FRAN KELLY:
Treasurer thanks very much for joining us.
JOSH FRYDENBERG:
Good morning Fran.
FRAN KELLY:
The Pfizer vaccine has been given the go ahead in Britain. Given how much is riding on this tiny jab in both health and economic terms, will Australia try now to bring forward it’s approval process and get it rolled out as soon as possible?
JOSH FRYDENBERG:
This is obviously a positive development in the UK. Their situation is somewhat different to Australia. They’ve had more than one million infections, nearly 60,000 deaths and right now in Australia, there’s not one person who is in an ICU unit or on a ventilator due to Covid. That being said, we are conducting our own regulatory approval processes and we expect them to conclude by the end of January, with a rollout of a vaccine provided it’s safe and effective, by the end of March. That is our timetable. We’re sticking to it, but obviously our first, second and third priority is community safety.
FRAN KELLY:
Well I’m sure you’re watching it closely though, that timetable. We got that timetable from the head of the Therapeutic Goods Administration yesterday, but if a vaccine is rolled out early and if it is rolled out perhaps in the first half of next year, that’s going to improve your Budget bottom line isn’t it? By how much?
JOSH FRYDENBERG:
Well it does, and we actually had an expectation in the Budget that a vaccine would be available across the country by the end of next year. But we also had a scenario that if the vaccine was available six months earlier, it would boost the economy by $34 billion, so a substantial uplift in economic activity as a result of a vaccine coming earlier than expected. But let’s just wait and see how it plays out. Certainly getting a vaccine globally distributed will be very important to stabilise the global economy as a number of major countries are going through second waves and third waves and that is obviously going to impact here in Australia as well.
FRAN KELLY:
And there’s other factors too that will impact on the economy. I’m talking about China. The National Accounts suggest the economy could be fully recovered from the COVID-19 recession by the end of next year, but how much of that depends on also Australia getting the relationship back on track with China? Because the OECD yesterday noted an escalated in geopolitical tensions with China, is what they’re talking about, could hurt exports.
JOSH FRYDENBERG:
Well the China relationship is Australia’s largest trading relationship, it’s worth more than $200 billion a year. But it’s mutually beneficial Fran, our iron ore has underpinned China’s economic growth. Our agricultural produce is among the best in the world…
FRAN KELLY:
Well that hasn’t stopped them slowing down the imports of them or whacking huge tariffs, or threatening to.
JOSH FRYDENBERG:
It hasn’t and we’re obviously willing to engage in a respectful bilateral dialogue to try to resolve those issues. But we also reserve our right to pursue those trade issues in multilateral forums and again, they’re decisions that the Government has under active consideration. This is a challenging time in that important relationship with China. But if you look at the list of grievances that they outlined, on not one of those would we give ground in the sense that they go to the heart of our identity and to our national security. The free press, the right of democratically elected politicians to speak their mind, foreign investment framework and protecting the national interest, foreign interference laws. All of those things.
FRAN KELLY:
Sure. No one wants Australia to give ground on that but obviously it’s in our interest to try and get this relationship back on track and there is no dialogue at the moment. You know, Beijing has already threatened a range of imports as we mentioned, there’s wine, there’s barley, there’s beef, there’s coal exports held up and now concerns are mounting for iron ore, which is worth about $80 billion a year to Australia. The WA Premier, Mark McGowan, is really worried about iron ore. What’s being done to make sure iron ore is not next on the hit list, or are we just at the mercy of the Chinese at the moment?
JOSH FRYDENBERG:
Well again, our positions are well known and our positions have not changed. We are willing to engage in that dialogue with China, but clearly they have put out a list of grievances which we will not give ground on, so let’s just wait and see where things go. From our perspective we are absolutely focused on ensuring that our exporters get access to a range of markets, not just China, we have been investing in opening up new markets with free trade agreements with other countries as well as multilateral free trade agreements and as you said, yesterday’s National Account numbers, does show that the economic recovery here in Australia is well underway. A 3.3 per cent increase in GDP growth in the September quarter was the highest since 1976 and while technically the recession may be over, the recovery is not, and those numbers were taken before the Budget on October 6 which had a range of other economic supports for the Australian economy.
FRAN KELLY:
I will get to the economy in a second. Just one last question on China because the Opposition Leader now has become publicly critical of the Government’s managing of this. Anthony Albanese says the Government’s presiding over a complete breakdown of the relationship. The WA Premier again, Mark McGowan wants cool heads to prevail to work things out by discussion and not confrontation. Did the Prime Minister overreach when he said the Chinese Government should be totally ashamed of that post and demand an apology that we’re not going to get from China. Should the Australian Government do more and talk less, that’s former Prime Minister Kevin Rudd’s advice. Australian Government should do more and talk less.
JOSH FRYDENBERG:
Well in terms of what our Prime Minister did, he spoke on behalf of all Australians who found that tweet very offensive and he made those views clear from the top of Australia’s political leadership. He also posted, as you know, on WeChat, a message which made it very clear that despite the challenges in the relationship with China, it no way diminishes our close relationship with the Chinese-Australian community, as well as our respect for the Chinese people. In relation to those allegations coming out of the Afghanistan deployment, we have established a transparent process to deal with it and that’s what the Prime Minister laid out on his WeChat post before it was deleted.
FRAN KELLY:
Talking about yesterday’s GDP figures, should anyone be surprised that the economy bounced back – a strong bounce back 3.3 per cent – given lockdowns were lifted across much of the country and it was rebounding from such a low base, that 7 per cent collapse in the previous quarter; do these figures really tell us anything about the underlying strength of the economy?
JOSH FRYDENBERG:
Yes, they do underline the remarkable resilience of the Australian economy because if you look at the performance of the Australian economy year on year, we’re out performing Japan, Canada, New Zealand, France, the United Kingdom, Germany and nearly every other developed nation. Not just on the economic front, but also on the health front. There was a big increase in household consumption of 7.9 per cent, and that’s around 60 per cent of GDP and that did reflect the easing of the restrictions. We saw very strong growth in every state and territory bar Victoria, which actually saw a contraction. Now, if Victoria had experienced the same level of growth we saw across the other states and territories, then the number would have been a 5 per cent increase, not 3.3 per cent. So, we welcome the easing of restrictions in Victoria, bringing the virus under control, and that will augur well for the speed and trajectory of our economic recovery.
FRAN KELLY:
Yeah and that led you yesterday to say that the “trend is our friend,” but will that trend continue when JobKeeper ends in March? Won’t that rip too much money out of the economy? The OECD says you should be maintaining fiscal support until the recovery is well entrenched.
JOSH FRYDENBERG:
The JobKeeper program has been a remarkable success story…
FRAN KELLY:
Exactly.
JOSH FRYDENBERG:
It has supported 3.6 million people in September, but the October ATO data showed that there were 2 million fewer Australians on JobKeeper in October and 450,000 fewer businesses on JobKeeper in October, compared to the previous month. Again, that’s a sign of the economy gaining pace. But JobKeeper was always intended to be a temporary program and one that would taper down over time. It’s not the only economic initiative that we’ve undertaken, Fran. In the Budget, we put in place the JobMaker hiring credit, which will support businesses to take on younger people who have been unemployed. We put the tax cuts for 11.5 million Australians which was legislated through the Parliament, with the business investment incentives…
FRAN KELLY:
Absolutely, but as the Treasurer, JobKeeper is the big one, as the Treasurer would you like to keep that as a fluid end date to see what the economy is doing?
JOSH FRYDENBERG:
The JobKeeper program is scheduled to end at the end of March. As you’ve seen in recent days, we’ve announced other initiatives which will help generate support in specific industries. For example, the extension of the HomeBuilder program for three months which we announced on Sunday and just earlier this week we announced extra support for travel agents who are doing it tough. So we’ll continue to take the measures necessary to support the economy. But JobKeeper as an economy-wide wage subsidy will come to an end at the end of March.
FRAN KELLY:
Treasurer, I know your time is tight. Just one last question. The household savings ratio is almost 19 per cent, that is the fifth highest on record. With the withdrawal of Government support, is it now up to consumers – all of us – to blow our savings and spend our way out of trouble to keep the recovery going? Your predecessor, Peter Costello, once famously urged Australians to have more babies – one for mum, one for dad, one for the country – are you urging Australians to spend, not save for the nation?
JOSH FRYDENBERG:
As the restrictions are eased and the confidence comes back across the economy, both consumer and business confidence, those savings will be spent. As you said, that savings ratio has gotten to 18.9 per cent, it’s actually slightly lower than it was in June at 22.1 per cent, it will come down and it will help the economic recovery as people spend. So, I have no doubt that as long as the virus is controlled, that the economy will continue to grow, the trajectory will be in the right direction and households will spend as they did pre-COVID.
FRAN KELLY:
Josh Frydenberg, thank you very much for joining us.
JOSH FRYDENBERG:
Thank you.