‘Switzer’, Sky News Business

11 APRIL 2017

E&OE

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PETER SWITZER:   

My next guest is the Minister for Industry, Innovation and Science, Arthur Sinodinos, and it comes on a day when the Treasurer has been out there doing a bit of innovation. So let’s have a talk about that first before we see what the Minister’s going to do to create more innovation in this great country of ours.

Mr Sinodinos, thank you for joining us on the program.

ARTHUR SINODINOS:       

Thanks Peter, great to be with you.

PETER SWITZER:   

Now Arthur, today the Treasurer came out with a few ideas to try and fix up our housing problems. What are the ones that you think have really got some legs for the budget?

ARTHUR SINODINOS:       

Look, what Scott Morrison’s been saying for a while, what the Prime Minister’s been saying for a while is that a lot of the problem, the essence of the problem is increasing the supply of housing. I remember when Malcolm Turnbull was chairman of the Menzies Research Centre he got Christopher Joye, the well-known Christopher Joye to do a study for theCcentre on home ownership in Australia. And that tracked it back in terms of supply and demand in major cities through the last few decades and showed pretty clearly supply was the major constraint. Supply relative to demand. There’s been always this issue about supply keeping up with demand.

Now we’ve had a fairly strongly growing economy for a long time but the supply response has always been more muted than it could be and this has led to price pressures and so a longer term, I suppose, solution to the problem is what we’re trying to do in concert with state government and local government which is using our city deals for example and using our infrastructure money to try and encourage improvements and reforms to land use planning, better transport solutions, more integrated planning of transport and land.

We’re trying to use what we do in Western Sydney around the Western Sydney Airport to be a bit of an exemplar of taking jobs to where people are and then creating a set of integrated transport links and with it making sure that we’re promoting the proper development of housing blocks and the like. So supply is a major thing that we’ve got to focus on. But what Scott Morrison in particular has had a passion about is what we do for those people who are essential workers, whether they’re nurses, teachers, police and the like and how we encourage affordable housing to be more a feature of some of the housing developments so we don’t lose that – particularly so that we have those sorts of workers closer to the city in which they are working. He did a trip to the UK in January where he looked at some of the work over there on affordable housing, how they’re funding housing cooperatives, using the Government as an intermediary to help pass on the appropriate sort of financing to some of these housing cooperatives to help promote more affordable housing solutions.

PETER SWITZER:   

Mmm. Now, Arthur, on the weekend, I read a brilliant article, which I actually wrote, where I actually portrayed you playing a pivotal role because in many ways a lot of the big problems we’ve got in this country have been problems that have been around for a long time and no one’s addressed it. Now, you are the Minister for Industry, Innovation and Science. Clearly three important areas where we can get some significant changes. Now you brought up that the very fact that we have a housing supply problem and for years in my commentary pieces I’ve been bagging state governments because if you look at a land and house package about 30 per cent of it is charges going to governments. Mainly state governments. Is there anything a federal government can do to really twist the arm of state governments to do something to make it easier for developers to put more properties out there in our capital cities?

ARTHUR SINODINOS:       

Well Malcolm Turnbull as Prime Minister, has set up this innovation, infrastructure and project finance unit in his own department as a way of looking at how we leverage more innovative financing solutions, using balance sheets, commonwealth and state balance sheets, finding ways to drive the dollar further and matching with our infrastructure as well to try and do the sorts of things that you are talking about. I think it’s very important for us to be open to new ideas. We’ve talked about value capture and we’ve been talking to the New South Wales Government about how we trial that in certain areas. I think it’s important for us to try new things in this whole space.

PETER SWITZER:   

Yeah but given the fact that you are a federal government and you know the state governments have been probably the biggest fly in the ointment, apart from being nice to state governments, is there any way in which you can pressure them even publicly to pull their finger out and do something about it, Arthur?

ARTHUR SINODINOS:       

Well I mean through the Council on Interstate Financial Relations that Scott Morrison chairs, we’ve been talking to state governments exactly around how they reform land use planning and the like and how the Commonwealth can help them drive that process. Scott Morrison will have more to say on that in the near future but look, this is not about having confrontation with state governments. State governments also have revenue needs. So if you want to do something about developer charges, infrastructure charges, we’ve got to help them to find ways to make that up and looking at a way of reducing that wedge between the cost of creating those new blocks and the final cost to the ultimate customer or consumer.

PETER SWITZER:   

Have you guys seriously looked at negative gearing and as a consequence ruled it out on the basis that it would affect – seriously affect the real estate industry?

ARTHUR SINODINOS:       

Yeah, we have, for all the reasons that Scott Morrison has mentioned before and that you yourself have mentioned, particularly the way it may take the pressure off one part of the market and put it in another part of the market, so you get these distortions. I think the other concern, to be honest, is that when you look at the figures on all this, up to 80 or 90 per cent of those who have negative gearing have only got one or two properties. So, we’re not talking about something that’s seriously distorted here. The other issue here is, to the extent possible, we want to maintain the focus on what we see as the main issue in this whole debate which has been about the balance between supply and demand and, in particular, what we do to durably increase the supply as we go along.

PETER SWITZER:   

Now, this is an issue that came up with me over the week, I did a speech for SA Food, and I was quite impressed with the fact that the Victorian State Government has a food innovation centre at Monash University where they even invite food manufacturers from other states to come to the centre to learn how to sell products to China and all that sort of stuff and I thought that was a fantastic thing that the State Government’s actually helping other entrepreneurs in other states. But it seems to me that there are a lot of aspects of what used to be good about Austrade which don’t seem to be operational now. Four or five years ago, Austrade was quite famous for promoting lots of businesses. Arthur, have you got any views on the changing function of Austrade in terms of helping local entrepreneurs become great exporters?

ARTHUR SINODINOS:       

Look, Austrade is Steve Ciobo’s responsibility but what we’re working on is processes where we take small and medium size enterprises here in Australia, we identify potential opportunities for them through our programs in global value chains, and then we work with Austrade to help get those companies into those markets. We’ve also set up landing pads in major overseas markets, like San Francisco in the US, Tel Aviv because of its innovation superiority around the world – you know, Israel has a name as the Start-Up Nation – in Berlin, landing pads in Berlin, and we actually take small and medium size enterprises there, get them immersed in the ecosystem there, they make networks and connections so that they see the world as their oyster.

This is about, Peter, creating a global mindset in Australian industry, if you like, and we’ve got a whole series of programs to do that, and it’s not just my programs. We’ve got to have good regulation, we’ve got to have good competition policy to create a level playing field between big and small business to the extent we can, and we try and reduce tax where we can. We reduced tax last week for enterprises up to $50 million turnover and we want to go further in that regard. It’s doing a whole series of things to be as competitive as possible. The free trade agreements give us opportunities, but we’ve got to be match fit to take advantage of those opportunities. The biggest issue I see is that often in Australia we see, you know, Western countries as our comparator. Our comparator is in the region, countries in the region which are doing really well on funding innovation, they’re doing really well on getting good education results, and we’re slipping in the national league tables on education outcomes. We’ve got a big challenge  ahead of us to increase the number of kids who go on to do science, technical studies, engineering, and maths, and increasingly creative and design subjects as well.

So, there’s a whole series of things we’ve got to do and we’ve got a whole series of programs that help with that, but we’ve still got a way to go. We’re great at the knowledge creation in this country and we have great scientific establishments. The issue is translating that into commercial outcomes and, where possible, doing it here in Australia.

PETER SWITZER:   

Okay, Arthur, while I’m throwing curve balls at you, this is one you must’ve thought about. You know, the arrival of Uber, Airbnb, and ultimately Amazon is going to challenge a lot of local industries and the pricing pressures from these big, monolithic digital businesses are certainly going to put pressure on local business. Do you think the arrival of companies like Uber, its fair that locals have to compete against them in a sense with one arm tied behind their back because they have to follow regulations that these digital companies don’t?

ARTHUR SINODINOS:       

Look, a point I made in the speech to the Press Club the other day is that disruption is now a constant. We’ve got to accept that markets are going to be disrupted and the question is whether we adapt to those conditions and maximise the benefits out of it or allow ourselves to effectively roll over with the wave of disruption. We’ve got to be able to capitalise on the prosperity that that can bring and it does mean, when it comes to regulation, that regulation increasingly has to be forward looking rather than backward looking. We’ve got to be able to accommodate these changes and importantly we’ve got to be able to say to our fellow Australians that where they’re being affected by change, and potentially affected adversely, that through government programs, adjustment programs, employment programs, we’re there to help people adjust and potentially move on so that we have Australians working in the highest valued activities rather than trying to sort of beat back a change which is going to be inevitable.

PETER SWITZER:   

Do you think the big corporations we’re talking about will ultimately pay the same kind of tax that local corporations pay?

ARTHUR SINODINOS:       

Well, we’ve just passed a diverted profits tax. We’re doing all sorts of things to make sure that multinational corporations and others pay their fair share of tax here in Australia. One of the issues that’s happened in the global economy in the last 20 years is that often the tax authorities have lagged behind the business models of these new enterprises, the Facebooks, the Googles, and the like. But increasingly I think tax authorities across the OECD in particular, because we need to have a coordinated approach but where possibly we’re also ahead of the pack in trying to do things to try and tax them properly.

PETER SWITZER:   

Arthur, thanks for joining us on the program. I wish you luck with becoming Australia’s great innovator.

ARTHUR SINODINOS:       

Thanks mate, and you’re a great innovator too.

PETER SWITZER:   

Cheers, thanks very much. Arthur Sinodinos, the Minister for Industry, Innovation, and Science.

 

[ENDS]