FRAN KELLY:
Treasurer, welcome back to Breakfast.
JOSH FRYDENBERG:
Nice to be with you, Fran.
FRAN KELLY:
The IMF is calling it ‘The Great Lockdown’ and forecasts this pandemic will push the global economy into the worst recession since the Great Depression. How urgent do G20 finance ministers see the need to plot a path out of this lockdown? What kind of timeline were you talking about last night?
JOSH FRYDENBERG:
Well, we're all going to be guided by the medical advice. We hear the calls of business and indeed members of the public as well, to see an easing of the restrictions. But what we've seen in both Singapore and in Japan is a second wave of coronavirus cases after they thought they were having great success against the virus. So we've got to be very careful not to move ahead of the medical advice. It has served us well. And here in Australia, Fran we've seen a flattening of the curve just a few weeks ago. We were seeing an increase in the number of coronavirus cases of more than 20 per cent per day. Now we're down to below 2 per cent and that's obviously as a result of the isolation, the quarantine and the social distancing measures we put in place.
FRAN KELLY:
And given it's a global pandemic and we're in a connected world, are you concerned that around that table some countries are too keen to open things up too quickly?
JOSH FRYDENBERG:
No, I got a sense that everyone was seized of the seriousness of this issue and a number of countries have felt the full brunt of it like Italy, like the United States, some of the nation’s closer to home have had a lot more deaths than we have here in Australia. But what was clear on the call as well was the need for coordinated action both on the economic side, the fiscal policy stimulus side but also the central banks synchronising their actions in terms of monetary policy but also in terms of the health response. And I think that's served us well. Nations last night talked about new support packages. More than $8 trillion of fiscal support has been committed and we've already seen the credit and the debt and the equity markets globally start to stabilise.
FRAN KELLY:
In terms of coordination though, we also have seen countries acting independently, obviously, locking down borders but also buying up health supplies wherever they can. Is there a fear that the desire to protect their own countries from the disease could morph into full-blown protectionism that would have an impact on free trade long after this crisis is over? Are you concerned about that at all?
JOSH FRYDENBERG:
It's a legitimate issue and that's why last night in my comments on the call, I reiterated the need for borders to remain open, for the free flow of those urgent medical supplies and other equipment that's necessary in fighting this global pandemic. We do not want to see a reversion back to protectionism and indeed the Canadian Finance Minister was another person on the call who made a similar point. We want to see free trade continue but obviously borders have been closed because of the medical need.
FRAN KELLY:
It's clearly putting a strain on international cooperation on some fronts. Yesterday we saw the US President, Donald Trump pull US support for the WHO right in the middle of a pandemic. The UN has been virtually sidelined during this crisis. Will COVID-19 kill multilateralism and globalisation?
JOSH FRYDENBERG:
I don't think so. I think global bodies can play an important role, helping to coordinate action…
FRAN KELLY:
Do you think the WHO is playing an important role?
JOSH FRYDENBERG:
I think it's made some significant mistakes along this journey. I mean, take Australia's call early on about the coronavirus having pandemic potential and indeed we called it a pandemic before the WHO did. And when we announced that our borders with China would be closed on the 1st of February, the travel ban, we were criticised by the WHO which did not support it. And, as you know on wet markets from the Prime Minister down, we've been very outspoken in the need for these to end because they've been a source of the viruses that we've seen whether it's the swine flu, SARS or now coronavirus.
FRAN KELLY:
So what's Australia's public position? You've got some criticism, as you've just said. Is Australia threatening to pull out funding too, or cut funding?
JOSH FRYDENBERG:
We're going to continue to support international bodies and we do think that WHO…
FRAN KELLY:
Including the WHO?
JOSH FRYDENBERG:
It does important work in our region and we want to see that continue, whether it's in terms of measles or malaria, or treating some of the other diseases in our region. What happens at a regional level is not necessarily what happens back in Geneva and the practical solutions provided by the WHO locally are much more beneficial than some of the political positions they've taken centrally. But what we will do is leverage off our membership to make these points very clearly within the WHO and the need for reform.
FRAN KELLY:
Treasurer, I know you've got a lot of commitments this morning so let's move on to the Australian economy. We're struggling too, of course, and the IMF had pretty dire predictions this week forecasting a contraction of the economy by nearly 7 per cent this year which would be the single largest hit since 1930. Yesterday we spoke with former Prime Minister Kevin Rudd who is now an adviser to the IMF. He said that the IMF forecast for a rebound in our economy next year of 6 per cent was on the upper end of forecasts and he says the economy could still suffer a U-shaped recovery or even a W-shaped recovery which could see it bouncing off the bottom for some time. Do you agree that that's a risk?
JOSH FRYDENBERG:
Well, the speed and the timing of the recovery will depend to an extent on when the health restrictions are lifted and that's where the medical advice is going to be critical. In terms of the IMF forecasts, you're right they are predicting a significant uptick in unemployment and a downswing in growth but what they are saying is that Australia will grow by more than 6 per cent next year which is more than the United States, Canada, France, Germany, the United Kingdom and Japan - other comparable nations. But we've been very comprehensive and quick in our fiscal response. More than $320 billion worth of measures, if you include the work of the RBA injecting liquidity into the financial system and I think this is helping to stabilise the local economy and from Treasury's own forecast, unemployment will reach around 10 per cent but would have reached 15 per cent…
FRAN KELLY:
Okay.
JOSH FRYDENBERG:
But for the JobKeeper program.
FRAN KELLY:
Well, talking of unemployment, we'll get this latest month's unemployment figures today. Already around 800,000 businesses have registered for JobKeeper. Hundreds of thousands extra people have signed on to JobSeeker. How big will the blow-out in unemployment number be today?
JOSH FRYDENBERG:
Well I think obviously, unemployment will go up. The median forecast is for it to be around 5.4 per cent and unemployment had fallen to 5.1 per cent in February…
FRAN KELLY:
It's going to be more than 6 per cent, isn't it?
JOSH FRYDENBERG:
Well, what the median market expectation is 5.4 per cent and the reason why that is the case, Fran, is because the data is assembled in the middle of March, so it doesn't take into account the full impact of those longer unemployment lines.
FRAN KELLY:
Treasurer, can I just ask you finally the Government appears to have rebuffed Virgin airlines pleas for a bailout. The company now faces, by all reports, a real risk of going under. Why won't the Government come to the company's aid with a $1.4 billion lifeline even a loan guarantee, not a handout? Because if Virgin fails, it will be diabolical for our tourism industry and other sectors, won't it?
JOSH FRYDENBERG:
Well, we want to see Virgin continue. We want to see two airlines in the domestic market but we're not in the business of owning an airline. I mean, Paul Keating sold Qantas 27 years ago back in 1993. Where our focus has been Fran is on providing industry-wide support. We've maintained lines of communication with both Qantas and Virgin but you also have to note that Virgin has a number of very significant shareholders, Etihad, Singapore, Virgin International…
FRAN KELLY:
Yeah, but they've said no. They've rebuffed it. They've said no.
JOSH FRYDENBERG:
But they've got deep pockets. They're shareholders.
FRAN KELLY:
Well, they've said no.
JOSH FRYDENBERG:
Those conversations are continuing but you have to understand from the Government's perspective we're continuing to talk to the company, as we are with Qantas. We've provided more than a billion dollars of support already in terms of regulatory relief, tax relief and rate relief across the industry. But we're not in the business of owning an airline and that obviously is important.
FRAN KELLY:
No, that's true but Virgin are on the brink of collapse because the Government ordered the borders closed. There's a very direct link. Isn't it a special case? You gave cash grants to regional airlines like Rex.
JOSH FRYDENBERG:
And we've provided relief for Virgin as well as for Qantas. We've also put in place our JobKeeper package and we're continuing to talk to the company. But this is a delicate situation where there are major shareholders in the company and no doubt they too want to see the airline continue.
FRAN KELLY:
Josh Frydenberg, I know you have to leave. Thank you very much for joining us.
JOSH FRYDENBERG:
Good to be with you.