JOSH FRYDENBERG:
Nice to be with you.
LEIGH SALES:
The Budget's based on a series of assumptions, and they are that the whole Australian population will be vaccinated by the end of the year, that there'll be no sustained state border closures this year, and no major COVID outbreaks, and that international borders will start to operate reasonably normally by the middle of next year. Those are very uncertain and heroic assumptions, aren't they?
JOSH FRYDENBERG:
We're in the middle of a pandemic, and making assumptions during normal times is difficult - to make them during the middle of a pandemic is even more so. Those assumptions are based on the best available evidence to us. We know that more than 10 per cent of the Australian population has now received their first dose. We've seen 30 per cent of those aged over 70 or above receive a dose. We saw more than 400,000 doses rolled out over the course of the last week. More supply is coming online. So that is the assumption about vaccines. With respect to international borders, it's quite a conservative, cautious assumption that international borders will gradually reopen from the middle of next year.
LEIGH SALES:
The economic recovery has come much faster than you anticipated in the Budget just six months ago. You've had two quarters of the fastest economic growth on record. Employment is far rosier than expected. Given that, why the need to keep government spending so high?
JOSH FRYDENBERG:
Well, we're very much in the middle of a pandemic. If you look around the world, there is a lot of uncertainty - more than 800,000 global cases a day. Europe has just gone into a double-dip recession and, here in Australia, we just saw Western Australia have a state-wide lockdown. So our recovery needs to be secured. That's why this job focused primarily on supporting more jobs through investments in skills, in infrastructure, the digital economy, and tax relief for families and also to support businesses to make more investments. They're the initiatives that we put in place designed to boost aggregate demand, overall economic activity, and create more jobs, because we cannot take the gains that we've made for granted.
LEIGH SALES:
Let's talk about the size of government spending. Last year, it was 32 per cent of GDP. For the next four years, it will never go lower than 26 per cent of GDP. The coalition was absolutely screaming blue murder when Labor was at 25.9 per cent during the Global Financial Crisis, claiming that was waste and profligacy.
JOSH FRYDENBERG:
Look at the context in which we're operating; a once-in-a-century pandemic and the biggest economic shock since the Great Depression. What has happened with COVID-19 has dwarfed what happened during the GFC. We saw 1.3 million Australians either lose their jobs or see their working hours reduced to zero. That is what required us to spend an unprecedented amount of money on direct economic support programs like JobKeeper, which helped keep 3.8 million Australians in a job. So, that was what was required. What you see in this Budget is that the deficit has come down by two-thirds over forward estimates, and net debt as a proportion of GDP, which is a key indicator of fiscal sustainability, comes down every year compared to what was forecast at the last Budget just over six months ago.
LEIGH SALES:
You raised JobKeeper. When you're spending at this level, I assume that you would agree there should be no waste of or inefficiency. Why aren't you then chasing down firms that banked JobKeeper as a profit when they never really needed it, and taking that back to spend on things that are needed?
JOSH FRYDENBERG:
At the time, our priority was to get the money out the door. You remember those...
LEIGH SALES:
Totally don't dispute that. Just wondering why you're not chasing it now.
JOSH FRYDENBERG:
The rules and the law that passed the Parliament was that businesses could access JobKeeper based on an anticipated turnover reduction of more than 30 per cent, or 50 per cent, depending on the size of the company. That was the rules in which the companies accepted that money. And it worked. It helped stabilise the economy. So we're not going to retrospectively change the legislation. We're not going to knock on the door of every small business...
LEIGH SALES:
But if this happened under Labor in power, you would be outraged that they were just writing it off and that there was no accountability for that.
JOSH FRYDENBERG:
Whichever way you look at it, JobKeeper has been an incredibly successful program...
LEIGH SALES:
Of course...
JOSH FRYDENBERG:
One could argue, Australia's most successful economic support program ever.
LEIGH SALES:
Just because it did do the job it was intended doesn't mean that it's flawless or that there wasn't waste built into it. As I point out, if you're spending at these levels, surely trying to minimise waste and inefficiency has to be an utter priority?
JOSH FRYDENBERG:
Well, again, it worked very effectively through the tax system. You'll remember the debate, Labor asked us to extend JobKeeper beyond a year. We said no. It was costing, at that time, more than $2 billion a month. And we have seen, in the month of April, more than 100,000 people come off income support, even as JobKeeper ended. Labor said they would spend more. They said the sky would fall in if JobKeeper ended. It hasn't. And that step that we took - that decision we took - has proven to be the right one.
LEIGH SALES:
You want unemployment below 5 per cent. Without open borders, how are you going to get enough workers to fill the vacancies in the sectors where they're needed?
JOSH FRYDENBERG:
Well, there are workforce shortages. You've identified a real issue in various aspects of the economy. The agriculture sector being one. We are working through this Budget on increased programs in relation to skills and training. We have announced tonight an extra $500 million for the JobTrainer program to take it to $2 billion to support 450,000 places. The apprenticeship program has been very successful, Leigh. We've tonight invested $2.7 billion in 170,000 new apprentices. We're also focused on getting the long-term unemployed into work by boosting subsidies and grants available to employers who take on, as well as a focus on foundational skills like maths, English, and computer literacy for those out of work. So there are a lot of measures that we’re taking.
LEIGH SALES:
Even with that, with the borders closed, you've got a problem. Let's take mental health as an example. The Government's putting $2.3 billion into mental health services. If you talk to anybody at the moment trying to see a psychologist or psychiatrist or people who work in that field, they will tell you that you just cannot get an appointment. There's no way around that because you can't magic up psychologists and psychiatrists out of the domestic pool.
JOSH FRYDENBERG:
You’ll be pleased to know in this Budget there’s more money for actually training people to work in the mental health space...
LEIGH SALES:
Those degrees take like six years.
JOSH FRYDENBERG:
…including for psychiatrists and the like. This is a record spend on mental health. Everything from expanding the successful Headspace centres to putting in place Head to Health, new adult centres for those aged 25 and above, based on the Headspace model. We also have additional support that we're rolling out when it comes to mental health to treat people who need it most.
LEIGH SALES:
The Budget sets this out as a two-stage recovery. The first part's led by government spending, and then there's a transition to private sector-led investment. But when vaccination is lagging behind world's best practice, when there's no detailed roadmap for when or how borders will open, when the State Premiers close down their states for one or two cases of COVID, how can the private sector plan to invest with any kind of certainty?
JOSH FRYDENBERG:
Well, they are right now. Because what we've seen is investment in machinery and equipment at near highest levels in seven years off the back of the Government incentives that we've put in place in the last Budget and extended in this Budget. Business conditions have reached a record high. Consumer confidence at its highest level in 11 years. And you’ve got more Australians in work than ever before. I know it's easy to be critical about various things, but I do want to point out that Australia right now is ahead of the global pack when it comes to our economic and our health recovery. No one's taking that for granted. No one thinks that the job is done. It's far from over in that respect. That's why this Budget seeks to lock in the recovery with a whole series of new investments.
LEIGH SALES:
If I can ask in detail about aged care, there's $17.7 billion extra in here over the next five years but if we can go back to first principles, isn't the core problem here that it's a sector that's being run for profit, so there is an in-built incentive to deliver the bare minimum care allowable in order to maximise profit?
JOSH FRYDENBERG:
Well firstly, there's a large not-for-profit aspect to the aged care sector as well. But I would challenge that assumption. I would say to you that the people even working in the for-profit aspect or sector with respect to aged care are deeply committed to their residents, are deeply committed to the highest quality care that is provided.
LEIGH SALES:
Look at what we've seen, Treasurer. My point, I guess, you know, if you can give somebody, say, a $6 meal of chicken nuggets and frozen carrots, then what incentive is there to give them a $12 meal of roast chicken and fresh vegetables?
JOSH FRYDENBERG:
Well, in terms of what we're trying to do with the residential sector, what we're seeking to make more sustainable for the longer-term and we're increasing the base funding by an extra $10 per resident per day. That's going to be welcomed by the sector. We're increasing the amount of time that's required from carers and from nurses to spend with residents. We're releasing 80,000 new Home Care Packages, they're Level 3 and Level 4 packages, predominantly, and that's going to be of great help to people who need it. And we've got 33,000 new training places for those in the care sector, as well as a whole host of other measures to strengthen our regulatory agencies to put in place a new Act and to boost the infrastructure spending on aged care facilities. So this is a very comprehensive program of initiatives, a response to the Royal Commission, and I think will make a real difference on the ground.
LEIGH SALES:
On that, say, $10 a day, how do you know, though, that, say, the JobKeeper plan that went into dividends and bottom line in some cases, how do you know that the $10 will actually filter through to residents, that it won't be put in the pockets of aged care providers?
JOSH FRYDENBERG:
Again, we're putting in place a new regulator who will work closely with the sector. We're putting hundreds of extra audits every year. There's going to be new powers for the regulators, a more coordinated system to ensure that the money being spent is getting to the residents.
LEIGH SALES:
One of the things you want to prioritise is innovation. You want a thriving gaming industry, medical research, biotech and so on. Yet there's basically nothing in this Budget for universities, which are reeling from the loss of international students. How can the Government be serious about cutting-edge innovation and research without a serious injection of money into universities?
JOSH FRYDENBERG:
Well firstly, there is $19 billion a year going to our universities. We actually guaranteed that base funding from domestic students to universities through the pandemic. And tonight, I said in my speech that, as a result of our measures, we've announced through the pandemic an extra 30,000 university places. And last year's Budget, which was just over six months ago, Leigh, I announced an extra $1 billion for research. So we're deeply committed to that sector. But what we'd also like to see is, and it's happening right now across the country, is close collaboration and coordination between our universities and our industries. Because take an area like medical technology and biotech, CSL, a great Australian company has been driven by research done at the University of Melbourne and through our universities more broadly. And tonight, we've announced a new innovation called a Patent Box where patents that have been registered in Australia and derive income for a particular company can be taxed at a lower concessional rate at around 17 per cent. And because we've developed wi-fi here in Australia, the bionic ear, the cervical cancer vaccine, we want to see more commercialisation here in Australia of those technologies, and putting in place a patent box that is in place in other countries like Singapore and France and the Netherlands and the UK is, I think, a step towards that goal.
LEIGH SALES:
The Budget notes that you'll start to pay back Australia's debt when the economic recovery is secured. It makes no mention of how that will be measured, the timing of it, or any target of it whatsoever. How is this possible debt as far as the eye can see, when, for a decade, the Coalition did not stop railing about the evils of leaving future generations to pay off debt?
JOSH FRYDENBERG:
Well, let me remind you when we went into this crisis, we had delivered the first balanced Budget in 11 years….
LEIGH SALES:
But no, I don't want to get back into the Back in Black thing, and I'm surprised you raised it, actually, but let me make the point, my point is, as you well know, Treasurer, that the Coalition's rhetoric on debt was that it was pure evil. And now you're arguing, when it's needed, that you embrace it. It's a total shift in rhetoric.
JOSH FRYDENBERG:
You're raising an historical case so let me raise one with you. When we went into the pandemic, we had successfully balanced the Budget for the first time in 11 years by getting welfare dependency down to its lowest level in 30 years. Now, COVID hit, even after the drought, and even after the bushfires, we were still on track for the surplus. But then COVID hit. And as I said earlier, this has been the most significant economic shock since the Great Depression…
LEIGH SALES:
So sometimes debt is warranted?
JOSH FRYDENBERG:
At times of national crises there are no ideological constraints and we spent as required. And as we grow the economy, as we've seen in tonight's Budget, we get a dividend from more people being in work, so higher income tax receipts and lower welfare payments. That is going to help ensure that our debt-to-GDP, which is a key measure of our fiscal sustainability reduces over time.
LEIGH SALES:
Treasurer, thank you very much.
JOSH FRYDENBERG:
My pleasure.