Interview on 2GB, Money News, with Ross Greenwood

  • Transcript, E&OE
Topics: trade surplus levels; gas exports; US-Australia trade relationship.
03 December 2019

Ross Greenwood: You know what it is. Even the Minister for Trade Simon Birmingham knows that one, don’t you Simon?

Simon Birmingham: Nutbush City Limits, Ross.

Ross Greenwood: Thank you very much. And when did it come out, Simon?

Simon Birmingham: Now you’re testing me.

Ross Greenwood: It came out the year before you were born.

Simon Birmingham: I was about to say, when I was a babe.

Ross Greenwood: Before then, it was the year before you were born.

Simon Birmingham: Even before then.

Ross Greenwood: Why is that important today, Simon?

Simon Birmingham: Why is that important today? Well, because it probably relates back to when Australia last recorded a current account surplus.

Ross Greenwood: Two in a row. And it’s the year before you were born in 1973. You were born in 1974, am I correct?

Simon Birmingham: That is correct, Ross.

Ross Greenwood: There you go. 46 years since Australia had two consecutive [indistinct]- now, that’s the reason why you as the Trade Minister today, here on the program, it’s very important to have a yarn to you about this, because quite clearly something is happening there in Australia’s happening. We’re not bringing as much stuff into the country; we’re not borrowing as much money at the moment, but we’re also sending a whole bunch of stuff out of the country. Is this about free trade deals that you’ve done, or not?

Simon Birmingham: Well, it’s a combination of factors, Ross, and you are quite right there to say that some of it relates to investment flows. And what’s happened after the maturing of a superannuation environment in Australia is we have much bigger pools of savings and investment here, and indeed, much more Australia investment happening offshore. But some of it’s also related to trade flows, and we have now record levels of exports, and our trade volumes are at surplus levels too. So we’re exporting more than we import, routinely now as a nation, and recording record trade surpluses, and in addition to this current account surplus that aggregates all of the flow of money in and out of our country. And so-

Ross Greenwood: Is it ironic though- is it ironic that a big part of our exports right now is made up of gas, which is- the irony of this is of course that the east coast has gas shortages at the moment that are well publicised and well known about, contributing also to higher electricity prices. And yet oddly for the national economy, selling that gas overseas has actually made the country an awful lot of export dollars.

Simon Birmingham: It has made the country a lot of export dollars, and it’s generating a lot of jobs in different parts of Australia at the Ichthys plant up in Darwin, at the LNG plant run by Santos in Gladstone in Queensland, and so these are real jobs supporting Australian industry and Australian employees, but yes, we want to see more gas come online, and it’s pleasing to see that the Northern Territory Government, the New South Wales Government have taken steps in the right direction to allow for more gas development, and we want to see that trend continue, and particularly we’d love to see a reversal of the very restrictive policies in Victoria. This is about making sure that Australia can make the most of our investment.

Countries in our region have turned to gas for a few reasons. It has lower emissions footprint than coal; gas fired power stations can be dialed up and down in tune with renewable energy resources at a faster rate, so that means they can complement investment in renewables, and that’s something that’s important to Australia as well. And if we can get more gas development on stream in Australia, then that can bring down domestic prices, improve our domestic availability, but still allow us to be able to export to the rest of the world.

Ross Greenwood: Okay. So then we’ve got the actual surplus of goods and trades, the surplus at $21.1 billion. Now, the odd thing is that the export part of Australia’s industry with the low Australian dollar as well is flying at the moment; it’s going great guns, and yet quite clearly consumers, households are actually feeling the pinch. And this is – if you like – the two phased speed of our economy as we sit here right now. Reserve Bank keeps interest rates on hold, but your area, the area that actually deals with trade, is going gangbusters. And that’s something that’s hidden from most Australians.

Simon Birmingham: And most Australians don’t spend their time worrying about what the balance of trade looks like, and I think it would be a surprise to many of your listeners to know that now for many, many months we have been exporting more than we import as a nation; that we’ve now clocked up a first, record financial year trade surplus, now a record quarterly trade surplus. And that this is a result of Australian businesses seizing the opportunities created by our free trade agreements that our government has struck. It’s allowed our goods exports and our services exports to hit record levels. But it’s also important to note, that when we talk about the trade surplus, it’s not because imports have collapsed. Australians are still importing quite a lot as a country, but it is that we have so successfully grown our exports to outstrip those imports, and to create a decent sized buffer between the two.

Ross Greenwood: But the important part about trade – and you are the Minister for Trade – is today our stock market fell. It was 2.2 per cent give or take, $45 billion wiped off the stock market, 146 points down, and that was all about trade. It was fears of increasing trade wars. Now, this came as a result of the US, Donald Trump, imposing new tariffs on both Brazil and Argentina in steel and aluminium. The odd thing about this is – we'll explain to you – is that Brazil, not the President, the new President is a personal ally of Donald Trump's, but Brazil as a country is also a very strong ally of the United States. I just want to play you this. This is Stuart Varney on FOX Business talking to the US Commerce Secretary Wilbur Ross about those tariffs.

[Excerpt]

Stuart Varney: Early this morning, the President re-imposed tariffs on steel imports coming to us from Brazil…

Wilbur Ross:  Right.

Stuart Varney: …Brazil is an ally. The new President of Brazil is a strong supporter of President Trump. Was our President taking a deliberately strong line, symbolically, to say to China look, we'll deal with allies like this, we’ll certainly deal with rivals like you.

Wilbur Ross: Well, even our friends must live by the rules. Our best allies must also live by the rules. I believe what the President was concerned about was the deterioration in the Brazilian currency…

Stuart Varney: Yup.

Wilbur Ross: ...and that's a fair factor to take into account.

[End of excerpt]

Ross Greenwood: Okay. So I want to come back to you Simon Birmingham because you are the equivalent minister here in Australia. You've heard there, of course, from Wilbur Ross talking about allies who need to deal by the rules and also talking about the deterioration of the Brazilian Real. Here in Australia, our currency has deteriorated, picked up a little bit today, however. Is there also concern that given the fact we were pretty much exempted by Donald Trump himself from most of the tariffs he imposed on other countries around the world, that there is a fear that if we do not play by the rules, that we ourselves could have those tariffs imposed on Australia?

Simon Birmingham: It is important that we are a country who lives by our word. And we made certain commitments to the US to be able to secure exemption from the tariff hikes that Donald Trump applied to the steel and aluminium products around the rest of the world, and those commitments were that there wouldn't be a surge of products coming in from Australia. And we're working hard to make sure that we do live by those commitments. We're not quite clear today in relation to precisely what action will or won't be taken against Brazil and Argentina. President Trump has tweeted and we've seen those tweets, but that hasn't come with any policy detail at this stage. So, I know markets have reacted, as you rightly outlined. But from Australia's perspective, firstly, yes, we got some good and important deals for Australia to exempt our steelmakers, our aluminium producers, from US tariffs and we've been working hard to make sure we maintain those exemptions.

Secondly, we continue to make sure that we uphold our trade agreements. We stand by global trade rules and we continuously have urged the US and China and others to engage in the same type of constructive way that we do because these sorts of actions are hurting the global economy. And that sort of diminishing of global economic growth and forecast rates of global economic growth has a spill over impact that is hitting all of the rest of us around the world and that's not something that we want to see continue.

Ross Greenwood: Okay. And as a final part of this, is it a concern, perhaps, if Australia is seen to be replacing US exports into China? So in other words, if China, through the trade war, has got certain commodities, products it can't get, if it’s then sourcing them from Australia, could that be seen by the United States as bad faith on our behalf, and is that potentially happening?

Simon Birmingham: Well, no. I don't think that could be seen as bad faith. In the end, business is done by businesses. I like to use the analogy that our trade deals we do with other countries open the door for business to be able to walk through that door and undertake commercial contracts and do trade with other businesses in other countries. But it's up to those businesses whether they do so. And if Australia is seeing growth in certain products into China, that's a result of Australian businesses seizing the opportunity to trade with Chinese businesses. And yes, we've created a better environment for them to do that as a result of the China-Australia Free Trade Agreement but it's commercial realities that drive that behaviour, and I would expect that any of our partner countries, who are also market economies like Australia, would respect those commercial realities and the way they play out.

Ross Greenwood: There you go. Senator Simon Birmingham is our Trade Minister. A man who has not seen during his lifetime, until today, two consecutive current account surpluses. As we pointed out, the year before his birth was the last time that took place.

Simon, I appreciate your time here on the program this evening.

Simon Birmingham: Always a pleasure, Ross. Thank you.

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