LEON BYNER:
Treasurer, what’s your reaction to the banks not passing on the full point two five per cent decrease?
JOSH FRYDENBERG:
Look, we’re disappointed and this has been a pattern of behaviour by the banks. When Labor was last in, there were fourteen separate interest rate cuts and only five of those were passed on in full…
LEON BYNER:
Anything you can do about that?
JOSH FRYDENBERG:
Well, look you can’t legislate to force them to pass it on. But what you can do is encourage competition. I do see some of the smaller lenders like Athena, out there today saying that they will pass on the full rate cut and they’re offering a variable rate at 2.84 per cent which is very competitive. And it’s important that customers of these banks make their concerns known, vote with their feet and go looking for the best possible deal in the marketplace.
LEON BYNER:
But of course you’re aware the ACCC has also been onto the fact that the banks are not making these ‘if you don’t like us, go somewhere else’ changes easy. So, that’s an issue. Yes, you can swap but there is a lot of schlep involved.
JOSH FRYDENBERG:
Well, of course, it’s like the energy market. There’s effectively a loyalty tax, if you stay with the bank you might not necessarily be getting the best deal than if you go and take your business elsewhere. So, we need to encourage people to shop around, we need to encourage as we are more competition in the marketplace against the big banks. But at the same time, the good news from these interest rate cuts is that the cost of borrowing goes down. And if you’re an Australian family with a $400,000 mortgage, a twenty-five basis rate cut is the equivalent of $720 less a year in interest payments.
LEON BYNER:
There is a view around and you know this well, Treasurer, by economists that the traditional way the Reserve Bank uses monetary policy to stimulate the economy is far less effective. One of our own former Treasurer’s, Peter Costello, said it and Labor are saying there may need to be a stimulus package. But it’s been put to us, and Scott Morrison talked about this when he first got elected, and that is that you could force or coerce both government departments and businesses to pay their bills on time, particularly big ones, what do you think about that?
JOSH FRYDENBERG:
Well, we do and we have as a Government, we’ve focused on paying our bills on time and being a role model in that regard and we encourage all businesses to do so and I note that the BCA, the Business Council of Australia, has a major initiative underway to also encourage its members to do so. But what we are continuing to do is encourage competition, we’re lowering taxes, we’re creating jobs, the Australian economy has a AAA credit rating and has just completed its 28th consecutive year of economic growth. That’s in stark contrast to our political opponents whose idea of a stimulus was $387 billion of higher taxes and who promised surpluses that they know they will never deliver.
LEON BYNER:
Treasurer, what’s your reaction to people, and there are many of them, who are living on their own incomes; some get part pension, some not at all, and of course, they are getting a haircut whether they like it or not again. What do you say to them?
JOSH FRYDENBERG:
Well, we did make some changes to the deeming rate to the cost of around $600 million to the budget and we are very conscious that for people who put that money in the bank, the returns for them are much less than they were in this world of lower interest rates. But, the Reserve Bank operates monetary policy independently of government, we focus on fiscal policy; that’s our infrastructure spending, that’s our tax cuts and that’s the other macro-economic settings.
LEON BYNER:
So, if people use the interest rate cut to pay off more of their debt, that’s not really a stimulus for the economy, is it?
JOSH FRYDENBERG:
Well, in time it will be because it means lower interest payments for them and that frees up money in their disposable income to spend through the economy. So, it’s a bit of a timing factor if you like and the Reserve Bank has commented about people spending some of their money paying back debt but also a proportion of their money in the economy they’re spending and that’s good news for the tradies, that’s good news for the retail shops, that’s good news for people running businesses.
LEON BYNER:
So you don’t think you need to do anything at all yourself in terms of a stimulus for the economy?
JOSH FRYDENBERG:
Well, what we have done is cut taxes and there’s $18 billion plus that has made its way in the last few months out of the ATO into the pockets of working Australians and that’s money that will be spent through the economy. We’re still rolling out our $100 billion infrastructure pipeline and we’ve delivered the first balanced budget in eleven years. I want to point out to your listeners, Leon, that while the Australian economy continues to grow, other big economies around the world have actually experienced negative economic growth, in particular Germany, the United Kingdom, Singapore, Sweden, all experienced negative economic growth in June. So we’re being very careful with the public’s money, we’re not wasting it. We’re targeting the spending, we’re creating more jobs and the reason why the budget has got into a much healthier state than what we inherited is because we’ve helped create more jobs which mean that people have moved from welfare into work.