FRAN KELLY:
Treasurer, welcome back to breakfast.
JOSH FRYDENBERG:
Nice to be with you Fran.
FRAN KELLY:
Treasurer, if someone can afford a $700,000 home renovation why should the taxpayer be giving them a $25,000 handout?
JOSH FRYDENBERG:
Well as you know there’s support at both the state and the federal level for home buyers and it’s up to, a new property of up to $750,000, and no doubt people will have a big mortgage on a property of that size as well. So this is designed to increase economic activity in a sector that is going to see a reduction in demand, particularly in the back half of this year. Hundreds of thousands of people are employed in the sector. The housing sector is worth more than $100 billion to the economy overall, and this is a temporary, targeted measure. It’s designed to work within existing state systems. There are income caps that are applied and it’s already been welcomed by the housing industry.
FRAN KELLY:
Ok, temporary and targeted, but not capped is it? So it’s slated to cost what, I think around $688 million but it’s demand-driven so it could be much higher couldn’t it? People do like a handout.
JOSH FRYDENBERG:
Well our estimate is that around 30,000 new builds and renovations will be undertaken. There are pretty strict caps that are in place. You have to have an income of under $125,000 as a single, or under $200,000 as a couple. As I said, the property has to be up to a value of $750,000 and the renovation itself has to be more than $150,000, so it is very much targeted at particular types of activity as I said, to fill a void in the market and to get people back to work in this post-pandemic recovery.
FRAN KELLY:
Pretty strict caps, but I think a lot of people listening will go hang on, if you’re a household that’s earning $200,000 and you’re going to take out a loan to do a big renovation and, you know, people are listening, there’s more than a million people on the jobless queues at the moment, a lot of people going, well I’m nowhere near that situation, why are they getting a hand out?
JOSH FRYDENBERG:
Well again, we’ve got a range of support measures across the economy. The JobKeeper program is one, the cash flow boost to businesses is another, $750 payments to people who are on income support. But what we need to do Fran, is to get people back to work. We don’t want them to be on JobKeeper indefinitely, indeed it’s a program that won’t be going indefinitely. And the construction sector was the number one industry that was actually taking up the JobKeeper payment. So we want those plumbers, those sparkies, those painters, back to work, and if we can increase economic activity, particularly in the back half of this year where there’s going to be a fall as a result of the virus, then that will be a good thing.
FRAN KELLY:
Are there any conditions attached? I mean how many jobs do you think HomeBuilder will save, that’s the name of this package. And are there any commitments going to be asked from the construction industry in terms of keeping apprentices on or taking apprentices on? I mean there’s 100,000 apprentices and trainees who look pretty vulnerable in their jobs right now.
JOSH FRYDENBERG:
Well, as you know, we have a subsidy, a wage subsidy for apprentices which is supporting…
FRAN KELLY:
But I mean, are there any commitments attached to this $688 million from the construction industry, in terms of apprentices?
JOSH FRYDENBERG:
Well there are commitments around insuring that we are using licensed builders. There are also commitments around the prices that they are offering, they have to demonstrate that the contract price is no more than a comparable product as of the 1st July last year. And as I said it’s going to be complementary with existing state systems where they’re providing support for first home buyers, and I think this will come at a very necessary time for the overall economy. We believe this will actually lead to more people back at work and will help that transition, which the economy needs Fran, to get people off the income support.
FRAN KELLY:
It’s not the only way to do it, I mean while we’re busily helping people renovate there’s nothing in this construction package for social housing, which is in drastic undersupply, we know that. You would have had the same job multiplier plus the social dividend, if you’d spent money to build social housing, wouldn’t you?
JOSH FRYDENBERG:
Well we’re already doing things on the social housing front…
FRAN KELLY:
There’s no stimulus money so far on social housing is there?
JOSH FRYDENBERG:
But we have a national housing infrastructure facility which has about a billion dollars at work, and that means that there are loans out there that are significantly supporting more than 1000 new dwellings, as well as nearly 4000 existing social and affordable dwellings…
FRAN KELLY:
Yeah but we have a shortfall of at least 400,000 social housing dwellings in this country.
JOSH FRYDENBERG:
And they’re also combined responsibilities with the states, and I notice Victoria and other states have made significant investments in social housing, so this is a combined Federal and State Government effort in the housing sector. Our focus is today, on ensuring that people can invest in a new home and the economic activity that that brings, and as I said it couldn’t come at a more important time.
FRAN KELLY:
Treasurer Josh Frydenberg is our guest. This tradie-led recovery Treasurer, comes as the country falls into recession for the first time in a generation. Is this the recession we had to have?
JOSH FRYDENBERG:
Well, this is the economic consequence of the health restrictions that we had to put in place as a result of the global pandemic. There was no escaping the fact that, you know, Australia had to put those travel bans in place that came in with regards to China from the 1st of February, but also the social distancing requirements that were progressively put in place over the course of March. We saw in the numbers I announced yesterday that consumption fell by 1.1 per cent in the quarter Fran, that was the biggest drop in 34 years as people stopped going out to cafes, using public transport, booking hotel rooms, and that was reflected in the numbers. But it is also important to note that while we fell by 0.3 per cent in the March quarter, in the same quarter China fell by 9.8 per cent, France by 5.3 per cent, the United Kingdom by 2 per cent, the United States by 1.3 per cent, so we have fared relatively well not only on the health front, but also on the economic front.
FRAN KELLY:
Some of those countries you talked about of course went into lockdown and their economies started shutting down before ours did. We know that Treasury’s gathering real-time information around consumer sales, construction starts, on a whole lot of levels, you must have a fair idea of where we are heading in terms of June quarter results. You’ve said those numbers will be even more severe, what does that mean? How great a contraction are we heading for?
JOSH FRYDENBERG:
Well again, it’s still a dynamic situation, but what we’ve seen over the course of this June quarter, is as you say, the real impacts of the restrictions taking place, so it’s too early to put an exact number on it, but it’s going to be very significant. But we have started to see some bright spots in the recovery as restrictions are being eased. Consumer confidence Fran, has been up for nine consecutive weeks, we’ve recovered 95 percent off those lows in March. The Australian Stock Exchange has picked up more than 60 percent of its falls, and the Australian Dollar has recovered more than the 11 cents that it fell during those low points. So we’re coming out of the restrictions with what was agreed by National Cabinet, and Treasury believe that 850,000 people will be back at work, and also that the economy will benefit by more than $9 billion a month as a result of those restrictions being eased.
FRAN KELLY:
You’re starting to sound a little bit optimistic. Do you think we might see a V-shaped recovery after all?
JOSH FRYDENBERG:
I don’t put that letter on it, so to speak. I do think we’re going to see elevated unemployment for some time. I think business investment will be slower to recover than say consumption as restrictions are eased, but I do think we’re better placed than most countries. And I saw that one economist yesterday from Commsec described it as a remarkable result, particularly when he said the kitchen sink was thrown at our economy, we just not only had the coronavirus, but we also had the fires. And Chris Richardson, a notable economist, said that if we’re able to keep the virus at bay, we’re in his words, ‘superbly positioned to bounce back’. So we will do everything we can to ensure a smooth transition off the income support, and to ensure that as many people can get back to work as possible.
FRAN KELLY:
Well there’s a lot of questions about the timing of that income support. We’ll discuss that with you next time we speak. I know you’ve got a busy morning and you have to go. Treasurer, thank you very much for joining us.
JOSH FRYDENBERG:
My pleasure.