DAVID SPEERS:
Well, Treasurer, thanks for your time this afternoon. Let’s start with this $9 billion in decisions taken but not yet announced. What are these decisions?
JOSH FRYDENBERG:
Well, look, we have important decisions and announcements to make and to take between now and next year’s budget. But, the overall message from today’s MYEFO is that these are the best set of numbers for Australia’s economy for more than a decade. We have gone from having a $14.5 billion deficit in 2018-2019, to a $5.2 billion deficit for that year, updated from the budget in May. We have also seen the surplus which was expected to be $2.2 billion in 2019-20 being upgraded to a $4.1 billion surplus.
So, the story of these numbers, David, is that they are better than what was forecast in May. They reflect the fact that we have kept spending under control with the average growth in spending at 1.9 per cent, the lowest of any government in fifty years. And we’ve also stayed well below our tax to GDP speed hump of 23.9 per cent.
DAVID SPEERS:
And I want to come back to that, but just sticking on this $9 billion that you will be announcing in the coming months. I note that in your income tax collections over the next three years, you’re going to be collecting $3.6 billion less income tax than you were expecting back in May. Is it fair to assume that there may be more income tax cuts coming?
JOSH FRYDENBERG:
Well, you can make as many assumptions as you like, David, I’m not going to be making any announcements here today other than to say that the Coalition has a proven track record of reducing taxes. We’ve legislated tax cuts through the Parliament, both for businesses as well as for households and families. Labor opposed a number of those and we still got them through because we want more people to keep their hard earned income.
DAVID SPEERS:
You point to the fact that you’ve kept spending under control, and indeed spending is low, about $3.5 billion lower than what was forecast back in May. But, it’s really receipts to the government, your collections, that has gone up more than $12 billion. That’s the big reason for this improved bottom line, isn’t it?
JOSH FRYDENBERG:
Well, the improvements in nominal GDP reflect improvements in the terms of trade, but you are also right that we have been getting improvements on the revenue side as more people find work. And one of the great success stories of the Coalition Government has been the fact that we have created nearly 1.2 million new jobs. We have seen more women get into the workforce than ever before, more young people get a job than ever before and more seniors entering into the workforce. And the net result is more people are paying tax as a result. This is good news for the economy because the economy is growing, we are growing faster than any other G7 country except the United States and we are doing so with the support of the IMF and the OECD and having our AAA credit rating reaffirmed. So, the news across the economy, the news in today’s numbers is very supportive of the Government’s economic plan, which is working.
DAVID SPEERS:
Why have you cut research grant funding by nearly $330 million?
JOSH FRYDENBERG:
Well, what we have seen is that the grants have been kept for these particular block grants at the same level for 2019 as they were in 2018, at $1.9 billion and they will rise to $2 billion in 2022. The money has just been redirected to other education purposes. Money for facilities, money for scholarships and for student places. So, we will continue to strongly fund research in a number of ways and we continue to support this particular program, but we have ensured that some extra money has gone to other education purposes.
DAVID SPEERS:
Alright, let me ask you about the overall economic outlook. Growth and wages growth have been revised down a bit for the coming financial year. Why is that?
JOSH FRYDENBERG:
Well, growth only came down marginally from 3 per cent to two and three quarters and this reflected the impact of the drought, to be honest and there is some expectation that agriculture exports will be about 10 per cent lower than expected. But, at the same time, going out to 2019-20, David, we will see growth get back to 3 per cent. So, the Australian economy is growing strongly and, as I said, we have been creating new jobs, we’ve been cutting taxes, we’ve had our AAA credit rating reaffirmed and, of course, the budget is coming back into surplus for 2019-20. But what will be a big wet blanket across the Australian economy is Labor’s $200 billion worth of new taxes. And it doesn’t matter what the question is for Labor, the answer is only to increase taxes.
Now, Chris Bowen in 2013, after we came to Government, did a speech at the Press Club where he set what the parameters or the criteria were for the Coalition to be successful economically. He said that unemployment needed to be below six and a quarter per cent. Well, as you know it’s down at five per cent and
the unemployment numbers forecast have been revised downwards, which is good news in this MYEFO. He also said that we needed to maintain our triple AAA credit rating, which we have done, he said that the Australian economy needed to be in the top ten economies of the world, which we have done. And he said that we needed to stay below a tax of GDP ratio of 23.7 and we are just above 23 per cent now. So, we have done that. So, by Chris Bowen’s own standards, we have ticked the box.
DAVID SPEERS:
All of that is true Treasurer, but, but the government too used to say that debt was at crisis levels and the net debt has doubled under your watch.
JOSH FRYDENBERG:
Well, actually if you look at the, again, the MYEFO announcement today it is a very strong and positive story about net debt. Because, it is coming down from just above 18 per cent to 1.5 per cent by the end of the medium term, that is an amazing success story in terms of paying back Labor’s debt.
When we left government back in 2007, David, as you remembered there was cash in the bank, there was a $20 billion surplus, there was no net government debt. Now, we inherited from Labor when we came to government, $240 billion of accumulated deficits on their watch, plus $120 billion of deficits still to come. So, we have been gradually winding back the payments the expenditure. We inherited spending growth at 4 per cent, per annum and now we have got it down to just 1.9 per cent. This is part of the success story. Our first job is to deliver the budget back into surplus and our next job after that is to pay back Labor’s debt. DAVID SPEERS:
Let me just turn to another couple of issues, Treasurer, while I have got you there. The decision of the Morrison Government not to shift the embassy in Israel at the moment, but to recognise West Jerusalem as the capital of Israel, hasn’t gone down well with all in the government there in Israel. One Minister close to Benjamin Netanyahu said that it’s a mistake that Jerusalem needs to be a whole and united eternal capital of Israel. Who is right?
JOSH FRYDENBERG:
Well, David I welcome the Prime Minister’s speech and his statement and enunciation of the government and Australia’s position. It was a very clear and strong and principled statement by him. It was the product of a carefully considered process that we and the government undertook and now I think what we have announced is consistent with our long standing position, which is to support a two-state solution. And so therefore our announcement is a step towards that two state solution and it is consistent with our previous positions, which is to support Israel’s right to exist behind a secure recognised borders. And to also recognise the Palestinians right to their own independent homeland and that is obviously a process that needs to be negotiated between the two parties.
DAVID SPEERS:
Sure, but what is, what is, Josh Frydenberg, what is the capital of Israel?
JOSH FRYDENBERG:
Well, we have recognised West Jerusalem as the capital of Israel and that is where
the Knesset is, that is where the ambassadors go and have their credentials presented, we have not decided to move our embassy, our embassy is staying in Tel Aviv, but we are setting up a defence and trade office in West Jerusalem. We recognise…
DAVID SPEERS:
Does that mean you disagree with the whole united Jerusalem into the future?
JOSH FRYDENBERG:
Well, look, what we have, David, what our position is that we support Israel’s capital in West Jerusalem, we recognise it and at the same time we recognise that the Palestinians and their future capital will be in East Jerusalem. But, again these are many issues that would need to be worked out between the parties…
DAVID SPEERS:
Where would the Western Wall be? Would that be in Israel or would that be in the Palestinian capital?
JOSH FRYDENBERG:
David, I am not going to get into a geographic, geography battle with you here…
DAVID SPEERS:
That is exactly what Australia has done now, isn’t it? By drawing this geographic distinction.
JOSH FRYDENBERG:
No, what Australia has done is announced a position, which is consistent with having a two-state solution to the challenge in the Middle East. But, if you look at the Prime Minister’s speech, it is even much broader than a discussion of Israel’s capital, it was also a discussion of the Iran nuclear deal, as well as calling out some double standards of the UN.
DAVID SPEERS:
Absolutely, but this is the bit that has upset the Israelis and it is not something the Americans have done or the British have done. We are drawing a distinction here and the Israeli Government seems to have an issue with it.
JOSH FRYDENBERG:
Well, we have made a decision that is consistent with Australia’s support for a two-state solution. I think it is an advance on where we have been and I think the Prime Minister should be congratulated for going through this process and for the strong and principled speech that he has made.
DAVID SPEERS:
Final one, are you a little annoyed that your colleague, or the National Party MP, Andrew Broad, has become embroiled in a sex scandal and he has resigned today. You’re out there trying to sell the government’s good news from the budget bottom line. This must be a frustration?
JOSH FRYDENBERG:
Well, look, I think for the people of Australia, what they are focussed on is ensuring there are lower taxes and there are more jobs and that is going to be product of the good news that we announced today in the MYEFO statement. That is what matters to the Australian people. Now, media commentators like yourself, might like to talk about those other matters. The Deputy Prime Minister has made a statement about that and I think that is the end of it. What I am focused on, as the country’s Treasurer, is continuing Australia’s 27 consecutive years of economic growth.
DAVID SPEERS:
And I appreciate that. But, just let me try one more time...
JOSH FRYDENBGERG:
But that’s important.
DAVID SPEERS:
…here, Josh Frydenberg, you don’t thing voters too get annoyed at these family values, National Party MPs doing stuff like this?
JOSH FRYDENBERG:
Look, I’ll leave that up to the individual voters and members of the communities to opine on. What I am focused on is economic matters, what I am focused on is the good news that we announced today.
DAVID SPEERS:
No, no condemnation from you about a married colleague on a taxpayer funded trip behaving like this?
JOSH FRYDENBERG:
Well, look, clearly that conduct is inappropriate, and he has taken the necessary steps.
But, what I am focused on is continuing to promote the Government’s economic plan and economic message, which has delivered more than a million new jobs, lower taxes and a budget that is on track to be in surplus, the first budget in surplus since the last year of the Howard Costello Government more than a decade ago.
You know Chris Bowen my political opponent, he likes to talk about Paul Keating. Well, I say to him these are the surpluses that Australia needs to have.
DAVID SPEERS:
Very good. And congratulations on staying on message, Treasurer Josh Frydenberg, on today’s budget news. Thank you very much for joining us this afternoon.
JOSH FRYDENBERG:
All the best.