ANNELISE NIELSEN:
Treasurer Josh Frydenberg thank you for your time.
JOSH FRYDENBERG:
Nice to be with you.
ANNELISE NIELSEN:
We had a set of grim numbers come out yesterday. Today your speech is all focused on the strategy to get Australia out of this debt hole. What will get Australia out to the other side of this?
JOSH FRYDENBERG:
Growing the economy. That’s the best way to pay back this debt, to get more people back to work and to get Australians to the other side of this once in a century pandemic. Australia is facing what many other countries around the world are facing, namely growth that has diminished quite significantly in the face of the health restrictions which have been put in place. But obviously also extended and increased spending and falls in expected tax receipts. And that played out in the Budget numbers that we released yesterday. But what is important is that 99 per cent of our spending is either in the 2019/2020 year or the 2020/2021 year, which means that we have protected the structural integrity of the Budget, and our programs whether it’s JobKeeper or JobSeeker, or whether it’s the cash flow boost or the cash payments to households, particularly pensioners, those programs are working helping to support the economy not just economically but also by providing a psychological boost to the nation.
ANNELISE NIELSEN:
Yesterday’s numbers had a projected unemployment rate of 9 ½ per cent. Are you still expecting that effective unemployment rate, those people who want more work but can’t get it, to reach as high as 13 per cent?
JOSH FRYDENBERG:
Well the effective unemployment rate was significantly higher in April, it reached 15 per cent then it came down in May to around 13.3 per cent, and now it’s around 11.3 per cent and gradually it will converge to where the official unemployment rate is. Now the official unemployment rate today is not the best indicator of where the labour market is because it doesn’t take into account people who have left the labour force altogether or those who are on zero hours. So what we’re focused on is the JobMaker program, I will speak about that today at the Press Club, which is all about getting people back to work. And with the restrictions being eased in States and Territories outside of Victoria, we’re actually starting to see better jobs numbers. Last month in the month of June, we saw 210,000 people find a job, that was double what the market expected and 60 per cent of those were women and 50 per cent were young people and so we’ll continue to see the economy opening up. But of course, how effectively we manage the health response and dealing with new cases will very much determine the speed and the trajectory of our economic recovery.
ANNELISE NIELSEN:
So do you have a projection of where that effective unemployment rate will peak? Will it be that 15 per cent high or will it be 13 per cent by the end of the year or should we expect higher?
JOSH FRYDENBERG:
Well the effective unemployment rate has peaked in April at around 15 per cent and it’s now gradually coming down and that’s the projection going forward.
ANNELISE NIELSEN:
When we see how volatile the situation is in Victoria though, are you expecting things to just return to normal or should we expect more of a ‘W’ shaped recovery, up-down again?
JOSH FRYDENBERG:
Well it’s a very uncertain time, and more than five million of my fellow Victorians are in lockdown and that’s a quarter of the national economy. So not only does it hurt business and economic activity in that State, but it also diminishes confidence more broadly around the country. So that’s why the Commonwealth is working very closely with the Andrews’ Government to give them every support that they need. The Premier has said that every time he has asked Scott Morrison for assistance, the answer has invariably been a yes. We have more than a thousand defence force personnel deployed to Victoria right now, more than 800 Commonwealth officials. We have funded 28 respiratory clinics that have undertaken more than 55,000 tests so we’ll do whatever we can to help Victoria suppress this increase in cases.
ANNELISE NIELSEN:
In your speech today you will speak about the fact that the Government doesn’t have the lever of interest rates to be raising more capital and that during the Global Financial Crisis, it was a huge advantage. Prior to the pandemic you used lower interest rates as a marker of economic health, was it a mistake for the Reserve Bank to keep interest rates so low?
JOSH FRYDENBERG:
Interest rates are an issue and a responsibility of the Reserve Bank and I’ll leave that there. But what I’m saying very clearly is that there’s not the same flexibility of monetary policy now to move as there has been in previous crises. And during the GFC we saw interest rates come down by 425 basis points, that was the equivalent of $100 billion stimulus to the economy over a 12 month period. What we’ve seen over the course of the Coronavirus pandemic is interest rates come down by 50 basis points to a cash rate now of 0.25 per cent and that’s where the Governor has indicated that it will remain for some time. So there is not the monetary policy room to move this time round which means that fiscal support is doing much more of the heavy lifting and the $289 billion of economic support, $164 billion of which has been direct financial support and $125 billion has been using our balance sheet alongside the RBA. The Government will continue under Scott Morrison to do everything possible to assist the community through this very difficult and turbulent time.
ANNELISE NIELSEN:
We would be in a better position now though wouldn’t we if interest rates were higher going into the pandemic?
JOSH FRYDENBERG:
Look I’m not looking backwards I’m looking forwards. What I do know is that interest rates are at historical lows right around the world and fiscal support, there’s been more than $11 trillion dollars worth of fiscal support and economic support, that has been deployed globally by Governments around the world. And I think it’s really important to underline that Australia is better placed than nearly any other country, both on the health front as well as on the economic front. I mean, if you look at the number of active cases per million people in Australia it’s 156, in the United Kingdom it’s 3,700 and in the United States it’s 7,700. So we have effectively deployed a suppression strategy but obviously what we’re seeing in Victoria is of great concern. And the next few weeks will be absolutely critical in trying to get those numbers down.
ANNELISE NIELSEN:
In your speech today you’ll also be calling for IR reform to help stimulate the economy, what specifically needs to change?
JOSH FRYDENBERG:
Well as part of the JobKeeper reforms, we introduced temporary industrial relations reforms and that gave greater flexibility to employers, to act reasonably with their employees but to amend duties, to amend the location of their work and of course the hours of their work. And that was just reflecting the difficult economic climate that we’re in and the fact that there was significant Government support in the form of a flat $1,500 a fortnight payment. Now the feedback from businesses is that’s been a really important part of the recovery, having that flexibility. So what we would like to see is those IR changes continue, not just for those firms that have been on JobKeeper already and those who are going forward, but we would like to see those reforms become a very important feature of our economic recovery.
ANNELISE NIELSEN:
Realistically in your career now as Treasurer you won’t get to see a Budget in surplus, what’s the goal now?
JOSH FRYDENBERG:
The goal is to get more people back to work and that is what we’ve seen in the most recent June numbers and we’ll continue to do everything we can to support the economy towards that end.
ANNELISE NIELSEN:
Treasurer Josh Frydenberg thank you for your time.
JOSH FRYDENBERG:
Good to see you.