Scott Morrison and Malcolm Turnbull on Brexit

Well good afternoon. It is 24 hours since the British people made the momentous decision to leave the European Union. The Treasurer and I are going to update you on the implications for Australia and on the advice and consultations that we've had since then.

 

This is as I said a momentous and historic decision. Britain is the fifth largest economy in the world. The European Union itself is by some measures the largest economy, by other measures the second largest economy. So this decision is a very significant one. It has created uncertainty in global markets as we've seen, in the sell-off in stock markets and in a number of currencies, including our own.

 

An event like this does raise the level of uncertainty and does undermine to some extent investor confidence. The critical thing for Australians to understand however that is our economy is strong. The fundamentals of our economy are very, very strong indeed.

 

There should be no need or cause for alarm. I know Australians will be seeing on the nightly news for some weeks, probably some months, stories about economic uncertainty, political ructions in Europe arising out of the British Brexit vote but it is important to remember that we have a very, very strong economy, a strong open economy with very strong fundamentals.

 

Having said that in an environment where there is downward pressure on confidence, where there is increased uncertainty, it is more important than ever to ensure that we choose on July 2 a stable Coalition majority Government with a clear national economic plan.

 

Every element of our economic plan supports investment, it supports economic growth and it supports employment. That is what it is all about. Those measures, that plan and that stability and that strong economic leadership is needed now more than ever.

 

I'll now ask the Treasurer to update us on his discussions and consultations.

 

TREASURER:

 

Thank you Prime Minister. Over the course of this morning I've had the opportunity to speak to APRA, the Reserve Bank and of course Treasury and on top of that I've had quite lengthy discussions with each of the major bank CEOs.

 

Australia is well placed and well prepared for the situation that we now face and that is not by accident. This Government over the course of the last few years, engaged in the Financial Systems Inquiry, we engaged in a strong health check of our financial system and our financial system is strong and the stability and confidence in our banking and financial system is always critical at moments like this. It is important that we take every opportunity to remind Australians and to remind those further afield of the strength of Australia's banking and financial system.

 

Liquidity issues have been addressed and funding issues for our financial system are well in hand as they are indeed being addressed overseas as well. Banks here and overseas knew of the date of this, were well prepared for the date of this, our regulators and others took the necessary precautions leading into this event in stress testing the institutions and that was occurring overseas as well.

 

The announcement by the Bank of England that there's some 250 billion pounds of potential support there to support liquidity in those markets is also very necessary and very welcomed. As the Prime Minister said the volatility is expected to continue in the short term as markets re-price in the wake of this most recent news and in addition to that after that flight to quality which we've been seeing in the short term. That will have an obvious impact on short-term returns and that would be expected to moderate over time.

 

In particular, in our largest trading partners - China and the US and others - the reaction has been far more modest than what we've seen, obviously, over in the UK and in Europe. And especially in China where things remain very, very stable. The market expectation is for rates to remain lower for longer. Expectations about what might be happening with Fed and things of that nature have moderated as a result of what we've seen in the last 24 hours. Indeed this volatility which saw appreciation as well as devaluation in the lead up to this vote and since, means that over a week’s period, even on our own markets, you’ll see the week long impact being less than what you saw in just the one day period.

 

Now the process they're also noting will unfold over time. The Article 50 process won't be initiated yet for some months at the very least and the process then it follows will be a matter for the UK and the European Union. So existing arrangements that exist in the banking and financial system and trading arrangements and others will remain as they were for some period of time. But of course markets and institutions will be keen to learn in a period of over the medium term, of what that may look like down the track in terms of the exit.

 

So there will be a period of uncertainty now that will go for several years as those terms for the UK's departure from the European Union are determined and finalised. Now that also obviously has impacts for Australian companies that are operating in Europe through the UK – just one of the many transitional issues that will have to be dealt with.

 

Markets can never have certainty soon enough but the Australian people can have certainty next Saturday. They can contribute to that certainty as the Prime Minister has said because by supporting and voting for a Liberal-National Government next Saturday will ensure the stability of a clear national economic plan and the stability that is necessary in what are very uncertain times. While we are well prepared - not by accident - for what is happening at the moment, it is an important reminder of the global volatility and headwinds the Australian economy faces.

 

We have a strong national economic plan that deals with investment. That therefore deals with growth and therefore deals with jobs. Our plan means that we are reducing the deficit, that we will be ultimately reducing the debt. Importantly, we will not be increasing the tax burden on the Australian economy at a time like this. The tax burden in comparison to the projection that has been there for some time, we will not be increasing that burden over those projections and that will give business the room it needs and markets the room it needs to cope with those sort of events.

 

Thank you Prime Minister.

 

PRIME MINISTER:

 

Thank you.

 

JOURNALIST:

 

Prime Minister do you think the Brexit vote shows a disillusionment with ‘the establishment’ and are you worried about an increased protest vote here especially when polling doesn't seem to be any scientific indicator that it was in the past?

 

PRIME MINISTER:

 

The only vote on Saturday that will ensure a stable majority government, a stable majority Coalition Government, is a vote for the Liberal and National parties. That's the only vote. A vote for Labor, a vote for Greens, a vote for independents is a vote for the chaos and instability with a Labor-Greens-independents alliance with all the dysfunctionality that brings. Now more than ever Australia needs stable strong economic leadership. We have a clear plan. We are the only parties that have a clear economic plan and we are seeking the opportunity to carry that out over the next three years.

 

JOURNALIST:

 

Prime Minister on free trade agreements you've previously said it has been negotiated with the EU as a bloc. Tony Abbott said yesterday it’s more likely with Great Britain itself. Who is being prioritised over those two countries now?

PRIME MINISTER:

 

To explain the context our trade arrangements with the UK are part of our trade arrangements with the EU. So they continue so long as Britain is part of the EU. Scott has talked about the lengthy process that needs to be undertaken for Britain to disentangle itself from the EU and then re-entangle itself as a separate, politically separate, nation because obviously Britain's biggest trading relationships are with the European Union. So the complexity of this is not to be underestimated.

 

The process in terms of negotiating or bringing negotiations forward to a free trade agreement with the European Union will continue because we have very strong relations with all of the countries of the EU and in particular, the very strong support of Germany and France together, which are the largest and third largest economies in the European Union, Britain being the second largest after Germany.

 

So you can see the significance of Britain leaving the European Union. You may well all remember the concern about Greece leaving the European Union. Greece is a relatively small economy. Britain is a big global economy. So there will be a lot of complexity there.

 

I have no doubt that we will be able to negotiate satisfactory trade arrangements with a separated Britain, absolutely no doubt about that whatsoever. But equally, the European Union is still an enormous trading bloc.

 

We are committed to more free trade agreements. Can I tell you one of the big elements, key elements of our national economic plan is our trade export deals.  As you've seen because you've been travelling with me round the country how they have driven growth and economic opportunities right across Australia, particularly in regional Australia. We were just in Tasmania and you saw, you know the growth in all of those food businesses, you know exporting all manner of Tasmania's wonderful produce. That's being driven by those big trade export deals particularly through the China-Australia Free Trade Agreement. We want to do more of them because we recognise that in this global economy, this rapidly changing and growing global economy, we need to have access to as many markets as possible because that is a big driver of economic growth. You shouldn't forget that the China-Australia Free Trade Agreement was bitterly opposed by the Labor movement.  You’ll remember those advertisements the unions ran against it. It was only really at the 11th hour that the Labor Party in the Parliament chose to support it.

 

JOURNALIST:

 

Prime Minister you talk about the importance of strong economic leadership. Mr Shorten this morning has accused you of being a weak leader and the need for a strong government as well. He says that your party is divided whereas he can promise that his party is united. What do you say to that?

 

PRIME MINISTER:

 

Well he is reduced now to personal attacks. I have a plan. I have a strong united Government, united around a clear national economic plan. That's what we're focused on. This is a day and a time when Australians expect their leaders to focus on the economy, focus on their jobs, focus on their future. If Mr Shorten wants to engage in personal attacks then he can do so but I won't be trading them with him.

 

JOURNALIST:

 

Just on the economy first Prime Minister. Your message throughout this campaign has been about having a strong economic plan. The Brexit as you’ve said is an uncertain time. Doesn’t this just play perfectly into your message?

 

PRIME MINISTER:

 

Look I am not going to run a political commentary on this. You're free to do that but I have always said that we are living in an age of rapid economic change, unprecedented in human history in both its scale and its pace. I've often spoken about how we are living in a time of volatility and the importance of expecting the unexpected. So there's plenty of uncertainty out there. There are huge opportunities and so an economic plan such as ours has to build on the strengths of the Australian economy, has to deliver the economic growth that will enable Australians to get better jobs and get a job and move to another job or start a business and invest, it has to enable all of that. But it also has to ensure that we are resilient and able to seize the opportunities but also resilient and able to deal with the challenges and uncertainties. It is absolutely critical to have a plan that meets the nature of the times. And these uncertainties and instabilities, these are part of the nature of the times in which we live, because we're talking about rapid economic change, which brings with it a degree, often a very high degree, of volatility. But we have the plan to deal with that. We've thought about it. Unlike our opponents we've actually thought carefully about what we need to do and what we set in place. So everything we have in our plan is encouraging investment. Everything we have is encouraging employment. Everything we have is encouraging innovation. Our opponents I regret to say with their anti-business, anti-jobs, higher taxes agenda, are simply undermining investment, making us less competitive and less able to either seize the opportunities let alone deal with the very real challenges.

TREASURER:

 

Can I just add to that. There is a very important point the Prime Minister has highlighted.  That is the uncertainty of the global environment and the uncertainty the economy faces only reinforces the need to focus on these next four years particularly over the Budget and the forward estimates. Who would have thought 18 months ago, 12 months ago that yesterday's result would have been the result? And the complexities of 10 years from now, I mean that is another world away. The next four years and what will happen with our Budget, what will happen with our economy, what will happen with jobs is what matters. Over the next four years our opponents are saying there'll be higher deficits, there will be higher debt and there'll be higher taxes. Now they have confirmed all three of those triple-A threats to our triple-A economy and this is the worst possible time in the midst of this global uncertainty, for that to be Australia's future.

 

JOURNALIST:

 

Prime Minister can you say something about David Cameron, Prime Minister and whether it’s a shame that he’s had to go? And secondly you’ve said that this is a very sensitive time,  is there a danger that the Coalition could add to this by talking about say a Labor-Greens alliance when Labor have said that it hasn’t happened? Have you also got to be careful about the rhetoric in the next week?

 

PRIME MINISTER:

 

Let me say something about David Cameron. As I said on 7.30 last night I spoke to David shortly before he made his announcement. I understand his reasons for doing so. I do regret his resignation. He has been a great and transformative, transforming, reforming Prime Minister of Great Britain. He inherited a British economy that was in the absolute depths of recession. He and his colleagues George Osborne of course he’s Scott’s counterpart, the Chancellor of the Exchequer, they have made extraordinary reforms in Britain. He has led his party to a victory in its own right at the last election. Obviously the Brexit vote is a great disappointment to him. But I think Britain and the world will miss David Cameron but we thank him for his great leadership and we wish him all the best in the next part of his career and wish Britain all the best. We respect the decision of the British people absolutely. I'm sure his successor will be more than equal to the responsibilities and challenges that managing this departure from the European Union involve.

 

JOURNALIST:

 

Prime Minister the Governor of the Bank of England warned in the lead-up to the Brexit vote that a vote to leave might trigger or lead to a recession. In your discussions - including you Treasurer - in your discussions has this been canvassed? Is this something that people should prepare for that there could be the risk of recession over there? What will the broader ramifications be for growth as a result of this decision?

 

PRIME MINISTER:

 

Well I'll say something briefly and then pass over to Scott. Look the global economic recovery is stronger in some places than others. Overall you would say it is somewhat fragile. So the British decision to leave the European Union is not helpful in terms of the global economic recovery. It is quite clear, it is a big economic shock. While it was clearly on the cards I think markets generally expected the vote to go the other way, until pretty recently in fact. So yes it does pose a risk to investor confidence. It will increase risk. That's why risk assets have been sold off. That's what always happens. That is why you need to ensure that you have stable leadership, a clear economic plan, every element of which is supporting the investment that we need. You see if you have an economic policy - if you can call it that, which is what the Labor Party has - which involves higher taxes, higher taxes on business, higher taxes on investment, that is the last thing you would want to be doing in an environment like this. This is precisely why our plan took into account - Scott and I didn't know how Britain would vote in the Brexit but the one thing we did know was that there will always be uncertainties and risks that appear in the global environment that are adverse, we talk about headwinds and that you haven't anticipated. So you have got to build resilience into your economy so that people have the opportunities and the incentives to invest and employ. We have done that with our economic plan and you have seen evidence of it around Australia. It is working but we need more time for it to be fully carried out and deliver the enormous benefits it offers for the prosperity and security of Australians.

 

TREASURER:

 

The feedback we've had is the ratings agencies will be looking closely at the triple-A position of the UK but the private market forecasts aren't going to the extent that you've indicated and others may have suggested. Here in Australia because it is still very early days about what all this means, what it means back here is that the UK is around 3.5 per cent of our two-way trade, China and the US are 10 times that in terms of its impact for the Australian economy. So I think it's important to get that in perspective. Our growth going forward will be critically dependent on exports. It'll be critically dependent on investment and it will be critically dependent on household consumption. Now this is the very important point; consumer confidence in this election campaign and the figures released this week suggest it is at its highest level since November 2013 and this is what has been underpinning so much of our strong economic performance. Now that confidence has every reason to remain where it is if you continue with the strong and stable economic plans and policies that we're putting forward and we need to continue that. That's why we stand here today and can quite ably say that there is no need to be alarmed about these events but you cannot take your growth for granted. You cannot take jobs for granted. You cannot take investment for granted. And so that's why our plans very much go towards boosting that confidence in the economy, boosting that confidence in investment and having the trade deals in place that are necessary to drive that growth. So that's what we're doing. That's what people can support next Saturday. As I said before at a time of great global instability, Australians can vote for stability at home next Saturday by voting for their Liberal or National candidate.

 

PRIME MINISTER:

 

Thank you very much.

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