KIERAN GILBERT:
Welcome back to our budget special. And fresh from handing down his pre‑election budget, Josh Frydenberg joins me live now at the desk. Why shouldn’t we think this $8.6 billion going out in six months is not an attempt to throw cash at people to buy their votes?
JOSH FRYDENBERG:
Well, Kieran, the number one topic of discussion around the kitchen tables of Australia right now is cost of living pressures, and near the top of that list is the higher fuel prices at more than $2 a litre. Now, Government has within its power the ability to reduce the excise, and that’s what we’ve done substantially tonight, cutting it by half, and that money will flow through to the bowser and, therefore, to the pockets of Australians. And for many Australians…
KIERAN GILBERT:
But will it?
JOSH FRYDENBERG:
It will.
KIERAN GILBERT:
But you can’t be sure of that because one day’s fluctuation on the oil price could swallow that up.
JOSH FRYDENBERG:
But what I can tell you is that by cutting the excise you’ll see the fuel price, the petrol price, more than 22 cents lower than what it otherwise would be. Now, you’re right that international oil prices are very volatile. In fact, a barrel of oil has gone up by 50 per cent since the start of the pandemic. But what we have done is take action within our responsibility around the excise to help deliver for Australian families, because we’ve heard…
KIERAN GILBERT:
But you can’t guarantee it’s going to be cheaper because you’re not in control of the international oil price. You could swallow it up in the fluctuation.
JOSH FRYDENBERG:
But as you would appreciate, when you cut the fuel excise in half, that’s more than 22 cents that doesn’t have to be paid by the petrol company and therefore doesn’t have to be passed on to the consumer.
KIERAN GILBERT:
You’re going to pay a $1,500 payment to low and middle-income earners as of July 1. We know there are inflationary pressures already in the system, that budget forecasting 4.25 per cent inflation for the next financial year. Is this dangerous in that context of inflation, because you could be handing it out with one hand and the RBA through interest rates and the banks take it with the other?
JOSH FRYDENBERG:
Kieran, these are temporary, they’re targeted and they’re responsible measures. The cut to the fuel excise, according to Treasury, will actually reduce inflation, decrease inflation, by a quarter of a percentage point. The total package that we’re talking about here is less than half a percentage of GDP. So, you have to keep into perspective and the context what we have done today compared to the size of the economy. Treasury have factored in to their forecast, including for that inflation rate, of 4¼ per cent, these measures, and they say that inflation will fall to t3 per cent in the next year.
KIERAN GILBERT:
So, it’s not risky given the high inflation we see internationally and…
JOSH FRYDENBERG:
We’re seeking to get the balance right here, Kieran. It’s a judgement…
KIERAN GILBERT:
You don’t think it’s a risk?
JOSH FRYDENBERG:
I think it’s an important step that is balanced, that is responsible, but that responds also to the needs of Australians who are seeing higher cost of living pressures right now.
KIERAN GILBERT:
That’s true, but if you’re giving say that payment, $1,500 as of July 1…
JOSH FRYDENBERG:
Well firstly, it’s a $420 payment that we’ve announced tonight. It’s on top of the $1,080 so it takes them to $1500 which is real cost of living relief, but it’s also consistent with our values because it’s lower taxes.
KIERAN GILBERT:
It is, but it also comes in the context of, globally an inflationary environment, and now you’ve got also $250 payments going to pensioners, those on welfare cards and so on. A lot of those people will spend every cent of that. Now, obviously they’re doing it tough. Cost of living is an issue, we all know that. But it’s also a risk, is it not, in terms of inflation?
JOSH FRYDENBERG:
So, what we’ve sought to do here is to bank the vast majority of the revenue upgrades that have come from a stronger economy, more people being in work, fewer people on welfare, to the bottom line. So that improves by more than $100 billion by the end of the forward estimates. That’s a very significant improvement to the bottom line, and what I said is that’s the fastest and strongest and largest improvement to the budget bottom line in over 70 years. But at the same time, we recognise that Australian families right now are being very challenged. Their household budgets and balance sheets are under stress as a result of these higher cost of living pressures.
KIERAN GILBERT:
$100 billion you say the bottom line has improved. It’s due to luck though, isn’t it, commodity prices, as opposed to budget restraint.
JOSH FRYDENBERG:
I’m very glad you asked me that question, Kieran. Three‑quarters of those higher revenue upgrades is due to improvements in the labour market. So that’s more people in work, paying tax, and fewer people on welfare. We have been particularly conservative when it comes to commodity price forecast. The Labor Party baked into their long‑term assumptions higher commodity prices when iron ore was $180. We have iron ore today in the budget at $55 even though it’s been tracking at above $130.
KIERAN GILBERT:
The Government is cutting foreign aid as per the forward estimates. Is there any wonder the Solomon Islands is open to China’s embrace?
JOSH FRYDENBERG:
That’s actually not true. What we’ve increased in this budget…
KIERAN GILBERT:
In real terms, is there an increase in foreign aid?
JOSH FRYDENBERG:
Well, the aid budget is $4.5 billion.
KIERAN GILBERT:
There’s no increase.
JOSH FRYDENBERG:
There’s some temporary support of about half a billion and there’s $4 billion of base funding and what you will find is about a billion dollars of that $4 billion is going into the Pacific and that includes…
KIERAN GILBERT:
But there’s no increase in that. And you can see the Solomon Islands open to China’s embrace. Has the Government been negligent on that?
JOSH FRYDENBERG:
Well who was there recently when there was domestic unrest in the Solomon Islands? It was the Australian Government that was quick on that.
KIERAN GILBERT:
So they should be grateful for what they get.
JOSH FRYDENBERG:
No, we are important partners for the Solomon Islands as they are important partners for us. The Prime Minister and I and the rest of the National Security Committee and indeed the Government are very concerned about these reports about China extending their influence in the Solomon Islands. So, we’ll continue to work with the Pacific family to ensure that, you know, we don’t destabilise our region because that’s very important to our national interest.
KIERAN GILBERT:
With respect, there’s been aid groups and advocates in this space calling for an increase for years and there’s been no increase.
JOSH FRYDENBERG:
As you can see, we’re paying and supporting some $4 billion a year in base funding. We’ve been there through COVID with more than half a billion dollars of additional support, and we recognise that this is not only the right thing to do, but it’s also very much in Australia’s interests.
KIERAN GILBERT:
It absolutely is. Now, something else that’s in our interest is Defence spending, aged-care spending, NDIS; these are all massive spends, and they’re all going to grow. Now, you told me during the week that there’s no finish line in politics and in the budget there’s no finish line. If you win the election, will you look at reform to grow the funding envelope to pay for those things, because at the moment, I read this budget, I can’t see where the money comes from?
JOSH FRYDENBERG:
Well, what you can see, firstly, is an improvement to the bottom line. What you can also see from this budget is that our economy is now more than 3 per cent bigger than it was going into COVID. That can’t be said about other countries.
KIERAN GILBERT:
Sure, but you’ve got things like nuclear subs that aren’t even funded here. Where do you get the money?
JOSH FRYDENBERG:
Kieran, the first thing…
KIERAN GILBERT:
Where’s the revenue?
JOSH FRYDENBERG:
Kieran, the first thing to say is we have a $270 billion Defence capability plan. So, we’ve actually ensured that the money is available to invest in that Defence procurement. And as I outlined in the speech, we’re actually building air warfare destroyers here in South Australia and we’re putting them in the water. That didn’t happen under the Labor Party. We’re maintaining combat vehicles in Queensland and we’re putting parts on the F‑35s in Western Sydney and they are now in the air. We’ve got a fantastic story to tell about lifting Defence spending from its lowest level since 1938 under Labor to now tracking 2 per cent and beyond. We are growing the economy. That’s why important investments like the regions tonight will help generate growth and jobs.
KIERAN GILBERT:
We’ve only got 20 seconds left, but you finished the speech with “We delivered, we delivered, we delivered.” That’s fine. In many respects you have, but what’s the vision? Where’s the vision in this?
JOSH FRYDENBERG:
So what I outlined tonight was immediate cost of living relief now but also a long‑term economic plan to create jobs and just to pick out one issue, we identified four regions as economic frontiers for Australia, from the Hunter in New South Wales, to the Pilbara in Western Australia, to Middle Arm in the Northern Territory, to North and Central Queensland with the Burdekin. These are the areas that are going to supercharge growth.
KIERAN GILBERT:
Treasurer, big day for you. I appreciate you making some time.
JOSH FRYDENBERG:
Thank you.