JOSH FRYDENBERG:
Good afternoon. Today the Reserve Bank has cut interest rates by twenty five basis points to 0.75 per cent. In the RBA’s statement, it pointed to a gentle turning point in the domestic economy and the positive benefits that are being gained in the economy from the benefits of interest rate cuts, from the tax cuts, from the extra spending on infrastructure, from the stabilisation of the housing market, and to the uptick in mining investment. The Reserve Bank also has pointed to a reasonable outlook for the global economy, but they point out that the risks are tilted to the downside and that in making their decision today, the Reserve Bank has taken into account global movements in interest rates which have been downwards.
Indeed, the Reserve Bank Governor, only a week ago, made a speech where he said it would be unhelpful for the bank to ignore these global movements downwards in interest rates because it would make it obviously more difficult to meet their objectives of the inflation target as well as full employment.
It is the Government’s expectation that the banks will pass on this twenty five basis point rate cut in full.
What this means for an Australian family with a mortgage of four hundred thousand dollars is $720 less a year in interest payments. That’s a significant benefit to an Australian family.
It's completely reckless for the Labor Party to be talking down the Australian economy. Indeed, could you imagine the challenges the Australian economy would be having if Labor had a chance to impose their $387 billion of higher taxes that they took to the Australian people and that the Australian people firmly rejected?
In contrast, the Coalition has an economic plan that sees the Australian economy continue to grow. That sees the Australian economy maintain its AAA credit rating. That has helped see the creation of more than 1.4 million new jobs and to see the workforce participation rate at a record high. And has seen the Government deliver the first balanced Budget in eleven years. The Government is focused on creating more jobs and ensuring the Australian economy continues to grow.
Are there any questions?
QUESTION:
Yes. Now that rates are again at record lows, when will you spend some money to stimulate the economy? You’ve got economists and businesses wanting you to increase Newstart for example, for an immediate economic boost. How many more rate cuts will it take before that happens?
JOSH FRYDENBERG:
Well, as the Reserve bank itself and the Board has made clear in its statement today, the domestic economy has reached a gentle turning point and they positively referred to the benefits that are flowing from the tax cuts which are the most substantial in more than two decades, and which the Labor Party opposed. Let’s get that right. The Labor Party opposed our tax cuts which are now delivering billions of dollars into the pockets of hardworking Australians.
We’ve also got a ten year $100 billion infrastructure pipeline that is being rolled out, with record spending on infrastructure projects across the economy.
We’re also seeing apprenticeships being created, we’re also seeing the benefits of the stabilisation in the housing market with the clearance rates now in the key markets of Sydney and Melbourne being above seventy per cent, compared to around fifty per cent this time last year.
So jobs are being created, the economy continues to grow, but we do face some significant challenges. Those challenges are internationally with the global trade tensions between China and the US, but they’re also domestically, particularly with the punishing impact of the drought and floods.
QUESTION:
Are you concerned about the effect of low rates on the housing market and potentially causing a housing bubble?
JOSH FRYDENBERG:
Well, we have welcomed a stabilisation in the housing market and this is important, because it plays into confidence for households and household consumption is around sixty per cent of GDP. We also know that for most Australians, owning their own home is not only their dream, it’s their biggest asset. And they want to see its value appreciate over time which has been the history in our country. In terms of the clearance rates, they’ve gone up, and in terms of prices, they’re now starting to go up. So the interest rate cuts have contributed to a stabilisation in the housing market which we welcome.
QUESTION:
Has this decision left us without a buffer in case of a global downturn?
JOSH FRYDENBERG:
Well, clearly what gives us a buffer in the event of external economic shocks is to pay down debt so that you have that fiscal capacity to spend through the cycle. Let’s not forget when John Howard and Peter Costello left the Australian economy to the Labor Party, back when Kevin Rudd was Prime Minister, the Coalition left with zero Government debt. They actually left money in the bank and that enabled the spending through the GFC and for Australia to get though that period.
When we came to Government, we inherited an economy which was weaker, we inherited an economy where unemployment under Labor was rising and now it’s been falling under us. And we also inherited an economy where debt was spiralling upwards, whereas we have been able to start to turn that around with the first balanced budget in eleven years and we’ve committed to a budget surplus in 2019-2020. So, what we are doing is focusing on paying down Labor’s debt, creating those buffers to be able to withstand external shocks, and to maintain our AAA credit rating which is really important for not just governments, but also businesses and for households.
QUESTION:
Do you need to continue to fast-track infrastructure? You say you’re doing that but Labor is calling for more. Is that an option?
JOSH FRYDENBERG:
Well, let’s again be clear about what Labor does and then what they say because they talk about spending more on infrastructure but their record in government was that they spent around $6 billion a year when we’re spending around $10 billion a year. So, again, they don’t walk the talk.
The Prime Minister has written to the Premiers about the possibility of bringing forward some infrastructure projects, bearing in mind that we do face some capacity constraints in delivering those projects. So, we will work closely with state governments. But we do have a record pipeline of infrastructure spending. That’s not only creating jobs, busting congestion in the city, getting people home sooner and safer, but also, ensuring product can be taken from the field, from the mine, or from other parts of the country to the customer in a quicker, more efficient and effective manner.
QUESTION:
Look overseas, is it a good look for Australia to be cooperating with such a controversial domestic issue in the US as the William Barr investigation?
JOSH FRYDENBERG:
Well, the Government has put out a statement in relation to that point you just raised and we’ve said we’ve always been willing to cooperate, shedding light on those investigations. Again, that was confirmed in that conversation. The statement from the Government speaks exactly to that question.
QUESTION:
What assistance has been given?
JOSH FRYDENBERG:
Well, again, the statement made very clear that we’ve always been ready and willing to assist in shedding light on those matters that are raised.
QUESTION:
Just a question on China. What do you make of comments made by China’s ambassador that Australia must remember that it relies on China for its economic success? Do you think we depend on China too much for our prosperity?
JOSH FRYDENBERG:
Well, the economic and strategic partnership with China is very important to Australia. We have welcomed China’s growth and the fact that they have lifted hundreds of millions of people out of poverty into the middle class. Now, the Australia-China trading relationship is our most significant.
Two-way trade is over $200 billion last year and about a third of our exports go to China. We’ve also seen large numbers of Chinese students study at our universities, as well as over a million Chinese visitors come as tourists to our shores. Now, we welcome all that engagement with the nation of China and with its people. Indeed, we have a number of sister city partnerships and relationships between Australian towns and cities right across the country with their counterparts in China. So, that relationship is important and will continue to be important. We might not agree all the time, but you wouldn’t expect two countries to do so.
QUESTION:
Do you think we depend on them too much?
JOSH FRYDENBERG:
I think the relationship with China is an important one and we are opening new markets for Australian businesses, not just in China but more broadly. And one of the really positive developments that has occurred under the Coalition has been the free trade agreement that we have struck with China back in 2015, where we have now seen an increase by over 40 per cent of two-way trade between China and Australia.
So, the Coalition has delivered a stronger economic partnership with China, that’s helped create jobs in Australia with one in five Australian jobs being related to trade. But that has also ensured that the Chinese people have got the goods and services that will help them continue to grow, become more prosperous, and that includes the iron ore that makes the steel for their cities, the agriculture which fills their plates, or whether it’s the financial, education, health and tourism services which can also help contribute to a better life for the Chinese people.
QUESTION:
Treasurer, will the Prime Minister (inaudible) between him and President Trump?
JOSH FRYDENBERG:
Look, I’ve answered that question in relation to that matter and the Government has put out a statement. Thank you.