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CNBC Transcript: Malcolm Turnbull, Prime Minister of Australia

Following is the transcript of an exclusive CNBC interview with Mr Malcolm Turnbull, Prime Minister of Australia. The interview was broadcast on 2 September 2016.

All references must be sourced to a "CNBC Exclusive Interview'

Interviewed by Oriel Morrison, Anchor, CNBC Asia Pacific and Matthew Taylor, Reporter, CNBC Asia Pacific

Matthew Taylor: Will that be your message to your counterparts at G20 - ditch protectionism and work together for global growth?

Malcolm Turnbull: Australia goes to the G20 committed to open markets to trade to innovation to recognizing that our future lies in continuing to raise living standards across the world and the way to do that is by expanding markets, opening our markets, and encouraging the innovation and entrepreneurship that that brings. That has transformed - to transform China open markets trade has been absolutely critical in raising hundreds of millions if not billions of people out of poverty and that the answer is not protectionism. The answer is not fear. The answer is confidence and commitment to the goals that were set out at the G20 in Brisbane and that we should continue with this G20 and across the world as we recognize that the answer lies in more trade stronger growth more innovation recognition of the extraordinary opportunities that are offered by the electronic digital platforms which Jack Ma was speaking of just a moment ago.These are enormous opportunities they asked supercharging global growth and we have to make sure those leaders that we make the case for them and that we ensure that in each of our nations we ensure that everybody is brought along with the benefits of that growth. We have to make sure that no one is left behind and that we can ensure that the people whose industries are being disrupted and changed by technology are supported in that transition so that they see the benefits the really transformational benefits of a stronger global economy fueled by trade.

Oriel Morrison: Prime Minister Malcolm Turnbull. It is a pleasure to have you with us here on CNBC today. You are and you have just put forward your argument against protectionism. We do neither. In saying that the G20 countries have imposed a record 145 new trade restrictive measures in the seven month period from last November to my 2016. We do know that the US is likely to kill the tape TPP, the Trans-Pacific Partnership. How do you prevent protectionism in the age of decisions like Brexit?

Turnbull: Well we need to make the case for trying. We need to point we need to set out the facts,we need to make sure that all of our statistics recognize the enormous growth that we see from trade. I spoke earlier about the digital economy one of the important items elements for the G20 to address is whether we are calculating our - the cycle the size of our economies GDP, in other words, are we accurately taking into account the enormous productivity gains and economic gains derived from digital platforms for example. You know the good, the classic example is AirB&B. If you were to build hotels that had 50,000 hotel rooms in them, that would clearly be an enormous boost to investment. Massive boost to investment - sharpen the figures but with an application like AirB&B and others like it if you know if you make available for occupation for rental 50,000 rooms in people's houses that is to say underutilized, existing inventory that is already built, that is of course an enormous productivity gain.

But how is that being taken into account. So many of the digital platforms that we enjoy, we are able to access them for free, that functionality that we access on many of the cloud based applications is free and it adds enormously to productivity, so -- in the UK is a child's brain has been upright she has been looking at this. It's been a study done there estimated that the UK GDP was underestimated by, think around 0.7 percent. This is very important that we look at this as a G20 because we need to be able to get the facts out there to justify, to defend the continued support of free trade and open markets because I can tell you it's of critical importance to Australia. I mean we enjoyed a once in a lifetime mining construction boom in recent years and that boom occurred, there was massive investment and of course inevitably once those big projects were built will supply increased commodity prices came down the construction boom has been tapering off.

So one of the elements that has enabled us to make the successful transition we have is why we have three percent 3.1 percent growth here in Australia higher than almost all other comparable developed economies. What we've been the reason, we've been able to do that is in large part due to the big trade deals that we've done with China with Korea with Japan which has opened up big markets to Australian exporters, Australian agriculture, Australian Services tourism education and so many others. And that has picked up some of that slack and enabled us particularly in regional Australia to demonstrate that the open markets and trade is actually the key to success. It's not a threat. It is a key it's an opportunity.

Oriel: Prime Minister I know that this is a topic that you're going to be addressing at the G20 this weekend. You're talking about the fact that everybody loses from putting up barriers, that you have been or Australia has been accused of putting up barriers themselves when it comes to foreign investment in China has directly accused you of protectionism.

Turnbull: Well that is not the case. There is, I would challenge you to find a market in the world where it's easier to invest in for foreign investors including Chinese investors to invest in than Australia.

Matthew: But just to pick up on that point. Of course we're referencing the AUS grid decision here with the Treasurer just in the last few weeks I decided to block in China's Ministry of Commerce said the decision was protectionist and would likely result in reduced interest from Chinese firms to invest in Australia. So when he, I guess met with the Chinese delegation this weekend what would be your message to them about what they're saying as a result of that decision that your government announced?

Turnbull: Well I'd like a couple of observations. Firstly many years ago, more than 20 years ago I established a Chinese Western Mining joint venture in China. And so I've actually established what light of what has become a large zinc mine. So I've had my own experiences in investing in China and I can tell you that it is a lot easier for much much easier and you know this for Chinese companies and businesses to invest in Australia then for Australian companies to invest in China.

But you know something. China understands the point about sovereignty. It is a question of sovereignty. It is up to Australia to determine the basis on which foreign companies invest in our country and the terms on which they do. That's up to us just as it is for China. And this is a very open market. We have, we welcome foreign investment but we reserve the right to say no and the AUS grid matters you know that. That was the Treasurer explained the reasons for that. It was one of the rare cases where an investment of foreign investment consent for a foreign investment was declined.

Matthew: All right before we turn to some other issues I just want to go back to grind on the agenda that was outlined in Brisbane that two percent of additional growth above and beyond what global economies were already trying to advance. And you mentioned trade is as one of the areas that can I guess help us trying to shape those type of growth levels. But what other policy; other available to policymakers, because monetary policy globally certainly looks like it's running out of steam. It certainly can't be a trade agenda on its own.

Turnbull: No absolutely right. And that is why structural reform is so important, what we need to do is to ensure that we do that and this is particularly important given the innovation theme that China has for the G20 which of course is very important leading theme of my government's economic policy.

Innovation is critical and it thrives on openness and freedom. You need to have flexibility in your own your economy to enable firms and individuals to innovate to adapt to evolve rapidly. Speed is very important now. There are a number of changes.The number of reforms that we've been undertaking here are national innovation and science agenda is a leading part of our agenda because what that does is promote innovation that promotes investment and start-ups promotes science and maths, stem subjects in schools promotes research and investment. Now that's a critical part of our agenda. It also promotes international cooperation and we look forward to more cooperation with innovative companies and technologists around the world. So again that is a big part of it and I think that will be something recognized by all the G20 countries. It also means that we've got to free up our own markets and our law rules competition rules to make markets more open. On the other side of Europe behind the border inside our country and this of course benefits both locals and foreigners. We've got to make sure that we, it is easier to invest and do business that's critically important.

We have I very, very pro-business agenda here with business tax cuts starting off with small and medium companies and then building up to all companies over time. It's also important to ensure that infrastructure investment is well targeted and managed. I mean there's a lot of calls, people are making the point you just made, that monetary policy doesn't have the same impact that it used to because of course rates are so low so that the heavy lifting has to be done by fiscal policy by investment. And of course one of the highlights everywhere is looking for long run economic infrastructure investment. Now again that's a very big part of our agenda in Australia as you know we have a federal government, state government, local governments that haven't always cooperated as well as they should or coordinated as well as they should. So a big part of our agenda is a city deals approach which to be fair was inspired by some of David Cameron's policies in the UK so that we will better coordinate federal government investment state government investment local government investment to ensure that we as we invest in our cities in particular. We get the right outcomes in terms of growth in jobs growth. Well you know dwelling construction so that you improve housing affordability making sure that all the elements of transport infrastructure that are being supported well planned and coordinated as opposed as has often been the case to a sort of ad hoc series of investments done by different levels of government often without regard to the to the an overall committed objective.

Oriel: Prime Minister, I wanted to touch on some domestic issues in Australia it's like the first week of Parliament has concluded with that to say the least some challenges for your government. Voters are already as we know frustrated with political games. Is the government really guilty of complacency here? I mean should the situation that we saw in Australia last night have happened?

Turnbull: Well if you're asking me the question 'should a number of my colleagues in the House of Representatives left the parliament to travel mostly to travel home prior to the house being adjourned?' The answer is they absolutely should not have left. I know that they made a mistake. They've been read the Riot Act as we say here and they - It won't happen again. But it will, it was you said, you talked about political games. It was a political game, a political ambush, a tactic employed by the Labor Party to take advantage of some complacency on the part of some of my colleagues and they succeeded in embarrassing the government. But it is very much a question of political games played by Labour.

But what we have to do and what we are doing is focusing on delivering our agenda.So what we've been doing this week while the Labour Party's been playing games and having some success with them as we've seen what we've been doing, is introducing one major element of legislation after another. So reform of the construction sector the building and construction Commission legislation the big omnibus tax, omnibus savings bill we've been introduced our tax cuts measure for middle income earners and a whole range of over 20 new pieces of legislation some of them brought back that had lapsed in the last Parliament.But putting that whole agenda into the Parliament to get on with the job of legislating governing and delivering on our economic plan the jobs and growth that we took to the election and to the Australian people endorsed.