DAVID KOCH:
Treasurer, thanks for joining us. Last night you were on a call to the International Monetary Fund about the impact of the Coronavirus, what did they say?
JOSH FRYDENBERG:
Well many countries are feeling that economic impact, Kochie, and they’re taking substantial fiscal and monetary policy measures. You’ve seen central banks around the world reduce their interest rates, just like the bank here has done in Australia, and as the Prime Minister has foreshadowed we will be announcing a series of measures to support businesses, to keep Australians in jobs, to encourage investment and support the cash flow of many of Australia’s employers. That’s what we want to do because what we believe in is a strong economy and what we did see, as you mentioned at the top of this segment, what you did see yesterday with the National Accounts is that the Australian economy is approaching this economic shock from a position of economic strength.
DAVID KOCH:
And it really is a Black Swan, what they call a Black Swan event, in financial markets. No one saw this coming. But that IMF briefing last night, how serious are they forecasting this to be for Australia and also the global economy?
JOSH FRYDENBERG:
For Australia, we are in our 29th consecutive year of economic growth and we’ve seen, both from the IMF and the OECD, talk about the strength of the Australian economy. Indeed just a couple of days ago the OECD singled out Australia and Germany as two countries that had that fiscal flexibility to respond to the Coronavirus without endangering our debt sustainability, so we do approach this in a much better position than many other countries.
DAVID KOCH:
Ok, so are they saying it will cut half a percent from our economic growth, something like that?
JOSH FRYDENBERG:
Well the Reserve Bank said last night in testimony to Senate Estimates that they foresaw a direct impact of about half a percentage points in the March Quarter.
DAVID KOCH:
k and what the IMF is saying, just to translate for people, is hey our Government debt compared to most other countries is quite small and also we have been running a balanced budget for the last couple of years. So you the Government have got the firepower to actually stimulate the economy.
JOSH FRYDENBERG:
Well that’s absolutely right. Australia has been living within its means, with responsible targeted spending, that does mean we can respond as other countries don’t have the same ability.
DAVID KOCH:
So are you going to announce that next week, this stimulus package, and what will it focus on?
JOSH FRYDENBERG:
Well we’re obviously working through the details of that package and it will be announced sooner rather than later, and it will run into the billions of dollars so it will be significant. The Deputy Prime Minister announced yesterday that he was speaking to his state and territory counterparts asking them for suggestions, in particular, infrastructure projects that could be brought forward and started immediately. But obviously we’re also looking at an investment allowance to support businesses, as well as other measures targeted to some of those sectors that have been directly hit.
DAVID KOCH:
And you mentioned yesterday that deeming rates will be adjusted for pensioners to give them more money to go out and splash that cash around as well. When will that come into effect?
JOSH FRYDENBERG:
Well as you know when interest rates go down as they have, that’s good news for borrowers but not such good news for people who deposit their money in the bank. And if you’re a borrower, that 25 basis point rate cut the other day could be worth more than $700 a year if you’ve got a $400,000 loan. But when it comes to depositors, we understand what they’re going through, we’ve said that we’ll have another look at the deeming rate which at the lower level today is at 1 per cent but obviously the cash rate is at half a percentage point.
DAVID KOCH:
Yeah, this is like, for you as a Treasurer, this is like almost a defining moment for you isn’t it? This is like the onset of the GFC, and your mark in history if you like, political history, will be made on how you react on this. Are you feeling the pressure?
JOSH FRYDENBERG:
Well, Kochie, it’s not about me, it’s not about the Prime Minister, it’s about the Australian people. We do know…
DAVID KOCH:
...but you make the decisions.
JOSH FRYDENBERG:
We absolutely do and we take that ability very, very seriously. But Australia is well prepared. These external shocks are outside of our control, just like the bushfires and the extended drought have been outside of our control, but all the work that we’ve done over the last six and a half years is preparing us for this moment and that’s why we’re focused on ensuring that Australia steers through this economic shock but gets to the other side much stronger and better.
DAVID KOCH:
Ok, alright Treasurer thanks for joining us. No doubt we’ll be catching up regularly over the next couple of weeks with this stimulus package.
JOSH FRYDENBERG:
Good to be with you.