LEIGH SALES:
Treasurer, thank you very much for racing up from the House.
JOSH FRYDENBERG:
Nice to be with you Leigh.
LEIGH SALES:
Your promises and targets are based on these assumptions listed in the Budget papers, that future Coronavirus outbreaks in Australia are all localised and contained, that a mass vaccine is available by the end of next year, that people keep on obeying social distancing, that all state borders except WA are open by the end of this year, and that there is no major disaster or shock internationally. That’s an incredibly fragile foundation, isn’t it?
JOSH FRYDENBERG:
Well there is great uncertainty, unprecedented uncertainty, in the economic environment. Not just here in Australia but globally right now. As you know, the country was on a trajectory for a speedy recovery until we saw that second wave of cases in Victoria. Victoria representing a quarter of the national economy has hit it hard, and that’s hit GDP in the September quarter by up to $14 billion alone. So we have made a set of assumptions based on the evidence available to us. As you know, the states are working with the Prime Minister to lift borders by the end of the year. We have said that Western Australia's border won’t open until April, and as for a COVID vaccine, we are doing everything possible, both with our researchers here in Australia, but linking into the global supply chain to ensure that Australians have access to it next year.
LEIGH SALES:
It’s a fair conclusion, though, isn't it, looking at what Treasury says in these Budget papers that your path to recovery is best case scenario, and could easily be derailed?
JOSH FRYDENBERG:
Well actually the Treasury Papers outline a couple of other scenarios that may be even better cases. So in the event that we get access to the vaccine earlier than is laid out in the Budget papers, will lead to a $34 billion boost to the economy. So there is a great deal of uncertainty. These are projections, these are forecasts, these are made during a once in a century global pandemic. But there is a clear path back to jobs and employment for hundreds of thousands of Australians and you see that, as the unemployment numbers come down over time, and you see that as a result of our economic support provided in this package of measures.
LEIGH SALES:
On the point about economic support, given the extremely uncertain environment that you acknowledge, why have you set dates to abolish JobKeeper and JobSeeker, rather than waiting to see what the relevant economic data shows over the next few months. Wouldn't flexibility be more prudent?
JOSH FRYDENBERG:
Well, the first thing to say is that JobKeeper and JobSeeker are very substantial programs but they are not the only programs that we have put in place. As you know, we have got a $30 billion cash flow boost supporting the working capital of small businesses, we have got $750 cash payments. Tonight we have announced a whole series of other incentives...
LEIGH SALES:
But can I get you to address that point about flexibility rather than having dates locked in?
JOSH FRYDENBERG:
So in the context of JobSeeker Leigh, we have said we will make a decision about that level of payment closer to the end of the year when we have a better sense of the labour market dynamics. With respect to JobKeeper, we have extended it for an extra six months, it has helped keep people employed. But programs like this JobMaker hiring credit will be very important in that transition away from JobKeeper and to a more dynamic economy.
LEIGH SALES:
But you are still relying on, as just discussed with Andrew Probyn, that people feel confident enough to actually hire somebody. Businesses might go ‘well even with the extra $200 a week I don't want an extra person on staff.’
JOSH FRYDENBERG:
Well again these are going to be difficult decisions for businesses but we are making it easier for them to take that decision to hire someone. We are also investing record amounts in apprenticeships, $4 billion both to keep current apprentices but also to attract 100,000 new apprentices. We have got 50,000 short courses in specified areas where there are job needs. We are also, having created a $1 billion JobTrainer Fund with 340,000 training positions. So we have got a whole suite of measures that are designed to boost the employability of Australian workers but also to encourage businesses to take them on.
LEIGH SALES:
Wouldn't there be a case for Victoria, specifically, to have JobKeeper extended beyond that March date?
JOSH FRYDENBERG:
Well again, Victorians are benefiting most from the Government's decision to extend JobKeeper. Around 60 percent of those who are on JobKeeper in the December and March quarters are expected to be from Victoria. We have put out already about $28 billion to Victoria through the range of measures, and of course the Victorian Government’s made their own announcements. If you are receiving JobKeeper, you have retained a job, and that’s really important to understand. What we have sought to do is create a series of incentives and make a series of investments that are designed to create more jobs. 40,000 jobs with our infrastructure rollout. 50,000 jobs with our income tax cuts. Another 50,000 jobs with the loss carry back measure and the immediate expensing. Treasury believes that nearly a million new jobs will be created by the measures in this Budget and what is happening across the economy over the next few years.
LEIGH SALES:
Your JobMaker program will subsidise employers who hire new staff aged 16 to 35. Why the cut off at 35? Because plenty of people over that age need work too.
JOSH FRYDENBERG:
Well again, it’s not our only measure. So as I mentioned, there is a real focus on skills and training and other programs. The incentive for businesses to invest will create a lot more jobs across the economy as businesses buy and sell and maintain and service equipment and new machinery. So there will be jobs across the economy...
LEIGH SALES:
Why did you settle on that 35 though?
JOSH FRYDENBERG:
We settled on 35, because young people have been particularly impacted by this crisis, and also because of the history of previous recessions in Australia, in the 1980s and 90s, that it took a while for jobs to come back. So in the 1980s, it took some six years to get the unemployment rate back below 6 percent from where it started. In the 1990s it took around 10 percent and young people...
LEIGH SALES:
On that point Treasurer, sorry to interrupt because I think you’ve made the point about young people, but what I want to pick up there is if it takes a while for things to come back online, doesn't that underscore the point I made before that, why do you want to take JobSeeker and JobKeeper off too early?
JOSH FRYDENBERG:
Because they were always temporary and targeted measures, and we have got a series of other measures which are helping the economy transition...
LEIGH SALES:
But you could prolong the recession. If you take them off too early and the jobs you are trying to create aren't quite there yet, you could prolong the recession and really cause some suffering.
JOSH FRYDENBERG:
There’s nearly $100 billion of new support in this Budget. There is a record amount of spending, but there is also important supply side structural reforms. The most significant changes to insolvency in 30 years; the changes to the provision of credit will also help spur activity; what we're doing in our manufacturing strategy; of course energy is a vital input into job creation for so many industries; and of course we're pursuing more flexible workplaces. All of those inputs are helping to create a stronger economy. JobKeeper was temporary and targeted and at $101 billion, Leigh, it’s the most significant and successful program that any Australian Government has ever undertaken in an environment such as this.
LEIGH SALES:
Is it credible, even with that, that unemployment would be under 6 percent within the forward estimates period, four years, off the back of the worst recession in 100 years?
JOSH FRYDENBERG:
Well this is Treasury’s best forecast based on the evidence that is available to them. But unlike previous shocks, this shock has occurred both on the supply and the demand side. Because of the health restrictions you haven't been able to go out to your local restaurant or to your cafe or take a holiday to your favourite destination. So people's movement has been restricted, hence people’s savings ratio has gone up. That will come down over time and then once we get the virus under control, and we are doing very well outside of Victoria, and in Victoria those numbers have come down recently, once you can suppress the virus you can start to ease the restrictions and that helps create jobs and we’ve already seen that in recent months.
LEIGH SALES:
You’re bringing forward stage two of your income tax plan. Why did you make the decision to keep the stage 3 change back in 2023-24?
JOSH FRYDENBERG:
Because this is what the economy needs at this time. The changes to the stage two, bringing it forward by two years, but we’ve also kept in an additional low and middle income tax offset, will see an Australian who earns $60,000 today paying $2,160 less tax this year compared to what they would have done prior to that reform…
LEIGH SALES:
I am not asking about that Treasurer. What I’m asking about is, if you are trying to pump money into the economy then why haven’t you pulled forward your other tax cuts?
JOSH FRYDENBERG:
Well again, we are maintaining a watching briefly, Leigh. This is what the economy needs today. These are very significant reforms. They will boost economic activity across the economy and it’s Treasury’s forecast that these tax cuts alone will help create 50,000 jobs.
LEIGH SALES:
Net debt this year is going to be $703 billion, by June 2024 it will be almost a trillion dollars. In the 2008-2009 Global Financial Crisis and the years after, the Coalition aggressively and persistently attacked the then Labor Government on the grounds that debt and deficit were signs of economic incompetence and mismanagement. Why shouldn't I apply that same argument to you now?
JOSH FRYDENBERG:
Well the first thing is we haven't baked in spending as our political opponents did…
LEIGH SALES:
No, I'm asking about their use of fiscal policy?
JOSH FRYDENBERG:
And I am responding directly to that question Leigh. We have spent more than 90 percent of the money that we’re putting out in this Budget over just two years. The second point is, that the GFC saw the global economy contract by 0.1 percent. This year the OECD is expecting the global economy to contract by 4.5 percent. This crisis dwarfs the GFC so you cannot compare it.
LEIGH SALES:
Well of course it does, but Labor's largest deficit was $54 billion a decade ago. Yours is four times that today.
JOSH FRYDENBERG:
And they baked in spending that we inherited and because of the diligence that we had with the finances we were able to deliver the first balanced budget in 11 years. We saw unemployment go down from when we came to government at 5.7 per cent to 5.1 per cent…
LEIGH SALES:
But Treasurer, everyone watching this show will remember for years and years the Coalition went on about Labor's debt and deficit disaster, you argued that taking the Budget into deficit, building up debt was a sign of economic incompetence and mismanagement. Everybody remembers that and now that is what you are doing as a form of responsible economic management.
JOSH FRYDENBERG:
Well again, they baked in spending, they spent it on pink batts, and of course the GFC was a fraction of what we’re seeing today…
LEIGH SALES:
But you’re not addressing the principle of what I'm talking about here. Isn't the reason that I shouldn't make this argument, Treasurer, that it was always dishonest and cynical as your current policy response proves?
JOSH FRYDENBERG:
I think you are being cynical today. Leigh to be honest with you we are dealing with a once in a century pandemic. Australia's GDP has fallen by 7 percent in the June quarter, a record amount. If you turn to New Zealand, it's fallen by more than 12 percent. If you turn to France, it’s around 14 percent. If you turn to the United Kingdom it’s by more than 20 percent. Our net debt to GDP, even after all the spending in this Budget, will see as you said, peak at around 44 percent. That’s less than half of what it is in other comparable countries.
LEIGH SALES:
Treasurer I really want to, I’m just trying to get the facts here for the Australian public and look back historically. Can we treat the Australian public like adults, and agree, that both during the Global Financial Crisis and today using debt, deficit, government spending, fiscal policy to cushion the economy are responsible economic policies.
JOSH FRYDENBERG:
We have always been responsible in responding to this crisis…
LEIGH SALES:
Treasurer, I’m asking in comparison to the GFC. It was responsible when Labor did it and it’s responsible when you are doing it today. It’s a legitimate tool of economic policy.
JOSH FRYDENBERG:
Well fiscal policy is always a legitimate tool of economic policy and it sits side by side with monetary policy…
LEIGH SALES:
It just seems weird to me that you can’t acknowledge that…
JOSH FRYDENBERG:
Well Leigh I’ll make the point. When it comes to monetary policy, during the GFC it was able to fall by 425 basis points, that was a hundred billion dollar stimulus effectively into the economy over 12 months. During this economic crisis, because the cash rate was already very low, it could only fall by 50 basis points so it fell to fiscal policy to respond as we have. We have and we have done so responsibility. And can I also just point out Leigh, we have set ourselves a bunch of principles that we have been consistent with, namely that our spending has been targeted, proportionate, temporary and using existing systems, the same cannot be said about Labor.
LEIGH SALES:
The Coalition's principles for years and years have been that a surplus is a sign of economic competence and this, your response over this crisis, which I am not arguing is an incorrect response, proves the validity of what Labor also did during an economic crisis.
JOSH FRYDENBERG:
Well the reality is unless you are disciplined fiscal managers and you get the Budget into a position of strength then you can't respond on a rainy day. And the fact is we did get the Budget into a much better position than what we inherited and that gave us the ability to respond as we have today and our measures collectively have already saved some 700,000 jobs and tonight's Budget will see the creation of nearly a million new jobs over the future years.
LEIGH SALES:
Treasurer, last year in this same interview you were prematurely claiming credit for the Budget being back in the black. On today’s numbers, will you ever deliver a surplus as Treasurer?
JOSH FRYDENBERG:
I'm certainly not putting a date on that Leigh. The reality is we printed a series of deficits tonight and a higher debt burden. But this has been the heavy price to save lives and livelihoods. We had no other alternative but to spend as we have and it has helped make Australia a stronger nation and it has helped see Australia come through this crisis nearly better than any other developed economy across the world.
LEIGH SALES:
Treasurer thanks for your time.
JOSH FRYDENBERG:
Good to be with you.