DAVID SPEERS:
Good morning, thanks for joining us.
JOSH FRYDENBERG:
Nice to be with you David.
DAVID SPEERS:
So let's start there, why are you cutting the rate of these support payments in October, JobSeeker and JobKeeper, when our unemployment is still rising?
JOSH FRYDENBERG:
Well David, we're actually extending the JobKeeper program beyond its legislated six month life. Since we introduced JobKeeper on 30 March, 3.5 million Australian workers, 960,000 Australian businesses, around 30 per cent of the pre-COVID private sector workforce in Australia, have benefited from the JobKeeper program. We've had the Treasury review which found that it met its multiple objectives, namely that it saved jobs and businesses, that it kept that formal connection between employers and employees and that it also provided income support. But now with the economy starting to recover, and in transition obviously beyond and outside of Victoria, we thought that it was important to continue this program, because there is still need, but to do so with a reapplied eligibility test, with a stepped down payment and with a two-tiered payment.
DAVID SPEERS:
That's what I'm asking about. Why now reduce these payments?
JOSH FRYDENBERG:
Well, these payments are going to continue and are going to be at a significant amount. So at $1,200...
DAVID SPEERS:
I'm asking why the reduction?
JOSH FRYDENBERG:
Ultimately, this is a program that at $11 billion cannot be continued, $11 billion a month…
DAVID SPEERS:
So it costs too much, is that the answer, it costs too much?
JOSH FRYDENBERG:
Well at the end of the day, we have to make sure that our spending is sustainable. At $11 billion a month, that is an enormous bill. At $86 billion, it's the single largest initiative that any Australian Government has undertaken. But it's a transition.
DAVID SPEERS:
The Reserve Bank Governor says, "the biggest policy mistake to make at the moment would be to withdraw support too early." He certainly doesn't seem to think there’s a problem with the level of debt.
JOSH FRYDENBERG:
But actually we're not withdrawing support, and I've been in close contact with the Reserve Bank Governor. What we’re doing is continuing…
DAVID SPEERS:
But you're reducing the amount.
JOSH FRYDENBERG:
Well it's still at a very high amount. At $1,200, it's around 80 per cent of the minimum wage, and then it steps down again in January. But importantly, we haven't changed this legislated program from what is going out until the end of September, and then we're continuing it beyond then. But what we do know is that JobKeeper, together with our other economic support measures, have saved some 700,000 jobs, and this spending initiative from the Government has been the largest single economic support measure that any Australian Government has ever undertaken.
DAVID SPEERS:
Okay, but for part time workers, it's going to halve. It will go down to $750 a fortnight…
JOSH FRYDENBERG:
Yes, well based on hours. It depends on the hours that an employee has worked.
DAVID SPEERS:
This affects a lot of women, as mentioned. And women, particularly young women have been very hard hit in this crisis so far. What do you say to them?
JOSH FRYDENBERG:
Well the first thing to say is why we've gone to a two-tiered payment, when we've had time to build a new system, and that better reflects what the pre-COVID income of the people who are receiving the JobKeeper payment will…
DAVID SPEERS:
How do you work that out, how do you work out who’s working less than 20 hours?
JOSH FRYDENBERG:
Well again, it's going to be up to the employer to provide a declaration to the ATO, and that is a signed declaration for which they're accountable. Now as for…
DAVID SPEERS:
Based on…
JOSH FRYDENBERG:
Hours worked.
DAVID SPEERS:
During which period?
JOSH FRYDENBERG:
During the period of February. So it’s the period before COVID really started.
DAVID SPEERS:
Just on that, I read the Treasury review of JobKeeper and it said specifically that there would be many instances where using February hours would be unfair for employees whose hours were atypical for that period…
JOSH FRYDENBERG:
Correct.
DAVID SPEERS:
…because of the bushfires.
JOSH FRYDENBERG:
So, and that's where the ATO Commissioner will have a discretion and he'll be providing some detailed guidance for employers. So for example, if you were on leave for the whole month of February, you may not have had your regular hours, or if you were volunteering in the case of the bushfires, you may not have had your regular hours. So there will be an ability to take that into account. But as for your question about women, what the JobKeeper review found David, was that women were receiving the JobKeeper payment in a larger proportion than they were as a proportion of the overall private sector workforce. And at the same time, what we've seen in the most recent job numbers that came out in June, that 60 per cent of the 210,000 jobs that were created in the month of June were women. And in those sectors like retail and hospitality, where they are heavily represented, they're the sectors that are starting to come back as restrictions are eased outside of Victoria.
DAVID SPEERS:
But just back on the Treasury review. I mean it seems, Treasury seems a little sceptical about the whole idea of splitting JobKeeper into two payments at all. It says, "it is not clear that the net benefit of these changes would be positive." So whose advice are you relying on here to split it in two?
JOSH FRYDENBERG:
We've absolutely made these changes based on Treasury advice and we’ve worked with them throughout this process. But what…
DAVID SPEERS:
But does it say in the Treasury review of JobKeeper, you should do this?
JOSH FRYDENBERG:
They absolutely say that you can move to a two-tiered payment...
DAVID SPEERS:
But they also, well my reading of the report, is that they say, "it's not clear that there's a net benefit."
JOSH FRYDENBERG:
Well I can tell you that they haven't counselled against a two-tiered payment. And what we do find from that Treasury review…
DAVID SPEERS:
So there’s separate advice?
JOSH FRYDENBERG:
What we do find from that Treasury review is about a quarter of the recipients received on average $550 more than their pre-COVID income a fortnight. Now, that's an upper estimate, because it doesn't take into account people losing secondary jobs and 39 per cent of jobs that were lost were second jobs...
DAVID SPEERS:
But they also highlighted problems with doing this at the same time?
JOSH FRYDENBERG:
It’s complex.
DAVID SPEERS:
So there is separate Treasury advice, is there? To this JobKeeper review?
JOSH FRYDENBERG:
Well, again, we've had multiple ERC reviews. We've sat with the Secretary of Treasury and his advice is very consistent with the Government's decision.
DAVID SPEERS:
Why didn't he put that in the review that he did of JobKeeper?
JOSH FRYDENBERG:
This review was not specifying exactly what needs to be done going forward. What it did do was assess the integrity and the effectiveness of the scheme as at the midway point three months into a six month program.
DAVID SPEERS:
For a lot of workers and business owners in Victoria, the situation is no better now than it was back in March, arguably worse. So why should they be receiving less support payment?
JOSH FRYDENBERG:
Firstly, it's a demand-driven program. So they will be receiving the support that they need. About 975,000 of the 3.5 million people that are on JobKeeper are employed in Victoria. It's Treasury's estimates, and obviously this is a very difficult time to be making estimates and forecasts so it comes with the usual caveats, that about three-quarters of those, given the restrictions that are in place in Victoria, will continue to receive the JobKeeper payment from October through to December.
DAVID SPEERS:
So about half the JobKeeper recipients will be in Victoria?
JOSH FRYDENBERG:
Well roughly around half based on those numbers. But again, it's a very fluid situation. Victoria is in a six week lockdown. It's obviously a quarter of the national economy.
DAVID SPEERS:
And that's my point. Why should they get less money, less support?
JOSH FRYDENBERG:
Well again, the first thing I’d say is that it is still significant support. The second thing I’d say is it's not been the only measure of support that we've been providing to businesses. We've also provided up to $100,000 with a $30 billion program called a cash flow boost based on the size of businesses’ payroll.
DAVID SPEERS:
Sure, but based on your first answer, you're essentially saying to Victorian workers and businesses, we can't afford to keep supporting you at the same level?
JOSH FRYDENBERG:
No David, what I'm saying to Victorian workers and businesses is this Government has gone further than any previous Government...
DAVID SPEERS:
We are in an unprecedented crisis.
JOSH FRYDENBERG:
And look at the numbers. Look at the numbers that we released this week about our expenditure, about our payments, about our programs. We're talking about $289 billion of economic support that the Federal Government is providing.
DAVID SPEERS:
And there's a limit.
JOSH FRYDENBERG:
Well, again we've got to do what is reasonable. But the fact is, the JobKeeper program is being extended for another six months, and as you heard there from the Small Business Ombudsman, that's come as a great relief to small businesses.
DAVID SPEERS:
What about the unemployed? Treasury, in fact, your budget update says that unemployment could reach as high as 10.75 per cent by December. Would you seriously be willing to go back to the old Newstart rate after December?
JOSH FRYDENBERG:
Well the first thing to say is, when you look at the unemployment rate, the best rate to look at is not the official unemployment rate, but what is known as the effective unemployment rate. And the reason being…
DAVID SPEERS:
Is there a forecast for that?
JOSH FRYDENBERG:
Well, there is not an official forecast, but there is a belief by Treasury that it will start to come down and be very similar to what is their official…
DAVID SPEERS:
Come down to what, what is their unofficial forecast?
JOSH FRYDENBERG:
The official forecast for unemployment is around 9 ¼ per cent, and the sense is that it will come down to something approximating that by December. But let me just…
DAVID SPEERS:
What about this effective unemployment rate?
JOSH FRYDENBERG:
Let me just explain that. So the effective unemployment rate takes those who are officially unemployed, then it also combines that with those who are on zero hours and those who have left the workforce altogether.
DAVID SPEERS:
So what's that going to be at the end of the year?
JOSH FRYDENBERG:
So right now it's 11.3 per cent and the view of Treasury is that number will come down gradually by December to be somewhere close to where that 9 ¼ per cent official unemployment rate is. And the reason being is that those who are on zero hours today as restrictions are eased, are starting to get more hours. And in those June ABS data numbers, we saw 130,000 people who were on zero hours start to get some hours.
DAVID SPEERS:
Still a very high number.
JOSH FRYDENBERG:
A very high number.
DAVID SPEERS:
Would you really be willing to go back to the old Newstart rate for that many Australians after Christmas?
JOSH FRYDENBERG:
The PM has made it very clear that we're extending the JobSeeker coronavirus supplement, so at $250. And obviously, it doesn't change the $550 rate till the end of September. And then we've given ourselves the flexibility to assess the future of JobSeeker, the coronavirus supplement, closer to the end of the year. But the Prime Minister himself has talked about leaning in…
DAVID SPEERS:
What does that mean? What does "leaning in" mean?
JOSH FRYDENBERG:
Well it means that we're favourably disposed to continuing it, but we've got to do an assessment of where the jobs market is at that time. And obviously, it's all about getting the balance right, David. It's about getting the balance right so that there are incentives for people to return to work, and at the same time, providing the safety net, the cushion to the blow, which is losing a job.
DAVID SPEERS:
Let's talk about what's going on in the workplace and these IR emergency flexibility arrangements that have been put in place. You want them to continue, even for businesses no longer receiving JobKeeper after September. Does that mean a worker could suddenly have their hours reduced by their boss even if they're no longer entitled to JobKeeper?
JOSH FRYDENBERG:
Well the way it's worked, and it applies not just to hours but also to duties and to the location of staff, is that you need to consult with the employee, you need to give three days’ notice, you need to do what is reasonable, it needs to be within the normal operations of the business. And if you look at the number of disputes that have gone to the Fair Work Ombudsman, or the Fair Work Commission, there have been minor numbers or small numbers in comparison to the size of this program. So this has been...
DAVID SPEERS:
But you know right now that you're going to get $1,500 a fortnight, right? If your business is no longer receiving JobKeeper, it’s turnover has picked up, where does that leave the worker?
JOSH FRYDENBERG:
Obviously, this is about aligning the interests of the employer and the employee and ensuring that the business can get back on its feet. So just because a business who is on JobKeeper today is not getting JobKeeper from October onwards, doesn't mean that they're not doing it tough. This is going to be a hard grind for those businesses. It's not business as usual. I mean, borders are closed, social distancing is in place, Victoria is in lockdown, and these businesses have seen their turnover fall by more than 30 per cent. So even if their turnover...
DAVID SPEERS:
We're talking about businesses who have picked back up again.
JOSH FRYDENBERG:
But what I'm saying is that those businesses who have been on JobKeeper today have seen their turnover fall by more than 30 per cent. So let's say after October, their turnover is down by 20 per cent and they're no longer eligible for JobKeeper, don't think that they're not doing it tough.
DAVID SPEERS:
Would you have any sort of test? They have to be still down by a certain percentage?
JOSH FRYDENBERG:
Look, the Industrial Relations Minister is going to be engaging with the stakeholders. But it's really important to understand...
DAVID SPEERS:
...so sorry, are you open to having some sort of test?
JOSH FRYDENBERG:
No, we're not talking about a test at this point. What we're talking about is having discussions with the stakeholders to continue those JobKeeper arrangements in terms of the IR laws. Because can I say that the protections for the staff members remain; adverse action, coercion, unfair dismissals, occupational health and safety. All those protections are in place. But we want to give the businesses the best opportunity to go forward. So this is very much aligning the interests of employers and employees and giving business the best possible chance to get to the other side.
DAVID SPEERS:
On the reform that's going to be required to grow Australia out of this and create some jobs, can I get a sense of how ambitious you're willing to be? I mean, I think it was Paul Keating, he famously said, "every galah in the pet shop has got ideas on micro economic reform." A lot of people are giving you free advice of how big and bold to be here. Can you give us a sense of what we should expect?
JOSH FRYDENBERG:
Our first priority and our great ambition is to get people back into work and to keep people in work. And so that's why extending the JobKeeper, these IR flexible changes, bringing forward $4 billion worth of infrastructure spending, shovel ready projects to boost aggregate demand, as well as 340,000 positions for training and skills, is absolutely critically important. So our number one priority is to get people back into work and to keep those jobs. Now, looking longer term about broader reforms, obviously, we've kick started those discussions with stakeholders about the industrial relations settings. And so, whether it's around awards or enterprise agreements or greenfield sites or compliance or casuals, we've set up five separate work streams. When it comes to skills, we're looking to move to an efficient pricing model…
DAVID SPEERS:
But for you, are you really prepared to push hard here for something big, or should we expect what's achievable?
JOSH FRYDENBERG:
Well, reform is not an end in itself. It's all about the outcomes that reforms deliver. And what we're focusing on, David, is reforms in the skills space, reforms in deregulation and reforms obviously continuing in the energy space which has seen 10 consecutive months of wholesale price reductions…
DAVID SPEERS:
So we might see something more on energy?
JOSH FRYDENBERG:
No, well I’m saying there's a lot of work going on there. Can I just make that point, when it comes to energy, we're looking at every aspect of the value chain, whether it's through generation with what we're doing on gas, whether it's through transmission with the second interconnector with Tasmania, whether it's storage with Snowy 2.0 or whether it’s transparency and competition on the default market offer on price.
DAVID SPEERS:
You did say when it comes to economic reform the other day that you'll be taking inspiration from Margaret Thatcher and Ronald Reagan. Really?
JOSH FRYDENBERG:
Well they dealt very successfully with the challenges that they faced, particularly stagflation, high unemployment, high inflation. But if you look at Margaret Thatcher after Labour's Winter of Discontent, she came in, she reduced the number of days lost to industrial disputation from 30 million down to 2 million, she cut taxes and she talked about every earner being an owner…
DAVID SPEERS:
Also went for some sweeping IR reform that might scare some workers.
JOSH FRYDENBERG:
Well she had eleven and a half years so she was doing something right by the people of Britain. And when it comes to Ronald Reagan, he used to talk about two economists having three opinions. But what he did say is that cutting taxes, cutting red tape, he created 20 million new jobs…
DAVID SPEERS:
Doubled the debt.
JOSH FRYDENBERG:
Well he did spend the Soviets into submission, and that wasn't a bad thing for the world, so he was very successful…
DAVID SPEERS:
Reaganomics is…
JOSH FRYDENBERG:
Well he boosted growth…
DAVID SPEERS:
It sometimes (inaudible) trickle down economics too, Treasurer.
JOSH FRYDENBERG:
Thatcher and Reagan are figures of hate for the left because they were so successful. One got two terms, which was the maximum you can get in the United States, Margaret Thatcher got eleven and a half years…
DAVID SPEERS:
So they’re (inaudible) guiding light here?
JOSH FRYDENBERG:
Well you take inspiration from lots of different sources. I also take it from Howard and Costello. But the reality is that Thatcher and Reagan cut red tape, they cut taxes and they delivered stronger economies.
DAVID SPEERS:
Treasurer Josh Frydenberg we’ll have to leave it there, thanks for joining us.
JOSH FRYDENBERG:
Good to be with you.