JOSH FRYDENBERG:
Well, it’s a great pleasure to be here with my ministerial colleagues Michael Sukkar and Jane Hume. We’re working hard together on a series of important productivity-enhancing reforms, which is very much the theme of today as we launch the fifth Intergenerational Report, a document that comes out every five years, an initiative of former Treasurer Peter Costello. This is a very timely, important document. It highlights key economic and demographic trends. It’s not a predictor as to what Australia will be in 40 years’ time, but it is an insight into what cause could be in 40 years’ time based on existing policy settings. This report concludes that Australia will continue to grow, that our debt levels will remain low by international standards and are sustainable. But there are some warning signs. The ageing of the population is going to put significant pressure on the budget, on both the revenue and the expenditure side. The impact of Covid is not short lived; its economic impacts, its budget impacts, will persist.
Australia’s population is expected to reach 38.8 million people by 2060-61. This is the first IGR where there is a downward revision in terms of population. Because as a result of closed borders through Covid, we see Australia’s population growth today at its lowest level in a hundred years. And migrants tend to be younger on average than the rest of the community, the existing population. So closed borders will see our population smaller but also see our population older. A key message out of this year’s IGR report is the importance of productivity to Australia’s economic growth and to Australia’s national prosperity. 80 per cent of our income growth over the last 30 years has been driven by productivity-enhancing reforms, and we continue as a government to pursue those reforms that sees more investment by businesses in machinery and equipment, the infrastructure rollout, skills programs, tax reform that from the 1st of July will see company tax rates cut down to 25 per cent for businesses with a turnover of less than $50 million. Income tax reform which will see the abolition of a whole tax bracket. Our digital transformation strategy is vitally important in boosting productivity. In addition, the changes that we are proposing and have been proposing to ensure more flexible workplaces a critically important as well. So this report indicates that Australia has performed better than nearly any other nation in the world in terms of responding to the Covid pandemic. But the impacts on our economy are significant and that there is some significant warning signs there and that this document and its conclusions provide us with guardrails for future decisions that governments will take. Are there any questions?
JOURNALIST :
The report shows that Australia can’t expect to see a surplus until 2060. Is this a sign that the Coalition has failed future generations?
JOSH FRYDENBERG :
Well, actually more recent IGRs have also shown that there are deficits at the end of the projected period. So the first two IGRs from the Coalition – 2002 and 2007 – showed that there would be a deficit of 7 per cent and 5 per cent respectively at the end of the projected period. We saw in Kevin Rudd’s IGR in 2010 that there would be a deficit at the end of the projected period of 4 per cent. It was only with the 2015 IGR that we saw a small surplus of 0.5 per cent projected at the end of that 40-year period. That was, of course, before Covid, which has been the biggest economic shock that Australia has faced since the Great Depression. So previous IGRs have showed that while there can be improvements, as we’ve seen in this IGR, of the short and medium term in terms of our budget position, the ageing of the population based on existing policy settings does have an impact on budget sustainability and budget deficits. So the conclusions in this IGR are not that different to what we’ve seen in earlier IGRs.
JOURNALIST :
Treasurer, you’ve talked about the impact of Covid on the budget in the longer term. In the short term what about the threat of constant shutdowns, lockdowns over the next few months, what effect is that going to have? And in that context, why has the federal government been so unable to fund a creative, imaginative campaign to counter vaccine hesitancy?
JOSH FRYDENBERG :
Well, we have media campaigns –
JOURNALIST :
They’re not very effective.
JOSH FRYDENBERG :
Well, they’re rolling out. Vaccine hesitancy is not an issue isolated here in Australia. In other countries where they’ve seen higher vaccination rates they’ve also seen vaccine hesitancy. And so we continue to roll out that media campaign, that communication campaign. But our focus here is to get the vaccine out to as many people as possible as quickly as possible. More than 7.3 million doses have been already delivered. As you know, we’re focused on the more vulnerable cohorts, so in terms of the over 50s, than 50 per cent have received their first dose. The over 60s, around 60 per cent have received their first dose, and the over 70s, nearly 70 per cent have received their first dose. Twenty-eight and a half per cent of the eligible population have received their first dose. We’ll continue to roll out the vaccine, but there are issues like with AstraZeneca and the issues that were raise there and it’s applicability to different age cohorts that, you know, the government has no control over. That is something that other countries have also found.
JOURNALIST :
What about the impact, the economic impact?
JOSH FRYDENBERG :
The economic impact of the lockdowns are significant. Treasury modelled the expectation that there would be lockdowns each month, and that was in the budget expectations. But what we are now seeing is a more deadly variant with the Delta strain. It’s more contagious, and it can move more rapidly among the community. And that’s what we’ve seen in New South Wales and that’s what we’ve seen in other countries as well. So the measures that governments are taking now to restrict the movement of people is based on the medical advice and hopefully will lead to the suppression of the virus. And once it can be contained then things can open up again and the economic recovery can continue.
JOURNALIST :
A key part of this report that as you’ve spoken is skilled migration and making sure that program works. If you compare Australia to say the UK, they’re essentially almost fully opened. The United States are getting there. Here in Australia we’re going to have borders shut possibly for another year, quarantine is going to be a thing for a long time. Are we not missing the boat already on getting skilled migrants back into Australia?
JOSH FRYDENBERG :
Well, the first thing to say is Australia’s decision to close our international borders was a very important one and served us well. It meant that we avoided the fate of the United Kingdom. Both Australia and the United Kingdom are islands, yet the United Kingdom had a much more difficult situation with the spread of Covid-19 than Australia did, and that’s because we moved very quickly to close our borders. We have an assumption in the budget that the borders will gradually reopen from the middle of next year, but that’s an assumption, not a policy decision. And we’ll continue to take the medical advice as to when it is safe to open. And, of course, the vaccination rates are a factor in that as well. With respect to cohorts of skilled migrants coming to this country, we have already worked with state governments to ensure that students can come to Australia where the chief medical officer in the particular states have ticked it off and where state governments are bringing in those students over and above their existing quarantine cap. So, too, with skilled migrants; we’re looking at opportunities to bring in skilled migrants where possible. But, again, it’s going to be based on the medical advice. We’re not going to move ahead of the medical advice because obviously the consequences for people’s health, for the economy, are very significant.
JOURNALIST :
That’s a very bespoke program with very low numbers compared to a normal time. How are we realistically going to compete on the international stage for at least the next 12 months on skilled migrants?
JOSH FRYDENBERG :
Well, we are seeing labour force shortages across the economy, and Jane and Michael and I are talking to businesses every day that are seeing some of those constraints. But, again, we have closed our borders and kept them closed based on the medical advice and the threat to the recovery and threat to people’s health by moving too quickly to open. And as we’ve seen, when there are outbreaks, like today in New South Wales, the cost to the economy is very significant. So we don’t want to move ahead of that medical advice, but we’re continuing to monitor the situation very closely. With respect to Australia attracting the skilled migrants that we’re going to need as this IGR said to support Australia’s population growth and our economic growth, I’m very certain that Australia will remain an attractive place for people to come and live and work, particularly given our success as a nation in getting through the Covid crisis.
JOURNALIST :
Given the extent of the threats and the opportunities that are outlined in the report, is it sufficient ambition to aim for only incremental reform, or is that just based on political pragmatism or your understanding of the economy?
JOSH FRYDENBERG :
Well, we’re aiming for big reform. We’re aiming for incremental reform.
JOURNALIST :
But you emphasised –
JOSH FRYDENBERG :
The point I was making in the speech today is that some of the big reforms that we saw in the 80s and 90s can’t be replicated. That’s not to say they can’t be big reforms today. Indeed, we’re very focused on some of those reforms right now, like what we did with superannuation, which was the most significant changes that have passed the parliament since 1992, the most significant changes in insolvency reforms in 30 years, the most significant changes in foreign investment reform in nearly 50 years. So we’ve made significant changes, but you can’t always have those big-bang reforms, and that’s why when we bring these things through parliament we look for bipartisan support. And we haven’t been getting it. We didn’t get it on occupational licensing, we didn’t get it on superannuation, we haven’t got it on labour market flexibility. We’re certainly not getting it in terms of tax reform that we’ve been pursuing. You know, so our political opponents talk a big game, but they haven’t delivered their support in the parliament as John Howard delivered when he was in opposition and the Coalition was in opposition when these big-bang reforms helped drive productivity growth in the 1990s.
JOURNALIST :
Just on the vaccinations, is the federal government looking at whether to purchase Johnson & Johnson now that the TGA has given it provisional approval?
JOSH FRYDENBERG :
I saw Greg Hunt was asked about this yesterday, and I’ll leave those questions to him. But there are opportunities that we’re constantly looking at to increase the supply of vaccine. But I’ll leave that to Greg.
JOURNALIST :
And the AMA this morning has said that quarantine, particularly in hotels, is one of the repeated failings of Australia’s pandemic response. Why has it taken so long to get movement on stand-alone facilities like the one that’s being built in Mickelham?
JOSH FRYDENBERG :
Well, actually our quarantine facilities, our quarantine processes have been effective. We saw a big outbreak in Victoria, but that was very unfortunate and should never have occurred. With respect to stand-alone facilities, as you know, we’ve supported the establishment of one here in Victoria on commonwealth land, and we’ll help fund that thousand-bed facility. I made that very clear to the Victorian government. The Prime Minister has written to the Queensland government and to other state governments proposing potential sites on commonwealth land. So these additional quarantine sites are there to supplement, not replace hotel quarantine, and that’s an important point to make.
JOURNALIST :
In terms of how we approach quarantine, obviously being stuck overseas for tens of thousands of Australians is a big issue, but we’re now in the situation where millions of Australians are in lockdown because of breaches of people coming into the country. Do you think there needs to be a discussion around how many people we’re bringing in through quarantine? Do you think we should cut the numbers perhaps through the winter when the risk of the virus spreading is higher?
JOSH FRYDENBERG :
Again, we’ll take the medical advice on numbers that are coming in and how our systems can cope. As you know, the Prime Minister took and the government took some decisions around the numbers of people coming from India with the new variant and that was because of the capacity of our quarantine process. Again, we will take those decisions based on the medical advice. But the quarantine system has by and large been effective. And Australia’s success has been very effective in suppressing the virus. I’m advised there’s one person in an ICU today here in Australia because of Covid. We haven’t seen the deaths and the hospitalisation rates that we’ve seen in other countries. Indeed, if Australia was to have seen a death rate commensurate with the average across the OECD more than 30,000 Australians would have lost their lives. Tragically 910 have lost their lives, but that is a significant lower figure than what we’ve seen in other countries. And that’s because of our wonderful medical professionals on the frontline, contact testing, contact tracing and working together across state and territory boundaries with the Federal Government to ensure that our response on the health and the economic front is as effective as possible. Thank you.