Interview with Patricia Karvelas, ABC RN Breakfast


SUBJECTS: China trade; PMs visit to China; Ag & Land Plan; interest rates

PATRICIA KARVELAS, HOST: Overnight, Anthony Albanese and President Xi Jinping met in Beijing at the Great Hall of the People, where Gough Whitlam visited in 1973 when he became the first Australian Prime Minister to visit China.

While this trip is also historic, the key question now is what action will come from the meeting as a list of grievances slowly declines and the relationship stabilises? Murray Watt is the Minister for Agriculture and Emergency Management. He joins us now. Welcome back to the program.


PATRICIA KARVELAS: The Prime Minister met President Xi last night. Have relations with China now stabilised, is that what that meeting symbolised?

MURRAY WATT: I think it's a very important step forward in the ongoing stabilisation of the relationship with China. We've always acknowledged that it's not as if we're always going to agree on every issue with China, and as you would have heard the Prime Minister and Penny Wong and others say, we will always seek to cooperate with China where we can and disagree where we must. So we don't expect this to be a relationship that is universally in agreement, but certainly I think the relationship is in much better stead than it was even 12 months ago, let alone two or three years.

PATRICIA KARVELAS: The PM says the meeting was not transactional, and I just want to drill down into "not transactional". Does that mean he comes away empty handed?

MURRAY WATT: Well the Prime Minister went into this meeting not necessarily expecting to return with a bag of goodies, but I think even if you look at what we've managed to achieve over the last few months, there have been significant successes delivered to Australia in the form of new exports and jobs for Australians as a result of us beginning to stabilise this relationship.

I think what the Prime Minister's referring to is that we don't expect a quid pro quo for everything; we won't give one thing and expect one thing back, and equally China aren't looking to us to deliver one thing in return for something that they give us.

But as I say, if you look at the benefits that have accrued, the Prime Minister actually said that even the products where we've been able to restore trade in the last few months, we've actually generated $6 billion worth of exports between about January and August this year in those products, compared to $85 million last year. So, it's restoring valuable exports, valuable jobs for Australians, and that's why it's so important that we stabilise this relationship.

PATRICIA KARVELAS: So from your perspective, you know, with your Agriculture Minister hat on, which you have here in this interview, when are we going to see those last barriers removed? Your colleague, the Trade Minister, says on lobster and beef, he hopes it will happen by the end of the year. Is that your expectation? When do you think those will be lifted?

MURRAY WATT: Yeah well I obviously caught up with Don Farrell, the Trade Minister, when he returned to Australia yesterday. And he obviously had a very positive meeting with his counterpart, the Trade Minister in China, particularly around lobster. And based on that, Don I know is hopeful that we will see some movement before too long there.  Let's not forget though how far we've come, and then, it was $20 billion worth of exports that were sacrificed previously, and that we lost, and we've been able to restore about $18 billion of those, with $1 billion more to come in wine. Of course, China have now committed to review their wine tariffs, and they have a five month period to do that. There's obviously been a couple of weeks of that elapse already.  So we expect that that will be resolved within that time period, just as it was for barley. That does leave lobster and some beef and sheep abattoirs which are still blocked, and we have raised that at every possible occasion. I've raised it with the Chinese Agriculture Minister. Don has obviously raised it with his counterpart, the Prime Minister and the Foreign Minister as well. And we want to see them lifted as quickly as possible.

PATRICIA KARVELAS: The Government has been working on diversifying Australia's trade portfolio. While discussions with the EU for a Free Trade Agreement have fallen over, do you want to see trade with China return to those pre 2019 levels?

MURRAY WATT: Oh, of course we would always look to make the most of any possible market in China, even with those impediments remained Australia's biggest agricultural export market over the last few years, and of course though we would like to get back to those sorts of figures that we were seeing in China. You know, one of the things that was so important about losing those markets was that for particular products, like wine and lobster, China was far and away our biggest market, and the premiums they were prepared to pay were just not possible to get elsewhere. But I think what we have learnt from that experience is that we can't only count on China as our only market, and that's why we are putting so much effort into developing alternative markets for our products.

You're right, it was disappointing that the EU negotiations fell over, but as we've said before, we weren't prepared to sign up to a dud deal that was going to do over Australian producers. But even leaving that aside, over the last 12 months or so, we've managed to open new market access for Australian agricultural producers in about 100 occasions to different countries for different products, and we expect that that's going to generate up to $5.5 billion in extra exports. So I think it's not a matter of choosing China or other markets - we want to do both - but it is vital that we do develop those other markets and not be so reliant on one.

PATRICIA KARVELAS: Minister, is there anything to stop China from putting fresh restrictions on our exports if there's another grievance?  I mean, at the moment, there is no particular new grievance but that can change very quickly. What protections do we have in place for that?

MURRAY WATT: Well, just as I said that we have learnt this experience, and about the need to diversify our markets, I'd like to think that China has learnt from this experience, and I think most observers recognise that their decision to impose those sorts of impediments on Australia sort of backfired on them really, because we were able to find other markets, and they were quite dependent on Australia for some of those products.

Also, of course, it's been well-publicised that China is keen to join the CPTPP, the new Comprehensive Trade Pact, and one of the key sticking points there is that countries that seek to join that pact need to be able to demonstrate that they're going to follow trade rules. So it's in China's interests to be able to demonstrate that it will abide by trade rules, and I think that that does give us some level of confidence that we won't be seeing similar things again in the future.

PATRICIA KARVELAS: What conditions would China have to meet for Australia to support it joining the CPTPP- very hard to say.

MURRAY WATT: It is a bit of a mouthful! Look, I mean there's obviously a very large number of conditions and requirements under that trade agreement, but the key point is that all parties that seek to join and remain parties to that agreement need to be able to demonstrate that they do follow the rules set out by that agreement. In essence-

PATRICIA KARVELAS: Is it possible   sorry to be rude and interrupt   but is it possible, in your view, that China can demonstrate that and get your support?

MURRAY WATT: Well, that's a matter obviously for all the members of the trade agreement, I mean we've been through some recent-

PATRICIA KARVELAS: But from Australia's perspective?

MURRAY WATT: Yeah, we've been through some recent experiences which would cast doubt on that, but obviously China has indicated an intention to abide by those sorts of rules, and if it can do that, then that's a good thing for the world economy, it's a good thing for the Australian economy, that we can have those sort of guarantees-

PATRICIA KARVELAS: Is it such a good thing for our economy that we would change our position?

MURRAY WATT: Well, I think we have made our position fairly clear, that we would only support China's bid if they do have a track record of abiding by and sticking to those sorts of commitments, that's something that they will need to demonstrate. And of course to be able to access that and join that partnership, every single member of the partnership - and I think the current number stands at about 17 or 18 - needs to be convinced of that as well. So it's not only a matter for Australia, every single country that's a member of that agreement needs to agree, and it's really up to China to be able to develop that track record that they will stick to those sorts of deals.

PATRICIA KARVELAS: Just on a couple of quick things, if we can.  This morning, you're opening consultations for the first of six decarbonisation plans for six sectors. Will the focus be on reducing the baseline emissions that sector produces, or offsetting those emissions?

MURRAY WATT: Well, we want to do both. What we are doing, as you say, today, Patricia, is releasing the first of what will be six different sector plans for how we're going to reach net zero as an economy, and I'm very proud that the agriculture and land sector is the first one out of the blocks.

It's really important that agriculture does reduce its emissions going forward for a couple of reasons; for starters, even now agriculture produces close to 17 percent of Australia's emissions, and that amount is likely to raise as we decarbonise our energy sector. But also our farmers are already seeing the impacts of climate change on their production.

We have modelling from within our department that demonstrates over the last 20 years, due to climate change and seasonal changes, the average Australian farmer's profit has fallen by about 23 percent, or nearly $30,000. So it's having a bottom line impact on our farmers. And to link back to trade, what we're finding is that pretty much all of our international trading markets, as well as domestic consumers, expect to see higher and higher sustainability records when it comes to agricultural production.

So there are all sorts of very important economic reasons in addition to the environmental reasons for us to reduce agriculture's emissions. I expect that will be done by a combination of actually reducing emissions on farm - that could be done by moving towards feed supplements that reduce methane in livestock, it could be moving towards low emission fertilisers, it could be done by moving towards more use of renewable energy on farm. But also, of course, there is a role for offsets in farming as well.

PATRICIA KARVELAS: Minister, today the Reserve Bank meets and considers an interest rate rise. Your colleague, Cabinet Minister Bill Shorten says that he hopes it stays static today. Is that your view?

MURRAY WATT: Well, as a mortgage holder, of course I would agree with that, Patricia. I mean, you know, we know that Australians are under pressure when it comes to inflation and interest rates. It is pleasing to see the inflation levels starting to moderate, but they are higher than we would like them to be. Of course, I'm not going to predict what the independent Reserve Bank will do with its interest rates decisions-

PATRICIA KARVELAS: But you would like it to hold interest rates today?

MURRAY WATT: Well, of course, I think all Australians would - especially those who have mortgages - would prefer their mortgage rates to be static, but we're not going to be interfering in what the Reserve Bank has got to do. They're an independent organisation.

As a government we're doing everything we possibly can to bring inflation under control, and thereby put some moderation around interest rates. Of course, we're taking all sorts of cost of living measures. You would have seen the comments from Jim Chalmers and Catherine King about the infrastructure program, so we're doing what we can to take that pressure off interest rates and inflation, but ultimately it's a decision for the Reserve Bank.

PATRICIA KARVELAS: Thanks so much for joining us.

MURRAY WATT: Thanks Patricia.