TREASURER:
Over to you for questions.
JOURNALIST:
Treasurer, with respect, the dollar dropped below 70 cents overnight. We’ve seen the weakest growth since 1961, how can you say with a straight face that the Budget is growing well?
TREASURER:
Well, it is wrong to say it's the weakest growth since 1961, it's just factually wrong. The fact is that the economic growth we had in the last quarter was in line with expectations. Of course it bounces around from quarter to quarter, but it was in line with our overarching expectation to have two and a half per cent growth in the last financial year. We remain committed, absolutely committed to our growth forecasts going forward, but the good news is that the unemployment rate was lower than we forecast in the Budget. Quite clearly there is resilience in the Australian economy that other economies that have huge exposure to commodity prices could only wish for. You look at Canada, for example, a commodity-based economy, very close to the United States, much closer to the United States than we are to China or Japan. United States is growing at 3.7 per cent and Canada has gone into recession. Commodity prices are hitting the Canadian economy very hard. So too have commodity prices hit the Australian economy very hard and yet we've had annual growth of two and a half per cent, which is very reassuring that the diversification of the Australian economy and our capacity to cope is starting to deliver the resilience that we always hope for, but most importantly lay the foundations for future improved growth.
JOURNALIST:
Still below projected growth of 0.4 per cent though?
TREASURER:
Say again?
JOURNALIST:
Still below projected growth.
TREASURER:
No, market expectations were 0.4. There are obviously variations and what we've done is distribute a number of different slides for you, and you can see that obviously there were seasonal variations. There were also, importantly, some one-off variations such as changes in public expenditure and net exports fell quite dramatically. You can see on slide four the drop in net export volumes which is in many ways directly linked to the closure of the Port of Newcastle and a number of other disruptions at key ports. Normally they occur in the first quarter of the year because of seasonal weather, but they occurred in April and therefore had an impact on net exports.
JOURNALIST:
What about the election promise for tax reduction, will that have to be moderated or even scrapped after these figures?
TREASURER:
No, these figures are directly in line with our Budget expectations. As I show on slide number two, as you can see, in the Budget, forecast for real GDP was two and a half, we delivered 2.4 which is approximately the same because in the Budget they use halves rather than decimal points. Employment, a little bit better in outcome. Unemployment rate 6.1 instead of six and a quarter as forecast in the Budget, so better on unemployment, better on employment growth. Inflation was actually better than expected. Wages were around the same, and nominal GDP was a little bit better than expected in the Budget. So overall we exceeded, managed to exceed the Budget expectations.
JOURNALIST:
What about net disposable incomes, that's dropped for the sixth quarter in a row. What do you say to Australians who are coping with less money? Lower wages?
TREASURER:
Well, there has been some more recent data which is encouraging about wages and the more recent data suggests there has been some wage growth beyond inflation. But having said that, when you have a dramatic fall in your terms of trade, it is reflected in the national income, there's no doubt about that. And despite having the biggest fall in our terms of trade in 50 years, 50 years, we've managed to continue to grow and grow strongly last year compared to any other commodity-based nation. It is a remarkable story about the resilience of the Australian economy, but also, it illustrates that the economic plan that we laid down is actually delivering the dividends as best measured by the fact that, for example, in the month of July 38,000 new jobs were created in Australia, compared to 3,600 which was the average under the previous Labor Government for the last 12 months in office.
JOURNALIST:
Just one more question on Government spending, that’s sort of helped keep the economy from contracting. Would any further spending risk entering negative growth territory?
TREASURER:
No again, there are seasonal fluctuations. In that quarter, as you can see, there was a significant increase in government expenditure in that quarter. I can promise you it wasn't planned to be that way, but the fact that you saw new public final demand increase, illustrates the volatility of quarter-by-quarter figures. As you can see from the graph further on, you can see that basically it can be a volatile series, slide 10. You can see that the series is quite volatile and representing all levels of government. These are the seasonal fluctuations. What matters is what the numbers are for the entire year, as it is in the end of the financial year 2014/15 financial year, and the numbers are encouraging. We're not complacent at all. We're not complacent at all, but I tell you what, the Australian economy is showing a deep resilience that people in Canada and elsewhere would die for, and that resilience is going to help to get us through the biggest drop in commodity prices. When I became the Treasurer, iron ore was around $120 a tonne, now it’s $50 a tonne. If I had $120 a tonne still, the Australian economy would be doing even better.
JOURNALIST:
Can I ask you very quickly on another matter, if China does walk away from this Free Trade Agreement, as was suggested as a possibility by one of your cabinet colleagues this morning, how long do you think we’ll have to wait before we have another crack at this?
TREASURER:
It took ten years to negotiate the Free Trade Agreement with China. We got the Chinese to the table, they gave us the best deal of any nation that they have signed a Free Trade Agreement with. Understandably, after ten years of negotiations, the patience of our Chinese friends has worn thin. Bill Shorten is out on a limb on this with the CFMEU and the ETU. If Bill Shorten cares about jobs, if Bill Shorten cares about growth, he must agree to the China Free Trade Agreement. There is no choice. If we do not export more, if we do not get better prices for our commodities, then we will lose jobs and we will lose growth. Bill Shorten doesn't get it and if he does get it, then his partnership with the CFMEU and all of those unions is going to cost lot of Australians a lot of jobs. Thanks very much.