Subjects: National Reconstruction Fund, quantum computing, interest rates and housing policy.

 

PATRICIA KARVELAS, HOST: Elsewhere today, the $15 billion National Reconstruction Fund will now be allowed to back green projects making a loss under new rules announced today. The Industry and the Science Minister, Tim Ayres, is responsible for the changes and he is my guest in the studio. Welcome to the program.

 

 

SENATOR TIM AYRES, MINISTER FOR INDUSTRY AND INNOVATION, MINISTER FOR SCIENCE: G'. Day.

 

HOST: Why should taxpayers fund things that are running at a loss?

 

AYRES: Well, they just won't be. I mean, that introduction is not right.

 

HOST: Well, so let's clarify. You have basically changed the rules.

 

AYRES: Yes.

 

HOST: Which does actually mean that things will be funded that are of high risk to taxpayers.

 

AYRES: Let's take those positions in turn. The first is that what we're doing is, yes, setting a more aggressive approach for these partnerships with the private sector, mostly in regional Australia, to change the mandated rate of return to bond rate minus 1% for a $5 billion component of the $15 billion fund. What that means is that there is a different approach to risk. It doesn't mean that there will be a lower rate of return. This is an investment team that knows what it's doing. But it does mean that their risk settings are different. And that is because our job here is to reindustrialise suburban and industrial regions in Australia. And if we leave it to the banks and the investment community to do this by itself, it won't happen and we'll see deindustrialisation continue apace, which is what we saw over the last decade.

 

HOST. So, can you guarantee that no project that actually runs at a loss will be funded?

 

AYRES: Of course not, because what the fund –

 

HOST: My intro is correct then?

 

AYRES: No, no, no, no, no. That’s always the case, whether it's any of the Special Investment Vehicles that are there to invest in equity terms or loan terms to critical minerals projects, for example, there is always a level of risk –

 

HOST: Do you think this is a much higher level of risk?

 

AYRES: It does mean that we've got $5 billion there for Australian manufacturing, who have got decisions to make about how they invest in more efficient or lower emissions technologies. As some of these firms move off gas and they're sort of at that point in the capital cycle where they want to get off expensive gas and move to lower cost electricity or move to other industrial heat technologies. This provides a vehicle for them. It'd be very unusual for it to be the only source of finance. Last week, for example, in Queensland, in the heart of Central Queensland, Gladstone, the National Reconstruction Fund invested $75 million, dragged in $225 million of capital that will open the world's largest high purity alumina manufacturer in Gladstone in Central Queensland. So, crowding in private capital, creating 500 jobs blue collar jobs in Central Queensland that'll make Australia stronger and more economically resilient.

 

HOST: The Opposition says that this is reckless, that you are basically backing losers. And I'd like you to respond to it, to this, that it's inflationary. Now we know inflation is an ongoing problem. Interest rates went up yesterday. So, is this inflationary? Is this going to actually exacerbate inflation?

 

AYRES: Absolutely not. And I'll come to the inflation bit in a minute. But this is just a continuation of the relentless negativity from the Coalition.

 

HOST: Avoid the politics, which I understand is part of everything. But just on the inflation question.

 

AYRES: It's hard to take any of the questions positively when it's negative.

 

HOST: It might be negative, but sometimes negatives can be true though. I mean we've got an inflation problem. Will it exacerbate inflation?

 

AYRES: We’ve seen the impact of that negativity this week.

 

HOST: Will it exacerbate inflation?

 

AYRES: No, in fact it's, it's absolutely the opposite. That as we grow the capacity of the economy, as we shape the future economy to have more productive capacity, that's good in productivity terms, it's good in growth and efficiency terms. And that means we've got a bigger economy, more capacity, downward pressure on inflation.

 

HOST: Got a couple of other questions. You've also said you want to deliver. The world's first quantum computer is on track to be delivered when it's meant to be.

 

AYRES: Yeah, that project is moving along well. I'm not in a position to sort of talk about the day-to-day commercial details.

 

HOST: Sure, I'm not asking for the commercial details but in terms of delivery, will it be delivered on time?

 

AYRES: I believe so.

 

HOST: Can you guarantee it?

 

AYRES: We’ll see how it goes. There are gateways that that project needs to go through.

 

HOST: Has company found a site in Brisbane?

 

AYRES: It has been managed very carefully and very closely.

 

HOST: Has the company found a site in Brisbane?

 

AYRES: They will reveal those issues that are commercially sensitive as they –

 

HOST: Because that's key, isn't it though? If you want it to stay on track?

 

AYRES: I've got some confidence about that project and we'll no doubt be answering questions about PsiQuantum and the world's first fault tolerant quantum computer that'll be built in Australia with support from the Commonwealth Government and that'll make a big difference for our local tech sector and our tech sovereignty.

 

HOST. So, you can guarantee that it will be delivered on time?

 

AYRES: Let's see, let's see. But we have got everything in place commercially and legally. And in terms of the relationship with this company and the tech community more broadly that delivers this, it is important in economic terms for Australia, it's important in technological terms and of course, in this modern world of technological disruption, it's important in security terms as well.

 

HOST: Today, big announcement on defence sites and some other politics. Housing is a crisis in this country. Why not guarantee that this is actually all about housing and housing development?

 

AYRES: There will be, of course, there will be housing development on some of these sites.

 

HOST: Shouldn't it be the majority though? Like that's the biggest problem in the economy, isn’t it?

 

AYRES: That will go to the suitability of these sites for that purpose. Some of them are defence sites that will not be suitable for housing, whether there's the infrastructure there that's required, whether there's likely planning approvals. There will be housing on these sites. But the core project here is making sure that every defence asset is targeted towards the defence of Australia and the strategic reason that defence exists. It is a big body of work that's been led by Richard Marles and Peter Khalil here. It's going to take some years to work through to deliver sales and all of the sort of commercial work that needs to get done. Primarily this is about returning money to defence for defence projects. But of course, it'll be a positive overall in housing terms.

 

HOST: Just on inflation with interest rates going up yesterday, in fact, my bank just emailed me to say my interest rates go up. Thank you.

 

AYRES: I'm sure I’ve got an email coming too.

 

HOST: It's a fantastic email to receive. It makes you feel good. There's a lot of discussion about big reform that we need now in our economy to tackle inflation, but generally to deal with some issues. Should we tackle property taxes as part of the challenge of intergenerational inequity?

 

AYRES: Our focus, as you know, is on the supply side and property, for houses, that's been the big effort of the government –

 

HOST: But should we tackle those intergenerational fairness questions through looking at all of the taxation policies?

 

AYRES: The Treasurer has said that we are looking at those intergenerational issues, but our primary focus is on supply, a very big package there on supply and of course some of the demand side measures to support young people in particular.

 

HOST: Something like capital gains tax and the discount. You think it needs to be looked at?

 

AYRES: I've heard that Liberals and Greens on a committee have been agitating this question. There has always been a cry from some sections of the community over potential tax reform in this area. But as I say, our focus is on supply.

 

HOST: I get the focus, but that doesn't rule it out. With respect, Minister, that's politics language, focus. But you think it needs to be. Just be frank with me, you think it needs to be looked at.

 

AYRES: We make decisions in the normal way. It's not as the Industry Minister –

 

HOST: I understand it is not signed off but you understand the case. I mean you're a NSW Left MP for tax reform that deals with this huge issue in our community.

 

AYRES: I've heard the arguments and I wouldn't put any particular measure on a pedestal as being the measure that deals with those intergenerational issues. We're a Cabinet-style government that makes decisions in a careful kind of way. The focus of our work is on delivering a very ambitious agenda in housing and that's not just about supply, the 5% deposit, very important measure. That's where I've been focused on.

 

HOST: Alright Minister, thank you, thank you.

 

ENDS.