FRAN KELLY:
Treasurer, welcome back to Breakfast.
JOSH FRYDENBERG:
Nice to be with you, Fran, on this very auspicious day.
FRAN KELLY:
Treasurer, the economy shrank in the September quarter but is expected to rebound in the final three months of the year. Does that mean no double‑dip recession? We haven’t dodged the COVID bullet to the economy, but we have avoided a rout?
JOSH FRYDENBERG:
Well, everything’s pointing to a strong December quarter, the result which we’ll get earlier next year. But the 1.9 per cent decline in the September quarter was no surprise. We had 13 million Australians who were in lockdown with our two biggest states, New South Wales and Victoria. But from the start of this pandemic, we’ve actually had a stronger recovery, Fran, than all but two major advanced economies, so a stronger recovery than Canada, than the United Kingdom, than Japan, than Germany, than Italy. And things are now starting to turn around. We’ve seen 350,000 jobs come back since the start of September. We’ve seen very strong consumption and retail sales figures, including on Black Friday. And business investment intentions, particularly in the non‑mining sector, have been particularly strong with up to $100 billion plus being spent this year on investments. So, I’m looking forward to a strong Christmas and a very strong new year.
FRAN KELLY:
What about the – I mean, the strong recovery there in the stats, but what about the almost 1 million Australians who are unemployed and, as the shadow treasurer said, the almost 1 million who are underemployed. Do you think they’re feeling, sort of, zippity doo da about the economy right now?
JOSH FRYDENBERG:
Well, firstly, the unemployment rate has actually come down to 5.2 per cent, which is lower than when we came to government, even after this biggest economic shock since the Great Depression. And the Reserve Bank has pointed to an unemployment rate into the low 4s. Now, it would be only the second time in the last 50 years where Australia has had a sustained unemployment rate in the low 4s. So, clearly, there are people who are wanting more hours of work and the effective unemployment rate has been a bit higher as a result of the lockdowns. But everything that we saw at the end of last year after restrictions eased, pointed to a very strong rebound in the labour market. So, I think that’s one of the very positive stories, in fact, is about what’s happening to employment across the board.
FRAN KELLY:
But we always have to look through these figures.
JOSH FRYDENBERG:
Sure.
FRAN KELLY:
I mean there seems to be a story of, sort of, fairness in these accounts or lack of it. Business profits grew despite the shrinking economy, rising over $6 billion in the quarter, more than 4 per cent. We haven’t seen wages growth of the same order, not even close. Business profits grew eight times faster than wages. Is this an unfair recovery?
JOSH FRYDENBERG:
Well, actually, the wages and salary bill of the economy has actually grown more than the company profits. What we have seen across the board is that businesses have done it very tough.
FRAN KELLY:
Well, profits are up $6 billion or 4 per cent.
JOSH FRYDENBERG:
Actually, if you look through the numbers you can see that retail sales in the September quarter fell by more than 11 per cent in terms of the income that these businesses were generating. So, I don’t think you can say businesses have done well through this crisis. There’ll be many small business owners who are listening to your program this morning who have done it very tough. Now with respect to wages, the best way to get a lift in wages it to get a tighter labour market. Now we also know that there are more than 250,000 jobs available today with job ads more than 30 per cent higher than at the start of the pandemic and actually workforce shortages is a real issue, whether it’s in hospitality, whether it’s in construction, whether it’s in engineering and IT and professional services. We’ve heard those concerns from business right across the board. So, I actually look at our economic recovery and I’m very proud of what Australians have done over the last two years. And overnight the OECD put out a significant report where they lifted our economic growth prospects for next year from 3.3 to 4.1 per cent and, quote‑unquote, said the economy was rapidly recovering. So, I think if you look at the relative performance of Australia it's very strong indeed.
FRAN KELLY:
Well, one thing that certainly Australians have done is save. As you say, a damn lot of money has been saved since the start of the pandemic – around $250 billion accrued by households, $120 billion by business. Does that show that people are still apprehensive about COVID and their job security and, if so, there’s no guarantee they’re going to start spending that soon, are they? Particularly with Omicron on the loose.
JOSH FRYDENBERG:
Well, firstly, the savings ratio has spiked very considerably. The average for the savings ratio or the savings rate is around 5 per cent before this pandemic. Yesterday I announced that it had risen as high as 19.8 per cent. Now that is a combination of the fact that, you know, people haven’t been able to travel, haven’t been able to move more freely because of the health restrictions that have been put in place but also increased caution. But what we saw last year was that once the restrictions eased and those lockdowns ended in most states, that actually people started to spend again quite rapidly. And the savings ratio halved, and the consumption rate reached a record level. So, I’m hoping for a repeat of that experience. And, as you say, households have accumulated $220 billion on their balance sheets, businesses $150 billion on their balance sheets. And I think that is money that will be spent across the economy over the coming year and beyond.
FRAN KELLY:
And are you hoping on that or are you relying on households getting out and spending? You know, is the government just a bystander in this whole process of recovery?
JOSH FRYDENBERG:
Well, I don't want you to be cynical on your last show, Fran, because…
FRAN KELLY:
Well, I mean, where are the policies to grow the economy? What’s…
JOSH FRYDENBERG:
We’ve actually taken over 500 individual decisions that have helped steer Australia through this economic recovery and to put us in a very strong place. As you know, whether it was the JobKeeper program which saved more than 700,000 jobs, whether it’s the cash flow boost…
FRAN KELLY:
Well, exactly. Exactly.
JOSH FRYDENBERG:
So, my point is, far from being a bystander, we’ve been a very active participant in it.
FRAN KELLY:
I’m talking about the recovery, though. The OECD’s got a report out to today, it says the Australian government needs to spell out clear targets and time frames to repair the budget and pay down national debt. So, will we see measures in this month’s budget update or the full budget slated for late March? Or are you going to keep quiet on spending cuts until after an election?
JOSH FRYDENBERG:
Well, actually, the best way to repair the budget is to strengthen the economy. And, again, another proof point of that was earlier this year I pointed to the fact that 200,000 more people were in work than what we were expecting just four months prior. Now that had a $5 billion payoff for the budget bottom line; $3 billion in a reduced welfare bill and $2 billion in increased tax receipts as people were in work. And we did see an $80 billion improvement from what was the forecast in my budget last October to what was the final budget outcome for the 20‑21 year. Now, of course, next year’s budget is going to be about locking in the recovery, but also building for the future; investment in skills, investment in infrastructure. We’ve obviously got very significant tax relief that continues to flow through the economy, the digital transformation, energy investments and cutting red tape. All of those are inputs into driving a stronger economy and higher productivity and creating more jobs. So for me, the bottom line is what happens to people’s jobs. What happens to business investment. And on both those fronts we are seeing very positive signs.
FRAN KELLY:
But we are looking, too, at a budget deficit already of $106 billion in this financial year, $99 billion in the next. National debt is forecast to hit $1.5 trillion within a decade. Pre‑election budgets are normally a bit of a cash splash. You’ve just talked about the areas of productive spending. The government’s going to obviously have spending measures in it. But given the record debt and deficit, do you promise not to try and spend your way to victory and saddle future generations with more debt?
JOSH FRYDENBERG:
Well, obviously the spending that we’ve undertaken through this pandemic had to be done, and it’s actually prevented a scarring of the labour market that was so reminiscent of earlier recessions in the 1980s and ‘90s. You know, it took between 8 and 10 years for the unemployment rate, Fran, to recover to where it was after those recessions in the ‘80s and ‘90s. We’ve seen the unemployment rate recover in just over a year in record time. So I make no excuse for what the decisions that we, or apologies, I make no apologies for the decisions we had to take to save the economy from that economic Armageddon. Now that we’re moving into a different phase of our fiscal strategy, and I’ve talked about that publicly, but our key driver is to get more people into work and obviously to keep the country safe, because we’re not through the COVID pandemic. We’ve still seen this new Omicron variant which we need to learn more about, and there probably will be more variants of the virus in due course. But we have to keep our heads. We’ve got to respond to the medical advice, as we’ve been doing, but also your listeners can be very confident about the future and if we get a stronger economy, which looks very, which it looks like what’s happening, then we will get a better budget bottom line as well.
FRAN KELLY:
And just speaking of the future, the Kate Jenkins report into Parliament House workplace culture yesterday, 28 recommendations which she says are all urgently needed, yet neither party has yet committed to implementing them all in full. Why not?
JOSH FRYDENBERG:
Well, we’re all leaning in to that report. I think it was a very significant piece of work and I commend Kate Jenkins for it. It had some alarming statistics and confronting data in there and it was a wake‑up call for everyone in Parliament House. And it’s now going through a multi‑party process because it’s not about one political party; it’s actually about the buy‑in of everybody in the parliament. So, we do need to act on those recommendations. We do need cultural change. We need better prevention measures. We need more support measures, and we need more assistance measures. That’s what Kate Jenkins has outlined and that’s what we will do.
FRAN KELLY:
Your very good friend, Health Minister Greg Hunt, is widely anticipated to announce his retirement from the parliament today. Christian Porter has declared his intention to quit at the election. It’s been a tough two years for the Health Minister, busy years at the helm during this COVID crisis. But does, do these resignations give the Liberal Party the chance to do something about that “male, pale and stale culture” identified in the Jenkins review? Should women be preselected for these seats?
JOSH FRYDENBERG:
Well, I understand there are very strong female candidates in both those seats who are looking to put their hands up. And that would be welcome. In terms of other seats that we’ve got open at the next election, I know in Dunkley and in Corangamite, two winnable seats for us in Victoria…
FRAN KELLY:
Corangamite is usually a pretty tough seat. I mean…
JOSH FRYDENBERG:
Well, we’ve held it for a long time.
FRAN KELLY:
Pearce has got a significant – a significant margin.
JOSH FRYDENBERG:
Yes.
FRAN KELLY:
So would you, as the Deputy Leader of the Liberal Party, would you say on air now that really you think that it should be a female candidate preselected for that seat?
JOSH FRYDENBERG:
Well, obviously I’d like to see more women on our side of politics and, indeed, both sides of politics. And I understand, though, in both those cases there are strong female candidates. And ultimately the decision will be up to the local electors, but things are changing and we are getting some, you know, very strong candidates putting their hands up. But I do want to take the opportunity to commend both Greg and Christian on their outstanding careers. And in the case of Greg Hunt, he’s my best mate in the parliament. I was best man at his wedding, we’re godfather to our respective children, and he can be very proud of his achievements in public life, including overseeing very significant investments in mental health, in listing new drugs on the PBS, in medical research and, of course, steering Australia through this pandemic where we now have one of the highest vaccination rates in the world and one of the lowest fatality rates in the world.
FRAN KELLY:
Josh Frydenberg, thank you very much for joining us again on Breakfast.
JOSH FRYDENBERG:
Well, thank you, Fran. And can I also acknowledge your incredible contribution to journalism in Australia. You’ve been a towering figure. Your professionalism, your good humour, your balance commends you to all your listeners. And you’ll be greatly missed, but I hope it’s not the last time to hear you on the airwaves or to join you in the interview studio.
FRAN KELLY:
Treasurer, I hope so, too. Thank you very much.
JOSH FRYDENBERG:
All the best.