15 January 2018
Transcript - #2018005, 2018

Interview with Stephen Engle, Bloomberg

SUBJECTS: financial services; Asia Region Funds Passport; corporate tax

STEPHEN ENGLE:

Minister Kelly O'Dwyer thanks so much for joining us.

KELLY O'DWYER:

Great pleasure to be with you Steve.

STEPHEN ENGLE:

So as Linda, the anchor, just mentioned these numbers, about 70 per cent of the services sector, or the GDP's made up of about 70 per cent of the services sector but financial services much less than that. How are you going to get others to buy into your financial services sector?

KELLY O'DWYER:

Well it's such a critically important part of our economy, representing nine per cent of our GDP and there are so many Australians actually employed in this important sector. One of the things that we're doing, one of the reasons why I'm here in Hong Kong at the Asian Financial Forum is to talk about the Asia Region Funds Passport, which is a new international passport that will be implemented this year with a number of participating economies that will allow fund managers to be able to sell their product into other participating economies so those consumers can benefit. There's mutual benefits all round in getting rid of so much of the duplication when it comes to regulation, which at the end is one of the reasons why Australia is so focused on making sure that we can have a new investment vehicle, Corporate Collective Investment Vehicles, to enable people to make that investment. It's well understood and it can be passported into various participating economies.

STEPHEN ENGLE:

On [inaudible], how optimistic are you? Because we know in Australia there's exports from mining to dining but financial services have been on the backburner, underperforming.

KELLY O'DWYER:

Well we know that there is a long way to go, we know that there is even more that we can do and Hong Kong, of course, being such an important part of the financial services sector, given it's so critical to the economy here, is obviously a city that we hope to encourage to participate in the new Asia Region Funds Passport. I've been having some great discussions here in Hong Kong. We've already got a number of countries that have signed up. Of course, we've got Thailand, we've got Japan, we've got New Zealand, we've got Korea, and we're hoping, of course, to get even more countries in the region to be involved. Australia is very good at funds management. We've got more than $3 trillion of funds under management…

STEPHEN ENGLE:

But why would they put money there – I'm just playing the devil's advocate here – as opposed to Hong Kong or the United States?

KELLY O'DWYER:

Well we do it incredibly well and certainly we want opportunities for our funds managers to be able to compete with the best in the world and vice versa because, of course, there's mutuality there. People can come into Australia as well and sell product into Australia so there's definite benefits for the participating economies that are involved.

STEPHEN ENGLE:

What's the next regulatory push then, as the Minister here to get this feasible, in addition, it's separate, but lowering the corporate tax rate as well to attract more business…

KELLY O'DWYER:

We have, Steve, a really strong plan to ensure that we can cut the corporate tax rate in Australia. Right now, we have got a 10 year Enterprise Tax Plan to reduce the corporate tax rate to 25 per cent. We've been able to legislate that up to companies with a turnover of under $50 million down to 27.5 per cent and we're looking to take that further. We've had some challenges domestically getting that through but certainly when you see the reduction in the corporate tax rate right across the globe, in order for Australia to remain internationally competitive it is absolutely fundamental to achieve these legislative changes and that's certainly been a real focus for me and for the Treasurer and the Prime Minister as well.

STEPHEN ENGLE:

Even more so with the tax cut, the Trump tax plan going into law, also we have had Angela Merkel in the EU say post-Brexit we need to get all our ducks in a row and have a synchronised corporate tax structure that's not prohibitive for attracting business.

KELLY O'DWYER:

Absolutely, we're in a global environment now where we compete for funds and we compete for investment. And while Australia has had a record breaking 26 years of uninterrupted economic growth, it's something that we cannot take for granted so we have to put in place the right financial framework to ensure that can continue to be delivered, that that growth continues to be delivered. One way we can do that is by making sure that we've got the right corporate tax rate because if we do that, we will encourage investment. Where we encourage investment, we make sure we can bring in new jobs and expand job opportunities in Australia. Now under our Government, we've been able to increase jobs – on our watch, to the tune of more than 371,000 in the last 12 months alone and more than 300,000 of those have been full time jobs.

STEPHEN ENGLE:

There are some concerns that 2018 might not be as [inaudible] year for jobs.

KELLY O'DWYER:

Well we are fully focused on getting the policies in place to be able to deliver that economic growth and there's no one silver bullet on it as you know. You've got to actually combine all of those elements in order to actually deliver that drive and that focus.

STEPHEN ENGLE:

How do you think Chinese Australia business relations right now? There has been some tensions led by some comments by your Prime Minister. Do you think that's weighing things down or is it different?

KELLY O'DWYER:

Well I don't accept that there have been negative comments made by the Prime Minister. I mean the Prime Minister and the foreign minister and the Government recognises that China is a critically important trade partner and investor in Australia and it is obviously important to our trade there as well. We look to deepen and encourage, strengthen those relationships. We welcome investment. China, of course, has been a very significant investor. Here in Hong Kong there has been, over the last little period where the data is known, $100 billion worth of stock of investment in Australia and, of course, Australia has likewise invested in Hong Kong to the tune of around about $50 billion as well. So there's real mutuality benefits in this sort of investment and in deepening those ties.

STEPHEN ENGLE:

What's your general feel as far as protectionism in Asia Pacific? We were talking to the CEO of Lloyds who was this morning saying definitely one year into the Trump administration, the overall tone is more protectionist. Are you still hopeful that free trade can win out over protectionism, or?

KELLY O'DWYER:

Well we've always advocated strongly for open trade. We're negotiating, as you know, a free trade agreement here in Hong Kong and obviously being very much a services based industry, we think there are huge benefits two-ways for that agreement. Australia has been developed through these open trade agreements, whether it's bilateral agreements or a multilateral agreements. And obviously the Australian Government will always make decisions that are in Australia's national interest and it's most certainly in our national interest to have those open trade relationships right across the globe.

STEPHEN ENGLE:

Minister O'Dwyer, thanks so much for your time.