LEIGH SALES:
Thanks for racing up Treasurer.
JOSH FRYDENBERG:
Nice to see you, Leigh.
LEIGH SALES:
Given the timing of this Budget as a springboard for an election, how can any voter trust that it's about what's genuinely best for the nation rather than what's best to get the Liberal Party re-elected?
JOSH FRYDENBERG:
Because what you've seen in tonight's Budget is a dramatic and material improvement to the bottom line as we've banked actually, the vast majority of those revenue upgrades. And as a result, we see the deficit more than halving over the forward estimates, we see debt, also peaking earlier and lower. And then we've provided cost of living relief, which is really important to Australian families right now. This is the number one topic of discussion around the kitchen table. And we've done it in a practical and a temporary and in a targeted way. Halving the fuel excise providing the $250 payments to pensioners, veterans, carers and others on income support, a $420 boost to the low and middle income tax offset that will go to more than 10 million working Australians and cheaper medicines and access for both concession and non concession cardholders. These are very practical. These are very responsible measures that respond to people's needs.
LEIGH SALES:
You're giving as you mentioned voters $250 each within the next few weeks, by total coincidence time to learn in the middle of an election campaign. When your own Budget papers note that household disposable income has increased by 11 per cent during the pandemic, why is any further handout needed when many people have bank savings during the past two years?
JOSH FRYDENBERG:
When you speak to pensioners, when you speak to veterans carers and others on income support, you know that the cost of living pressures are biting. Now, you've also got an indexation arrangement to the pension, which has seen a single pensioner receive more than $20, additional a fortnight from March. that will put over six month period around $260 into their pockets and then tonight, we're boosting that with $250. Again, that is reflective of the challenges that they face. But I point out to you that the low and middle income tax offset actually doesn't get into people's pockets till after the first of July and that's after the election. So you kind of have a both ways
LEIGH SALES:
Treasurer, what's contributing to cost of living is inflation. And so therefore, you have to be careful to not do things that are going to make inflation worse. How is it responsible to pump up government spending in an economy where inflation is a serious risk?
JOSH FRYDENBERG:
Well, because these measures are very considered, and they're temporary, they're targeted, and they're responsible. And if you look at our fuel excise cut, which will deliver to an Australian family with two cars who fill up once a week about $30 and then over a six month period, about $700, that actually, according to Treasury reduces inflation by about a quarter of a percent. So that's a result of cutting the fuel excise. So we've got the balance right. That's what we've sought to do with temporary measures that go to the heart of people's needs
LEIGH SALES:
But Treasury is also warning in the Budget papers that the combination of higher global inflation and an historically tight labour market suggests that domestic inflation risks are tilted to the upside. So they're worried inflation could get worse. Yet the actual forecast has inflation declining over the forward estimates. What's the basis for your optimism that from next year, inflation will trend downwards?
JOSH FRYDENBERG:
Well, you're right that they lift inflation this year. And again, that's largely driven by those international events, not just the oil price, but the supply chain disruptions, which has seen freight costs increased by five times since the start of the pandemic. You've also seen wheat costs of 40 per cent since Russia's invasion of Ukraine, so that's flowing through. But then Treasury see inflation moderating from four and a quarter percent this year, to 3 per cent next year, and they point out that the Wages Price Index, as an indicator of wages growth is above inflation, which is good news for working Australians.
LEIGH SALES:
But wages, you know, every budget, I've covered wages, forecasts have been over optimistic compared to what's actually happened. You're highly optimistic that low unemployment is going to fuel wage increases. But Treasury is warning that we've all already seen the unemployment rate fall faster and lower than expected without generating substantial pay rises. Why do you think that's going to change?
JOSH FRYDENBERG:
Well, I wouldn't want to correct you but I have to. In last year's budget, I forecast wages that were ended up ended up being lower than what was delivered. They were half a percentage point higher than what I delivered, that what I forecast in last years budget -
LEIGH SALES:
But you can’t dispute that over say 20 years, there have been a lot of forecasts that we're going to see wage rises and then they've just stayed flat.
JOSH FRYDENBERG:
Well, you're pointing them to the Labor Party's record as well and I welcome that…
LEIGH SALES:
But you’ve been in power for nine years, come on.
JOSH FRYDENBERG:
But the record is this, that we are now heading to the lowest unemployment rate in some 50 years…
LEIGH SALES:
But I'm wondering why you think that's going to drive wage increases when it hasn't so far?
JOSH FRYDENBERG:
For two reasons. Firstly, it just follows that when you've got a tighter labour market and employers are competing for workers, that that will put upward pressure. And secondly, there's another wages indicator, which is called a AENA, which I announced in the national accounts, which was at 3.3 per cent in the December quarter, which will then, is expected in these documents to rise to 5 per cent, by the June quarter. Now, that's a broader indicator of what wages and earnings more importantly, earnings are happening across the economy that's pointing to upward pressure. So as more people get into work, we'll see upward pressure on wages.
LEIGH SALES:
But if business is going well and there’s earnings, what you're banking on is that businesses are going to be able to pay better wages, because there's fewer workers because unemployment is low. But businesses at the same time, even if they've got good earnings, their supply costs, their transport costs are all going up. So where is the money going to come from to give workers additional wages when they're trying to meet very substantially increased supply costs?
JOSH FRYDENBERG:
Well again, employers will pay what they need to get the right workers…
LEIGH SALES:
And you only pay what I've got, right?
JOSH FRYDENBERG:
But what we are seeing is a very strong economic recovery. And what we've encouraged in this budget is more relief for small businesses with two particular measures to drive their adoption of digital technologies to drive their skilling of their workforce. What we've got is more infrastructure programs to support growth, particularly in our regions, all of which is going to drive a stronger economy where businesses are not just more productive and competitive, but they're also more profitable. And that gives them the opportunity to take on more workers, to pay them higher wages, especially when right now the biggest issue facing businesses is workforce shortages.
LEIGH SALES:
You mentioned the cut to the fuel excise a few times you've said that will be removed in six months. Is that timing simply a dirty bomb set for Labor, if it wins the election, you'll turn around in six months time and then blame them for a sudden increase in petrol prices?
JOSH FRYDENBERG:
No, it responds to the here and now where you've seen petrol prices above $2 a litre. And it's been largely driven by the events overseas with a barrel of oil up by 50 per cent since the start of this year. But also in the budget, Treasury have forecast that the price of a barrel of oil will come down to around $100 in the September quarter, and it's on the 28th of September, that we pivot off that cut in the fuel excise back to where it normally was. And what I've made very clear in my budget speech tonight is that the cutting the fuel excise is not coming at the cost of investments in roads, we're still committed $12 billion a year to new road funding, which is very important, and which is where normal fuel excise revenues go.
LEIGH SALES:
We've had a situation where the market, you know, oil prices that are greater so therefore petrol prices are greater. So the market is potentially driving people out of petrol cars because they think, maybe I should move to an electric car faster, right because petrol so expensive. But what you've done is now distort the market because you've made petrol cars go back to being cheaper. And you've changed people's focus, perhaps from electric cars, which is supposedly what you've renewable vehicles policy would aim to do?
JOSH FRYDENBERG:
I think that's a long bow. If I've ever heard one. This is a temporary, targeted six month cut in the excise, reflecting the challenges that Australian families face. And we know that people are voting with their feet and taking up electric vehicles. And we're investing in the charging facilities so that we can see more electric vehicles rollout but this is a cost of living pressure that is hitting hard on households budgets. We've listened to them. We've acted and you've seen that result in the budget tonight
LEIGH SALES:
On infrastructure spending, you've emphasised 11 national projects in your publicity documents, and a number of them are in areas where there are critical seats in play. So Central and North Queensland, Tasmania, the Hunter, the Northern Territory. The Auditor General's previously said that the granting of projects to politically desirable areas is a big problem in both sides of politics. How can people trust that these are the most worthy projects out there, not just the best pork barrels on election Eve?
JOSH FRYDENBERG:
I think one of the more exciting aspects of this budget is our investments in the new economic frontiers. Those areas of our country, those are the regions in our country, which will supercharge growth and jobs and capitalise on what is a growing middle class in the region. So we're focused on the Northern Territory. It's called Middle Arm around Darwin. We're focusing on central and northern Queensland around the Burdekin. And we're also investing in Hell's Gate. The Pilbara is well known for its iron ore and, of course, it's good port facilities. But it's got great potential as well as an energy hub as an export hub for more than for more than resources. And then of course, the Hunter as well, which is well known region in New South Wales, we're investing in there. So we've got a very substantial regional package. It's more than just infrastructure projects. It's also investing in skilling in regional universities, in modern manufacturing and recycling, as well as substantial health programs to encourage more doctors into the region's, for example, greater access to MRIs, as well as a substantial telecommunications package for our regions, because we know how important it is for people in the regions to be digitally connected.
LEIGH SALES:
But are you telling me it's just coincidence that so many of those projects have landed in areas and seats that you really need to either win or hang on to to win the election?
JOSH FRYDENBERG:
Well, it by definition, regional Australia is largely held in coalition hands. That's a fact. And we know that regional Australia provides more than two thirds of Australia's exports and in goods, and that is a dramatic, a very significant asset for our country. So we want to further invest in these regional areas, Leigh, because we need those new frontiers of economic activity, if we're going to be able to significantly, substantially enlarge our economy so they can pay for those essential services, like aged care, like the NDIS, like mental health, like hospitals and school funding, which is, of course, you know, priorities for us.
LEIGH SALES:
When Labor was in power, I mentioned to Andrew Probyn earlier, the maximum their spending ever hit was 25.9 per cent of GDP. And we all remember the Coalition was screaming blue murder about how irresponsible that was. The Coalition is now well above that and staying there. You said in your speech tonight, when Labor start spending, they simply can't stop. Was that a typo, was it should have been Liberals?
JOSH FRYDENBERG:
Well, what the Labour Party does is not only that they don't stop spending, but they also increase taxes. And what you've seen during this pandemic is Labor commit to more than $80 billion of additional spending. When I ended JobKeeper, they said no, they wanted to keep going. When we said to bring to the end the COVID disaster payment, they wanted to keep going. We ended those temporary measures, it was the right thing to do, it would allow the economy to stabilise but there's no secret Leigh, we are facing increased pressures for funding on aged care, on the NDIS and for defence and national security. So we've taken those steps..
LEIGH SALES:
But you weren’t acknowledging those pressures when the other side was in government. I'd point out to you as well, that if you have a look at the size of the deficit for this year versus next year, it's $79.8 billion and then next year, it goes to $78 billion. So really, you're not making any inroads there over the next 12 months at all?
JOSH FRYDENBERG:
Well, I think a very important take out of the budget is that we're seeing a more than $100 billion improvement by the end of the forward estimates. That's to the bottom line Because what we have done is banked the dividend of a strong economy. three quarters of those improvements to the revenue side have actually been delivered because more people are in work and fewer people in welfare. Unlike Labor, we haven't baked in high extended commodity price assumptions, we've been a lot more responsible. Our measures are targeted, and there is a very strong story of improvement across the forward estimates with deficit as a percentage of the economy actually fall by more than half.
LEIGH SALES:
You've always been honest that you'd like a shot at being the party's next leader. But if Scott Morrison loses the election, aren't you irrevocably tied to that loss? Because it's your budget that he's relying on to launch the campaign?
JOSH FRYDENBERG:
Well, obviously, I'm, you know, focusing on winning the next election, but I'm very proud of the fact that Australia's economic recovery now leads the world. In the United States, there are millions of fewer people in the workforce at the start of the pandemic. In Australia, there are 375,000 more people in work than at the start of the pandemic. Unlike the 80s and the 90s recessions under Labor, where the unemployment rates stayed elevated, for a decade, we've actually reduced the unemployment rate below when we came to government. And the Labor Party said the single biggest test for our government's management of this recession would be what happens to jobs and unemployment. When they left office it was at 5.7 per cent, today, it's 4 per cent, ithe budget, we’ve printed 3.75 per cent. So we stand every day of the week on our jobs record, but more importantly than our record, is our plan for the future, which is laid out in tonight's budget.
LEIGH SALES:
Treasurer, thanks for your time tonight.
JOSH FRYDENBERG:
Thank you.