3 November 2020

Doorstop interview, East St Kilda, Melbourne

Note

Subjects: RBA rate cut; terror attack in Vienna; deeming rates

JOSH FRYDENBERG:

Today the Reserve Bank of Australia confirmed that Australia’s economic recovery is well under way. The Reserve Bank has upgraded their forecasts for Australia’s economic growth and for our labour market. And this followed positive economic data this week. We saw today consumer confidence increase for the ninth straight week to take consumer confidence levels back to where it was in early March. We’ve also seen job ads up this month by more than 9 per cent and we’ve also seen loan approvals up by 5.9 per cent with particularly strong numbers for new loan approvals for new home construction off the back of the HomeBuilder programme and other Government incentives.

The decision by the Reserve Bank of Australia today to cut the cash rate down to ten basis points and to target the three-year bond yield at ten basis points complements the economic support that the Morrison Government has provided the Australian economy. The Reserve Bank made it very clear in their statement today that their moves today complement what the Morrison Government announced in this year's Budget, particularly supporting job creation and our economic recovery.

We have committed, as a Government, some $507 billion both in direct economic support and balance sheet support. That's the equivalent of around 26 per cent of GDP. And it's in stark comparison to just a 3 per cent of GDP commitment by the states, and that's all the states put together. So, we realise that today's announcement will reduce the cost of borrowing. And today's announcement by the Reserve Bank will reduce the cost of borrowing and is good news for households, good news for small businesses and it will complement what the Morrison Government has already undertaken to support job creation across the economy. It's my expectation that the banks will now look for ways to pass on those rate cuts. Pass it on to small businesses and pass it on to mortgage holders. Are there any questions?

QUESTION:

My question is if this is passed on in full by the commercial banks as you are hoping, what would it mean for someone with a $400,000 mortgage for example?

JOSH FRYDENBERG:

Well, someone with a $400,000 mortgage, which is about the average mortgage across the country, the combination of what we’ve seen from early this year to today's announcement when it’s come from down from about 75 basis points to just ten basis points, that’s worth about $1,000 a year to somebody with a mortgage of that that size. Some of the

banks have already priced in today's announcement by the Reserve Bank, it had been highly forecast and highly expected. That being said, the banks, no doubt, will look for other ways to pass on this lower cost of borrowing for them, whether it's for small business loans or whether it's for fixed mortgage rates as well.

QUESTION:

Jim Chalmers says that the Reserve Bank has to step in and do the heavy lifting because the Morrison Government is not doing enough, is that correct *inaudible* confidence in your handling of the recession?

JOSH FRYDENEBRG:

Sorry, who said that? But who put that proposition?

QUESTION:

Labor, the Shadow Treasurer, Jim Chalmers.

JOSH FRYDENEBRG:

Well, if Jim Chalmers was a horse he would be running in a group

three and coming last and he would be put out to pasture, which probably would be the best course of action for his leader, Anthony Albanese, right now. The reality is no-one's listening to him. What they are focused on is the measures in the Budget. And the Budget supported job creation across the country. We've seen in the last four months, 446,000 jobs being created; 60 per cent of those jobs have gone to women, 40 per cent have gone to young people. We saw consumer sentiment up in the Budget month by 11.9 per cent. That was the single biggest increase in consumer sentiment in a Budget month since the series began back in 1974. And today, we've heard again that consumer confidence has been on the rise nine straight weeks. And Australia's AAA credit rating has been reaffirmed. You only have to look at the statement itself from the Reserve Bank. It is crystal clear. Their announcement today in their words, complements the significant steps taken by the Morrison Government in this year's Budget to support job creation and our economic recovery. Our economic recovery which is now under way.

QUESTION:

Yes, Treasurer. You say the economic recovery is now under way. The Reserve Bank board said it is not expecting to increase the cash rate for at least three years so, I guess,  does this indicate that this recovery, it will be a long recovery?

JOSH FRYDENBERG:

Well, they made clear as well in their statement it is going to be a bumpy road and it's going to be a long road. And we know that because the Australian economy has been hit by the biggest economic shock in more than 100 years. Let's not forget that early on in this crisis, 1.3 million Australians either lost their jobs or saw their working hours reduced to zero and we all have that picture imprinted in our minds of those long queues outside Centrelink as people lost their jobs and feared for their job security. But now with the significant support from the Morrison Government, and the suppression of the virus across the country, the jobs are coming back. And they're coming back in all sectors across the economy. Obviously, with international borders remaining closed and some of the state borders remaining closed, tourism and aviation will continue to feel the pain of the virus. But in other sectors across the economy, we're seeing some positive signs as jobs are coming back and restrictions are eased. But it will be a long, hard and bumpy road for the Australian economy, and indeed, for the global economy.

QUESTION:

Will you still not commit to budget repair until the unemployment rate falls below 6 per cent?

JOSH FRYDENEBRG:

We’ve made it very clear in our fiscal strategy that there are two phases. The first phase is to continue with that targeted and temporary support so that we can get

the unemployment rate back comfortably below 6 per cent. And then we move to the next phase, which is the fiscal sustainability. They move together, and what both phases depend on is strong job creation. The Budget was all about one thing; creating jobs. Jobs, jobs and more jobs. That has been our focus. Let's not forget, when the Morrison Government, in February, before the COVID pandemic had really hit, it had 5.1 per cent unemployment across the country and that was a reduction in the 5.7 per cent unemployment when the Coalition first came to government. Obviously, with this pandemic hitting the economy, the unemployment rate has gone up and the expectation is that next year it will start to trend down.

QUESTION:

Another one from me on another matter please, Treasurer. Are you able to respond to the terror attack in Austria?

JOSH FRYDENEBRG:

These were devastating pictures and a devastating story of yet more lives being lost. Whether it's the attack in Vienna or recent attacks in Paris and in Nice, these

attacks have a constant thread. They're barbaric and they're acts of terrorism. And they're committed by people who don't respect our rule of law, and certainly don't adhere to our values. So we need to continue to be vigilant and continue to respond both with law enforcement and intelligence agencies and all those various steps that we take. But also continue to promote education and a message of tolerance, not hate.

QUESTION:

Can I just ask one more on the rates, please. The low interest rate is another hit to savers. What can be done to help them, particularly retirees? And will you look at, perhaps, reducing the deeming rate, or the lower deeming rate?

JOSH FRYDENEBRG:

Well, as you know, Jen, we have reduced the deeming rates substantially. The lower deeming rate was at 25 basis points ahead of today's announcement. We'll continue to monitor that very closely, understanding that while today's news is good news for borrowers, whether they're small businesses or households and families with a mortgage, it's also tough news; tough news for savers, people who have put money in the bank. And so, we'll continue to monitor very closely those deeming rates, recognising that the Coalition's track record has been to reduce those deeming rates, consistent with the interests of senior Australians and other savers across the community. Thank you.