LEIGH SALES:
Today’s mid-year economic forecast shows a faltering Australian economy with weak wages, slack consumer spending, slower than anticipated growth and soft global conditions. The Budget, still expected to reach a surplus next year, although it will be smaller than forecast, the Treasurer Josh Frydenberg joins me from Canberra. Thanks for being with us Treasurer.
JOSH FRYDENBERG:
Good evening, nice to be with you Leigh.
LEIGH SALES:
This mid-year economic forecast has downgrades everywhere you look, growth, inflation, wages, household consumption, business investment growth. Every sign points to a struggling economy. So how is it not reckless to cling to your surplus-at-all-costs mentality?
JOSH FRYDENBERG:
Well just to correct the record there for you Leigh, actually these numbers show that the participation rate is better than what was forecast at Budget. That public final demand, which is government spending on infrastructure as well as programs like the NDIS is also up from Budget…
LEIGH SALES:
…But Treasurer, I don’t think you’re correcting anything there. I’m pointing to the major economic indicators; growth, inflation, wages, household consumption.
JOSH FRYDENBERG:
Well I am correcting you because what you said there Leigh was that every indicator was pointing downwards and that’s not right. In fact mining investment will have the biggest jump in seven years… for the first time will be up in seven years. And what we’ve seen from today’s midyear economic update is that Australians can be confident about their economic future. We’re living within our means, the Budget is back in balance for the first time in eleven years, we will deliver the first surplus in twelve years, the Australian economy will continue to grow on the back of a strong labour market, increased exports, household consumption and as well as public final demand and we are putting record amounts into the essential services that people need and rely upon. In this midyear update you’re seeing extra money for infrastructure, $4.2 billion dollars either in new projects or money that’s brought forward into the forward estimates, as well as increased support for aged care and drought.
LEIGH SALES:
Treasurer, what do you think Australian voters care more about, a tiny budget surplus next year or staying out of recession?
JOSH FRYDENBERG:
Well the Budget surplus has never been about a trophy for the cabinet shelf. What it’s been about is paying back the debt that we’ve inherited. Now our interest bill…
LEIGH SALES:
…Treasurer, sorry to keep cutting you off but I want to clear that up. It’s not debt that you’ve inherited; debt has doubled since the Coalition took office.
JOSH FRYDENBERG:
Well when the Labor Party came to Government they were bequeathed a pristine ballot sheet with zero government debt, then they accumulated $240 billion dollars of budget deficits. We inherited a situated where debt was growing by more than 30 per cent per year…
LEIGH SALES:
And it’s doubled over that time you’ve been in power…
JOSH FRYDENBERG:
And it’s taken six years for us to get that under control. So much so that we’ve now brought the Budget back into balance and we will deliver the first surplus. Now our interest bill is nineteen billion dollars last year. What the numbers show today is that will decrease to fourteen and a half billion dollars over the forward estimates and in cumulative terms Leigh, that is fourteen and a half billion dollars that will no longer be paid in interest that can be spent on schools, on hospitals and other essential services.
LEIGH SALES:
Treasurer, monetary policy run its race, there’s no more stimulus to be had there, interest rates are at a record low. The case for fiscal expansion is staring you right in the face but you are determined to bank more money rather than spend it in an economy that is desperate for stimulus.
JOSH FRYDENBERG:
Well just last week the IMF released a report which said that our fiscal settings were appropriately expansionary for the 19/20 year. You’ve heard respected economist, Chris Richardson saying that both fiscal and monetary policy are pointing towards economic growth. And we know that we are continuing to spend record amounts on schools, hospitals and aged care, and we’ve got a hundred billion dollar ten year infrastructure plan. So we need to be responsible. The Labor Party will make heaps of promises, they won’t add up the sums and of course they wanted to load the economy at this delicate time with $387 billion dollars of higher taxes.
LEIGH SALES:
You’re trying to paint a very rosy pictures but if everything is as rosy as you suggest, why are we seeing GDP growth downgraded, why are we seeing household consumption growth downgraded, business investment growth downgraded, wages growth downgraded?
JOSH FRYDENBERG:
So on household consumption, some people are saving as opposed to spending and ultimately it is my job to put more money in their pocket. But what we saw on the last national accounts is that household disposable income had its fastest increase in a decade and that’s not insignificant. When it comes to business investment, actually that’s going up and as I said mining investment will have its first jump in seven years. So what we’re determined to do is to grow the economy and what these numbers show is that next year the Australian economy will grow faster than the United States, the U.K, Germany, France, Japan and other comparable nations.
LEIGH SALES:
Treasurer, are you suggesting that all the economists today interviewed, and economic analysts who have looked at this have got it wrong and it’s actually a wonderful rosy picture and nothing to be worried about?
JOSH FRYDENBERG:
What I’m saying to you is that we’ve worked really hard to bring spending under control and we’ve done that in terms of bringing the Budget back into balance and we will deliver the surplus without increasing taxes. And that has required significant discipline. But I also don’t understate some of the significant global and domestic headwinds Leigh that we’re facing. The drought has taken a quarter of a percent point off GDP and of course it has required additional support into those communities. The trade tensions, which may be showing some signs of abating, have also affected negatively, consumer sentiment and business sentiment so we can’t ignore those facts.
LEIGH SALES:
On that point Treasurer, given the effects those things have had, why wouldn’t you drastically expand your infrastructure program and bring aspects of it forward to turbocharge the economy and job creation and to make up for some of the hit from those other factors?
JOSH FRYDENBERG:
Well we actually have brought it forward, in terms of $4.2 billion dollars…
LEIGH SALES:
No but I’m suggesting further…
JOSH FRYDENBERG:
Well this is quite significant. You’ve got major projects not like the North East Link in Victoria, the North South Corridor in South Australia, the Tonkin Highway, the Bass Highway, the Bruce Highway upgrade. I mean these are all major projects that we’re bringing forward into the forward estimates in terms of spending, as well as new projects. And you’ve also heard from Labor state Governments talk about capacity constraints within their own states. If you don’t get the funding profile right, if you don’t get the pipeline right, then ultimately the taxpayer pays more because there are those constraints on getting the skill, workers, or in getting the necessary materials and equipment to do the work.
LEIGH SALES:
Treasurer this will be your last appearance on the program before Christmas. I wish you a very merry one and thank you very much for your regular availability for the show throughout the year.
JOSH FRYDENBERG:
And all the best to your viewers as well.