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SIMON CREAN: Australia recorded a monthly trade surplus for the month of May - April. This is the first trade surplus in 18 months. It reflects the very strong effect of resource exports and in turn that reflects the very high prices that are being paid for those resources. Obviously in terms of the other debate that's going on at the moment, the Government's tax for resource rent will ensure that Australians get a fair share from this growth. The asset belongs to the Australian people. These figures demonstrate that the price is determined on the world market, that the miners are recording, and the country’s extraordinary growth in export prices for their resources.  And we want to make sure that Australians get a fair share from it. The second thing I just want to report on is that I'm going to Japan on the weekend.

This will be an interesting opportunity, obviously because the Prime Minister has changed. The new one is expected on Monday in Tokyo, but I'm going for the meeting of APEC, which Japan is hosting this year. This is the meeting of the economic ministers at APEC. The opportunity there, of course, is to discuss: the ongoing agenda for economic integration within the Asian region; the assessment of the success of the Bogor Goals and objectives; building the agenda going forward; the movement towards a Free Trade Area for the Asia-Pacific – so obviously the Trans-Pacific Partnership will figure strongly in that.

The agenda that we've already set ourselves for reducing the cost of doing business in Asia is going to be terribly important for greater opportunities for our exports into the region. We will be also obviously discussing the ways to move forward the Doha Round in advance of the G20 Leaders' meeting in Toronto later this month. I will be participating as well in a forum in Tokyo hosted by the Foreign Minister to advance the free trade agreement between Australia and Japan. The Government has indicated a keen desire to conclude the free trade agreement with Australia. So that's an important signal. I'll also be taking the opportunity to participate in a forum to advance Australia's financial services sector. As you know, as part of the bilateral relationship, we've been developing with Japan the opportunity to work together to penetrate third markets. One of those areas of opportunity is in infrastructure. Obviously the financial services sector backing that infrastructure development is an important corollary. So I'm looking forward to the meeting, but it will take place at an interesting time.

QUESTION: You're using these trade figures to back the new mining tax, but we got Xstrata today saying that it's the mining tax that's caused them to shelves some projects.

SIMON CREAN: Well this is not the first time Xstrata has announced the holding up of this particular project and I might say that I had the opportunity to speak to Xstrata yesterday and to try and get some better fix on why they were making that point.  Because obviously, the fact that they have not made the decision in terms of this for some time is because it's a more marginal project. Under the design of the resource tax that has been proposed, more marginal projects will be advantaged. They'll be advantaged in a number of ways: the deductibility will be able to be claimed upfront before any profit is turned; importantly the companies will be able to claim an upfront deduction for mining royalties levied by the states.

Royalties are a disincentive to invest, because they actually attract tax and require it to be paid before any profit is turned. So this is - the design of the tax would encourage these sorts of investments. Now why Xstrata has chosen to do it, I think, I'm not surprised, given the performance last night at the dinner. There's a campaign going on out there. You ought to be aware of it.  But I think there has to be some honesty in this debate, not just rhetoric.  And the sooner the parties get together to, in trust, to honestly sort the negotiations out about this, the better.

QUESTION: So is Xstrata not being honest, are they lying?

SIMON CREAN: I'm not saying that, I'm just saying that this is not the first time this particular project has been put on hold. It's been put on hold previously when there was no such tax around. But in circumstances in which part of the tax regime that would have been a disincentive – they had to pay a royalty before they turned a profit. This tax actually addresses that question and I just wish that people would properly assess all of the details of this, privately, calmly and actually work towards what seems to be a common objective. I mean we've got the mining industry saying they haven't got a problem with paying more taxes on profits. That's what the resource rent tax seeks to do. Now if there are problems with its implementation, let's negotiate them. That's what we've offered, but that needs to happen within an environment of trust, of calmness and not overblown rhetoric.

QUESTION: Mr Crean there's an agricultural delegation heading with you to Japan and Japan is also in the grip of a devastating FMD outbreak. Would you be looking at ways Australia could better prepare itself for foot and mouth disease, or even review our own control measures here in Australia?

SIMON CREAN: Well Australia's got an excellent system of control for its beef cattle industry in particular. A tracking system - an identification system that enables in all cases, us to identify the source immediately. This is something we've tried to get the rest of the world to embrace, so that if it does suffer these sorts of problems it can immediately trace and quarantine it.

Now that was the drive behind what we were involved in, in terms of the recognition of the need to bring our system of treatment of these issues in line with WTO obligations. I think we have got a very good opportunity to not just take advantage of the safeness of our product, but the system that delivers it and to not just export the beef, but to export the platform that delivers it.

QUESTION: So there's nothing more you think we need to do and would you be having discussions on the issue next week?

SIMON CREAN: Well if - I'd take advice on that, the agricultural delegation will be there. I'll meet with them whilst I'm there. I look forward to the discussions on Monday. But we've got an APEC agenda before that.

QUESTION: Mr Crean, Australia's export performance is being driven by very strong growth in Asia. Do you think that growth is sustainable at the rates that we've been seeing of late?

SIMON CREAN: Not sure about the rate, but the growth will continue to be strong for some considerable time to come. That's because China is going to grow in excess of 10 per cent this year from all accounts and is determined to sustain growth around that level for the foreseeable future. I've visited China again recently and I've had the opportunity to visit a number of regions, not just Beijing and Shanghai; regions themselves that have been growing at 15, 16 per cent. They're growing because: (a) there's a huge investment in infrastructure in China as part of their fiscal stimulus and as part of their modernisation of the economy and this is why the demand for our coal and our iron ore is so strong.  But it's not just the infrastructure, that's road, rail and ports, it's also infrastructure buildings, construction, housing. The greatest urban development in the history of the world is going to occur in China over the course of the next two decades. They have to house 300 million people. Think of it. That's the population of the United States, has to be housed in the next two decades. That is going to require enormous investment in construction but not just the physical construction because you can't build urban communities without the services that go with them.

So retailing, logistics to get the products to market and this all at a time where China understands that its future can't just depend on producing products to sell to the rest of the world. The global financial crisis exposed the problem for them in that regard. They therefore have to embrace and develop their domestic economy, a consumption-led economy. The fact that they're late developers in that field means they have the opportunity to pick up the efficiencies and the advantages that more developed economies have honed over the years. And so the opportunity to interest them in the services sector, financial services, education services, logistics, retailing, these are all huge opportunities for Australia. So I don't just see the future for us in China or Asia for that matter, where the same sorts of circumstances exist but not on the same scale.

I don't see our future in terms of trading with the region just limited to resources. Resources are going to be their own dynamic and they're producing the figures that we're talking about today and they will do that for some time to come but we have to look beyond the resources boom. This is what the previous government failed to do. It failed to invest in the last resources boom to accommodate the supply side of the equation. That's why we've invested so heavily in physical infrastructure, in skills development, something I didn't hear mentioned at the mining industry dinner last night in terms of the Government's contribution to that sector.

But we have done that, but we're also positioning ourselves to look for trading opportunities beyond the resources boom and in areas in which we have incredible expertise and we can produce quality outcomes. That's what the branding Australia is all about.
It's why we're using the Shanghai Expo in such a diverse range of fields over the course of the next six months. This is exciting times for Australia. We have to be in there but we have to be in there on many different fronts.

QUESTION: Doesn't your tax put at risks the numbers that we're seeing in these trade accounts?

SIMON CREAN: It doesn't at all. I mean if that demand is there that demand is going to determine the price. If no investment takes place in Australia, the price is going to go higher. Why? Because price is a reflection of demand over supply. This is why our tax, which actually will increase investment because it will bring in the more marginal players and why the economic modelling says investment will increase, six, seven per cent which - in that field, why that is good for those other economies because we are better matching supply with demand. And we are positioning ourselves to be not just the reliable supplier but the expanded supplier. That I think has got to be hugely attractive to these economies that are looking to their own future and worried about price not investment.

The concerns that are raised with me in China about this tax is their view that it will impact on price. What will impact price is the decisions that these companies are taking today to say they're not investing.

QUESTION: Do you think that then, based on what you earlier said, that Xstrata's decision isn't related to the mining tax at all?

SIMON CREAN: Well, you will have to - you can…

QUESTION: They say it is.

SIMON CREAN: Well of course they say it is. I think you've got to question that. I don't know because I'm not a technician in terms of all of those figures, but I do know what the fundamental design of this tax is designed to achieve.  I do know that the Australian people deserve a better return for their asset and think about it, any business that saw the asset increase in value, which this has because of the huge demand and the high prices that are being paid, wouldn't they be doing something on their balance sheet to adjust the return to them?

Why shouldn't the Australian people do that and we as a government want to do it for them. We want to do it fairly, we want to do it constructively but it's not just about getting a better return. It's also laying the framework in which we actually strengthen the mining sector, diversify the supply base and continue to drive competitiveness. One other point I would make because I keep getting asked, does this issue get raised with you in China, Japan?

It has in China, I've said that, it will be in Japan because I've already had discussions on the phone with my counterpart but what always gets raised with me, in terms of concern impacting on price, is the merger between BHP and Rio's facilities. And yet we've been in those countries defending why that should be good for China and why it should be good for Japan because it will produce greater efficiencies and should flow into better price, better delivery, more reliability.

They're the questions that get constantly raised. Again you won't hear that from the mining sector in the current circumstances, but we've addressed infrastructure, we've addressed skills. We're trying to drive efficiencies with the industry. To argue that we're holding the industry back when all we're seeking is a better return for the nation, but doing all of those things that underpin and strengthen the competitiveness of the industry and secure supply to markets that are going to be our future, that's what we're doing also in the interests of the nation and the mining companies should join with us in that challenge.

QUESTION: That's a bigger concern than the mining tax, the Rio-BHP joint operations?

SIMON CREAN: I'm not saying it's a bigger concern, I'm saying it is raised as a concern and has been raised with us as a concern ever since the first merger was raised and then the joint facilities were raised, yes.  A bigger concern? I don't know, but it's not a concern from China that says, we're worried about the competitiveness of the Australian, or the ability of the Australian industry to supply, it's their concern about price.  That's their concern because steel is so fundamental to their future and steel depends on coal, it depends on iron ore, therefore they need reliability, they need competitiveness and what they don't want is, in their view, price fixing.

QUESTION: Mr Crean, will you be having any discussions with your New Zealand counterparts about an apple agreement?

SIMON CREAN: I'm always talking to my New Zealand counterpart about apples.

ENDS

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