BY Rowan Callick
Asia Pacific Editor, Melbourne
ANDREW Robb may seem an unlikely saviour of the Abbott government, but the Trade and Investment Minister is shaping the narrative for a Coalition that continues to struggle with its economic message.
And he is doing it through the equally unlikely avenue of complex free-trade agreements and the potential these have to boost international competitiveness and revenue.
After a marathon year of travel, in which he spent 182 days overseas wrapping up deals with South Korea, Japan and China — three of Australia’s four biggest export markets — Robb says: “I feel I’ve been training for this for 30 years, commercially and politically.”
He has been in parliament for a decade, but his apprenticeship goes back to the 1980s and the politically sensitive role of executive director of the Cattle Council of Australia, and later the National Farmers Federation.
In 1990, he took the job of federal director of the Liberal Party and is credited with a major role in John Howard’s 1996 election win. He spent seven years in the commercial world, working with Kerry and James Packer, among others, before heading to Canberra. But Robb, 63, has had to overcome demons in his rise, battling depression, a condition about which he has written and spoken widely.
Now at the top of his game, the minister this week is in India with a delegation of 400 business people, visiting eight cities for Australia Business Week in India. His ambition is to match the successes of 2014 by completing an FTA with India — an aim which Indian Prime Minister Narendra Modi has told Robb is feasible.
It’s a satisfying time for Robb as he sees the FTAs with Japan and South Korea generating lower car prices — a palpable hip-pocket outcome. Thanks to the new Japan-Australia Economic Partnership Agreement, which comes into effect today, manufacturers Mazda, Subaru and Toyota have announced they are cutting prices. Toyotas will come down by up to $7630, some Mazda cars by almost $1000. Like the Japanese deal, the Korean FTA removes the 5 per cent tariff that generally applies for imported motor vehicles.
Saul Eslake, the chief Australian economist at Bank of American Merrill Lynch, says that “trade has been the outstanding success area for the government”.
Robb intends to maintain the pace. He has a program for 2015 which will beat last year’s schedule in travel terms.
“We have made a good start with the north Asian trade trifecta,” he says. “It’s logical to focus there because 52 per cent of our exports are bought there. And a big part of future increases in the stock of investment will come from there. We have seen a lot of interest since completing the FTAs. Competition for projects is emerging between the three.”
He says trade and investment are “two sides of the same coin … if I’m doing some trade negotiating in other countries, on the way back I tend to pursue investment opportunities.
“With many trade agreements, you’re negotiating with governments. With investment, you’re focused on businesses around the world. I am getting a really robust feel for what’s going on, feeding that back to my colleagues. There’s quite a lot of one-on-ones, talking with individual chief executives and chairmen.”
Last year he participated in 44 investment roundtables in 19 countries. The meetings involved people with investment power of trillions of dollars. One day he spent two hours in New York with six senior investors who together administer $A1.5 trillion and discovered that they had never met a senior government minister before, from anywhere. In Singapore, he had lunch, again with six people, who were responsible for $A1.2 trillion. At an infrastructure and tourism forum in China, he talked with nine potential investors including two of the four wealthiest people in the country.
“When I can, I bring the states in so I can showcase them,’’ Robb says. “It’s been a really effective initiative, making trade negotiations more relevant because I have my finger on the pulse in business opportunities.”
There are plans for a major summit in the second half of the year in north Australia to encourage trade and investment to flow to that region.
“The world is awash with cheap money, being borrowed and spent by governments,’’ Robb says. “The world is also awash with business uncertainty. So many reluctant investors and so much money at the same time. If people are looking for a safe haven, they’re not necessarily looking for the best return, but to protect their money and getting some return. Australia’s 23 years’ unbroken economic growth and a known regulatory system, with the lowering of costs [through the abolition of the mining and carbon taxes] provide real touchstones for our competitiveness. Our opportunity has been bought by political and economic stability over decades, contributed by both sides of politics, and we have to take advantage of it.”
This year, the government will help arrange yet more delegations overseas, including to north Asia. Robb will return to all three new FTA nations with delegations, and ask the new Parliamentary Secretary, Steve Ciobo, whom he will share with Foreign Minister Julie Bishop, to do the same.
“I’ll be writing to my colleagues, saying if they have overseas visits anywhere, that I have set up a secretariat within Austrade to help co-ordinate our efforts, so we don’t have different ministers and departments reinventing the wheel.
“Someone from their department would then work with our team for the duration of the trip, helping to organise meetings, events, set pieces, involving businesspeople accompanying them.”
Robb sees trade and investment as the key to budget success, arguing that increased international competitiveness will boost revenues.
“If as a government we are going to live within our means we must replace the slowdown in government spending of borrowed money, by greater income generated by the private sector, and one of the key ways to do that is to increase trade and investment.”
He says many tax changes will be flagged in the forthcoming white paper and these will be “far-reaching”.
“We are prepared to hear suggestions on any tax issues,” he says. “There are 125-129 taxes, state and federal, in Australia, and 90 per cent of revenue comes from about 10 of them. All the others cost money to comply with, and to administer. There is a higher cost to business of going through that spider’s web of taxes and charges. That area of tax simplification is very important, and will be a big part of our second term.
“Increased flexibility in the labour area always comes up as another topic for reform. And there were a lot of visa issues, that we have already moved strongly on.”
From an investment point of view, he sees great potential in attracting private funds into several public infrastructure works which will begin shortly. There are plans to begin tunnels in five cities in the eastern states by February.
Robb says that much of that $125 billion pipeline will over six years replace the downturn in resources and energy construction.
“It’s a critical part of maintaining the jobs and infrastructure and skills that had been brought to bear for the resources and energy boom,” he says. “And a lot of that will come from private sector money.”
One lure for investors is the asset recycling by states and territories included in last year’s budget. If a public asset is sold and the proceeds invested in identifiable and approved public infrastructure, Canberra will provide a 15 per cent bonus on the sale price.
“A lot is happening on this front,” Robb says, “especially in NSW and Queensland.” For instance, NSW is selling the port of Newcastle, and receiving a bonus of $350 million.
“It’s giving us political cover. Even when I was federal director of the party in the 1990s, people didn’t like privatisation if they thought it was going to be used to pay recurrent items like wages or to pay down debt. They think the next administration will just overspend again. But if the revenue is used to build something else, they are quite relaxed about it.”
Parties of both persuasions at the state level have often backed away from privatisations over the past 20 years, he says, “because people didn’t trust them”.
But within five weeks of last year’s budget announcement, the states and territories presented $64bn as qualifying for the bonus. This has since increased to about $80bn. He says that when he detailed this arrangement to investors in the US, “where there is not much privatisation, and there are lazy assets all over the country, their eyes lit up’’. The same happened at a meeting with Canadian pension funds that have since set up offices in Sydney.
He says the first few years of big infrastructure projects are very risk prone, but if the public sector can take on the early stages of a development, then the private sector can take it over. “It ticks boxes on a whole lot of fronts. There’s a lot of interest around the world in how this will unfold.”
With new FTAs in place, Robb sees the next challenge ensuring that companies exploit the opportunities.
“Historically, and not just in Australia, a lot of businesses don’t get to make anywhere near the use they could and should, out of the freeing up made by these agreements.
“We want to change that. Big companies do tend to benefit, because they have the people involved to ensure they do that.
“But if we’re going to generate a lot more income from the private sector, it’s essential we see a much greater take-up by the small and medium companies.”
One answer is the development of “a very sophisticated portal with a single interface” drawing in information from all government agencies involved in international trade and investment.
“So if you are running a metalwork business in Moorabbin with eight staff, you will be able to go on to the website and just tap in ‘metalwork products’ and we hope you will see all the countries with the relevant tariffs and restrictions and opportunities, very easy to navigate and then do the sums.
“We also have a big program with business groups like the Australian Industry Group and chambers of commerce, getting material out to anyone giving trade and investment advice especially to small and medium firms, and to companies directly.”
He said that while the South Korean deal was “a catch-up with the US and Europe, to stop us getting further behind”, the Japan and China deals “have given us the opportunity to take first-mover advantage in so many areas.
“There is an urgency in taking up the openings, since market share is critical, as I know from my own experience. You have to continue to invest and innovate very hard or your competitors will take that off you. But incumbency is a very powerful thing.”
One reason Australia’s small and medium firms haven’t seized the opportunities they might have, he says, is the explosion in the importance of global value chains.
In 1990, 20 per cent of goods and services around the world ended up as intermediate goods in other goods and services. Today, more than 70 per cent end up as intermediate goods — like a Boeing plane that draws parts from more than 100 countries.
“Someone in Sunshine, Australia, with a small factory can become a world leader in a little widget for such motors,” he said. “And if they keep innovating, they can dominate a market around that. They can find a niche, and make a great business.”