LEIGH SALES:
Josh Frydenberg has just raced to the ABC studio from the floor of the House of Representatives, thank you for making it up here in record time.
JOSH FRYDENBERG:
Good to be with you Leigh.
LEIGH SALES:
Congratulations also on delivering your first Budget.
JOSH FRYDENBERG:
Thank you.
LEIGH SALES:
Treasurer, you just told the Parliament that the Budget is back in the black, it’s not, it’s still in the red.
JOSH FRYDENBERG:
It’s actually a $7.1 billion surplus for 2019-2020, with $45 billion of surpluses over the next four years…
LEIGH SALES:
But Treasurer, we’re in 2018-2019, it’s a deficit this year of $4.2 billion.
JOSH FRYDENBERG:
Leigh, it’s a credible trajectory over the next four years which has been the product of disciplined decision-making over the last six years. You see when we came to government, we inherited a Budget that was out of control. Spending was growing at about four per cent per annum. We have reduced that to half of that now. And we are now seeing the product of that disciplined decision-making, with a Budget surplus of $7.1 billion and surpluses in the years ahead.
LEIGH SALES:
I’ll come to the projected surpluses in a second and the factors involved in that, but just for the sake of accuracy, can we agree that we are in the 2018-19 calendar year and that this year there is still a deficit?
JOSH FRYDENBERG:
Well, what Budgets do is they set out the numbers and the trajectory for that year and the years ahead. And we set out in the 2019-20 Budget, the numbers for 2019-2020, that’s what we have done.
LEIGH SALES:
But we also as part of the Budget, we get to understand what has happened this year, and this financial year, Australia is still in a deficit.
JOSH FRYDENBERG:
But we have delivered a $7.1 billion surplus for 2019-2020 which is what this Budget is all about. It’s about the revenue and the spending commitments over that year and the forward estimates beyond.
LEIGH SALES:
But like any projection, your ability to deliver that $7 billion surplus is reliant on factors that are outside your control, it might not happen.
JOSH FRYDENBERG:
No, it will happen, and it’s the product of bringing the spending under control, and also ensuring that we continue to provide more money into people’s pockets with the tax cuts we announced. You see when Wayne Swan announced a surplus that never eventuated, he was relying on a three per cent of GDP turnaround in one year. What we have seen, is a steady reduction in the deficits in the years that we have come to government, and now we’re seeing the first surplus in more than a decade.
LEIGH SALES:
But my point is that you could unwittingly be in the same position as Wayne Swan, which is announcing a surplus that won’t happen, because there are factors such as the global economy, Treasury points out in the Budget papers that commodity prices could weaken unexpectedly, household spending could be lower than anticipated, there are factors that could derail that.
JOSH FRYDENBERG:
Well let me point out a few things, firstly $7.1 billion is a very substantial buffer. So it’s not a wafer-thin surplus…
LEIGH SALES:
It’s very slim, actually, in the context of the overall GDP.
JOSH FRYDENBERG:
It’s a substantial surplus. The second thing is, we have beat our projected forecasts in the last couple of Budgets. Whereas Labor previously when they were forecasting a surplus missed their Budget targets. We have over-achieved, we’ve been conservative in relation to commodity forecasts, very conservative based on Treasury advice and extensive consultation. But what this Budget really does, Leigh, is it lays down a plan for the next decade for Australia, to grow the economy, with the tax cuts, with investment in skills, with a $100 billion infrastructure plan. And with a strong economy, you can guarantee the essential services like health and education, aged care, disability support services that people rely on.
LEIGH SALES:
You say that you’ve over-achieved, but the Coalition was elected in 2013 after promising during its campaign a return to surplus in its first term, you’re now at the end of your second term and the surplus is still only a projection, wouldn’t it be reasonable for Australians to judge you harshly at the ballot box for that?
JOSH FRYDENBERG:
No, what they’re going to judge us on, is on our economic record, which has seen 1.2 million new jobs created, a record number of women in the workforce, a record number of young people, we’re seeing a record number of Australian’s in a job. As a result, the number of working age Australians on welfare is the lowest in thirty years. Government spending growth is now the lowest in fifty years. We have committed to $100 billion in infrastructure to bust the congestion in our cities. To get people to work sooner and to get them home sooner. That’s what we’re doing.
LEIGH SALES:
On that employment issue while you raise it. The Budget includes a big infrastructure program for Australia, but labour market participation is already at an historic high, so there aren’t that many people…
JOSH FRYDENBERG:
That’s a good thing.
LEIGH SALES:
Yep. That means there aren’t that many people chasing work. You’re also cutting the migration program from 190,000 per year to 160,000 from next year. Given both of those things, where do you think you’re going to find the workers for your infrastructure program?
JOSH FRYDENBERG:
Well there are still people who are looking for work, but we have substantially brought down unemployment to below five per cent to 4.9 per cent…
LEIGH SALES:
That’s my point, there’s not that many people looking for work.
JOSH FRYDENBERG:
Well there are people who are ready to work on these projects. And we’ve also got in this budget a half-a-billion dollar skilling fund which is designed to ensure people have the skills necessary to meet the jobs available. Look, there are plenty of Australians who are in work, and there are plenty of Australians who want to get to work, and that’s what we’re providing opportunities for.
LEIGH SALES:
Is the Morrison Government making a mistake handing out cash via your proposed mid-year tax payments, rather than banking that money, given that it’s due to a temporary windfall?
JOSH FRYDENBERG:
We actually have banked the improvements since MYEFO, which is $2.3 billion dollars. But in our fiscal strategy, it makes very clear, Leigh, that we have a tax to GDP cap. Now that’s 23.9 per cent. We would’ve hit that tax to GDP cap, midway through this decade if we hadn’t taken action to reduce taxes. Now…
LEIGH SALES:
That’s just an arbitrary number though…
JOSH FRYDENBERG:
No…
LEIGH SALES:
that you’ve imposed…
JOSH FRYDENBERG:
It’s a discipline. And, the Labor Party don’t accept the discipline because they’ve got $200 billion of new taxes. But, the key point here is we philosophically believe in lower taxes. We want to reward people for effort, we want to incentivise people to work harder. We want people to earn more and to keep more of what they earn.
LEIGH SALES:
But, this close to an election by giving cash like that, don’t you risk voters viewing it cynically as a political bribe?
JOSH FRYDENBERG:
It’s not at all. What has happened last year in the Budget is we announced a $530 tax offset. What we have done here is more than doubled that to $1,080. So, if you’ve got a two income family, let’s say a teacher and a tradie both earning $50,000 or $60,000 a year, in 13 weeks’ time, they will get $2,160 additional into their pocket. That’s money that will go to the quarterly energy bill, the monthly mortgage payment, the yearly car insurance, this is real money to real people and it’s rewarding their effort.
LEIGH SALES:
But, isn’t it a sign of a policy failure of this Government that you’re having to give people a one-off payment to help with expenses rather than, at this point, being able to say ‘look, we’ve put in policies during the past six years that have consistently driven down your medical bills, consistently driven down your insurance premiums, consistently driven down your electricity bill.’?
JOSH FRYDENBERG:
Well, we’re taking all those actions but that’s not mutually exclusive. The point here is that we believe in lower taxes. It’s not the Government’s money, it’s the people’s money. So, at every opportunity, you should look to return that money to them. But, we’ve also included in this Budget, structural reforms, reforms that in the past, the Labor Party have not signed on to and this is reducing the 32.5 per cent tax bracket down to 30 per cent, which will ensure that Australians keep more of what they earn.
LEIGH SALES:
And, why are you pushing that out to 2024, given that a lot of Australians would welcome having that money in their pocket today?
JOSH FRYDENBERG:
Well, obviously we are balancing objectives here. We’re balancing and ensuring that we have got sustainable and significant surpluses to pay down the debt we inherited from the Labor Party. But, also, at the same time, we are making significant structural reforms to simplify our tax system. We think we’ve got the balance right, but in 2024-25, we’ve already legislated against the Labor Party’s wishes, to remove totally the 37 cents in the dollar tax bracket and this will coincide with that change.
LEIGH SALES:
By doing that, though, aren’t you beginning to dismantle the progressive tax system because under those changes, somebody who is earning $46,000 a year will basically pay the same rate of tax as somebody who is earning $195,000 a year?
JOSH FRYDENBERG:
To the contrary, in fact, this continues the progressive nature of our tax system. You’ll have the top five per cent of taxpayers paying around a third of the overall tax and that proportion that they pay will actually increase, not decrease, under our tax reforms. You’ve got someone who is earning $200,000 a year paying ten times what someone on $45,000 a year is paying tax. When you look at where our top marginal rate cuts in, in terms of average weekly earnings, it cuts in at a much lower rate than when it does in other countries like the UK and the United States. We have a very progressive system, we’re maintaining that. We believe this is a fairer, simpler, stronger tax system.
LEIGH SALES:
We know that the Government has underspent by about four billion dollars on the National Disability Insurance Scheme. Given how much need there is in the community from disabled Australians and their carers. How is that even possible and doesn’t it mean that half of your projected surplus is built on them missing out on services that they desperately need?
JOSH FRYDENBERG:
Not at all, let me make a few points here. The first is that we have guaranteed funding in this Budget for our share of the National Disability Insurance Scheme. This is a bipartisan scheme that will expand to $22 billion a year and it’s fully funded in this Budget.
LEIGH SALES:
But what about this underspend?
JOSH FRYDENBERG:
So what this is based on is that it is a demand based scheme, and there’s been issues in the transition. There are currently 250,000 people who are in the NDIS; 78,000 of whom have not got disability support before. It’s growing to 460,000. So whenever someone is in the NDIS, we meet the payment. But the way the demand driven scheme is looked at in the Budget is no different to hospital funding. So in this Budget, we are having to find an extra $1.9 billion for public hospitals because the demand was higher, just like the demand was lower in the NDIS because of the transition. So it really evens itself out over time.
LEIGH SALES:
You’ve pointed out tonight that, economically, the Coalition has marked some achievements: big deficit reduction, low unemployment, low inflation among them. Hasn’t the Coalition itself undermined those achievements with voters through your own toxic infighting, you’re leadership changes, and you’re ideological preoccupations in the past six years?
JOSH FRYDENBERG:
Well look, Leigh, you can talk about the past. This Budget is about the future.
LEIGH SALES:
Voters make their decisions often based on performance as they view it as a good indicator of how you’re likely to perform in the future.
JOSH FRYDENBERG:
And what I would say to the voters of Australia tonight is that when we came to Government, growth was lower, unemployment was higher, business investment was in freefall, and the Budget was firmly in the red. We have turned that around and it is no accident. It has been the product of disciplined decision making and an economic plan that is working. So your listeners know that this Budget will ease their cost of living. Your listeners and viewers should know that this is going to bust congestion in the cities and unlock the potential of our regions. And your viewers should know we are providing more funding for hospitals, for schools, for aged care, in this Budget.
LEIGH SALES:
Treasurer, thank you very much for speaking to us.
JOSH FRYDENBERG:
Good to be with you.