GARETH PARKER:
Treasurer good morning.
JOSH FRYDENBERG:
Good morning Gareth.
GARETH PARKER:
We've played a little bit earlier some words from Shayne Elliot from the ANZ, basically, he's unapologetic for failing to pass on the full interest rate cut saying he's running a commercial enterprise, he's got to worry about shareholders, is that good enough?
JOSH FRYDENBERG:
Well it's not good enough in this case because as the Reserve Bank Governor has made clear the Banks should pass on in full the rate cut to their customers. This is the first rate cut since August 2016, almost three years ago, and the belief of the bank is that unemployment can come down further without raising inflation concerns hence the announcement yesterday. Now the Commonwealth Bank, the largest bank, and the National Australia Bank have both passed on the rate cut in full. But the ANZ have only passed on 18 basis points of the 25 basis point rate cut and we know that their funding costs have come down significantly so there is no reason why the ANZ should've, you know, should not have passed on in full the benefits of this cut.
GARETH PARKER:
The comment that essentially I've got a business to run, is that, does that cut the mustard with you?
JOSH FRYDENBERG:
Well it doesn't in this case because we've seen their funding costs come down and that was directly from the Reserve Bank Governor and it's very unusual for the Reserve Bank Governor to come out publically, one, to signal the rate cut is going to take place which he did publically just, you know, days ago, but also to say that it's important that the rate cut is passed on in full. And so therefore the banks are ignoring the Reserve Bank Governor as well as ignoring my request that should've there been a rate cut, which there was, that the customers get to see the full benefit of it.
GARETH PARKER:
So what can you do about that?
JOSH FRYDENBERG:
Well they are, as you say, they are businesses and they've got shareholders and I'm not about, you know, to change the law to force them to pass on a rate cut. What I am, though, saying to them is that they need to explain themselves. Customers need to shop around and that this is deeply disappointing.
GARETH PARKER:
Have they learnt anything from the Royal Commission?
JOSH FRYDENBERG:
Well clearly the Royal Commission identified significant cultural problems within our banks and the Royal Commissioner made clear that he saw in some cases the banks putting profits before people and the decision yesterday by the ANZ and by Westpac does not give the public any comfort that this type of behaviour has changed.
GARETH PARKER:
You met with, or you have been meeting with, the bosses of the big four banks in recent days including ANZ and Westpac. Did, did, did, I mean everyone's been telegraphing that this rate cut's been coming, did they give you any indication when you met with them last week that they were, were not going to pass on the full whack?
JOSH FRYDENBERG:
Well Gareth what I'd made clear and I spoke to the Chairman of Westpac because their CEO was, has been travelling, but I did meet with the heads of NAB and the Commonwealth Bank and the ANZ and in each of those discussions it was broad ranging, we discussed a range of issues beyond just the RBA's monetary policy. But I've made it very clear that the public and indeed the economy would benefit from a, from the rate cut, were it to take place, to be passed on in full and obviously two of those banks did follow through but the other two didn't.
GARETH PARKER:
So you are upset with them?
JOSH FRYDENBERG:
Disappointed…
GARETH PARKER:
Okay…
JOSH FRYDENBERG:
…is the word and they, and they obviously know that in no uncertain terms.
GARETH PARKER:
The RBA Governor Phillip Lowe, he's, he's, I think he's been quite open about where he sees the state of the economy, and where he sees the, the need for action and for support here. So we've got the rate cut announced yesterday, the full expectation is there will be at least one more later this year, maybe two more later this year, but he also made some comments about things that are outside the RBA's control. I just want to read for listeners' benefit this from a speech he made on Tuesday night. "Structural policies that support firms expanding, investing, innovating and employing people, a strong dynamic business sector is the best way of creating jobs. Structural policies not only help with job creation, but they also help drive the productivity growth that's the main source of improvement in our living standards. So as a country, it's important we keep focused on this." Is this a call from the RBA Governor to you and your colleagues in the Government to do more to support the private sector?
JOSH FRYDENBERG:
Well we've put in place a very strong plan through the Budget to grow the economy, doing the things that the Governor has identified are important for example tax relief. As you know, we've got $158 billion worth of tax cuts that we want to legislate through the Parliament. We call on the Labor Party to, to support that as a package and this will boost disposable income for the public by seeing people who earn up to $126,000 a year get up to $1,080 in their pocket when they, when they put in their next tax return. But at the same time, when the tax bracket is expanded from $45,000 to $200,000, that the marginal rate of tax is no higher than 30 cents in the dollar. They're structural long term reforms that we're putting in place through the Parliament. At the same time we're spending $100 billion on infrastructure. These are nation building projects that will boost the productivity capacity of the economy, boost employment, but also be overall, I think, a very positive for the economy and then we've got the 80,000 new apprentices which we've announced through the Budget process. So we have got a pro-growth agenda and I do want to emphasise to your listeners that the fundamentals of the Australian economy are sound. We've seen over 320,000 jobs being created over the last year, eight out of 10 new jobs have been full time, over 1.3 million new jobs since we as a Coalition have come to government and we've also seen new trade opportunities through the Free Trade Agreements with China, Japan, Korea, the Trans Pacific Partnership and most recently Indonesia. So the Australian economy has strong fundamentals but we do face challenges and that's why our pro-growth agenda, that's why our tax cuts are important.
GARETH PARKER:
Ok, I'll come back to trade in a moment. But in terms of the longer term tax cuts and much of the infrastructure spending is over the horizon, it's not the right now. There is the tax cut that Labor agrees with which will take affect soon. But the big tax cuts come in 2022 and 2024, same with infrastructure spending, it's sort of two, three, four years over the horizon. Is there more that the Government can do now in a policy sense to support the private sector?
JOSH FRYDENBERG:
Well there's actually building that's taking place now under our infrastructure program, and it is $100 billion dollars, a record amount. Now, nearly half of that is over the forward estimates. So the money is getting out the door and we'd like to continue to invest in these projects and we work closely with state governments in doing so. But we do have a plan, the plan has helped create jobs, but we do face, as you indicated earlier and I talked about, we do face those trade tensions between China and the US as well as the impacts domestically of flood and drought.
GARETH PARKER:
Can we avoid those trade tensions that sort of the zero sum game the Prime Minister talked about overnight between the US and China. It is a bit of a worry given our economic reliance on China isn't it?
JOSH FRYDENBERG:
Well it's a drag on the overall economic outlook because it affects confidence and we've seen the IMF downgrade the international economic outlook and China is our number one trading partner and the United States is our number one investor. So where there is escalating tensions between those two major countries, all nations including Australia are affected. We'll continue to advocate that cool heads prevail, that any disputes are amicably settled, but at the same time we'll continue to look for new export opportunities with new Free Trade Agreements as well as strengthening our relationships with China and the United States.
GARETH PARKER:
Josh Frydenberg thanks for your time this morning.
JOSH FRYDENBERG:
Good to be with you, Gareth.