LAURA JAYES:
Treasurer, thank you for your time.
JOSH FRYDENBERG:
Good morning.
LAURA JAYES:
What did the IMF say? What will the impact on the economy be?
JOSH FRYDENBERG:
Well, what was a good opportunity last night on the call with the International Monetary Fund and counterparts from the United States, from China, Japan, Korea, Italy, the World Bank, the European Central Bank and the Bank of England and others, was an opportunity for everyone to update each other about the various steps that they're taking to support their economies in the face of the spread of the Coronavirus. It's very clear that financial markets remain stable and open and that both fiscal and monetary policy is being used to support those economies. From Australia's perspective, Laura, we go into this economic shock from a position of strength. Yesterday we had the December quarter for the National Accounts, and it showed that the Australian economy was strengthening, going from 1.8 per cent growth through the year in the September quarter to now 2.2 per cent growth in the December quarter. These were, in the words of Chris Richardson, a noted economist, "a good set of numbers", and it does show that we go into this shock from a position of strength.
LAURA JAYES:
Okay, yes, but what will your treasury say to senate estimates today? We know the Coronavirus, the December quarter doesn't tell the full story of the impact of the coronavirus, so in figures, in cuts to GDP, what will that figure be?
JOSH FRYDENBERG:
Well, last night at senate estimates you heard from the Reserve Bank Deputy Governor, that in their view it will have a direct impact of around half a percentage point in the December quarter. The Treasury Secretary will provide his update later this morning, but it is very clear that on top of the bushfires there will be a significant hit to the March quarter, and to those growth numbers.
LAURA JAYES:
So will it be worse than 0.5 per cent, because I note that the RBA only put its estimate forward yesterday based on the education and tourism sectors, not disruptions to manufacturing or exports, so it could be a lot worse, couldn't it?
JOSH FRYDENBERG:
Actually the direct impact does take into account the export sector. End‑to‑end supply chains, it is difficult to estimate some of those impacts, but what is clear is that in Australia we have immediately obviously felt the impact of the travel restrictions and the spread of the virus in the tourism sector, which is a very lucrative sector, in the international student sector, but we've also seen an impact on some of our exports. So that's where the direct impacts have been. There will be further impacts but, again, this virus continues to evolve and how significant the economic impact is depends on how long it takes the scientists to find a vaccine.
LAURA JAYES:
Well, it could be more than 12 months, so are you bracing, or perhaps “bracing” is the wrong word, Treasurer, but are you preparing, at least, for the possibility of a recession?
JOSH FRYDENBERG:
Look, what I do know is what the numbers told us yesterday, and that is that the Australian economy is strong, is performing well, compared to a number of other countries around the world. And what we did see in the bottom half of last year, unemployment was falling, household disposable income was rising, we saw the housing market stabilise, we saw retail sales volumes that were up, and we saw a strong demand for our exports. So we do go into this economic challenge from a position of strength. At the same time, I know how significant the spread of the Coronavirus is having on the economy, both here and globally, and China is a lot more interconnected with the global economy and with Australia since the time of the SARS virus back in 2003. But what our response will be, Laura, is targeted, responsible and scalable. We won't repeat the mistakes of the past with cash splashes, and what we won't do is undermine or undo the good work that has been done over the last six and half years to get the budget back into a position of strength.
LAURA JAYES:
Okay, give us some detail then. What will this economic stimulus package look like? Will it be worth billions or millions?
JOSH FRYDENBERG:
It will be worth billions in terms of the impact that it will have. What we do know is that yesterday the Deputy Prime Minister did say that he has written to his counterparts at the state and territory level to ask them to put forward particular projects that could be started immediately. So there will be an infrastructure component. But as the Prime Minister has said, we are focusing on ensuring that businesses stay in business and Australians stay in jobs and that the cashflow will be maintained for many cash‑strapped businesses.
LAURA JAYES:
So will a business investment allowance be the bulk of it here, and will there be spending caps on it?
JOSH FRYDENBERG:
That is one issue we're giving serious consideration. As you know the business sector would like to see an investment allowance of some type, and we also know that we would like to see more business investment in Australia. We saw strong growth in the December quarter in mining investment but outside the mining sector…
LAURA JAYES:
But small business, sorry to interrupt you because we are running out of time, small business want to see this direct cash injection. Are you ruling that out?
JOSH FRYDENBERG:
Look, we'll have more to say in due course about the details of the fiscal package, but we have seen the OECD say that Australia and Germany, they singled two countries out, of which Australia was one, we have a strong budgetary position.
LAURA JAYES:
But you're not ruling that direct stimulus out to small business which they're asking for.
JOSH FRYDENBERG:
Well, I'm not in the rule in, rule out game right now, Laura. What I am doing is saying that our package of measures will be responsible, it will be targeted, it will be scalable, and it will reflect what is in the best interests of the Australian economy.
LAURA JAYES:
When will we see it? Next week?
JOSH FRYDENBERG:
Well, you'll just have to wait and see but, obviously, we are working on it day and night.
LAURA JAYES:
But you want to see it sooner rather than later. I mean, it is not going to be next month, is it?
JOSH FRYDENBERG:
"Sooner rather than later" is a good way to describe it.
LAURA JAYES:
Okay, so perhaps in the next fortnight?
JOSH FRYDENBERG:
Again, you're asking me to put my finger on the date in the calendar. We're still working through the options. Obviously, there's a lot of work being done by Treasury, and obviously the Prime Minister, the Finance Minister and myself, together with the Deputy Prime Minister and others are hard at work on a series of measures.
LAURA JAYES:
Treasurer, thanks so much for your time, especially after that midnight phone call with the IMF.
JOSH FRYDENBERG:
Thank you.