KIERAN GILBERT:
With me the Treasurer Josh Frydenberg. Thanks for your time. Your third budget, but have you given up any notion of paying off the debt?
JOSH FRYDENBERG:
Well, no. And this budget is all about securing Australia’s economic recovery. We are recovering very strongly. Around half a million jobs have been created since the last year’s budget, which is just over six months ago. And Australia has been the outperformer when it comes to the rest of the world on both the health and the economic front. But we recognise that the virus –
KIERAN GILBERT:
So isn’t that the time to pay off some debt?
JOSH FRYDENBERG:
Well, Kieran, the virus is still with us. You’ve seen more than 800,000 new cases a day. You’ve seen Europe go into a double-dip recession. You’ve seen a state-wide lockdown recently in Western Australia here. So we have to secure the recovery. That’s why this budget has a focus on the health measures to keep Australians safe. It has a focus on job creation, particularly infrastructure, skills, tax relief for families, incentives for business to do what they do best – hire, innovate and to grow.
KIERAN GILBERT:
No, I can understand that. And no-one’s saying ‘let’s have a surplus next year’. But out to 2031 we’re still talking deficits.
JOSH FRYDENBERG:
Well, in this budget –
KIERAN GILBERT:
Has the Liberal Party given up on surpluses?
JOSH FRYDENBERG:
No. And what you see in this budget is that deficits come down by two-thirds over the forward estimates and that net debt to the size of the economy, to GDP, compared to what was forecast at last year’s budget is lower each and every year. Now, that’s a key indicator of fiscal sustainability –
KIERAN GILBERT:
Is that because interest rates are so low, the economy’s growing more than the interest rate?
JOSH FRYDENBERG:
The economy is growing more, and also because we have in this budget a lot of temporary spending. When you think about the lower-middle income tax-offset, that’s a stimulus measure. It’s not baked in permanently. When you think about the immediate expensing provision, it’s designed to bring forward investments by business. The infrastructure programs have a date on it. In terms of rolling them out.
KIERAN GILBERT:
What about the low and middle income tax-offset? Does that have a date on it, or are you going to make it permanent? You’ve rolled it over for another year.
JOSH FRYDENBERG:
It’s not a permanent feature of the tax –
KIERAN GILBERT:
Would you look to do it?
JOSH FRYDENBERG:
What we have done instead is legislate very significant tax reform which abolishes a whole tax bracket, Kieran, the 37 cents in the dollar. Now that legislated stage 3 of our tax plan will see 95 per cent of taxpayers pay a marginal rate of no more than 30 cents in the dollar. That’s a huge reform, one big bracket between $45,000 and $200,000.
KIERAN GILBERT:
Most of the benefit of that goes to people earning more than $180,000.
JOSH FRYDENBERG:
Not at all. If you’re earning –
KIERAN GILBERT:
In cash terms.
JOSH FRYDENBERG:
If you’re earning $45,000, when stage 3 is locked in, together with the other stages we’ve already put in place, you will be $1,080 a year better off compared to before the plan was put in place. And this is a really important point, with respect to our tax plan, it maintains its progressive nature. If someone earns $200,000 a year, they’re earning four times as much as someone earning $50,000, but they’re paying eight times as much as tax under our stage 3 and fully rolled out tax plan. So we’ve still ensured the top 5 per cent of taxpayers pay around a third of the overall tax –
KIERAN GILBERT:
Can you afford those stage 3 cuts, though, given it’s about 20 billion a year?
JOSH FRYDENBERG:
It’s legislated. It’s affordable and will make our economy stronger.
KIERAN GILBERT:
Your headroom for borrowing, it looks like, reading from the Budget, it said, “based on current yields an additional $1.6 trillion in debt would need to be issued in order for public debt interest as a share of GDP to reach the 1990s peak of 2 per cent.” It sounds like there’s a fair bit of headroom if the worst were to happen and we were to face another more severe lockdown.
JOSH FRYDENBERG:
What that’s referencing –
KIERAN GILBERT:
Can you borrow more?
JOSH FRYDENBERG:
Well, our focus is on ensuring that Australia gets to the other side of this crisis. It’s about securing the recovery; it’s not about taking for granted or the gains we’ve made or being complacent. It’s about trying to drive the unemployment rate lower. You would have seen in the Budget papers from tonight, that unemployment is expected from Treasury to go below 5 per cent at the end of next year. The last time we had unemployment at a sustained period under 5 per cent was between 2006 and 2008. Then you have to go back all the way to the 1970s. So we have an historic opportunity to drive the unemployment rate down –
KIERAN GILBERT:
Also an historic challenge of dealing with the aged care problem.
JOSH FRYDENBERG:
Yeah.
KIERAN GILBERT:
$17.7 billion, it doesn’t sound like it’s enough. It’s a lot of money, but the Royal Commission says you need $10 billion a year. That’s $17.7 billion across four years.
JOSH FRYDENBERG:
Kieran, we’re spending more than $23 billion a year before tonight’s announcement on aged care.
KIERAN GILBERT:
But is this enough in additional dollars? Because the Royal Commission said $10 billion more. The sector says as well something similar. You’ve put in $17.7 over four years.
JOSH FRYDENBERG:
So this is a significant investment in a better quality aged care system, but it’s also got significant reform in it as well. So we’ve got 80,000 new home care packages. That will bring to 275,000, the number of home care packages. We’ve also got here a $10 per resident per day increase in government funding. That’s something the sector’s been asking for. We’ve got more time that is spent by carers and nurses with residents. We’ve got 33,000 new training places for carers.
KIERAN GILBERT:
So are you confident –
JOSH FRYDENBERG:
We’ve got a new act and regulator –
KIERAN GILBERT:
– it will do what’s needed in terms of that system which is letting down a lot of older Australians.
JOSH FRYDENBERG:
I’m confident this will make a big change.
KIERAN GILBERT:
Let’s look at foreign aid, because in real terms it’s down –
JOSH FRYDENBERG:
Well, it’s $4 billion a year. It’s significant.
KIERAN GILBERT:
It’s down by 4 per cent in real terms from 2021 to 2024. Now, we are in what the OECD, what is called the 0.2 per cent club donors. We are in the bottom three donors when it comes to foreign aid. At the OECD international developed economies, we’re in the top 10 richest countries in the world. We’re a wealthy country. Shouldn’t we be doing more?
JOSH FRYDENBERG:
And if you look at our response to COVID, we’re doing everything we can to help our neighbours in a region, playing a critical role. And our aid program is a very successful program at around $4 billion a year, which is designed to do everything from the health response, to an infrastructure response, to better quality education.
KIERAN GILBERT:
It’s 0.19 of gross national income. What does it say about our country that we’re in the bottom three of developed economy donors?
JOSH FRYDENBERG:
Well, Kieran, I’d put to you that we have very strong relationships in our region and that we have a very effective aid program.
KIERAN GILBERT:
Would you like to do more? Is that an option? Is that an ambition for you, given how well this V-shaped recovery’s going. We’ve got 20 developing nations in our neighbourhood.
JOSH FRYDENBERG:
Kieran, we’re always looking to help out our neighbours and some of the other countries in our region who are not as well financially off as Australia is.
KIERAN GILBERT:
The Women’s Statement, you forecast that with me on the Sunday Agenda program, $3.4 billion in total. Does the quantum of funds match the intent that the government foreshadowed on this in dealing with the women’s issues?
JOSH FRYDENBERG:
Again, it’s not the first or the last work on these matters. But there are a comprehensive range of measures that we’ve announced tonight for women’s economic security. Obviously child care at $1.7 billion is a very targeted program at those with more than one child in childcare. Treasury believe that that could boost GDP by around one and a half billion a year and lead to 300,000 more hours being worked a week. And I spoke tonight how families will be better off under our childcare plan. We’ve also made changes around superannuation so that’s paid on the first dollar and we’ve removed that $450 a month threshold. That will see more money into incomes.
KIERAN GILBERT:
So does this say you’re listening to women?
JOSH FRYDENBERG:
And then there’s women’s safety issues –
KIERAN GILBERT:
This budget, do you feel that they will believe that you’re listening to their concerns now? Because childcare, for example, that’s family, it relates to the whole family, not just the woman.
JOSH FRYDENBERG:
And also it’s a particularly important measure around female workforce participation. Female workforce participation in Australia is at a record high, but it’s still 10 points below male workforce participation. And what we’re seeking to do is to reduce the disincentive for a parent if they choose to work an extra day from taking that work.
KIERAN GILBERT:
Now just before you go, the iron ore windfall is huge.
KIERAN GILBERT:
Largely consumed and purchased, hoovered up by the Chinese economy and the Chinese nation, and yet we’ve got this geopolitical tension on the other side. There’s an irony that underpins your budget, isn’t there?
JOSH FRYDENBERG:
Well, firstly, the iron ore price has been a lot higher than what we had initially forecast. We were expecting for it to trend down to $55 a tonne. We’ve seen it sustained above $160 a tonne from last December. We now have a new estimate around the iron ore price that will also be at $55 a tonne but by next March. If it is above that level, we will see more money come to, through company tax receipts, but I do point out to you that that economic relationship with China remains very important and mutually beneficial.
KIERAN GILBERT:
You’ll sleep better at night if you can get that back on an even keel I would have thought.
JOSH FRYDENBERG:
Well, I think it’s important for both countries that that economic partnership continues.
KIERAN GILBERT:
Treasurer Josh Frydenberg, appreciate your time.
JOSH FRYDENBERG:
A pleasure.