KIERAN GILBERT:
Treasurer, thanks so much for your time. The Government had previously promised to pay off net debt by 2029 -2030. That commitment's now gone, hasn't it?
JOSH FRYDENBERG:
What we are doing is delivering budget surpluses and paying down the debt that we inherited from the Labor Party. Now, net debt will be gone after the medium term. But what we can see from today's Mid-Year Economic update is that the Australian economy continues to grow. We're now living within our means and we're investing in the essential services that people need and rely upon. Australians can be confident, Kieran, about their economic future and today's MYEFO shows how remarkably resilient the Australian economy is in the face of pretty significant domestic and international headwinds.
KIERAN GILBERT:
On the net debt issue, though, you say you've paid down Labor's debt but net debt's more than doubled since the Coalition came into office. It was $175 billion, now it's getting to $393 billion. It doesn't marry with your suggestion that you're paying off Labor's debt. You've doubled it.
JOSH FRYDENBERG:
Well, the facts are these: When Labor came to office after the Howard-Costello years, there was zero government debt. There was a pristine balance sheet. Now the Labor Party took that balance sheet and engaged in a whole lot of reckless spending and the debt was increasing rapidly, in fact more than 30 per cent a year. They racked up $240 billion of accumulated deficits. It's taken us six years to get the budget back under control and we saw real spending growth, which was increasing dramatically under Labor, that has again, that has been brought down to much more manageable levels under us.
But the real story out of MYEFO today is that there will be $23.5 billion of surpluses over the forward estimates and despite the devastating drought, despite the global trade tensions, we're going to continue to see business investment perform; we're going to continue to see government spending being rolled out; we are also seeing household consumption pick up after we saw the biggest and fastest increase in household disposable income in a decade and we will continue to see strong exports on the back of the free trade agreements.
KIERAN GILBERT:
The net debt issue now pushed out beyond ten years, so that battle has been lost, at least in the short term. What about unemployment because you forecast it would get to 5 per cent, now for the next couple of years it's 5.25 per cent. Has the battle been lost on that as well in the short term?
JOSH FRYDENBERG:
Firstly, just on the debt point of view. Like I said, when we came to government, we inherited $240 billion of accumulated deficits. What we have done is brought the budget back under control so much so that the budget is balanced for the first time in 11 years and we’ll deliver the first surplus in 12 years. Now Labor would never deliver surpluses, they continue racking up debt. So actually our strong, disciplined budget management has got us into the position we're in today without increasing taxes. That's really important to underline, Kieran, because can you imagine the situation the Australian economy would be in if the Labor Party got their way and whacked it with $387 billion of higher taxes.
On the issue of employment, that's been one of the really strong sets of numbers that we've seen. We've seen employment growth at 2 per cent when the OECD average is 0.9 per cent, when it was 0.7 per cent when we came to government. We've seen more than 1.4 million new jobs being created, the majority of which are full time, and we've seen unemployment go down from 5.7 per cent when we came to government to 5.3 per cent today. So it's actually been a good story on employment.
KIERAN GILBERT:
But when you look at where unemployment needs to be to start having an impact on wages, the RBA says it needs to get to 4.5 per cent, the Treasury 5 per cent, and you're not even suggesting that's going to happen for a few years…
JOSH FRYDENBERG:
...well what we’re…
KIERAN GILBERT:
… so wages are going to be poor for the next few years in terms of growth?
JOSH FRYDENBERG:
Well in terms of wages, what we have seen is real wages, be it 0.6 per cent again higher than when we came to government, and wages outstripping inflation and that's really important to understand. But in the most recent national accounts, Kieran, off the back of the tax cuts, we saw household disposable income have its fastest jump in a decade and so some people are saving this money, others are spending.
KIERAN GILBERT:
So people are doing better than they feel, is that what you're saying?
JOSH FRYDENBERG:
What I'm saying is people are now getting more money in their pocket courtesy of the tax cuts that we took to the election, that we passed through the Parliament.
KIERAN GILBERT:
And in terms of that discrepancy, between the RBA and Treasury on where unemployment needs to be to start having an impact on wages growth, why is there that difference and do you think that if you got it to 5 per cent, that wages would start to improve because the track record on that front, as we see from today's forecast remains very anaemic over the next few years?
JOSH FRYDENBERG:
Well as I say, wages are continuing to grow and to outstrip inflation. RBA forecasts around growth, around wages are pretty similar to where Treasury forecasts are, and we have a very good story to tell on employment. At our 10 year $100 billion infrastructure pipeline, our initiatives around deregulation, our initiatives around industrial relations reform as well as obviously the tax cuts will all contribute to economic activity and the creation of more jobs.
KIERAN GILBERT:
You've been cautious on commodities forecasts..
JOSH FRYDENBERG:
We have.
KIERAN GILBERT:
Is that so we get to May, the Budget, and you can surprise on the upside, have a larger surplus than we think right now?
JOSH FRYDENBERG:
Well, let's not forget that the Labor Party had iron ore prices which were more than double where they are today. They saw iron ore around $180 a tonne. Today the most recent price is around $85 a tonne. We've got it in the Budget at $55 at the end of the June quarter in 2020, so you're right.
KIERAN GILBERT:
So basically fallen off a cliff…
JOSH FRYDENBERG:
We're prudent…
KIERAN GILBERT:
…is it really going to do that?
JOSH FRYDENBERG:
We're prudent and we're conservative and we'll wait and see what happens. But what we won't do is bake in overly unrealistic or overly optimistic commodity forecasts because we want to ensure that the Budget is a realistic assessment of where the numbers are and if you look at the last three final budget outcomes, they have been cumulatively $37 billion better off than what was originally forecast. So the Government's story is that we under promise and we over deliver. Labor's experience is that they over promise and under deliver.
KIERAN GILBERT:
On the growth figure, our growth is down 0.5 per cent for this financial year. If you look to China it's a quarter per cent, the US a quarter. Why are we double…
JOSH FRYDENBERG:
India, Euro…
KIERAN GILBERT:
…why is our growth off by twice as much as those two nations? You talk about international headwinds, well obviously they're subject to similar challenges, why is ours worse?
JOSH FRYDENBERG:
If you actually look at the IMF forecasts for growth next year, they have Australia growing faster than the United States, faster than Japan, faster than Germany, the United Kingdom.
KIERAN GILBERT:
Treasury doesn't.
JOSH FRYDENBERG:
No, but in terms of our growth numbers we will be growing faster than those other G7 economies.
KIERAN GILBERT:
But in terms of, what I'm talking about is this drop in our projected growth by 0.5 per cent, and the US and China it's 0.25 per cent, why is it having a bigger impact on us?
JOSH FRYDENBERG:
They're off different bases. Those different economies have different starting points. But if you look at Australia's comparative performance, it's been very strong. Kieran, for your viewers to understand the international climate they need to know that while other economies, this year Germany, the United Kingdom, Singapore and South Korea, all experienced negative economic growth, Australia continued to perform very strongly. We’re in our 29th consecutive year of economic growth, that's why Australians can be confident about their economic future and while the Labor Party continues to talk down the economy, continues to promise higher taxes and reckless spending, we're much more disciplined, we're much more considered, we're not going to be panicked into reckless spending, we're going to continue to deliver strong economic management.
KIERAN GILBERT:
The Tories had a massive win in the British election and the High Commissioner this morning I spoke to, has reiterated the UK's keenness to get the free trade talks under way. Would you hope that there's momentum as early as February towards that, as soon as Brexit is done?
JOSH FRYDENBERG:
Well it's an obvious priority for them and for us and I know our Prime Minister and Trade Minister and Foreign Minister, indeed all my colleagues, are very focused on ensuring that strong economic partnership continues. It was fantastic to see Boris Johnson and his team get up. Corbyn was an extremist, he had some pretty abhorrent views and I think some members of the Labor Party were ill-advised to get close to such a person. So I was happy to see him defeated and defeated pretty substantially.
KIERAN GILBERT:
Have you spoken to your counterpart, the Chancellor of the Exchequer?
JOSH FRYDENBERG:
I have and he was extremely pleased and I was equally pleased for him.
KIERAN GILBERT:
And how significant, just finally, would it be to get an FTA done between the UK and Australia and would it open up working rights, for example, for Australians in the UK to be there without a visa, for example?
JOSH FRYDENBERG:
Well, Kieran, I'll leave those details to the negotiators and to the Trade Minister but their relationship is strong at so many levels and the economic partnership, while already critically important to both nations, will even be more so with a free trade agreement. Bearing in mind that our record of securing free trade agreements when we came to Government, 26 per cent of our two way trading relationships were covered by free trade agreements, now it's over 70 per cent and what we've seen with China, with Korea, with Japan, with other nations that we've secured bilateral deals, trade, both in goods and services, have benefitted.
KIERAN GILBERT:
Treasurer, thanks for your time, and I wonder, will you be having a break over summer or are going to write an oped every day like last year?
JOSH FRYDENBERG:
I'll be having a break with the family but sometimes, you know, the heart and the hand don't always see eye to eye and sometimes it sort of gets off on a mind of its own.
KIERAN GILBERT:
Your poor staff. They never get a break. Thanks. Appreciate your time.
JOSH FRYDENBERG:
Good to be with you.