16 October 2019

Doorstop interview, Parliament House

Note

Subjects: IMF World Economic Outlook report; First Home Loan Deposit Scheme; Snowy 2.0; trip to Washington;

JOSH FRYDENBERG:

The IMF report today confirms that the global economy faces real challenges with a synchronized slowdown taking place. Australia is not immune from these global economic headwinds. That is why it is now more important than ever that we stay the course with considered, disciplined and responsible economic management. Economic management that sees Australia in its 29th consecutive year of economic growth, with a AAA credit rating that only ten developed nations have, with a strong labour market which has seen more than 1.4 million new jobs being created and with the first balanced budget in eleven years. Today, the IMF has confirmed that the Australian economy will grow faster than any G7 nation except the United States. Our economic plan will see the Australian economy continue to grow with lower taxes, record spending on infrastructure, providing the workforce with the skills that they need, cutting red tape and entering into new free trade agreements which has already seen businesses have greater access to some two billion new customers. We will ensure a strong economy and a strong budget position because a strong budget is critical to the economic resilience of the Australian economy as we face these global headwinds.    

QUESTION:

Treasurer, are you, as Jim Chalmers says, “kidding yourself” that the Australian economy is actually doing well?

JOSH FRYDENBERG:

Well, I saw Jim Chalmers today talk about comparing Australia to Greece. This was pathetic, reckless, shameful from a Labor Party which has shown it has no ability to balance the budget. I mean, Greece has an unemployment rate of 20 per cent, Greece has a debt to GDP ratio of around 200 per cent. In fact, the Greek economy is 23 per cent smaller since the GFC whereas the Australian economy is 33 per cent greater since the GFC. The reality is the Labor Party will look for every political opportunity to talk down the Australian economy and put at risk Australian jobs. That’s the comparison.

QUESTION:

Treasurer, you’re saying stay the course, not change the course in light of growth rates below 2 per cent. Does that mean you’re prepared to accept growth rates below 2 per cent?

JOSH FRYDENBERG:

Let’s obviously wait till we see September National Account numbers but we do know that the Australian economy is facing some significant headwinds. The global headwinds are real and you’ve seen that in the IMF report today and their description of a synchronized slowdown. You’ve seen, obviously, the impact of the drought which has not only taken more than a quarter of a per cent straight off GDP, but has seen significant funding being required from the Federal Government. So we do face these challenges but we have lower taxes putting more money into people’s pockets, we have record spending on infrastructure, we have the plan to create 80,000 new apprenticeships and we’re entering into these free trade agreements which are also ensuring greater opportunities for Australian businesses. So that is our economic plan and that is a plan that has also seen the budget come into balance for the first time in eleven years.

QUESTION:

Treasurer, are you surprised by the fact that you had Officeworks, Nick Scali, the Reserve Bank noting yesterday in it’s minutes that there doesn’t seem to have been an impact yet from the tax cuts. Are you surprised that hasn’t happened and do you think they will eventually start seeing a feed in to the economy?

JOSH FRYDENBERG:

The RBA has pointed out that some people spend the money and some people save the money. There is no surprise in that. Ultimately, if you are putting the money into paying down your mortgage, that’s going to reduce your interest payments and ultimately it’s a timing question as to when the rest of the money flows through to the economy from those people who are taking those decisions. But there’s no doubt that with more than $20 billion making its way out of the doors of the ATO into the pockets of Australians that that is money that will be spent with local businesses, in local shopping strips. We also know that the Reserve Banking reducing the interest rates down to a record low of 0.75 per cent has helped stabilize the housing market. We’ve seen clearance rates jump quite significantly and we’ve also seen prices go up in some of the major markets. So, in terms of the impact of those tax cuts, they are having an impact and it will certainly just be a question of timing.   

QUESTION:

Treasurer, why begin so much on the balanced budget? If the economic conditions in Australia turn down further, presumably the Government will stimulate the economy. Aren’t you sort of exposing yourself to the Wayne Swan problem? He promised a surplus, Labor wasn’t able to deliver it for a range of reasons. Aren’t you exposing yourself and the Government to the same risk?

JOSH FRYDENBERG:

Well, surpluses are not ends in themselves, they’re not trophies in a cabinet, Katharine. They’re actually an indication of strong budget management and helping to build the resilience in the Australian economy so you can weather those economic shocks. If Peter Costello and John Howard hadn’t paid back Labor’s debt, could you imagine the trouble that Labor would have had, more so than they even did, through that GFC? The fact that the Coalition left government under Howard and Costello with zero government debt, money in the bank and budget surpluses gave Labor that fiscal flexibility to spend through that cycle when that economic shock hit. So really, a strong budget position is not mutually exclusive from having a strong economy, in fact they come together. Our discipline and the fact that we’ve seen record job creation and the lowest welfare dependency in Australia in thirty years is actually an indication of good decision making, good economic management which is going to help protect us into the future. 

QUESTION:

Treasurer, on that budget surplus. Will you do whatever it takes to protect that budget surplus or do you envisage circumstances and concede the fact that there might be circumstances where you have to simply put that dream of yours to deliver that budget surplus a bit further back?

JOSH FRYDENBERG:

Well, firstly we’ve delivered a balanced budget and that’s not insignificant with the first balanced budget in eleven years. And we’re committed to the surplus but we continue to also ensure that there’s spending through the economy, with this record infrastructure program, with the tax cuts, and of course, monetary policy has helped stabilise the housing market. So, it’s not an either or proposition, Andrew, you can have a strong Budget position and a strong economy. In fact, the Australian people trust us to deliver that strong Budget position because they know when you pay down Labor’s debt, you help ensure the economy is more resilient for the economic shocks into the future.

QUESTION:

So, you were quoting Peter Costello earlier, Treasurer. Even he says now that monetary policy is having a negligible impact on the economy, because interest rates are so low and it’s time for stepping up more fiscal policy. Do you have another tranche of fiscal reforms on the way to head off these head winds coming from overseas?

JOSH FRYDENBERG:

Well, as I’ve said to Andrew, Mark, we’ve provided the most significant tax cuts that Australia has seen in more than two decades and the latest numbers from the ATO show that more than $20 billion has made its way in recent months to the pockets of Australians. We’re spending record amounts on infrastructure, shovel ready projects that are creating tens of thousands of jobs across the economy. We’ll provide an update on the Budget in MYEFO at the end of the year, and we will continue to provide support for new programmes and new policies, but…

QUESTION:

So you refuse to do more, that’s the crucial question?

JOSH FRYDENBERG:

The point is, we will continue to maintain considered, disciplined, responsible economic management, because that economic management is delivering more jobs and cutting taxes for Australians. We face significant global headwinds. That is the key point over this IMF report, and Australia is not immune from those headwinds.

QUESTION:

Treasurer, just on the home deposit scheme. We saw that pass yesterday.

JOSH FRYDENBERG:

Yes we did.

QUESTION:

But since interest rates cuts have gone through, we’ve actually seen a trending upwards in house prices which locks out young people particularly from buying their first homes. Are you confident that this scheme will actually get young people into owning their own homes?

JOSH FRYDENBERG:

Well, it’s going to give an opportunity for 10,000 people a year into the housing market. It’s an important piece of legislation, it was an election commitment, and it will help those first home buyers with a deposit as little as five per cent.

QUESTION

: You were involved as the Minister making the decision to go ahead with Snowy 2.0. Do you agree that, given the changes in technology and the market in the two years since then, that there’s a case for a new study into its costs and benefits, independent of the Snowy Board?

JOSH FRYDENBERG:

Well, I think that it will have significant benefits to the Australian energy market, providing power for more than five hundred thousand homes, helping to stabilise the growing intermittent energy that is coming into the system, particularly wind and solar, and Malcolm Turnbull is absolutely right that there are some vested interests that want to, you know, poo poo this project because it may affect their own particular plans. But the reality is, Australia, over the years, has not provided enough storage in our energy market and Snowy 2.0 is a nation building project that will be really important on the eastern seaboard in stabilising our housing market.

QUESTION:

Treasurer, the IMF report is another sign that the Australian economy continues to struggle in these global headwinds. You face calls from left, right and centre to fast-track infrastructure projects. We’re yet to see one fast-tracked. Why won’t you move forward an infrastructure spending program?

JOSH FRYDENBERG:

We are absolutely prepared to consider bringing forward infrastructure projects, and that’s why the Prime Minister wrote to the State Premiers…

QUESTION:

But not one yet, Treasurer, has moved forward.

JOSH FRYDENBERG:

Well, we have a $100 billion set aside for an infrastructure plan, and we are now spending around $10 billion a year on infrastructure which compares to Labor spending about $6 billion a year, and you’ve got big projects like the Melbourne to Brisbane inland rail, like WestConnex, like a second airport in Sydney, like Snowy Hydro, and these are absolutely critical infrastructure projects that are creating tens of thousands of jobs. But we will consider bringing forward infrastructure projects on a case by case basis. But I do want to point out the reality of some of the capacity constraints that we see in various markets, particularly in Melbourne and Sydney. And you heard even from the Labor Treasurer Tim Pallas, point out the reality of those capacity constraints, whether it’s around skills, or whether it’s around boring equipment, cement, bitumen or the like, there is significant capacity constraints, and what we agreed among Treasurers last Friday here in Canberra was that we would come together and that we would share information to try to unlock some of those capacity constraints that we’re seeing in the infrastructure sector.

QUESTION:

Treasurer, thank you. We’re entering a very unusual period where the RBA may only be one interest rate cut or so away from potentially having to go to QE, i.e. printing money. Are you prepared to let them go down that path, rather than fiscal policy playing a role? Because the message I’m getting from you today seems to be the case that you would be.

JOSH FRYDENBERG:

Well, what we’ve heard from the Reserve Bank directly, John, in their testimony here in the Parliament recently, was that they see it as unlikely that they would go down the path of unconventional monetary policy. But, as you know, as Treasurer, and the Government, we’re responsible for fiscal policy, and it’s the independent Board of the Reserve Bank that are responsible for monetary policy. So, the issue of interest rates will be a matter for them.

QUESTION:

Treasurer, you mentioned the US is the only economy doing better than us. So, what are advice are you going to be seeking from them when you visit the US?

JOSH FRYDENBERG:

Look, this will be a very important meeting and a good opportunity to meet with my counterparts to swap notes about the state of the global economy and also about policies that they may be undertaking, and certainly I can share what we’re doing here in Australia as a means of insuring that jobs are being created and lower taxes are being provided.

QUESTION:

But what specific advice?

JOSH FRYDENBERG:

Well, it’s actually just about swapping notes with key counterparts, I’ll be speaking obviously to the US Treasury Secretary and other key counterparts about what is happening in their economies, what is happening in the global economy, as we all strive for the same thing, namely to ensure that our economies are resilient, that more jobs are being created, and that people earn more and keep more of what they earn.