DAVID SPEERS:
Josh Frydenberg, welcome to the program.
JOSH FRYDENBERG:
Nice to be with you, David.
DAVID SPEERS:
Let me begin by quoting from your first speech to Parliament. You said, "My goal is to ensure that government learns to live within its means." Treasurer, when will those lessons begin again?
JOSH FRYDENBERG:
Well, look, we are doing everything we can to ensure that Australia gets to the other side of this crisis. Context is critical, David. Australia has been hit by the greatest economic shock since the Great Depression. We have seen Treasury fear that unemployment could reach as high as 15 per cent. That's more than two million Australians unemployed. GDP could fall by more than 20 per cent…
DAVID SPEERS:
Didn't happen, though?
JOSH FRYDENBERG:
It didn't happen because we responded with an unprecedented amount of economic support, more than twice what the states and territories committed combined.
DAVID SPEERS:
I guess I'm asking more about where we are now. You tell us that the economy is roaring back to life, and yet in 10 years from now you are still projecting the deficit, that the Budget will still be structurally in deficit by more than one per cent?
JOSH FRYDENBERG:
Well, this Budget, compared to last year's Budget, just last October shows that net debt to GDP, which is a sign of fiscal sustainability, comes down each and every year. The deficits have come down by two-thirds over the course of the Forward Estimates, and when you look at other countries with a AAA credit rating from the three leading agencies, there are nine of them, Australia is one of them, and actually our fiscal consolidation over the next six years is happening faster than those other countries. And, let's not forget, Australia has avoided the fate of other nations. We have seen unemployment come down to 5.6 per cent today, remarkably that is even lower than when we came to government, and we have prevented a generation of Australians becoming long-term unemployed and we've seen Australia recover from this recession five times faster than the experience during the 1990s recession.
DAVID SPEERS:
And that's true, but what I'm just asking about what you are doing now in this Budget for the years ahead? Is there any plan for a surplus?
JOSH FRYDENBERG:
Well we don't print a surplus number over the decade…
DAVID SPEERS:
Do you have any plan for a surplus?
JOSH FRYDENBERG:
We are always striving to balance the books, and we did it before and we will do it again.
DAVID SPEERS:
Where are you striving to, where’s this plan to balance, it is not there in the next 10 years?
JOSH FRYDENBERG:
Of the new spending, about half of it is temporary, so that is doing what is working to date, extending the Low and Middle Income Tax Offsets, which are going to support more than 10 million Australian families with a tax cut. If you earn between $48,000 and $90,000 you’re given an extra $1,080…
DAVID SPEERS:
I’ll come back to tax cuts. So half the spending is baked in, is that the point?
JOSH FRYDENBERG:
Well, half of the spending is around the long-term commitments on aged care, on disability support, on mental health, women's safety, all important issues, David, that you would agree that a government needs to meet. And when people come to looking at the this Budget in more detail, they will see how not only are we building the bridge to the other side of this crisis and getting more Australians in work, because this is our jobs plan, but we are also seeking to secure the economic recovery because the international environment is so uncertain with so many new COVID cases around the world and, of course, Europe has just gone into a double-dip recession.
DAVID SPEERS:
Will you cut spending after the election?
JOSH FRYDENBERG:
Again, we are focused on the here and now. We've always sought to fund appropriately the things that need it most.
DAVID SPEERS:
So does that mean you will cut spending after the next election?
JOSH FRYDENBERG:
Well again, we are not seeking to cut spending after the next election. What we are seeking to do...
DAVID SPEERS:
Not seeking to, what does that mean, you will or you won't?
JOSH FRYDENBERG:
Well our plans are in the Budget, it’s very clear what’s in the Budget.
DAVID SPEERS:
So no spending cuts after the election.
JOSH FRYDENBERG:
So what you can see in the Budget is record spending on hospitals, record spending on schools, record spending on disability support, indeed under a Coalition Government, the NDIS will always be fully funded…
DAVID SPEERS:
So you won’t cut spending on,,,
JOSH FRYDENBERG:
…record spending on mental health.
DAVID SPEERS:
So you won't cut spending after the election?
JOSH FRYDENBERG:
Well our plans are in the Budget that was just on Tuesday night and you can see that we increased spending to guarantee those essential services but we also did so in a way that is consistent with Liberal values, whether it's with regard to supporting the private sector with business investment incentives that will help support around $320 billion of investment, whether it’s backing families by cutting their taxes, rewarding effort, or indeed whether it's encouraging personal responsibility, supporting retirees, supporting stronger regions, supporting home ownership which is totemic to the Liberal Party values.
DAVID SPEERS:
Let's talk about tax.
JOSH FRYDENBERG:
Certainly.
DAVID SPEERS:
When you announced the Stage 3 tax cuts for higher income earners a couple of years ago, you said they were affordable because the Government, “will continue to deliver Budget surpluses.” How are they still affordable when you are now using borrowed money to pay for them?
JOSH FRYDENBERG:
Well they are legislated tax cuts, they are actually in the Budget numbers and they do create a stronger and a fairer system. That’s really important here.
DAVID SPEERS:
But using, before we get to the equity of the tax cuts, they are using borrowed money, I’m asking about the affordability, are they still affordable?
JOSH FRYDENBERG:
Well again they are rewarding Australians in work and it is returning more of their money. That's our approach. The Australian people voted for…
DAVID SPEERS:
Borrowed money. How’s it affordable…
JOSH FRYDENBERG:
But David…
DAVID SPEERS:
…when you’re going to be $57 billion in deficit the year they come in?
JOSH FRYDENBERG:
Well David, again, it creates a stronger and a fairer system, 95 per cent of Australians will pay a marginal rate of tax of no more than 30 cents to the dollar. We took this policy to the last election and then we legislated it.
DAVID SPEERS:
Yes but the world has change since the last election, Treasurer, as you keep telling us.
JOSH FRYDENBERG:
But these are important reforms, and what is also important is that it maintains the progressive nature of our tax system. So the top one per cent of tax payers will be paying about 17 per cent of the tax burden, the top five per cent of tax payers will be paying a third of the tax burden. The top 20 per cent of tax payers will pay about 60 per cent of the tax burden….
DAVID SPEERS:
So these figures you use about the fairness based on, you know, before the last election when you announced all this, can I ask you about the fairness of them now. When the Low and Middle Income Tax Offset ends, which it will, someone earning $45,000 a year is going to be $855 a year worse off than they are today. Someone on $60,000 is going to be about $700 a year worse off than they are today. Someone earning $80,000 will be about $200 worse off than they are today. Everyone earning more than $200,000 will be $9,000 better off under your tax cuts, is that correct?
JOSH FRYDENBERG:
Well, if Anthony Albanese abolishes these tax cuts…
DAVID SPEERS:
No, I’m not asking about Labor, Treasurer. I'm asking about your tax cuts. Is that correct?
JOSH FRYDENBERG:
Well the point is someone on $80,000 will be better off, someone on $90,000 will be better off. Someone on…
DAVID SPEERS:
How will they be better off than they are today? Is what you just said correct?
JOSH FRYDENBERG:
Absolutely.
DAVID SPEERS:
How will they be better off?
JOSH FRYDENBERG:
If you don't go forward with Stage 3 of the tax cuts, someone on $80,000 will be $900 worse off, someone on $90,000 will be $1,120 worse off. Someone on $100,000 will be $1,370 worse off. The key point is, and this is really important David, you mentioned someone on $45,000. When Stage 3 of the tax cuts is locked in, they will then be better off by $1,080 compared to what they would have been back in back in '17/18 before the tax plan.
DAVID SPEERS:
I'm asking about this year. They’re getting the Low and Middle Income Tax Offset…
JOSH FRYDENBERG:
But that is not a permanent feature of the tax system.
DAVID SPEERS:
Exactly, that ends.
JOSH FRYDENBERG:
That's the point.
DAVID SPEERS:
So all these people under $80,000 are going to be worse off.
JOSH FRYDENBERG:
No, they are not. And the key point here David is we are making a structural reform. We are getting rid of a whole 37 cents in the dollar tax bracket. That is really important to understand. A Low and Middle Income Tax Offset is temporary. We extended it last year, we extended it this year. It is not a permanent feature of the tax system…
DAVID SPEERS:
But compared to this year, once that goes, compared to where they are right now, people on average wages, below $80,000, worse off or better off in three years' time?
JOSH FRYDENBERG:
Well again, that's a temporary initiative. This is…
DAVID SPEERS:
So they are worse off?
JOSH FRYDENBERG:
No, this is a permanent feature of the tax system. Now you raised with me people on higher incomes...
DAVID SPEERS:
No, I’m just wanting to clarify.
JOSH FRYDENBERG:
Yes.
DAVID SPEERS:
If you are earning less than $80,000 a year right now, you are getting the Low and Middle Income Tax Offset. That ends, where are you left, worse off or better off?
JOSH FRYDENBERG:
You are better off on the Stage 3 tax plan, Stage 2, Stage 1, all compared back to 2017-18 when the...
DAVID SPEERS:
No, compared to this year, compared to this year Treasurer. Are you going to be worse off in three years’ time?
JOSH FRYDENBERG:
But you’re not comparing an apple and an orange…
DAVID SPEERS:
No I am…
JOSH FRYDENBERG:
You’re comparing…
DAVID SPEERS:
With respect, I am asking you whether…
JOSH FRYDENBERG:
No you're not.
DAVID SPEERS:
For someone today, what tax they are paying today, they are going to be paying more in three years' time?
JOSH FRYDENBERG:
So the Low and Middle Income Tax Offset which you are referring has been extended for a year. We've used it as a stimulus measure, it is not a permanent feature of the tax system…
DAVID SPEERS:
Right.
JOSH FRYDENBERG:
What is permanent feature of the tax system is what is legislated through the Parliament. And that is stage…
DAVID SPEERS:
But compared to what is in their wallet today and what will be in their wallet in three years' time, they are going to be worse off?
JOSH FRYDENBERG:
No, they are not. And can I also point out to you, because you did raise with me people on higher incomes. If you are on $200,000, you are earning four times as much as someone on $50,000, yet someone on $200,000 is paying many more times, as a multiple, the amount of tax that someone on $45,000 is, that's paying actually eight times…
DAVID SPEERS:
And what's the bang for the buck for the economy here? What's the economic growth that we get from these Stage 3 tax cuts?
JOSH FRYDENBERG:
What you are doing is you are rewarding effort, you are encouraging aspiration, you are returning more of people's hard-earned money back to them.
DAVID SPEERS:
So what's the growth dividend for the economy?
JOSH FRYDENBERG:
Well again, they are baked in. So you've seen in our numbers from Tuesday, you've seen how the economy continues to grow.
DAVID SPEERS:
I couldn't find the growth dividend. What's the growth that we get from the stage 3 tax cuts in the Budget?
JOSH FRYDENBERG:
Well again, you see economic growth going through the years in our Budget, including this year. We were around 5.25…
DAVID SPEERS:
But from these tax cuts, $130 billion worth of tax cuts….
JOSH FRYDENBERG:
They are.
DAVID SPEERS:
What growth do they deliver?
JOSH FRYDENBERG:
They deliver a stronger economy over time and…
DAVID SPEERS:
To what degree?
JOSH FRYDENBERG:
I just pointed out to you, compared to the Budget that we announced in last October, you've seen an improvement in our net debt to GDP over each and every year over the medium term…
DAVID SPEERS:
But I’m asking..
JOSH FRYDENBERG:
And that relates to…
DAVID SPEERS:
Surely you've had a look at whether there is any growth from these Stage 3 tax cuts?
JOSH FRYDENBERG:
Well the economy is still continuing to grow. Now David…
DAVID SPEERS:
I'm asking about the tax cuts.
JOSH FRYDENBERG:
And they’re baked in.
DAVID SPEERS:
A lot of money we are paying for this.
JOSH FRYDENBERG:
That's right.
DAVID SPEERS:
What growth do we get?
JOSH FRYDENBERG:
Well get a stronger economy, a fairer tax system, reward for effort and it encourages aspiration.
DAVID SPEERS:
You don't know how much growth we get from the tax cuts?
JOSH FRYDENBERG:
Well the growth numbers are baked into the Budget based on the legislated tax cuts. We took these tax cuts to the Australian people at the last election. They were either voting for Labor's $387 billion in higher taxes…
DAVID SPEERS:
As I say, a lot’s changed since 2019. A pandemic has come along…
JOSH FRYDENBERG:
I’ll tell you what hasn't changed David, our commitment to lower taxes.
DAVID SPEERS:
Okay. Let me ask you about wages.
JOSH FRYDENBERG:
Please.
DAVID SPEERS:
In the next couple of years, before we get to when these tax cuts come in, you are forecasting wages to actually fall in real terms. Why isn't there a plan to boost wages?
JOSH FRYDENBERG:
Well firstly, inflation is above wages this year…
DAVID SPEERS:
And next year.
JOSH FRYDENBERG:
But that is because last year, we saw the steepest quarterly fall in the Consumer Price Index since 1931. Off the back of free child care, lower petrol prices, and lower rents. That's the reason, and what we do see is that wages continue to grow, they grow from 1.5 to 2.25 to 2.5 to 2.75, so by the end of the Forward Estimates they’re above inflation...
DAVID SPEERS:
But the next couple of years you will be going backwards.
JOSH FRYDENBERG:
But the key David, to driving increased real wages is actually to get a tighter labour market. That's why you've seen in these Budget Papers that the unemployment rate comes below five per cent by the end of next year. We had a brief period where the unemployment rate was below five, between 2006 and 2008, then you have to go back all the way to the 1970s. So by driving down unemployment, which our jobs plan does…
DAVID SPEERS:
You will get there eventually. In the meantime though, the Fair Work Commission is currently considering a lift in the minimum wage. You made a submission. Why didn't you say you support a wage rise?
JOSH FRYDENBERG:
Well, the Government has always been consistent with respect to leaving it to the Fair Work Commission to make those decisions. What we did do…
DAVID SPEERS:
You could say you want to see a wage rise?
JOSH FRYDENBERG:
What we did do, is we pointed out the strengthening Australian economy and we will leave it to the Fair Work Commission to make that decision. That has been a consistent approach of our Government.
DAVID SPEERS:
Why aren't you at least doing something to boost the wages of aged-care workers, as was recommended by the Royal Commission, don't they deserve a wage rise?
JOSH FRYDENBERG:
Well the care work force are going through now a Fair Work Commission hearing, obviously seeking a significant boost to their pay, we will let that work out, work its way through, but what I can say….
DAVID SPEERS:
The Royal Commission said you should do more than that. Recommendation 84: Government should collaborate with unions and employers in aged care to increase wages. Why don’t you do that?
JOSH FRYDENBERG:
The Royal Commission also says we should put a tax on all Australians to pay for aged care, we didn’t do that.
DAVID SPEERS:
So the Royal Commission don't know what they are talking about?
JOSH FRYDENBERG:
No, we accepted the vast bulk of the Royal Commission recommendations.
DAVID SPEERS:
Not this one on wages.
JOSH FRYDENBERG:
On that one we have stayed true to our consistent position with respect to wages, but what we did do, with respect to the workforce is put 33,000 new positions for the care workforce through our JobTrainer program because that is a huge issue. But if you want to talk about aged care, we've given the biggest boost to aged care funding of $17.7 billion. 80,000 new home care places. That will reach 275,000 new places compared to just 60,000 when Labor left office.
DAVID SPEERS:
Just the poor old aged-care worker whose aren't getting a wage increase.
JOSH FRYDENBERG:
Well what I said, we are focusing on training. If you are working with dementia patients, we are going to give you extra training, there’s a whole series of initiatives around the workforce.
DAVID SPEERS:
Okay, On borders, you said last year, ‘closed borders cost jobs’. Why isn't there a plan to reopen the international border?
JOSH FRYDENBERG:
Well again we have taken a cautious assumption based on the medical advice that it will gradually open from the middle of next year. Now, the situation is very fluid. You've seen 800,000-plus cases a day, new variants of the virus and we've also seen how damaging new cases and outbreaks here in Australia can be, not just to the economic recovery, but obviously to the lives of our loved ones as well.
DAVID SPEERS:
Some of your colleagues are a bit anxious about this, though, aren’t they, they would like to see a reopening sooner?
JOSH FRYDENBERG:
Well again, we are going to follow the medical advice, it has served us very well through this crisis. Don’t forget the Prime Minister acted very quickly a head of the rest of the world, to close our international borders, at the time starting with China and then more broadly. He was criticised for it, but the net result has been that Australia has been a lot more safe as a result.
DAVID SPEERS:
Why isn't there a plan to seriously expand quarantine capacity in the meantime? Surely that is a no-brainer?
JOSH FRYDENBERG:
We are spending half a billion dollars by expanding Howard Springs to 2,000 people. Quarantine has worked effectively. More than 300,000 people have come in through the quarantine process, that has involved isolating about 3,000 COVID cases. Victoria has a proposal, we’re giving due consideration for, a designated facility between 500 and 2,000 beds. Happy to talk to the states, but the quarantine facility that we have been funding through Howard Springs, based on the Halton Review recommendations has been upgraded.
DAVID SPEERS:
The universities are pretty keen to bring in foreign students and some of the states are pretty keen to bring in as well, is there going to be movement on that soon?
JOSH FRYDENBERG:
Well we have encouraged the states to talk to the university sector to get the approval of the Chief Medical Officer and if they want to put a proposal which will see more international students coming, then it has to be over and above their existing caps, and we will look favourably at those proposals, but importantly they have to be ticked off by the Chief Medical Officer. Gladys Berejiklian, Steve Marshall, they’ve already raised these issues with the Prime Minister, so there’s certainly some interest in it.
DAVID SPEERS:
Okay so the New South Wales and South Australian Premiers have spoken to the Prime Minister…
JOSH FRYDENBERG:
They have.
DAVID SPEERS:
…about this. They have put proposals…
JOSH FRYDENBERG:
The formal proposals will be coming in, in due course…
DAVID SPEERS:
Okay.
JOSH FRYDENBERG:
But let's not forget, at the end of last year, we saw a small cohort of students come through for Charles Darwin University, from Japan, from Vietnam, from Hong Kong, it was a small number of students, if more students are going to come, it does need to be ticked off by the Chief Medical Officer.
DAVID SPEERS:
You said the Government will look favourably at this?
JOSH FRYDENBERG:
We are favourably disposed…
DAVID SPEERS:
Right.
JOSH FRYDENBERG:
…and in the Budget we said that we could see small numbers of international students coming from the end of this year.
DAVID SPEERS:
Okay. Well just finally on universities, not just the foreign students issue, their revenues are hurting many of them. And again, let me finish with a quote from your first speech to Parliament, Treasurer, you said, on university funding, "To underfund these institutions is self defeating because the harvest of intellectual property generated by them can be the source of our prosperity in the knowledge economy of the future." It’s a good speech.
JOSH FRYDENBERG:
You have been reading closely that speech. I also did say that Thomas Jefferson said, ‘education is the first defence of the nation’ and I firmly believe that…
DAVID SPEERS:
Yet overall spending on universities in your Budget is declining in real terms?
JOSH FRYDENBERG:
No, we put in place $19 billion in this Budget to guarantee the domestic enrolments for universities. In last year's Budget last October, I announced an additional $1 billion for research funding, and as a result of measures we've taken through the pandemic there are 30,000 new university places, I think universities are critical to Australia's economic prosperity, to our cultural harmony and, of course, to a better society. One of the initiatives I did put in the Budget was for a patent box on the tax system to ensure that our biotech and medical companies that are so closely interlinked with our universities could work more closely together, creating more jobs within our university system and in our biotech industry.
DAVID SPEERS:
Treasurer Josh Frydenberg, thanks very much for joining us.
JOSH FRYDENBERG:
My pleasure.