LEON BYNER:
Josh, thanks for joining us.
JOSH FRYDENBERG:
Good morning, Leon.
LEON BYNER:
First of all, I want to focus on the fact that China has used its real estate business arms to raid our shops of essential equipment, medical supplies as well as using its economic clout to take advantage of the virus and I notice that you've done a release, and I'll be very specific about this, you're going to protect financially distressed Australian companies from opportunistic foreign investors during this crisis. How do you propose to do that?
JOSH FRYDENBERG:
Well, basically, what we're saying is all foreign investment proposals, regardless of the amount, will be scrutinised by the Government. This will give us a lot more visibility over the proposals because currently there is a $1.2 billion threshold for particular countries with whom we have a free trade agreement. So, now any proposal will be subject to a very close degree of scrutiny.
LEON BYNER:
Do you acknowledge there is a difference between a foreign investor who represents an independent business separate from government, and a state, a state, that wants to strategically purchase an asset which they'll use to transfer goods back to their own country?
JOSH FRYDENBERG:
Well, the foreign investment review rules as they currently are do recognise that distinction because any purchase by a state-owned enterprise does need particular Foreign Investment Review Board approval and the Treasurer's approval. But there are companies that do not require the approval because of the purchase being under $1.2 billion. And what we're saying now, and this is not directed at a particular country or company, but we are saying now all proposals will be subject to that strict national interest test and we'll be looking at things like the character of the investor, tax and competition implications as well as, of course, national security grounds.
LEON BYNER:
Are we now going to retool industries that went offshore, bring them back onshore knowing that we are terribly vulnerable?
JOSH FRYDENBERG:
I think this will be a global conversation, Leon. I think many countries will reassess their supply chains after this event. Of course, our focus right now is dealing with the war that we're fighting on two fronts, the health crisis and the economic crisis, and both are straining and stretching resources as well as proving to be very challenging for the Australian people but we'll get through this, after which, there will need to be a reassessment of a number of those issues that you refer to.
LEON BYNER:
Alright, I need a clarification. A lot of callers have asked me this. Would you clarify the $1,500 per fortnight wage assistance, does it apply to those who are currently unemployed or to all employees?
JOSH FRYDENBERG:
Well, more details will be provided on that particular measure later today but I want to reiterate how significant that will be in keeping the connection between employers and employees because we know there's going to be the other side to this coronavirus and we want that connection being intact as much as possible so that people can get back to their jobs as they did before the virus occurred, and at the same time we want to lower the cost for businesses of being in business and that means having additional support from the Government. The measures that we announce today will be on top of the measures that we have previously announced, namely, the doubling of the Newstart payment so enhancing the safety net with the coronavirus JobSeeker supplement, as well as the cash payments of up to $100,000 to small businesses which were, depending on the size of their wages bill, would allow them to keep people employed as well as meeting some of the fixed costs they're incurring.
LEON BYNER:
Do you acknowledge that if the Chinese state, because there's really no such thing as a private business in China, as I think we know, so the fact is if the company comes along and wants to purchase one of our very important assets, of course in New Zealand you're only allowed five hectares, I'm talking specifically about agricultural purchases, are we now going to frown upon this and maybe disallow it from a state?
JOSH FRYDENBERG:
Well, let me be very clear to your listeners. Last year, China was the fifth largest foreign investor in Australia. The number one was the Americans. They had $58 billion worth of investment, that was followed by Canada, followed by Japan and Singapore. The Chinese had about $13 billion of investment in Australia. But that being said, we need to run the ruler over every particular investment proposal…
LEON BYNER:
Chinese states’ different though. Minister, I think the public are starting to tweak to the fact that a state purchase is very different to a normal commercial purchase.
JOSH FRYDENBERG:
I agree with that, and that's why even the existing rules provide for that flexibility and for that scrutiny. And I need to tell you, Leon, we have rejected a number of foreign investment proposals, some of which you know about and some of which you don't know about because that is the process, is that they would apply before they go public and when they're rejected then they walk away. And so there has been a number of foreign investment proposals that have never seen the light of day because they have been rejected on national interest grounds.
LEON BYNER:
Now, again, how much, and this is an important thing, you guys have spent an enormous amount of money to try and shore up employment, help for those who need it, the underprivileged, those who are doing it tough, those who have been stood down. Where is this money coming from? Are we borrowing it?
JOSH FRYDENBERG:
Well, ultimately, there will be a lot of money to pay back for the Australian people in the years ahead. There's no doubt about that. But the reason why we were able to balance the Budget and to get the books back on track was because we knew we had to prepare for the moment when the Australian people needed that type of spending from the Government. If we didn't get the books back on track then we wouldn't have had the financial firepower and the flexibility…
LEON BYNER:
Yes, but we're borrowing the money, aren't we, Treasurer?
JOSH FRYDENBERG:
We have a debt and that debt has been increasing, as you would expect. But your listeners, and no doubt you, would be also wanting the Government to respond to these areas of need.
LEON BYNER:
Of course. I'm not saying that we shouldn't be doing it. I just want to be clear because I think we all have to know how we're getting this money.
JOSH FRYDENBERG:
There's no money tree. There's no unlimited money tree and, indeed, a number of other countries will really struggle to meet the economic costs that they are incurring as a result of the coronavirus because their balance sheets, their fiscal position, are not as sound as Australia's. Take, for example, the United Kingdom and the United States. Their debt-to-GDP ratios are about a quarter of what it is here in Australia. Japan is about, we're about one seventh here compared to Japan. So we've got one quarter of the debt-to-GDP ratio as the United States and the United Kingdom which means that we are in a much stronger position to respond.
LEON BYNER:
OK. Can you, I hope you can clarify this one, and that is that people want to know, people want to know, what the difference is between going to Centrelink and claiming the benefits, some of which are very generous, there's that one-off payment coming and then the doubling of the allowance every couple of weeks, we know that. What is the difference between that and a supplement to basically give, say, whatever percentage it is of people's wages to the employer? What's the difference?
JOSH FRYDENBERG:
Again, you'll have to wait for detail later today but there are differences and, importantly, what we are seeking to do is maintain that connection between their employer and the employee. So, you would have seen the UK and the New Zealand systems; our systems will be different. We'll have our Australian response, not a British or a New Zealand response. But what we are seeking to do is to enable the employer and the employee to stay connected.
LEON BYNER:
Alright. Question about leases because this is one where you want to try and mothball or put businesses to sleep. What's the situation, and I want to get this out there very clearly, to landlords and tenants? Because you want to be fair to both though, don't you?
JOSH FRYDENBERG:
Well, what the states agreed to last night at National Cabinet, and I want to emphasise that retail and residential tenancies have been the domain of the states and the territories as opposed to a Commonwealth area, is that there will be no evictions for the six month period of which we think the coronavirus will at least go for. So, there's going to be a moratorium on evictions of tenants that have been severely affected by the coronavirus. Now, not all tenants will have been affected by the coronavirus. The supermarkets and the chemists are doing pretty well at the moment. The mining industry hasn't been that affected. All those types of tenants would be expected to meet their obligations under the existing lease.
LEON BYNER:
Sure.
JOSH FRYDENBERG:
But where there are other tenants who have been severely impacted, what we're suggesting is that the landlord and the tenant come together, they need to reach an agreement based on a fair burden-share between the parties. Bearing in mind that states are also looking at what means are available to help, and land tax is one opportunity, an option for the states to reach out and to reduce the cost to the landlords, and the banks are also stepping up because they've made an announcement today that there will be no interest payments or principal payments for a period of six months for those SME businesses or landlords who have a loan exposure up to $10 million. So, the landlord's going to get some interest relief from the bank, the landlord may get some land tax relief. The tenant obviously is doing it tough because he's had to either close his doors fully or partially and, therefore, there needs to be a degree of burden-sharing.
LEON BYNER:
Alright. When you've made the announcement today, will I be able to impose on you to come back tomorrow and explain to South Australians the very basic fundamental differences so that they're terribly clear on what's happening and who's getting what and how they're getting whatever's being offered?
JOSH FRYDENBERG:
It would be my pleasure to do so and I do want to congratulate Steven Marshall and my counterpart Rob Lucas and the rest of the South Australian Government for the good work that they're doing helping their state get through what is an unprecedented crisis and what the people of South Australia and your listeners need to understand, and I think they're learning this through this crisis, is that the Government has their back. The Morrison and the Marshall Governments have their back at their time of need.
LEON BYNER:
Treasurer, thanks for joining us. Look forward to speaking with you when the announcements in further details are made.