TOM CONNELL, HOST: Welcome back. Well, returning to one of our top stories where a South Korean firm has been selected to build next generation infantry fighting vehicles at Avalon near Geelong. The $21 billion contract was awarded to Hanwha – I think it might be 2.1; it sounds a bit high to me – 129 vehicles to be manufactured in Australia at the company’s $170 million Geelong plant will transform the army’s combat capabilities.
Joining me live, Skills and Training Minister Brendan O’Connor. Thanks for your time.
BRENDAN O'CONNOR, MINISTER FOR SKILLS AND TRAINING: Not at all, Tom.
CONNELL: The decision was made between this company and a German company. Why did the South Korean company get the nod?
O’CONNOR: Well, on balance it was seen to be the best offer, the best tender, and making sure that we get value for dollar, get the right capability consistent with government decisions and the Defence Strategic Review, and it was found on balance to be the right decision. And Hanwha is a very good company, and I think it means not only delivering defence assets that are absolutely vital but also ensuring that we have some very good employment outcomes, because it will obviously ensure high paid, high skilled jobs for the area and for the industry.
CONNELL: The reports are they both tested adequately and, in fact, Rheinmetall, the German group, was slightly cheaper than that. So, was there something else that gave the South Korean the nod?
O’CONNOR: Well, look, I wasn’t on the panel. I’m in a portfolio that requires to help supply skills to the defence industry working with the, you know, the Defence Minister and Defence Industry Minister and others. In fact, my department has set up a committee to very much look at how we provide the skills for defence industry over time, especially arising, as you know, Tom, out of the AUKUS decision.
But I’m advised this was the best decision. Look, I recall, you know, prior to the election it was always – there were two very good contracts, two very good opportunities and, on balance, Hanwha was seen to be the best fit for us. And it will be a great boon for the defence industry, for the Defence Force and, indeed, for the labour market in terms of great jobs.
CONNELL: We need – you know, your element of skills and training really relies on this industry growing.
O’CONNOR: Yes, it does.
CONNELL: Are you concerned that there are already reports that the German group, Rheinmetall, having lost out open this bid might then not go ahead with this billion-dollar export contract?
O’CONNOR: I think Rheinmetall has a place in Australian defence industry, as does Hanwha. I think there’s ongoing engagement between Australia and Germany. As recently as a week or so ago where the Prime Minister was speaking to the Chancellor around defence matters. I think that will continue. So, look, the real issue for us is that we have a series – we’ve got shortages across the economy, skills shortages across the economy, and we need to deliver a pipeline to each sector that is in need of those supply of skills, including defence industry. But whether we look at the energy sector and its transformation, the care economy, Tom, you know, digital skills, we have a huge demand, and it will increase, and that’s why we’re making strategic investments in skills and training. Jason Clare is obviously very engaged with the accord review for universities. I’m negotiating a national skills agreement with states and territories to deliver a five-year agreement for the VET sector. This is important. We have a very tight labour market, probably the broadest and deepest skills shortages we’ve had for many, many years and we need to respond. We did so, as you know, by firstly convening the Jobs and Skills Summit, announcing 180,000 fee-free TAFE places. We’ve got more to come and agreements to settle, and we’ll continue to work with employers and unions and universities and the VET sector to do what’s needed, which is deliver skills to the labour market.
CONNELL: You mentioned that labour market, how tight it is right now. What is your view on what a full labour market is? Because the RBA has this sort of increased watch, if you like, as part of the reform to focus not just on inflation but full employment. That’s the big question. What do you view as full employment in terms of what the unemployment rate would be?
O’CONNOR: Well, look, I don’t have a set figure. I think wherever we can – nobody wants to see unemployment rise. Obviously, we want to make sure that people have opportunities to access the labour market, have decent, fulfilling lives. And nobody wants to have some army of up employed people just ready and waiting but unemployed indefinitely. Nobody wants that.
So, getting that tension right about, you know, ensuring that we put downward pressure on interest rates and inflation and at the same time be as optimal as possible in terms of employment is the balance, is the tension we’re trying to strike here. And that’s never easy. But I don’t think we should assume that it has to be a certain X – you know, a certain number of unemployed people before somehow, we can attend to other matters. That’s not – that’s not the way we should be thinking. We should be trying to realise our, you know, goals, whether it’s employment, full employment, or whether it’s actually having a low inflation rate and less pressure on cost of living.
And – but it doesn’t do well for people to be unemployed when you’re talking about cost of living. So, we do need – as a Labor government our primary focus will always be making sure people get work but also managing the economy with responsible budgets that actually do not put upward pressure on inflation. And I think we’ve achieved that to some extent. We’ve a long way to go. But I think the Treasurer yesterday outlined that the combination of monetary and fiscal policy has assisted in some very good recent figures, economic figures. But more to do, of course. There’s still – people are still hurting; inflation is still too high.
CONNELL: But just on – yeah, just on the unemployment element though, because, you know, traditionally the thought years ago was 5 per cent. Roughly, you know, that’s the unemployment level. You don’t get much lower than that. And then we’ve found ourselves with three and a half per cent. Do you think the RBA should be looking at something a lot closer to three and a half, maybe 4 versus the old adage of 5 per cent?
O’CONNOR: Yeah, look, I think that 5 per cent metric was just a figure plucked, and I think, sure, you can use it as a guide. But I think we’ve been able to sustain, you know, an unemployment rate around 4, on either side of 4 per cent, and it didn’t – you know, there wasn’t an immediate impact on inflation. And so, we should be ensuring we do whatever we can to get the best possible employment participation rate and at the same time ensure that we’re not fuelling inflation. Of course, that’s our goal. And, therefore, I don’t agree with these sorts of – just these figures plucked as to some – as it’s some sort of science. That’s not the case.
CONNELL: Okay. Just finally on this IBAC report today in your neck of the woods down there in Victoria, it didn’t have any adverse findings against the Premier, but it did find it likely that Daniel Andrews passed on to a developer that he was sorry the government had to delay a decision on rezoning and that essentially his hands were tied because of media stories and blaming the journalists for raising these media stories. What did you make of this report and the Premier’s explanation on this?
O’CONNOR: Look, Tom, I’ve been at a company, Navantia, that’s building defence assets. I have no idea what the IBAC report says. I’ll certainly have a look at it, but I have no comment to make. I’m not briefed on it, and you may have spoken to my office, but I haven’t had a chance to be reading media reports or reading the report or anything like that. So, I’m really not able to answer your question in that regard.
CONNELL: All right. It’s a big report; that’s fair enough. I’ll just note, we did speak to your office, so we flagged we’d mention it.
O’CONNOR: Yeah, sure. I didn’t have an opportunity. I was too busy talking to defence industry about the future of defence assets in this country and great jobs in Melbourne, in this case.
CONNELL: All right. Minister, appreciate your time today. Thank you.
O’CONNOR: Thanks very much, Tom.