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Mr Speers: Simon Crean, thanks for joining us. This new branding for Australia, Australia Unlimited, what does it really mean?

Mr Crean: It means Australia's potential is anything we want it to be. The thing that's struck me every time I've been involved in these trade negotiations wherever I've gone in the last couple of years, is how much Australia can meet the sorts of objectives that countries are seeking, and yet how little awareness there is of that diversity on offer. Australia is a great performing nation, whether it's the pavilion that we launched it in, whether it's in the services sector, the manufacturing sector, the agriculture sector. Whatever Australia does, it produces a quality product. Not just something that's made in Australia, but something that says I am Australian, it's quality and we're proud of it. We know it, but the rest of the world doesn't know it. So the point of the brand is to promote that message to market: the strength of our diversity.

Mr Speers: This is about attracting investment to Australia, as much as anything, though. Is the title "Australia Unlimited" somewhat misleading, in that there are limits on how much foreign companies like Chinese companies can invest in Australia. There are limits on how much profits they can take.

Mr Crean: Well, there haven't been too many limits in terms of the approvals that have been granted to Chinese companies, in fact very few. Practically every application has been approved, and those that haven't have only had slight qualifications. So Australia is open for foreign investment, that's what has grown the nation.

Mr Speers: But on the profits front, particularly in the resources sector, there are limits on how much profits you can take. The new mining tax the government is proposing would lift the total tax take on resources to almost sixty per cent, the highest in the world.

Mr Crean: There's no limit on the profits made by mining and resources companies, David – they've been making a fortune.

Mr Speers: But you're trying to limit that.

Mr Crean: No, what we want to do is return to the nation a fairer share of the national resource base, and to also get a consistency in the multiplicity of ways in which the resource is taxed. Now, let's understand this …it's a tax on profits, not a tax on consumption, so it won't put the price up, but it's trying to build consistency into the way in which we as a nation get a better return from our resources.

Mr Speers: Nonetheless, have you run into concerns amongst Chinese officials during your visit this week?

Mr Crean: This issue has been raised. We had very detailed discussions, particularly in Beijing. I've indicated and invited that, if those concerns are real for the companies, that they have the opportunity to make submission to the panel that is looking at the implementation phase.

Mr Speers: So who has raised this – is it the Chinese Government or the mining companies?

Mr Crean: The Chinese Government has raised it in the context of its concerns about the impact on price. But as I made very clear...

Mr Speers: So they're worried about the impact this will have on the price they'll pay.

Mr Crean: But in the same way that I've just explained to you, this is a tax on profits, not a tax on consumption, it won't affect the price, because the price is determined in an international market. This is a free market, there are global competitors in the space that determines the price.

Mr Speers: But did they say to you that this is going to affect their investment decisions into Australia?

Mr Crean: No they haven't said that. But what they have raised it with us for, is to get greater clarification, greater understanding about how this is going to apply. Because their concern isn't that Australia shouldn't get the return for its resources, their fundamental concern is about price. Now why is that important? Because the steel industry is so fundamental to China's economic growth. Iron ore, therefore, is a vital ingredient in that. But the point we then go onto discuss, is what determines price? It is the excess of demand over supply. Who's driving the excess in demand? It's China. How do we address it? By increasing supply. That's why the investment equation becomes important. It's why Australia's investment in infrastructure becomes important. And again, as I've had the opportunity to point out, a large part of the revenue from this tax will go into also improving infrastructure capability, as did our budget.

Mr Speers: The Chinese haven't then, to be clear, said to you that they'd be suspending any investment decisions.

Mr Crean: No, of course they haven't. They haven't said that. They've raised it, because they're interested in information about it, and it's been a real opportunity to give that more informed view.

Mr Speers: And when you say Chinese companies can take part in the consultation process of working out the fine details of how this new tax will apply, does that mean the Australian Government will listen to, and perhaps even act on, feedback from Chinese companies?

Mr Crean: Like any other company. Any other company, if it thinks it is going to be affected by this, has the opportunity to make submissions to the panel. The panel has been set up to deal with the transition and implementation aspects. So the implementation, whether it's for a Chinese company or a British company – which is Rio, let's understand that – is the same. We don't discriminate about the source of the company.

Mr Speers: I guess what I'm getting at is, will foreign companies, be they British or Chinese, influence the final formation of this tax?

Mr Crean: Well, everyone will have the opportunity to raise their concerns, those concerns to be taken on board, recommendations to be made to the Government, and the Government will make a decision on the transition and the implementation.

Mr Speers: But you've made it clear to those who raised concerns – the forty percent won't change, and the level that it kicks in at won't change?

Mr Crean: We've made it absolutely clear that the forty percent rate won't change, absolutely clear to the Australian companies.

Mr Speers: And the level it kicks in at?

Mr Crean: And the level it kicks in at.

Mr Speers: So the six per cent profit level won't change.

Mr Crean: No.

Mr Speers: So where is there room for any movement.

Mr Crean: Well, there is serious opportunity for implementation and transition phase, but let's wait and see how the… Now first of all, Rio, which is making its representations today, BHP tomorrow, have the opportunity. Let's wait and see what they have to say. Let's wait and see how the report comes back. Don't try to pre-empt it. It's important that parameters are set down, to what people go in making submissions around.

Mr Speers: Could it be the Government offers a guarantee that state royalties will be refunded, even if they are increased, like they are about to be, it seems, in Western Australia.

Mr Crean: Look, I'm not going to go into detail, I simply make the point in terms of design. The design of this tax is to take account of state royalties, not double tax. And the deduction for what is paid is an important part of the design. As is the upfront deductibility. So when you look at the uptake rate, you can't compare it with the resource rent tax for off-shore, because it doesn't have that deductibility factor.

Mr Speers: Which is good for the small and medium players.

Mr Crean: Very good.

Mr Speers: Where are they in this debate? Why aren't we hearing them?

Mr Crean: Well, that's a very good question, a very good question indeed. And when this point is made in China, for example, that this will have the capacity to encourage more players into the field and therefore increase supply, they are very interested to hear that. Because they know that increasing supply is the most effective path to addressing the long-term issue… in the long-term, addressing the issue of price. I've found it very interesting in the discussions, David, that in our discussions with China, China is no longer arguing that governments should intervene on price, in iron ore. We have won that argument. We've said, you want to be treated as a market economy, act like one. That's not to say the Chinese Government has no concern about price, they have, because of the strategic importance of steel, and therefore the price in terms of iron ore. But the most effective way to influence that in a market economy is to get a better match between supply and demand. And the tax is designed in a way that encourage that, because the Econtech modelling said that investment would increase by six per cent, in the mining sector, as a result.

Mr Speers: Of course, one of the reasons China has such a big appetite for Australian resources, and Australian resources companies, is the stability of supply – they can be sure into the long-term what they're getting. When we look at a free trade agreement between the two countries, the fifteenth round of talks are coming up here pretty soon, how are things going on that, are we getting any closer?

Mr Crean: Well, let's make the point, it's not just stability and reliability of supply, it's the competitiveness with which we extract it. We are the most competitive mining operation in the world. And that, too, is important when it comes to price.

But on the question of the FTA, we do enter the fifteenth round next month. The fourteenth round did make some important progress. This was the first round that took effect after the important visit by Vice-Premier Li Keqiang to Australia in the end of last year. The political will exists to conclude this agreement. The difficulties still remain in agriculture, but as we're trying to do, it's to say "we can deal with the difficulties in agriculture". How do we prove that point? Because we were able to deal with difficulties in ASEAN. But really, let's put the difficulties aside for one moment. Let's look to the opportunities. Let's look to where the potential is to take this framework to encompass that more diversified set of issues, the brand that Australia is. Now whilst I've been here at the Expo, we've had seminars in relation to green building, green design. This building that we're hosting this in, won the award from the Expo authorities for the most civilised building. In other words, for the fact that it was the safest work practices, on-site. They're using that as a teaching mechanism. But the design here exemplifies a lot of what Australia has to offer in the building space. So given the fact that China is going to have to house three hundred million people over the course of the next two decades – this is the biggest urban development in the history of the world. So services, financial services, education services. Training, not just students coming to Australia but vocational training. Logistics. When we look at manufacturing, and we had a financial services dinner last night, today we've got an automotive sector event. Why? Because China sees itself as a major auto player in the world. It already is – it's the largest manufacturer and the largest marketer. The trouble is, it doesn't have the full range of capability. Australia has the full range of capability, but not the market. Now, I went to the GM pavilion, and they've got prototypes of the cars of the future, electric cars, etc. One of them was designed in Australia. That says something about that capability, and China's appreciation of it. So it's in the manufacturing space, food – food quality and processing. The dairy industry, look at the melamine scare – not just sending dairy cattle up here, but actually value-adding, the product. And presenting our brand: quality, nutrition. And then you've got all the services.

Mr Speers: There's no doubt that Australia is showcasing here very effectively what it can do with sustainable buildings like this pavilion we're sitting in, and with the technology on the auto front as well. That segues me into the final issue I wanted to raise with you, and that is climate change. What the Government is doing in Australia of course is being heavily criticised, putting the emissions trading scheme back a few more years. Ross Garnaut has said that China has shown more leadership on climate change than Australia on the climate. Do you accept that?

Mr Crean: I think that what has been fascinating while I've been in China on this visit, is how strongly they are taking the climate change challenge. Whatever the disagreements were over Copenhagen, China is committed to reducing its energy emissions.

Mr Speers: Was China to blame for the failure at Copenhagen?

Mr Crean: I'm not getting into the blame game, I don't think it works. What does work is that they've signed up to the Copenhagen Accord, we've had good engagement in the meetings in Beijing...

Mr Speers: The Accord didn't deliver a huge amount.

Mr Crean: It delivered commitments that they were prepared to make. The question is that people had in their minds, will they deliver? Will, I've got it from municipal authorities, and state authorities, governors and mayors, that their jobs are on the line if they don't meet the targets that have been set. Now that does help focus the mind, David, particularly in this economy, if their jobs are on the line. That does help focus the mind. So, what are those places doing? Interestingly, the big growth cities I've visited – I've visited Tianjin, I've visited Qingdao and I've visited Jinan in the last couple of days – the big cities have higher targets. They are looking for solutions. Where does that position Australia, in the space of partnership that helps them deliver those solutions. So green buildings, energy efficiency, water management, mechanisms that reduce emissions in their steel plants...

Mr Speers: Sure, but you're not running into any concern or criticism here that Australia has dropped the ball...

Mr Crean: No

Mr Speers: is no longer leading the world on this.

Mr Crean: No, none whatsoever, that was never raised in the discussions. What was raised was how we can work together in meeting the challenges of climate change. And I've talked about that urban design and all of those things. There is also the space of coal and clean coal technologies and sequestration, we are going to intensify our commitments there, as well as in the renewable energy space: hydro, wind, thermal and solar. They are all spaces in which they want to strengthen the relationship with Australia, and we're than happy to be partners.

Mr Speers: Simon Crean, good to talk to you. Thanks for joining us.

Mr Crean: Thanks, David.

Ends

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