KIERAN GILBERT:
Treasurer, thanks very much for your time.
JOSH FRYDENBERG:
Nice to be with you.
KIERAN GILBERT:
We’re out of recession, but do you accept for millions of people looking for work it won’t feel like that?
JOSH FRYDENBERG:
Well technically the recession is over in Australia, but Australia’s economic recovery still has a long way to go and there are a lot of Australians who are doing it tough right now. A lot of sectors that continue to find it difficult in the face of this once in a century pandemic and the greatest economic shock since the Great Depression. But what we’ve seen in today’s GDP numbers Kieran, is the biggest single quarterly increase since 1976 at 3.3 per cent growth, it’s better than what the market was expecting at 2.5 per cent, it does show that the labour market strengthening is helping the economy overall and obviously the Government is continuing to do everything it can to support Australian’s through this crisis.
KIERAN GILBERT:
On this trajectory, no more lockdowns, fingers crossed that happens, when to we get back to the pre-COVID levels of spending and growth?
JOSH FRYDENBERG:
Well this has seen a big increase in household consumption, 7.9 per cent. It was the single biggest contributor to the numbers today. Household consumption are about 60 per cent of GDP and they had a big fall in June as Australians were confined to their homes and couldn’t go out to a tourist destination or to a hotel or to a café, to a restaurant. We’ve seen a big jump in the numbers today in that sort of discretionary spending, so that is a positive sign. As long as the virus is controlled on a health front I’m confident that the speed and the trajectory of our economic recovery will go in the right direction.
KIERAN GILBERT:
One of the things the OECD points to is the insolvency issue, are you expecting a cliff in that sense of insolvency once those emergency measures are removed within months?
JOSH FRYDENBERG:
Well our reforms are key in respect of insolvency changes because what we did during COVID Kieran, is we put some temporary relief, we lifted the thresholds for the statutory demands that could be made on insolvent firms and that has meant a number of those businesses that were doing it tough have been protected through to the end of the year. But then that will morph into this new system, provided it gets through the Parliament before the end of the year and I’m hopeful of getting bi-partisan support for that. And that will allow businesses that have come on hard times to trade through some of their challenges, because as you know, as the health restrictions are eased a lot of those businesses who did it tough over June, July, August, even September, are starting to get their customers back.
KIERAN GILBERT:
So will that avoid that cliff of insolvency…
JOSH FRYDENBERG:
There will be some businesses that don’t survive, there will be some jobs that can’t be saved, but we’re confident that the unemployment rate will continue to track downwards and that the economic support that we’re providing to the economy will help keep people in jobs.
KIERAN GILBERT:
You sounded very, quite, if not very bullish in the news conference saying we’re better placed than any country, with the health story as it is and if the vaccines do roll out within the next few months, hopefully within the first quarter of next year, are we expecting growth of upwards of five per cent? Is that sort of where you’re thinking?
JOSH FRYDENBERG:
Well what we showed in today’s numbers that every state and territory, bar Victoria, had strong economic growth. If Victoria had the growth numbers that we saw on average across the other states and territories, then the number today would’ve been five per cent, not 3.3 per cent. So it’s very pleasing that the situation in Victoria is now under control, that augers well for the next set of numbers. That being said, the virus remains and we’ve seen Kieran, with the South Australian experience recently but that dent in confidence when there was a short lockdown. So we don’t know what’s around the corner, the vaccine trials are looking positive, so we’re hopeful about a vaccine. But again, this virus is persistent, it’s deadly and we need to always remain vigilant.
KIERAN GILBERT:
New South Wales want international students back as soon as possible. They’re pushing for that to be a part of the numbers coming in. Should the Federal Government be backing them in that endeavour, given we’re talking about our third biggest export, foreign students?
JOSH FRYDENBERG:
We’ve also got Australians that we’re seeking to bring back as well. As you know, we’ve been successful in bringing tens of thousands of Australians back home, but there are still many more that are wanting to come. So we need to work through those numbers as well, working with the states who have been running hotel quarantine programs. It’s pleasing again that Victoria will start to take some numbers as well, after their lockdown which meant that they didn’t take those people coming in from abroad. So, we will obviously over time see more students come back. But again, that is going to be very independent on borders opening up. It’s going to be very dependent on the success too and the speed of the vaccine.
KIERAN GILBERT:
The OECD also points to one of the other issues, not just insolvency, another weigh on the outlook is the China relationship. How much is at stake in getting that back on track, back on an even keel?
JOSH FRYDENBERG:
China is our number one trading partner. It’s worth more than $200 billion a year in terms of its two-way trading relationship and it has increased substantially under us. That being said, it’s no secret, Kieran, there are challenges in that relationship, there are some difficulties on the trade front that might be an understatement, they’re significant and they’re serious. Now, we would like to work through those on a bilateral level, but if that’s not possible, then we retain the options to use multilateral forums. It is a significant relationship for us.
KIERAN GILBERT:
Do you need to react to wolf warrior diplomacy, that’s what it’s called. The Chinese are not great at soft power, are they? They’re diplomacy is something, obviously, for a great power is lacking. Do we need to react to the wolf warrior sort of diplomacy with emotion and outrage? Or do you just let it slide?
JOSH FRYDENBERG:
If you’re talking about that doctored photo, then that was hugely insulting and completely unnecessary. So the Prime Minister was absolutely right to speak very strongly…
KIERAN GILBERT:
It was reprehensible but is the Prime Minister the one that needs to do it? It was reprehensible, it was disgraceful and everyone agrees with that. But is it the PM that needs to respond to a mid-ranking official?
JOSH FRYDENBERG:
Again, as the leader of our country, he speaks for our nation and you would find it hard to find somebody across the country who wasn’t offended by that. Particularly the insult to our armed forces, as well. That being said, the Chinese have put out a list of fourteen grievances and those grievances list everything from our free press to our democratically elected Parliament. Whether it’s decisions around foreign investment, whether its decisions around national security, whether its decisions around foreign interference, we’ll take those in the national interest and you wouldn’t expect us to walk back from it.
KIERAN GILBERT:
No one would expect us to walk back from that, but as the former Prime Minister, Kevin Rudd, says, should we be doing more and speaking less because that’s all in the national interest, you’re right, we should definitely be doing that, having security agencies managing all that stuff we need. But by the same token, it’s also in our national interest to keep our largest trading partner on an even keel in terms of that relationship? That’s also in our national interest.
JOSH FRYDENBERG:
But those issues that I raised with you; free press, a democratically elected Parliament, foreign investment, national security, foreign interference. All of those issues are really important to Australia, and some of those issues go to the heart of our identity, let alone to the heart of our national security. So therefore, we are going to continue to defend those national interests and that will be a consistently clear position from the Australian Government.
KIERAN GILBERT:
But does there come a time when you need to ignore the inflammatory messages? If not to simply, if not to amplify that sort of thing?
JOSH FRYDENBERG:
We would like to engage in a mutually beneficial and respectful dialogue with our Chinese counterparts but to date that has not occurred.
KIERAN GILBERT:
One final question goes to comments by Governor Lowe today. He praised the NSW Government for its reforms in terms of stamp duty. Can we expect any reform from the Federal Government in May? Or will you maintain a less ambitious strategy?
JOSH FRYDENBERG:
Well, firstly, Governor Lowe has spoken very favourably about the Government’s economic response and our economic policy and he has praised it as being the right policy. With respect to the most recent Budget, it was a Budget for the times. The economy had been hit by the biggest economic shock since the Great Depression and there was obviously new support to get people into work like the JobMaker Hiring Credit, but there was also big incentives to encourage more investment to get a private sector led recovery. You see, one of the key differences between us and, dare I say it, our political opponents, is we don’t see government as the solution, we government as a catalyst for that solution. The private sector can help lead the recovery and that is why we put in place a series of incentives to encourage them to hire, to innovate, to invest, and to grow. Now, with respect to the reforms that we’ve already outlined, whether it’s insolvency, whether it’s on responsible lending, whether it’s in superannuation, these are very significant reforms that were in this year’s Budget. When it comes to the tax cuts, yes, we brought forward two years Stage Two, but at the very heart of those tax cuts, which we’ve legislated through the Parliament, which the Labor Party seem to be walking away from, is the abolition of a whole tax bracket and having one single tax bracket of 30 cents in the dollar. Between $45,000 and $200,000, where the bulk of Australian workers will be, Kieran. Now, that strengthening of our tax system will not only make it better and fairer, but it will encourage aspiration and reward for effort and that goes to the heart of the Coalition’s philosophy.
KIERAN GILBERT:
Treasurer, appreciate it as always.
JOSH FRYDENBERG:
Good to be with you.