00:00We are here 20 straight years for me, you probably more than that, as you're a big participant in this
00:05conference.
00:06But obviously this year we're going to talk about the Chinese economy, but also the headwinds that the rest of
00:12the world is facing.
00:13What is going to be right now, four weeks in, with no end in sight, even though they're talking about
00:17a ceasefire,
00:18they're talking, we're not sure where the true story is.
00:22What's going to be the tax, if you will, the penalty on global growth?
00:25Well, firstly, thanks for having me on board. It's just great to be back with Bloomberg.
00:31And also I want to make the point that Bloomberg's contribution to Bar Forum is something we're all on the
00:36board very proud of.
00:38So don't understate it. It's fantastic.
00:42Now, onto that very large, large question, what's going to happen?
00:47What I can say is that that wonderful old ally of the United States, Ukraine, and its traditional adversary,
00:57which so much blood and treasure has been lost under Russia, even though Russia is such the dominant power
01:05and is bombarding everything, everything which moves in Ukraine, what you see in Ukraine is three or four odd years
01:14of a country under savage bombardment and not giving up.
01:19And the extreme intellectual innovation which you see happening in Ukraine to weather any storm, to be able to fight
01:30back and fight back hard and tough
01:32and make the overwhelming superpower life super difficult.
01:37You saw it in Afghanistan with both Russia and North America.
01:40You're seeing it now with Russia and Ukraine, where I think whatever happens, Russia will leave Ukraine licking its wounds.
01:49Now, Iran, Iran's been effectively at war with itself, with everyone else, Israel, for as many decades as Ukraine has
01:58been years.
02:00And it has inbuilt resilience. Its energy systems is widely fragmented.
02:06And the lever it has with the Strait of Hormuz has prolonged it as well.
02:09Now, that is part of it. But, you know, if you go and attack a country which has had decades
02:15of preparation for being attacked,
02:17it's not going to be easy to attack it. And it's a huge country.
02:21It's like, I mean, you look at it on TV and it's just a piece on a map.
02:26It's a massive country. So stopping a country like that retaliating when you've put a threat on the table
02:34that you're going to take out the power systems of the country within a number of days, like this weekend,
02:41that country, no matter how much you're bombarded, as we've seen with Russia and Ukraine,
02:45is going to be able to retaliate and retaliate savagely.
02:48And this time, my fear is that its response won't be surgical.
02:52You've talked about catastrophic consequences. That was your speech at the CDF.
02:57If that is the case, and if oil prices, yes, they've pulled back to below $100.
03:03But we were talking about $120, possibly, you know, ad infinitum, if the war went on in perpetuity.
03:09What does that do to, or what should it do to the decarbonization talk,
03:15as well as the electrification charge, which you've been leading?
03:18OK, remember what's happening here. So if the Straits of Homo was just closed and that was it,
03:23and everyone's policy stayed where the value system was, like you didn't take all the huge liabilities
03:31off Iranian oil, off Russian oil. If you just stayed with the value system you had before the war,
03:38then you'd have a much, much higher energy price. If the IEA wasn't out there warning,
03:43this is the worst energy crisis in human history, and saying release your reserves now,
03:49then you'd have a much higher energy price. But they're one-trick ponies. They're not going to
03:55last. If the war goes on, and we've used our reserves, and we've taken the sanctions off Iran,
04:01we've taken the sanctions off Russia, can you believe there would be a day last year that you
04:06could say that about 2026 that you'd actually do that? No, but that's what is happening.
04:10If we exhaust those measures, then of course you're back to the free market, and the free
04:16market will dictate any oil price you like. And you can't print electrons, baby. You can print US
04:22dollars, but you're not going to print electrons. So this will become a very serious issue. My point
04:28is to the United States and to Iran, reach an off-ramp. Iran, recognise Israel. Stop mucking
04:35around. You've got no earthly right or heavenly right to eliminate another country.
04:40The United States find the off-ramp quickly.
04:44Do you feel, I mean, you talk to Chinese leaders, you rub shoulders with them as well
04:47for many years. Do you feel what Wang Yi said overnight, essentially, that there needs to
04:52be this kind of diplomatic solution? They can play a role. They are a little bit more shielded
04:57for now on the oil shock because of the reserves they've built up and the resilience in renewables
05:02and the like. Do you think China can play that role? They have close ties. Tehran, less so
05:07with the Trump administration, but they can play that middleman role.
05:11Now, I'd say the Trump administration is anything that's highly pragmatic. I mean,
05:14it's going to deal with anybody. So if the Trump administration can see value in dealing
05:21with the Chinese administration, it's going to deal with the Chinese administration straight
05:24away. So let's just say you can, for all the faults you might be able to throw at the
05:30White House, it's pragmatic. So if China can help, Trump will enlist China as quick
05:36as he possibly can. What price of oil or diesel would it take for your industry to have a meeting
05:44of the minds, where maybe BHP backs off on its persistent need, they claim, for this diesel
05:52excise tax rebate, which you say must be abolished to hasten the electrification trend?
05:58Yeah, here in Australia, sorry, back in Australia, we're shutting out $10 billion a year to subsidise
06:09diesel, of which at least half goes to organisations which are amongst the most profitable in Australia.
06:14Now, they're the biggest taxpayers, great, they're making a wonderful contribution, but
06:17they hardly need to take money from mums and dads and put it in their own pockets in the form
06:22of the diesel fuel rebate. Mums and dads don't get a rebate. BHP, Rio, Tinto, Fortescue,
06:28we get a rebate. Go figure that out.
06:30So $150 a barrel, $200 a barrel, when does the math work for BHP?
06:36No, no, no, the maths work now, okay? The maths work now. This is the issue, this is the opaque
06:44environment which we're dealing in. It needs someone to break through. Nothing is possible,
06:48impossible, until it's possible.
06:50Each giant excavator uses one million litres of diesel a year, right? Yeah. So, there you
06:56go. That is a huge cost per machine. Now, they're not small machines, but it's a huge
07:02cost which disappears once you go electric and you can power it from your solar panel and
07:06a battery. Now, the Prime Minister Albanese, I believe on Monday, there was an industry dinner
07:10where he said, now's the time to bury the hatchet between, say, you and BHP and others. Is that
07:16something that can be reached, where you can...?
07:19It's a nice way of saying stop arguing with me. But, look, if there's a hatchet to be buried,
07:27I think it's around industrial relations, it's around all the arguments which BHP are having
07:32with the unions, etc.
07:34So, taxes and regulations they want reduced before they can accept a slashing of that rebate.
07:40But the diesel fuel rebate is an excess from pork barrel politics from well over a decade
07:47ago. It's an ancient dinosaur. Any government who keeps it going has got to look mum and dad
07:53in the face in this escalating energy price and say, we think you should keep subsidising
08:00indirectly the biggest players in Australia. And I'm saying it's one of the biggest players
08:06in Australia. This isn't fair on mums and dads. They should have gone green. Don't
08:10argue you can't go green when the technology is 100% there. If you're not sure if it's there,
08:15have a little look at China. It's quite a big player.
08:17Yeah. You say you're going to be diesel free within a couple of years, right?
08:20Yeah. And have a look at Fortisview, Australia's most successful company. We're not mucking around.
08:23We're business people. We're scientists. We're engineers. We're doing it because the technology is there.
08:28You pivoted to China. We're running out of time. But I wanted to pivot to the CMRG, the state-owned
08:34enterprise
08:35that essentially has been built in China to kind of try and find the right pricing mechanism in negotiations
08:42with the miners. I think you have a very different tact as well with BHP. Will there come a day
08:48when it's going
08:49to be necessary where you and BHP and Rio and others can, I'm not saying it's a cartel, but you
08:55can kind of have the reason
08:57You mean do what CMRG is trying to do? Create a cartel?
09:00Well, if they're a cartel. If they're a cartel, yeah. That is, I find what CMRG are doing is acting
09:09in the best interest of China.
09:10And I just say, look, do that by all means. Make sure that the really big dividends of people
09:17beginning to trade in RMB, buying ultra-competitive Chinese equipment and not just buying it from North America
09:24because it's what you've already done. Try cheaper, higher quality, more resources.
09:29And by the way, green equipment from China. Do all of these things which are big dividend boosts to China.
09:35Start playing around with what keeps Australia's economy rolling. You're kind of poking a bear.
09:41And I'd say to CMRG, look, step away from that gunfight. It isn't one worth having.
09:48There's a market out there. The market served you beautifully. But go for the big dividends,
09:53which is getting the RMB accepted into global currency, getting trade and getting demand
10:00for your huge manufacturing and industrial base. That's great for you.
10:06Forming a cartel to force down the iron ore price will impact an economy completely.
10:13And it's a bit like, you know, when you threaten someone who's got nothing to lose,
10:19you could get any kind of response. And all I'm saying is the iron ore price is critical to Australia's
10:26economy.
10:28That's one thing you shouldn't take when you're dealing with a country which has got nothing to lose.
10:34Now then I see.
10:34Two Police.
10:34Eight.
10:34Two.
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