27 January 2009
Interview with Karen Tso and Matthew Taylor on CNBC Asia Squawk Box
Subjects: Chinese economic slowdown, response of Australian companies to the global financial crisis, World Economic Forum in Davos, new US Treasury Secretary Tim Geithner
KAREN TSO: Well with Australians pausing to remember Australia Day, we thought it was a good time to look at how Australia is doing on the world stage.
Simon Crean is Australian Trade Minister, and he joins us now live from our Melbourne studios. Good morning to you Mr Crean. We do appreciate your time today. First of all we did see those official statistics from China last week painting a semi-bleak picture for the Chinese economy, showing growth just on 6.8 per cent of the December quarter.
How would you gauge the situation confronting Australian exporters right now?
SIMON CREAN: Well obviously China's slowing more than anticipated is of concern to us. It will impact upon demand for our resources in particular. I think though that we have to have a long-term view of China. China has - is an economy that is substantially driven by domestic activity. It understands the importance of maintaining growth at a level that ensures a social cohesion.
There is therefore going to have to be serious consideration by the Chinese, I would expect, for further stimulus. When we spoke with them at the end of last year, as recently as the end of last year, they were thinking that which they had already committed to and brought forward by way of stimulus would be sufficient to maintain growth above the eight per cent.
So I think we just have to wait and see. But we do know that the Chinese leadership is fully cognisant of the importance of maintaining significant levels of growth. Now that therefore is going to be of importance to us, even though China's growth has slowed.
It is still growing positively. Any further stimulus can add to that. And China is now our largest single trading partner. So I think we have to not be panicked by the short-term, be cognisant of these changing circumstances, but prepare the basis for going forward - including Doha round in trade terms, but also advancing a free trade agreement.
KAREN TSO: Mr Crean, it's an interesting message that you say there, not to be panicked by the situation in China and to take a long-term view, but in the immediate term we're seeing a lot of our miners take a very short-term view and cut back on production and pump out some very big job losses.
Are you worried about the message that that's sending and where it leaves Australia in the long term, because you've got to expect that trade volumes will be impacted for some time to come?
SIMON CREAN: Yeah, I think that's a very important point Karen, I mean, when the boom started, and China was the significant driver of that boom, what did it mean for our resources companies?
They found themselves subjected to significant capacity constraints. The demand was there, but they couldn't respond to that demand quickly.
There were in recent years also important stories of not just infrastructure bottlenecks, but skills shortages. We as a Government got elected in part on the basis of committing to investing in the nation's future, in the drivers of economic growth, particularly in infrastructure, in skills formation, in training and education.
This is a message that the companies themselves also have to learn from.
Now I know that there are going to be short-term circumstances that they have to adjust to. But my very strong message to them is for them to think about the longer-term too. We don't want a repeat, a similar set of circumstances as when they found themselves with strong demand off the back of sustained recovery.
We all know that there's going to be a recovery. The big question is how long it will take. But in these big developments, and particularly resource developments, I think there has to be a view of retaining skilled staff, building for the future, finding mechanisms in which we can develop the training and skill base, as well as a nation invest in the infrastructure that's important to ensure that we can meet increasing demand into the future.
MATTHEW TAYLOR: Mr Crean, it's Matthew Taylor jumping in as well. I just want to shift focus now to the United States. We have just heard in the last few moments that Tim Geithner has been approved as the new US Treasury Secretary. We're obviously waiting for the Congress as well to potentially pass a second stimulus plan in the United States this week.
How closely is your Government working with the new administration about these stimulus plans, and trying to kick start the global economy?
SIMON CREAN: Well I welcome the appointment, swift appointment by the Congress of Mr Geithner, and we hope that that flows through in terms of all the other appointments.
It's been very difficult to engage directly with the new administration until this confirmation process is concluded.
So that's the first point. Second point I would make though is a bit more general, globally, Matthew. And that is, there's not much point in countries investing lots of money, billions and trillions of dollars in their fiscal stimulus package, if they're not at the same time prepared to ensure that the multiplier impact of that fiscal stimulus package also works.
And that's trade. World trade grows much faster than world output. If we want to maximise the impact of the fiscal stimulus, we've got to liberalise trade markets. So that's why this upcoming meeting in Davos is going to be terribly important. There will be representation from the new administration in the US there, first time to engage them in a global forum, but importantly, all of the other world leaders.
So what we're hoping to do is to not just get a stock take of where the problems are, and we know that there are serious problems, and that the emerging data indicates that the impact is going to be worse than we'd previously forecast; we've also got to look forward. We've got to look forward at what we can do together.
It is a global crisis. It requires a global solution. But it requires the interrelated nature of the policy responses - not just what you can do individually for domestic demand, but how we can multiply that impact by getting trade flows going as well.
KAREN TSO: Mr Crean, world growth also will grow if you have good relations, and the new Treasury Secretary Tim Geithner certainly put a cat among the pigeons the other week, suggesting that China is manipulating its currency.
What's your view on whether China is in fact doing that?
SIMON CREAN: Well I think that this was a suggestion I saw Mr Geithner make. It remains to be seen how far they take it. But China, like all countries, has a responsibility to participate as a market, a functioning market economy.
We some years ago granted the market economy status as part of kick-starting the free trade agreement. They've got to function like markets. And I think that's the lesson that all of us have got to take, it's a message that will be reinforced in a number of different fora over coming months.
But the most immediate one is in Davos. But it isn't just about the currency. It is about trade flows. And that I think is the most important message that we can convey.
KAREN TSO: Mr Crean, we do appreciate your time this morning. We do appreciate that you're extremely busy right now. Simon Crean, Trade Minister of Australia there.
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Media Inquiries: Mr Crean’s Office 02 6277 7420, Clinton Porteous 0403 369 588 - Departmental Media Liaison 02 6261 1555.