DAVID SPEERS:
Treasurer, welcome.
JOSH FRYDENBERG:
Good to be with you.
DAVID SPEERS:
So you have this discretion. Under what circumstances would you use it to extend the payment to others?
JOSH FRYDENBERG:
Well, there is a power to amend the rules due to unforeseen circumstances. And the reason why this power was created, because the size of the program, David, $130 billion, it’s unprecedented in scale and scope, but also because the Parliament is not sitting on its normal schedule. We have no plans to change the rules. We want to implement the program as passed through the Parliament with the support of the Labor Party and we shouldn't lose sight of the fact that Wednesday was a historic day for the Federal Parliament. At $130 billion we now have a wage subsidy in place that will support some six million Australian workers, at around 70 per cent of the median wage.
DAVID SPEERS:
There’s no doubt about that. I'm just wondering, again, when would you use this discretion at your disposal? What would it take for you to extend the payment to others?
JOSH FRYDENBERG:
Well again, it’s for unforeseen circumstances, so if you needed to implement it in a different way with the ATO. These issues may arise as the program goes to the implementation phase. But the JobKeeper program will provide a massive financial boost to sole traders, to casuals, to part-time to full-time workers, to the not-for-profit sector. But it's not just the financial boost it will provide, it’s also the psychological boost to the nation.
DAVID SPEERS:
What about those casuals then? Let's talk about those who have been employed less than 12 months with a single employer? The truck driver example Raf was giving earlier is a good one there. Why shouldn't they receive this?
JOSH FRYDENBERG:
Well firstly, casuals that have been connected to their employer for 12 months or more are under this program. We’ve based that on an established concept in the Fair Work Act. But it's important that you don't see the JobKeeper program in isolation. Also, the JobSeeker program, which Renee referred to, will provide $1,100 or more to those casuals who don't fit within the JobKeeper program, but tragically lose their job. We've also relaxed...
DAVID SPEERS:
...It’s a big difference though isn’t it? $400 a fortnight is not a small amount.
JOSH FRYDENBERG:
Well look, you can, there’s also capacity as a casual to work for a small amount of money on top of JobSeeker…
DAVID SPEERS:
...(inaudible) no work at the moment, for a truck driver for example.
JOSH FRYDENBERG:
But again, you’ve got both programs in place. The other important fact here is that we provided up to $100,000 to small businesses based on the size of their wage bill. Now that’s a cash flow boost that they can use to maintain those on temporary visas or those who are casuals who don't come within the JobKeeper program on their books. We’ve also…
DAVID SPEERS:
...so just explain...
JOSH FRYDENBERG:
…we’ve also relaxed, David, we've also relaxed the partner’s income test from $48,000 up to nearly $80,000. Again, that will increase the eligibility for the JobSeeker program.
DAVID SPEERS:
Just explain to me though, skilled foreign workers, for example, they’ve been crucial in supporting our economic growth for years in Australia. What do they get right now?
JOSH FRYDENBERG:
Well, they’re getting access to their superannuation and we've made that very clear...
DAVID SPEERS:
What’s that? Up to $20,000?
JOSH FRYDENBERG:
Up to $10,000.
DAVID SPEERS:
Many of them wouldn't even have that in their super if they’ve only been here five or 10 years.
JOSH FRYDENBERG:
Well some may or some may not. But, as I said, we're providing businesses with up to $100,000 to use, to keep people employed, and to reduce that cost of labour.
DAVID SPEERS:
Okay, but for foreign workers, they don't get JobKeeper, they don't get JobSeeker either, do they?
JOSH FRYDENBERG:
They don't.
DAVID SPEERS:
So, what are they to do?
JOSH FRYDENBERG:
Well, again, it's going to be up to their employer to keep them on the books, if that’s what they decide to do. You see at…
DAVID SPEERS:
…if they can't? If they let them go, what happens to them?
JOSH FRYDENBERG:
Well, again, some will return back overseas. The same applies to international students…
DAVID SPEERS:
Is that what you're suggesting they should do?
JOSH FRYDENBERG:
Well again, if there’s no work for them and they can get back to their home country, then that is obviously an option for them. You see, at $130 billion, David, we had to draw the line somewhere. This is a massive call on the public purse and it is a debt that the country will pay for years to come and at six million people on the JobKeeper program, that's nearly half the Australian workforce.
DAVID SPEERS:
What would it have cost to extend this to foreign workers or, indeed, more casuals?
JOSH FRYDENBERG:
Well you add an extra million people on to the JobKeeper program, that’s an extra $18 billion.
DAVID SPEERS:
So you could afford $130 billion, but you couldn’t afford $18 billion more?
JOSH FRYDENBERG:
Well, in terms of temporary visa holders there’s 2.2 million of those. Now some of those are going to be eligible, the New Zealanders on the 444 visa. But again, we had to draw the line somewhere and I think the Australian people understand how generous, how significant this package is, and what a substantial difference it will make in the workplace.
DAVID SPEERS:
Okay, you worried about too much debt at that point are you?
JOSH FRYDENBERG:
Again, the other thing we’ve been focused on, in terms of the purpose of the JobKeeper program, was obviously to reduce the cost of keeping people in a job. But also to maintain that formal connection between employer and employee, so that when we get to the recovery phase...
DAVID SPEERS:
….but that's gone with the foreign workers isn’t it? As I say, many businesses and, yes, in regional areas, but in the cities as well, rely on those foreign workers and yet under your approach here, the student who might do a shift or two a week, serving coffees in a cafe, they get the full $1,500 a fortnight. The chef from the Philippines working full time in the kitchen will get nothing.
JOSH FRYDENBERG:
Well again, not everyone can fall within a program, it’s not a one size fits all. The other thing to bear in mind, David, is that not all sectors of the economy have been hit equally by the coronavirus. We know that, for example, the retail sector, the hospitality and the tourism sectors have been pretty badly hit and in that case, at $1,500 a fortnight, that's about equivalent to a replacement wage for those workers.
DAVID SPEERS:
How many businesses have now applied for the JobKeeper payments?
JOSH FRYDENBERG:
As of this morning 802,000 have and no doubt that represents millions of Australian workers.
DAVID SPEERS:
Any idea yet how many employees that covers?
JOSH FRYDENBERG:
We don't have those hard and fast numbers as yet because they could be sole traders, they could be not-for-profits, they’d be big businesses and small businesses. They’re likely to be a combination of all the above.
DAVID SPEERS:
And how many have applied to access their superannuation under the rules you touched on there? How many applications have there been?
JOSH FRYDENBERG:
Just over 600,000 already have indicated their interest in doing so. It's important to note that when we announced the early access to superannuation tax-free that was before the JobKeeper package was announced, so I expect the numbers that ultimately access it will be lower than maybe initially thought...
DAVID SPEERS:
So you thought initially $27 billion would be accessed. It’ll be less than that?
JOSH FRYDENBERG:
Well again, we’ll wait to see what happens. But we estimated about 1.6 million Australians would try to access their super early. Not all would take out the full $10,000. But it’s also important to understand that this is an extension of the existing hardship arrangements where you can access your super, and now we're doing so tax-free and Treasury's estimate of $27 billion represents about less than 1 per cent of the $3 trillion that is currently in super.
DAVID SPEERS:
Do you have any idea yet what impact all of this is going to have on the Australian economy?
JOSH FRYDENBERG:
Well it’s a pretty fluid situation. There’s no hard and fast numbers as yet. There is definitely going to be an uptick in unemployment and obviously a significant reduction in growth. That's what is forecast for the global economy as well. But we have approached this crisis from a position of economic strength. In the December National Account numbers, we saw growth was rising. In the February job numbers...
DAVID SPEERS:
It was only half a per cent to be fair…
JOSH FRYDENBERG:
…. we saw unemployment falling…
DAVID SPEERS:
…0.5 of a per cent is not exactly strong growth.
JOSH FRYDENBERG:
Well what we, you're talking about the impact on the growth, but in terms of...
DAVID SPEERS:
I'm talking about where growth was before all of this. Let's come back to what's happening now….
JOSH FRYDENBERG:
It was at 2.2.
DAVID SPEERS:
The annual rate, I’m talking about, anyway, the quarterly rate was 0.5, not exactly a strong…
JOSH FRYDENBERG:
It was ticking up. Unemployment was ticking down. Growth was ticking up...
DAVID SPEERS:
It was...
JOSH FRYDENBERG:
And we had balanced the books for the first time in 11 years.
DAVID SPEERS:
Okay, but the impact now, you said an uptick in unemployment? Is it only going to be an uptick?
JOSH FRYDENBERG:
Well I think it will be a significant increase in unemployment, but that’s a reflection of those queues that we saw outside Centrelink and that's a reflection of the health restrictions, which have had a severe economic impact.
DAVID SPEERS:
And the global economic impact, what’s your expectation there now?
JOSH FRYDENBERG:
Well I’ll be jumping on a call this week with G20 Treasurers and Finance Ministers as well as having an IMF call. There’s going to be a big hole in the global economy, there’s no doubt about that. The numbers that we saw in terms of jobless claims in the United States were pretty disconcerting. I mean…
DAVID SPEERS:
Is that your biggest concern, the US?
JOSH FRYDENBERG:
Well, it’s the world's biggest economy, and David, in the last week of March, 6.6 million people made jobless claims. That’s more than, that’s around 10 times what we saw at the height of the GFC. You know, in the recent three week period in the US, more than 15 million people have made jobless claims. That’s greater than the size of the whole Australian economy. We’re also seeing challenges in emerging economies. We're seeing cash outflows as investors go to safe havens, and we’ve also seen devaluations in those currencies which will increase the cost of servicing that debt.
DAVID SPEERS:
There is a lot of debate already about what the Australian economy needs to look like on the other side of this, when it comes to manufacturing, in particular. What do you think we need to be able to make in Australia that we can't make now?
JOSH FRYDENBERG:
Well I think there is going to have be a proper assessment of those global supply chains and what they mean for Australia and, indeed, for the rest of the world. I mean we're pretty self-sufficient in areas like agriculture. We have enough food for 75 million people, yet we're a country of 25 million people. The Minister for Energy is looking at the issue of fuel security because we import more than 60 per cent of our refined product there. In manufacturing, we play in the niche manufacturing space, and that's been quite handy in this crisis. For example ResMed, a medical device manufacturer, has helped come to the table with an increased number of ventilators, for example. But take masks, we've had to import more than 30 million masks, which Greg Hunt has done a great job with, but we've had to move the army in to a small firm in Shepparton to increase the capacity of production of those masks. So we have to look at all these supply chains…
DAVID SPEERS:
So how do you do that though? If we need to, China makes masks very cheaply compared to the rest of the world, so how do you make us more self-sufficient there? Would you have to impose some tariffs on imported masks and other equipment like this? Or directly fund businesses here to do it?
JOSH FRYDENBERG:
Well this should not be seen as an argument for protectionism. Australia is a great beneficiary of free trade and the Prime Minister has been…
DAVID SPEERS:
So how do you tackle this then? To become more self-sufficient with masks?
JOSH FRYDENBERG:
Well the Prime Minister has been very clear that we need to play to our comparative advantage. We don’t need to engage in mass national subsidies, or indeed, nationalisations of industries. We have to be very considered, purposeful and targeted and play to our strengths and we will work with other countries.
DAVID SPEERS:
What does that mean, sorry with respect, what does that mean?
JOSH FRYDENBERG:
For example, we’ve got great uptakes of technologies. We’ve been good in the niche manufacturing. We can repurpose some existing facilities. I mean, this is a conversation that we’re already starting but our initial and primary focus is on delivering the health and economic outcomes we need to get through this…
DAVID SPEERS:
Absolutely, but you talk there about Government funding certain businesses in niche manufacturing…
JOSH FRYDENBERG:
Well, again, this is where Treasury and other relevant departments like Industry will be doing more work over the months ahead, and the Prime Minister has been very clear…
DAVID SPEERS:
So watch this space…
JOSH FRYDENBERG:
we need to focus on our comparative advantage.
DAVID SPEERS:
He talked about economic sovereignty, the Prime Minister. Are there areas that are going to be critical that we can become more self-sufficient in? I’m thinking not just health but cyber security, energy, these sort of areas as well?
JOSH FRYDENBERG:
Well they’re all important areas to the economy, but also areas where we’ve got natural strengths and what the Prime Minister was talking about with sovereignty is we need to protect our lives and our livelihoods, and we won’t be surrendering to a faceless and a flagless enemy.
DAVID SPEERS:
Can I turn to the level of debt involved in all of this. Have you given much thought yet to how it’s going to be paid off?
JOSH FRYDENBERG:
It will be paid back in the years ahead. But again, we approached this crisis with about a quarter of the debt to GDP ratio of the US, of the UK and about one seventh of what it is in Japan. But the way to meet that growing debt burden will be to grow the economy. The Australian economy today, David, is 16 per cent greater than it was when we came to Government…
DAVID SPEERS:
So growing the economy rather than imposing any higher taxes or spending cuts?
JOSH FRYDENBERG:
Well, we are the Party of lower taxes, and as you know, we were able to increase spending on schools and hospitals to record amounts. We created over 1.5 million jobs since coming to Government…
DAVID SPEERS:
So (inaudible) the post-war approach of growing the overall size of the economy and making the debt therefore proportionally lower?
JOSH FRYDENBERG:
Well again, our track record shows that we can do that. 1.5 million new jobs, we were able to get welfare dependency to its lowest level in 30 years, we halved the growth in Government spending. We are going to have to climb that mountain again.
DAVID SPEERS:
So, are you open though to things like GST changes, other tax changes?
JOSH FRYDENBERG:
Again, we have no plans for that. What we are focused on is delivering the economic and health response and obviously we will have to consider all of those issues in the context of the Budget. But right now, we’re focused on the immediate task at hand.
DAVID SPEERS:
Finally, can I turn to the restrictions that are in place right now and some of the discussion around whether they should be eased. Do you think the economy, firstly, can sustain six months of these sort of closures?
JOSH FRYDENBERG:
I think that the Australian people are prepared for restrictions for as long as it takes, to be honest, because we’ve got to take the medical advice. It’s served us well, we’ve flattened that curve. Just a few weeks ago, David, we were seeing an exponential rise in the number of cases, more than 20 per cent per day, we’ve now got that to below 2 per cent. We’ve got to consolidate the gains. And if you look at Japan, if you look at Singapore, they both thought they had great success and now they’ve seen a second wave of cases. If you look at Sweden, they allowed large gatherings, they’ve now got the military setting up hospitals in the middle of Stockholm and they’ve had 650 deaths from coronavirus, they’ve got half the population of us and they’ve got more than ten times the deaths.
DAVID SPEERS:
So you can’t see any of these restrictions being eased anytime soon?
JOSH FRYDENBERG:
Again, we’ve got to take the medical advice. I think it’s very dangerous and unrealistic to move ahead of the medical advice. It has served Australia well. As the Prime Minister has said, patience is a virtue, complacency is a problem. Everyone needs to understand that this is a very fluid and difficult situation. When you look around the rest of the world, the United States, Europe, parts of Asia, even closer to home, we don’t want to have those experiences, and so far our medical experts and those on the frontline are the real heroes of this crisis.
DAVID SPEERS:
You’re talking to business leaders.
JOSH FRYDENBERG:
Yes.
DAVID SPEERS:
Are you satisfied we can do six months of this?
JOSH FRYDENBERG:
Again, I am talking to business leaders and they fully understand that the restrictions are based on the health advice and the health advice needs to be followed.
DAVID SPEERS:
But can we go six months of this?
JOSH FRYDENBERG:
Again, I don’t have a crystal ball. The Prime Minister has prepared the nation for six months, at least. But we are having a degree of success in flattening out that curve, but it is dangerous to move ahead of the medical advice and that is where we will go.
DAVID SPEERS:
Final one. Ten weeks ago, you sat in this chair. 12,000 people at that point globally had contracted the coronavirus. If I’d told you then that nearly three months on you’d be spending more than $200 billion to deal with this, it probably would have been my first and last appearance on the show. What lessons would you pass on to any future Treasurers about how to deal with crises like this?
JOSH FRYDENBERG:
Well, extraordinary times call for extraordinary measures. John Howard who has seen everything in politics said to me, and he has spoken to the Prime Minister, has said there is no ideological constraints at times like this. That’s the advice we have taken. The Prime Minister has shown great leadership. The National Cabinet has worked effectively. People can be comforted that Liberal and Labor Parties, the National Party, we reached across the political divide and passed the largest wage subsidy this country has ever seen. That’s going to be the bridge to the recovery, that’s the economic lifeline this country has received and this country has needed.
DAVID SPEERS:
Treasurer, Josh Frydenberg, thank you.
JOSH FRYDENBERG:
Thank you.