

It might be through harmonisation and we've actually got some runs on the board on that front. It
might be through other means. For example, bilateral arrangements with states or territories to try
and avoid duplication. Environmental assessment certainly is one of the things that the business
community have put forward and we are open to hearing their views on this. And for all - and I
think...

TONY JONES: OK, well here's another one, because they're opening to hearing your views. How would
you respond to demands the Government kill off the $10 billion Green Energy Fund?

PENNY WONG: Well I think that's a different issue. That's an issue about whether or not you support
investment in renewable energy and clean energy and whether you believe that's one of the ways in
which we can do that. And that fund was announced some time ago, as you know, as part of the Clean
Energy Future package. But can I just come back to the regulation point. I think what is very
important about tomorrow is that ministers, first ministers, premiers, the Prime Minister,
ministers such as myself, collectively can gain a deeper understanding of precisely what business
priorities are and how we can achieve reform to deal with those priorities.

I see this very much as part of the productivity challenge, meeting the productivity challenge. We
know - we are seeing the economy change. We know Australian businesses are dealing with that
change. It's very difficult for some sectors and you and I tonight have discussed manufacturing.
Alleviating the compliance load through deregulation and streamlining regulation is one of the ways
in which we can contribute to improving Australia's productivity in this time of change.

TONY JONES: OK, well you know the Opposition's point about this: they're saying the biggest piece
of green tape is the carbon tax. Now, are you prepared for a kind of fresh onslaught from business
on this question?

PENNY WONG: Well I notice that Mr Sinodinos said that and I wonder if he told John Howard that when
he advised him prior to the 2007 election to go to that election with a carbon price. And in
fact...

TONY JONES: He didn't say to go with a carbon tax, he said go with a carbon price associated with
an emissions trading scheme.

PENNY WONG: Well - a price on carbon. And as you know, and we've had this discussion, Tony, we have
a fixed price that moves to a floating price which is an emissions trading scheme, it's a
transition process, but a carbon price is the most economically efficient way, as you know, to
reduce emissions.

TONY JONES: Sure, but we're nearly out of time, so I've got to ask you: you've seen what the
business groups are already saying. Are you prepared for a fresh onslaught on the carbon tax?

PENNY WONG: I hope that tomorrow we can look to how we improve Australia's productivity. It is a
national challenge and one that government and business need to work together on. That's why we've
established this forum and that's what we want to achieve tomorrow.

TONY JONES: Penny Wong, we'll have to leave you there. We thank you very much for taking the time
to join us tonight.

PENNY WONG: Good to speak with you again.