SUBJECT/S: Possible British exit from the EU; Budget deficit, Breach of caretaker conventions - NBN, Parakeelia.

DAVID SPEERS: You’re watching PM Agenda. It’s time to bring in our panel this afternoon, Cabinet Secretary Arthur Sinodinos and the Shadow Agriculture Minister Joel Fitzgibbon. Gentlemen very good to see you this afternoon thanks for joining us.
I just want to start with some of the nervousness that's around in relation to a possible Brexit a British exit from the EU. The vote is taking place; I think it’s the end of next week. Our market lost 2% yesterday. It's lost just over 1% today. And it's nerves about Brexit that are driving a lot of this. What Arthur Sinodinos to you first, what is your view, should Britain actually leave the EU or not?

ARTHUR SINODINOS, CABINET SECRETARY:  Well, at the end of the day it's a decision for the British people. Britain has a very special place in Australian history and ongoing cultural relations. So whatever happens with Brexit, those relations will continue both the strategic and economic interests that we have. They're an important partner of the US as well as an important link to Europe. They're a very unusual country in one sense. And I think on the whole it would be more desirable if they stay in Europe. But if the British people decide that is not appropriate well it’s their democratic right, it’s one of the great democracies, it's up to them what they do and we will adjust accordingly.

SPEERS: Well, yeah, it is indeed up to them. But the sentiment you expressed there, the Prime Minister himself has previously expressed similar that we’d welcome Britain staying in the EU. If we did see it leave, if we did see that further strain and break apart the EU, Arthur Sinodinos, what do you think it would mean for the global economy?

SINODINOS: Well, look there has been uncertainty because people don't know exactly what a Brexit would mean in terms of whatever new economic relationships might develop after that. But from our point of view, the most important thing is to be as strong as an economy as we can be. So if there is any uncertainty, any adverse external shocks we're in the best position to work our way through them which is why our focus on having a strong economy, continuing with our plan on jobs and growth is very important to us in this campaign.

SPEERS: Alright, alright and we’ll get to the domestic competing interests but Joel Fitzgibbon, we are a trading nation, and some argue we might actually do better if we could deal more directly with Britain rather than the EU. What's your view? Do you share the concern that a British exit would be a bad thing on the whole?

JOEL FITZGIBBON:  I think Speersie it's important that I agree with Arthur and that is it is ultimately a matter for the British people. Of course they've been having this debate now since the early '60s and that's caused all sorts of vibrations throughout their communities ever since and will continue for some weeks to come yet. Look, I think Gordon Brown has this one right. I think he said today or yesterday that better for Britain to show or to attempt to lead the EU rather than leave the EU. And if the British people have some concerns about border movements, etc, or the imposition on its independence in terms of its judiciary for example, then it should be seeking new arrangements with the EU. I don't think it's in the interests of the EU or in the interests of the British people for them to exit.

SPEERS: In the event of an exit, in the event of worst-case scenario and other global financial shock, what should happen? Arthur Sinodinos, is stimulus here in Australia the way to go, even if not on the scale of 2008, but is stimulus the way to shield us against a recession?

SINODINOS: Look, I think it's way too early to be predicting scenarios. But we've got the Budget on a good path. I think that will help us if there is an adverse external shock. I also think that the economy is very resilient, we have a very flexible exchange rate and we have good, strong, independent settings for monetary policy. So the fundamentals of the economy are good. The main challenge is to build on those fundamentals.

SPEERS: That's absolutely right and we don't know what's going to happen but we're going to an election in just over two weeks. Do people deserve to know what the two sides would do if there is such a financial shock? Arthur Sindinos would the Coalition go with a bigger deficit to shield us against recession?

SINODINOS: Look, those are questions which are best addressed if and when you see that a particular shock may be coming. I think that's a bit speculative, in the meantime all we can do is say to people-

SPEERS: It’s not speculative to say what would your approach be, we're about to have an election and we are looking at the two sides. What would you do, it's not impossible that we have another global financial shock.

SINODINOS: Well, what we did in 1998, for example, is we let the exchange rate find its own level. Monetary policy was accommodating in the circumstances. What happens to the Budget will depend on what happens to the economy? And you certainly wouldn't want to be offsetting any adverse shock by sort of tightening policy. But, look, this is all speculation-

SPEERS: So no big stimulus spend in other words? No big stimulus spend?

SINODINOS: Well if you strengthen the economy through the measures we're talking about in this election, I think that's the best guarantee against dealing with adverse external shocks.

SPEERS: Joel Fitzgibbon, what about the Labor approach?

FITZGIBBON: Well David, the economy has already had to suffer the best part of an 8-week election campaign and strange as it may seem, we've all seen the impact that's having on the economy and activity and consumer sentiment, I think the last thing leading politicians should be doing is speculating about what might happen if Britain leaves the European Union.

SPEERS: Sure but again we deserve to know don’t we what your approach would be if there's a financial shock - would it be to stimulate as Labor did last time, would it be to let monetary policy do what it can? What's your approach, what’s your principal position on this?

FITZGIBBON: No I believe the best thing that we can do for the Australian people is not speculate on something which is entirely hypothetical. The British people haven't even voted yet on Brexit, let alone determining what impact that might have on the global economy. But I should say that those who are concerned about Brexit aren't concerned with Britain in isolation. They're concerned about the aggregate effect of slowing economies right throughout the globe, particularly in China, and other issues around China like the rising debt amongst its corporates in that Country so-

SPEERS: You're right; there are plenty of risks on the horizon. Why then is Labor over the next four years willing to sink us even deeper into deficit?

FITZGIBBON: Well, I noted that Alan Oster the Chief Economist of the National Australia Bank said today that given money is so cheap - that the cost of borrowing to Government is so low - that this is in fact the time not to be taking a sledgehammer to the economy but to be investing in productive infrastructure, which is exactly what the Labor Party is proposing in the lead-up to July 2. We will take the budget back to surplus, we have a plan to do so but we believe that in the next 4 years-

SPEERS: Hang on, your additional spending isn't all infrastructure, it's hospitals, it's schools, it's childcare, I mean, yes you can argue the case for them but just to be clear that's not economically productive?

FITZGIBBON: Well no it depends on your definition of infrastructure. Social infrastructure is relevant to this equation too. Over the next four years we will reduce the budget deficit every year and we have a plan to take the Budget back to surplus. But in the meantime we still think in the medium-term it’s important for us now to be investing in education, including higher education, including TAFE and vocational education and training to make sure we maintain the skills base that we need to grow into the future. I think that's a very sensible approach. And I see that Alan Oster agrees.

SPEERS: So because interest rates are so low, it's a good time to borrow?

FITZGIBBON: No, what I'm saying is that we have a plan to go back to surplus. We'll get back to surplus in the same year Malcolm Turnbull is promising to get back to surplus-

SPEERS: Yeah but with a higher level of debt because you’re saying bigger deficits between now and then?

FITZGIBBON: What I'm saying is that we will use the next four years to reduce debt and to start reducing the deficit but we won't take the sledgehammer approach to the economy that Malcolm Turnbull has chosen. We acknowledge and recognise the priorities in the economy and we would invest in that for the next 4 years-

SPEERS: Yeah and what I'm saying is it is now with all the risks that you identified globally, is now the time to be going deeper into debt with bigger deficits, given all those global risks? I'm just wondering is now the best time to do that? Is it your view that because rates are so low that it doesn't matter?

FITZGIBBON: I believe it's time to have a clear plan back to surplus and we have a clear plan back to surplus and to ensure over the next four years we pay off debt but at the same time we continue to invest in our future and one of the great keys to our future of course is the education of our most important ingredient in the economy and that is of course, our people.

SPEERS: Alright Arthur Sinodinos under the Coalition the deficits would be smaller over the next four or five years at least but again is the Coalition doing enough in light of these global risks? Is the big company tax spend the right way to go at the moment?

SINODINOS: Well, David, some reputable economists who are not necessarily friends of the Coalition have said that Labor's approach does risk our AAA credit rating; they haven't said that about our approach. We're taking quite a careful approach to getting the Budget back into the black over the next four or five years while at the same time having a rate of fiscal contraction which is appropriate based on the advice from the Treasury. We believe the whole armory of what we are doing on policy, including our competition policies and our policies to grow the economy provides us with a very positive outlook which gives people confidence about our economy. Unfortunately, Chris Bowen's approach will mean we’ll have to wait 100 days before we even know what's in his mini budget. He's attacked us at various times on our assumptions in the Budget but when push comes to shove he hasn't said what he would actually do about that. All he has said is we’ll have to wait 100 days for his budget, that will add to any global uncertainty that may pervade the Australian economy. This is not the time for uncertainty-

SPEERS: Alright-

SINODINOS: It's a time for having certainty and we’ve put out a 10-year plan with our cuts to taxes on business in order to find a way to fund more jobs and more growth.

SPEERS: Let me turn to the NBN. The head of the Prime Minister's Department, Martin Parkinson has found after an internal investigation that the chair of the NBN, Ziggy Switkowski, breached caretaker rules by submitting that opinion article than ran in Fairfax papers, defending his decision to call in the police to investigate leaks. Arthur Sinodinos what should happen if someone in his position breaches caretaker rules?

SINODINOS: Well look, the first point to make is that Ziggy Switkowski this afternoon has issued a statement in which he defends his interpretation of the caretaker conventions. He took a view that was on the public record, the leaks were being made were damaging to the potential effectiveness of the company, staff morale of the company, potentially impacting on the costs of the company and on raising appropriate revenue for the company. So there is provisions-

SPEERS: But Martin Parkinson is pretty clear about this?

SINODINOS: David there is provision in the caretaker conventions for agency heads and others to take into account those sorts of factors. He made that judgement and he has put out a statement this afternoon to that effect.

SPEERS: Yeah but I’m talking about the judgement surely of Martin Parkinson matters here too, he is the head of the Prime Minister’s Department.

SINODINOS: Well I think that in circumstances like this, no doubt Martin and Ziggy may discuss the matter further but it's clear that Ziggy was aware of the conventions but the conventions themselves do provide for circumstances like this where an agency head takes a view –

SPEERS: So you don’t think he has breached caretaker conventions?-

SINODINOS: the organisation is being impacted. No not to breach them-

SPEERS: So you don’t think-

SINODINOS: Well I believe based on what-

FITZGIBBON: Come on Arthur-

SINODINOS: He has said this afternoon; he has clarified why on his interpretation of the conventions he did what he did. It's very fatuous of Labor to try and go on about this when in the 2013 campaign, they flouted-

SPEERS: And I want to get to that –

SINODINOS: All conventions to keep running ads -

SPEERS: Well I want to get to that but –

SINODINOS: During the caretaker period-

SPEERS: Alright, just to be clear, you don't think Ziggy Switkowski breached caretaker rules?

SINODINOS: My view is that both of them, Ziggy and Martin, have taken slightly different interpretations of how the-

SPEERS: I'm asking what your view?

SPEERS: Arthur Sinodinos you’ve been around this game a long time; you've been through many elections in senior roles. So what's your view? Were Caretaker views breached, you're better placed than most to know?

SINODINOS: I think that Ziggy took an approach based on his judgement. The problem with the situation is that the NBN is such a politicised issue or has become so in Australia over the last six years that anything you do about the NBN in a political or election context does risk being misinterpreted. And unfortunately that's where we’ve ended up-

SPEERS: He should have stayed out of it. So he should have stayed out of it?

SINODINOS: Look, probably Ziggy today would think that he was doing the right thing by the company but no chairman likes to have publicity so he probably thinks well, I did what I had to do but he's uncomfortable about the fact that he's had to go public on it.

SPEERS: Yeah, but what do you think? That’s what I’m trying to get to, what do you think?

SINODINOS: Well, look, I think Ziggy did what he did because he wanted to defend the company and he has a perfect right to do that. Martin has taken a certain view. I have no doubt that Ziggy has learnt a lesson from that and will act accordingly in future.

SPEERS: Should he have done it thou at all? Should he have written this piece?

SINODINOS: Well I'm not inside Ziggy's head but he made a judgement and I wasn’t the agency head who made that judgement-

SPEERS: But you’re the Cabinet Secretary, you're a senior member of the Government. We have these caretaker conventions; I'm asking you do you think he did anything wrong?

SINODINOS: I don't think he did anything wrong but I think he should have realised he was probably walking into a political minefield.

SPEERS: Alright and Joel Fitzgibbon, not only the references Arthur Sinodinos made, but Mike Quigley who was the Chief Executive of the NBN I think back in the 2010 campaign was tearing into the Coalition's alternative approach, that was a breach of caretaker conventions surely to?

FITZGIBBON: Well David, Ziggy’s statement didn’t come into my inbox. It looks like it did go to Arthur’s but the Cabinet Secretary has just challenged Martin Parkinson’s interpretation of the conventions and I think that’s poor form. We all know this is an ongoing cover-up. This is all designed to cover-up Malcolm Turnbull's poor handling, poor implementation of the National Broadband Network. That's what this is all about-

SPEERS: Alright but what I was asking you-

FITZGIBBON: But can I just say Barnaby Joyce is running around day-

SPEERS: This is not the first breach and under Labor we had one from Mike Quigley and there wasn’t even a ripple of concern.

FITZGIBBON: Sorry Speersie I don't remember what happened in 2010 but I do know Barnaby Joyce is running around the Country everyday breaching the conventions. He’s got the chemicals regulator for farmers moving to Armidale without any cost to benefit analysis and he is spending $25 million in the process, a process which will have a very very bad impact on the Australian farming community. So this is almost a daily occurrence for this mob.

SPEERS: Alright look we are out of time. I’ve got to squeeze in one more thou because we did talk about this last week and there’s been a lot of commentary since Parakeelia. Arthur Sinodinos the PM has been saying there's no difference, Labor has its own research company that it uses as well. The difference, though, surely is that Parakeelia puts money back into the Liberal Party. Does that look bad, do you concede, at least?

SINODINOS: Look as I'm advised it's treated as other receipts by the Australian Electoral Commission, not as donations and it doesn't operate as a profit centre. It a matter for the-

SPEERS: But does it look bad thou-

SINODINOS: organisation. It’s now gone as I understand courtesy of Mr Shorten to the Auditor-General and I think for the sake of transparency, maybe Labor should lay out their arrangements with the Auditor-General as well and then the public can have a full view about how these arrangements operate and the Liberal Party organisation will fully cooperate with the Auditor-General.

SPEERS: Alright but you don't think it looks bad?

SINODINOS: Look, on the basis of the information that has been provided to me, I don't think it does, David and I think that you should maybe talk further to the organisation about that. Now it's with the Auditor-General lets us and Labor put everything on the table. The party organisation on our side will cooperate. Let's see what they think.

SPEERS: Alright we have to go to a break. Thank you both for joining us this afternoon and look forward to catching up again next week.


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