FRAN KELLY:
Treasurer, welcome back to breakfast.
JOSH FRYDENBERG:
Good morning Fran, nice to be with you.
FRAN KELLY:
Confidence is at the heart of your budget strategy, but how can people be confident when so much of what’s created this pandemic remains out of control starting with the deadly and infectious virus. You’re banking on a lot here, aren’t you?
JOSH FRYDENBERG:
Well, you’re absolutely right Fran there’s a great deal of uncertainty in the current economic climate, not just here in Australia but also globally. And primarily this is a health crisis that’s had a very severe economic impact, and that’s why suppressing the virus is so important. What we’ve seen in the last three months, Fran, is 458,000 jobs come back across the country as restrictions are eased. Jobs continue to be lost in Victoria but the numbers, fortunately, are coming down in terms of COVID cases there. So we are hopeful and optimistic about the future of the economy, and obviously the budget forecasts are predicated on unemployment coming down over successive years as our investments, whether it's backing business or with the tax cuts or the other payments and supports, will generate jobs.
FRAN KELLY:
The more jobs are created, the more confidence will be boosted and it will be a self-fulfilling prophecy. That’s the basis of this, but last night you said there is no economic recovery without a jobs recovery. The Budget’s got $98 billion in extra support but there’ll be another 160,000 Australians unemployed by Christmas. So, how soon will the jobs start flowing for them?
JOSH FRYDENBERG:
Well the unemployment rate is expected to peak at around 8% in the December quarter…
FRAN KELLY:
That’s right. That amounts to 160,000 more Australians unemployed by Christmas.
JOSH FRYDENBERG:
And a lot of that is being driven by what’s happening in Victoria, because obviously that’s where it's been most damaging with the second wave. But these investments, Treasury believe, will ensure that the unemployment rate does not rise higher next year, and actually in the Budget it makes it very clear that without these supports the unemployment rate would be as high as 12 per cent this year and next year. That’s the counterfactual that we’re dealing with, and our measures together with the dynamism in the Australian economy is helping to create around 1 million new jobs over the next few years. We should never lose sight, Fran, of the size, the scale of the shock that we face. It’s the biggest in a hundred years and no country has been immune, let alone Australia.
FRAN KELLY:
I don't think anyone’s going to lose sight of that really, people are feeling it in every element of their lives. Can we go to the $4 billion JobMaker Hiring Subsidy; employers who create a job and take on a young person will receive a wage subsidy between $100 and 200 a week, the Treasury estimates this will support about 450,000 jobs - so this is the heart of your job creation. But is $100 a week a big enough incentive to create a new job and will these mostly be minimum wage jobs? Is that what you're expecting?
JOSH FRYDENBERG:
Well, they’re going to be jobs that are going to see at least 20 hours a week for a worker and they’re going to focus on young people. And as you say Treasury believe it will support around 450,000 jobs, and it will make a difference to the decision that a business needs to take as to whether they can afford an extra employee. And there is a double barrel test here, the employer has to show that this worker is additional to their head count as of the end of September, as well as being additional to their payroll. So there’s no mix and switch with their employees here, they have to take on an additional person. That’s an important integrity measure. History of previous recessions, Fran, in the 1980s and 1990s in Australia is that it took a very long time to get the unemployment rate back from where it came. So in the 1980s it took six years...
FRAN KELLY:
Yes, we all remember
JOSH FRYDENBERG: ...
to get the unemployment rate back below 6 per cent. In the 1990s it took a full decade to get that unemployment rate below 6 per cent. So, we don't want to repeat that experience, we want to move faster, that's why we’ve thrown everything at this response in this year’s Budget.
FRAN KELLY:
What about for workers who are unemployed over the age of 35, according to Treasury there’s 928,000 of them. Could this age limit subsidy act as a disincentive to hiring older workers? You said in your speech last night there is hope as we embark on the next phase of the journey, but what hope would they be feeling today?
JOSH FRYDENBERG:
Well, we’ve got a series of other programs, this should not be seen in isolation from the broader context of measures that we’ve undertaken. So we have a JobTrainer program which is creating 340,000 new training places, we’ve also got 50,000 short courses, and of course, we’ve got record investments in infrastructure which is designed to boost job creation across the economy. But our focus on apprentices and our focus through JobMaker Hiring Credit is focusing on those workers who may not have had the fully developed experience in the workforce, haven’t had that length of time where they can develop the skills of some of those senior members of the workforce and therefore they are at a disadvantage. And if they stay out of the employment lines then that could be a long term proposition for them, and that’s not good news for them personally, and certainly not good news for the economy. That’s why we’re really determined to get them back into work.
FRAN KELLY:
JobKeeper will end in March, that’s still your plan. That’s not good news for a lot of people who are receiving it. How many of the 3.5 million people who are currently supported by JobKeeper have you calculated will end up on the dole queue in March?
JOSH FRYDENBERG:
Well again, the unemployment rate comes down even with the transition away from JobKeeper, and that’s important to...
FRAN KELLY:
...So how many people have been factored in as coming off JobKeeper when it ends in March and ending up in the unemployment queue?
JOSH FRYDENBERG:
Look, there will be some restructuring across the economy, and again, it’s a very dynamic and fluid situation. But as restrictions are eased, we’re seeing those 3.5 million workers who are currently being supported by JobKeeper starting to work for businesses that become more viable.
FRAN KELLY:
Sure, that will happen for many but it won’t happen for all. Have you got a calculation for how many will actually go onto unemployment at that point?
JOSH FRYDENBERG:
Well again, our calculation is 7.25 per cent by mid-next year, is going to be the unemployment rate. And as I said it peaks at eight per cent this year, and as you know JobKeeper ends at the end of March. We’ve seen with JobKeeper that as restrictions are eased, businesses come off it and therefore their employees don’t need that extra support. But in Victoria we’re going to see more people on JobKeeper in the December and the March quarters than in all the other states and territories combined, and that’s a reflection of what’s happened there with the second wave.
FRAN KELLY:
You’ve described the business measures, particularly the 100 per cent instant asset write-off as a game changer. 99 per cent of companies will be able to write-off investments in full, any eligible business purchase. Generous measures, they’re worth more than $30 billion in total. We are in the deepest recession in close to a century, how many businesses do you expect to go out and start investing in this climate of uncertainty?
JOSH FRYDENBERG:
Many, and you see that in the business investment numbers that are forecast for 21-22 with a boost of 6 per cent after we’ve seen declining business investment because businesses want to invest in their future, and businesses now will have the added benefit of being able to do so and to write-off that full expenditure in year one. So if you’re a farmer...
FRAN KELLY:
But they need to have the cash flow to do it, one, and a lot of people are cash strapped after the shutdowns - and they need to be certain that the business will come back once we find a vaccine, and this is all predicated, your Budget, on a vaccine of course. I mean there is a degree of uncertainty that might make businesses pause before spending more money wouldn’t it?
JOSH FRYDENBERG:
There is certainty uncertainty out there but what we are seeking to do here is to bring forward additional investment by businesses who may have otherwise delayed or deferred that investment. And you also need to see our initiative around immediate expense, well this expanded instant asset write-off, together with the loss carry-back measure, because it’s a virtuous cycle. Because businesses can use their losses today to offset against previous profits and therefore get a tax refund from the ATO, we’ll give them money so that they can spend on investment. So we’ve got all these measures working together, supporting each other, and ultimately those two measures alone will support 50,000 new jobs.
FRAN KELLY:
Treasurer, unusually we’re not talking about debt and deficit. That’s normally where we start these post-budget interviews, but everything is different at the moment. The Government was encouraged to spend. The deficit will be $213 billion. You’re tipping unemployment to be back down at around 5.5 per cent by mid-2024. When will the budget be back in the black? When will you bring out those mugs you had printed?
JOSH FRYDENBERG:
Well, as you know, we have set out a two phased fiscal strategy predicated on unemployment coming comfortably below 6 per cent, as you pointed out is that mid-2024 number. Until then, we will be providing this temporary, targeted support, allowing what are called the automatic stabilisers, the extra additional payment for those who need it, as well as letting the tax system to operate, importance with the downturn, and then we will move to stabilise that debt level. But the key point is that you cannot strengthen your balance sheet, you cannot strengthen the economy unless you get more people into jobs. And when we came to Government, unemployment was at 5.7 per cent, but as recently as February, pre-COVID, it was down at 5.1 per cent, and we want to boost the employment numbers and that will drive our better budget outcomes.
FRAN KELLY:
Treasurer, I don’t think we got an answer to that question, but thank you very much.