DAVID SPEERS:
Let's go straight to the Treasurer, Josh Frydenberg. Thanks very much for joining us this morning.
JOSH FRYDENBERG:
Nice to be with you, David.
DAVID SPEERS:
It seems one of the big unknowns right now is what happens to the economy when JobKeeper comes to an end in March. First, can you just confirm JobKeeper will definitely end in March or is there a chance you will extend it further?
JOSH FRYDENBERG:
It is only legislated until the end of March and that is the plan and JobKeeper has been a remarkable program at $101 billion, it has supported some 3.5 million workers, but it was always temporary, David, and always targeted. Even though we extended it for an extra six months, the Budget is moving and transitioning to the next phase of our recovery plan, namely to create nearly 1 million new jobs. We are doing that in three keyways: we are boosting economic activity with the tax cuts for more than 11 million Australians, which is now law, as well as the two $250 payments for pensioners, veterans, carers and others on income support. Secondly, we are enabling businesses to take decisions to invest, to hire, to innovate and to grow. We're doing that with the expansion of the instant asset write-off, the loss carry-back measure, the research and development, the infrastructure measure. Thirdly we are hoping to tip the balance for businesses to hire an extra worker. We are doing that with $1.2 billion with an investment to create 100,000 new apprentices as well as the JobMaker hiring credit, which is to support, according to Treasury, 450,000 jobs for young people. You see, the Morrison Government sees the government itself as a catalyst for the economic recovery, not the solution. The solution lies around every kitchen table in every Australian household. The solution lies in every factory floor, in every farm, in every shopfront. They are the people who have to take the decisions to employ more people. This is the philosophical divide between us and our political opponents. They see government as the solution. They will always spend more and tax more. We will provide the catalyst for the economic recovery.
DAVID SPEERS:
Presumably some businesses will take up the opportunities that you listed there. Some won't be able to. What numbers can you tell us here? How many of the 900,000 businesses that have been on JobKeeper, how many of them will have to fold when it ends in March?
JOSH FRYDENBERG:
Well Treasury doesn’t actually calculate, David, the number of businesses that will be created or the number of businesses that will close. The way their macroeconomic model works…
DAVID SPEERS:
Why not? Surely this is important?
JOSH FRYDENBERG:
Because, what is their focus in the macroeconomic model where they put in consumption, put in investment, put in public final demand which is government spending is what is the impact on employment. What they've told us and this is in the Budget Papers, while unemployment will peak at around 8 per cent in the December quarter, it will come down to 7¼ per cent by mid-next year, that's after JobKeeper has come out. Even though JobKeeper is coming out, we will see the unemployment rate come down. That’s because you can't see any one program in isolation, it's part of a complex ecosystem across the economy and our measures are all complementary.
DAVID SPEERS:
You are not curious about how many small businesses will fold as a result of ending JobKeeper in March?
JOSH FRYDENBERG:
Some businesses will not survive and obviously some jobs will be lost. What I can tell you is when we were doing the insolvency reforms, there are about 4,000 businesses that would have otherwise gone through the insolvency process, some of whom would not have survived, but they did because I made temporary measures to change the various thresholds for statutory demands and the like. There will be businesses that will fold, no doubt about that, and we can't save every business and we can't save every job. Our focus has been...
DAVID SPEERS:
This is the adjustment you’ve been talking about. Some businesses, you will let them go, they will have to adjust?
JOSH FRYDENBERG:
Well, some businesses will not get through, but what we are focused on is giving every business and every job the best possible chance of getting to the other side, and there will be a restructure across the economy. David, interestingly, when Treasury did their review of the JobKeeper program, they did say it had some adverse incentives which became more pronounced as the recovery picked up, namely it prevented the reallocation of workers to more productive roles across the economy. So we want to ensure there is enough dynamism in the labour market.
DAVID SPEERS:
What about the unemployed? There are currently 1.4 million unemployed Australians on JobSeeker. Now, that is expected to grow, as you just acknowledged, before the end of the year, so in the coming few months. Why can't you say in this Budget what's going to happen with JobSeeker after Christmas?
JOSH FRYDENBERG:
Well, the good news is that jobs are coming back and in the last three months, 458,000 jobs have been created, 60 per cent have gone to women, 40 per cent have gone to young people, but the labour market dynamic is still very fluid. Both the Prime Minister and I have said that we are leaning in to ensure that there is continued support for those who are on JobSeeker. The exact rate of that is yet to be decided and will be closer to the end of the year...
DAVID SPEERS:
What I'm asking is why this is. This is a pretty anxious time, I'm sure you will agree, for more than more than 1 million Australians. Why can’t all these plans be announced in the Budget? Why can't you announce this one?
JOSH FRYDENBERG:
Because we want to see where the economic outlook is. We want to see if the restrictions are being lifted, whether there is another wave of cases. We also want to see where the labour market dynamics are because if you look back in August, David, the unemployment rate fell from 7.5 per cent to 6.8 per cent which was the single biggest drop in 32 years. Treasury’s advice to me...
DAVID SPEERS:
As you just said, you are expecting it to go up 8 per cent.
JOSH FRYDENBERG:
Exactly.
DAVID SPEERS:
Just to be clear, you are looking at whether restrictions are lifted. If restrictions aren't lifted much in Victoria, will that weigh on your decision on JobSeeker?
JOSH FRYDENBERG:
All the factors such as where the labour market is, and I'm talking nationally, not just in Victoria, and where the economic outlook is, go into our thinking about the JobSeeker decision. And we recognise that the labour market is very different to where it was pre-COVID. You see, pre-COVID, two-thirds of people who were on the old Newstart were moving off that rate within 12 months. That is clearly not happening at the moment because you don't have the same number of jobs that are available.
DAVID SPEERS:
Now, there are about 750,000 women amongst those on JobSeeker, most of them over the age of 35. They are now going to be competing under your Budget plan against younger workers who will get a wage subsidy. It does put those older workers over 35 at a disadvantage, doesn't it?
JOSH FRYDENBERG:
Well, the first thing to say is we have a series of programs to help get people across the different cohorts into a job. So we've obviously got the JobTrainer program which is 340,000 places, we’ve got 50,000 new online places that are in this Budget, but we are also strengthening the economy more broadly. Women represented 54 per cent of the jobs lost at the start of this crisis. They have been 60 per cent of the jobs that have come back. But the reason why we went for that cohort of 16 to 35 was because if you look right now at the unemployment rate for people who are 15 to 34, it's around 10 per cent. If you look at the unemployment rate for people who are 35 to 44, David, it's 4.9 per cent. And the experience of previous recessions in Australia, particularly the 80s and 90s, is that it takes a long time for people to move off the unemployment queue into work, and particularly a long time for young people. In the 1990s, it took a full decade to get the unemployment rate down below 6 per cent from where it started, but it took a remarkable 15 years to get the number of jobs for young people back below from where it started, and that is what is first and foremost in our minds.
DAVID SPEERS:
Aside from the wage subsidy, you are spending tens of billions of dollars on things like infrastructure, manufacturing, apprentices.
JOSH FRYDENBERG:
Yes.
DAVID SPEERS:
And yet it is the arts, tourism and hospitality that really have been the hardest hit and these are, of course, sectors where a lot of women work. Why aren't you doing more for those sectors in particular?
JOSH FRYDENBERG:
Well, we are providing support for those sectors in a number of ways...
DAVID SPEERS:
Nothing like these other sectors I mentioned?
JOSH FRYDENBERG:
Well, there are women across the trades, too, David. There are women who work on infrastructure projects, David, there are women who work in research and development.
DAVID SPEERS:
Sure, you're right about that, but let's be honest here, the apprenticeships that you’ve supported so far in this pandemic, 8 per cent of the apprenticeships supported have been women, 92 per cent have been men.
JOSH FRYDENBERG:
And we've also announced increased support through the Women's Economics Security Statement for women apprenticeships and cadetships in what are previously male-dominated industries and that's why it’s a focus on mathematics, science, technology, and engineering…
DAVID SPEERS:
The point I’m making is that it’s a drop in the bucket compared to what you're doing in male-dominated sectors?
JOSH FRYDENBERG:
Well again, look at our track record. Look at our track record. Prior to going into this crisis, female workforce participation had reached a record high. The gender pay gap had started to close…
DAVID SPEERS:
Sure, but the pandemic smashed these sectors I mentioned, it’s changed the game. We are in a different economy.
JOSH FRYDENBERG:
And as I pointed out to you 54 per cent of the jobs lost were women, and 60 per cent of the jobs that have come back have been women, and we have measures right across this budget that are designed to boost female workforce participation so we could get it back to where we started. Of the 1.5 million jobs that the Coalition Government created, more than half, around 60 per cent, went to women.
DAVID SPEERS:
Okay, let me ask you about tax cuts. Why didn't you bring forward the Stage 3 tax cuts in this Budget?
JOSH FRYDENBERG:
We wanted the biggest bang for our buck and that was bringing forward the Stage 2 tax cut. That’s what was putting in this additional low-and middle-income tax offset for a year. Those low-and middle-income earners, they’re going to get the best and biggest boost from these initiatives…
DAVID SPEERS:
Are you saying there’s not much bang for buck in the Stage 3 tax cut?
JOSH FRYDENBERG:
That’s more of a structural reform. There is absolutely bang for buck, but that is a big structural reform. That’s getting rid of the 37 cents in the dollar tax bracket, that’s reducing the 32.5 cents in the dollar down to 30 cents and that's creating one big tax bracket between $45,000 and $200,000 which sees 95 per cent of people pay a marginal rate of no more than 30 cents in the dollar, but it’s still legislated.
DAVID SPEERS:
Weighted to the top end and about a third of the tax cuts in Stage 3 go to the top 10 per cent of income earners. Can you just clarify for us...
JOSH FRYDENBERG:
Can I just point out, David, our tax system with the Stage 3 remains progressive. You've still got the top 5 per cent of taxpayers paying no more than a third, paying around a third of the overall tax burden...
DAVID SPEERS:
I’m just asking about Stage 3, do you remain fully committed to Stage 3, or is there a chance you’ll dump that before the next election?
JOSH FRYDENBERG:
Absolutely fully committed. This is a very important reform to create a stronger, fairer tax system, as I say.
DAVID SPEERS:
And remind us what they cost, Stage 3?
JOSH FRYDENBERG:
Sorry?
DAVID SPEERS:
Remind us the cost of Stage 3?
JOSH FRYDENBERG:
It’s just over $130 billion and that is a big structural reform.
DAVID SPEERS:
$130 billion?
JOSH FRYDENBERG:
$158 billion worth of tax cuts went through the Parliament after the last election.
DAVID SPEERS:
Now, I'm asking about Stage 3 tax cuts alone, what are they worth?
JOSH FRYDENBERG:
Just over $130 billion.
DAVID SPEERS:
And you’ll definitely take those to the next election, the ones that have been legislated?
JOSH FRYDENBERG:
They’ve been legislated, they are in the Parliament. They come in 24/25. They’ll create one big tax bracket between $45,000 and $200,000. And 95 per cent of taxpayers will pay...
DAVID SPEERS:
And they’re permanent, they are forever, not like the temporary tax measures for the low-income earners?
JOSH FRYDENBERG:
They are there forever and it will see people keep more of what they earn, we’ll see reward for effort, it’ll encourage aspiration. But importantly, you will see the progressive nature of our tax system maintained, where the top 5 per cent of taxpayers pay overall one-third of the tax burden, where somebody on $200,000 pays 10 times as much tax as someone on $45,000.
DAVID SPEERS:
Alright, a couple of other quick ones finally, why have you cut the refugee intake in this Budget?
JOSH FRYDENBERG:
Well we have maintained the humanitarian intake at 13,750, that’s actually more than came last year and over the last five years, David, we have been second in the world for offshore refugee and humanitarian intake, just behind Canada. So Australia still maintains a very generous humanitarian intake, but obviously with the restrictions that are in place, the numbers are going to be affected.
DAVID SPEERS:
Okay, but you're putting in a cap. There wasn't a cap of 13,750 until what you’ve announced in this Budget.
JOSH FRYDENBERG:
We have put in a cap. And as I said, 13,750 is...
DAVID SPEERS:
Why did you need to do that?
JOSH FRYDENBERG:
Well, again, what we saw last year was that the number was less than 13,750.
DAVID SPEERS:
So why the cap?
JOSH FRYDENBERG:
We thought a cap was appropriate at this time and again we will reassess...
DAVID SPEERS:
Why is that?
JOSH FRYDENBERG:
Because we will reassess it at every budget.
DAVID SPEERS:
Sure, but why did you feel the cap was needed?
JOSH FRYDENBERG:
Because a cap, David, will ensure that we’ll continue to have a generous humanitarian intake. Again, it’s one of the most generous in the world and at 13,750, it just creates that level of certainty.
DAVID SPEERS:
Alright finally, you’re also cutting funding to the Audit Office by $14 million, despite the Auditor-General making it clear they needed more funds. At a time of unprecedented government spending in all these programs, grant programs as well, isn't now a time for more scrutiny, not less?
JOSH FRYDENBERG:
Well, the first thing is that the Audit Office does an important job across government. But if you look at the line item for the Audit Office spending, David, the departmental appropriation is only $600,000 lower this year compared to last year. That's…
DAVID SPEERS:
Well according to your budget Papers, they received $112 million last year and will get $98 million this year. That sounds like $14 million difference?
JOSH FRYDENBERG:
...and what you’re referring to there is taking into account the unspent money from previous allocations, and that number comes down by just over $12 million because that previously unspent allocation has now been partly spent on IT and an office upgrade, and they've still got $24 million, or around of that to spend for that previously unspent allocation. So the key factor and the key line item to look at when you're looking at the Audit Office accounts is to look at what is the departmental appropriation. It’s roughly similar, and importantly the average staffing levels are broadly similar as well.
DAVID SPEERS:
Alright, Treasurer, Josh Frydenberg, thanks for joining us.
JOSH FRYDENBERG:
Always a pleasure.