24 September 2020

Interview with Lisa Millar, ABC News Breakfast, ABC

Note

Subjects: ACCI speech; insolvency reforms; Coronavirus Supplement; Paul Keating; Reserve Bank of Australia

LISA MILLAR:

Treasurer, Josh Frydenberg joins me. Good morning, Treasurer.

JOSH FRYDENBERG:

Good morning, Lisa. Nice to be with you.

LISA MILLAR:

Ok, so, what kind of businesses are going to be able to go down this road?

JOSH FRYDENBERG:

Well, these are businesses with liabilities of under $1 million. That covers around 76% of those businesses that are currently going through the insolvency process and 98% of those businesses have less than 20 employees. So, by and large, they're going to be small businesses. Whether they're in the food industry, whether they’re in the hospitality, or the retail industry, or indeed the tourism industry. And many of these businesses have done it very tough through COVID, they've had to close their doors because of the health restrictions, but we know they're viable businesses. So, even though the bills have been racking up, whether it's for energy, for rent, interest on their loan and insurance bills, those bills have been racking up. And rather than going into a liquidation process, where they lose control of the company, we want those businesses to stay in control, to restructure their balance sheet, to work out an agreement with the creditors, and then to get out on the other side of this virus.

LISA MILLAR:

And, how many do you think are in that situation?

JOSH FRYDENBERG:

Well, we know that at least 2,000 insolvencies have been put on hold because of the temporary measures that we put in place, which is lifted the threshold for the statutory demands that can be made by creditors. That has been very helpful in buying some time. This is now a permanent change and this will allow these businesses to work with an insolvency small business practitioner to come up with a restructured plan over the course of 20 business days, then that will be put to the creditors and the creditors will have 15 business days to vote, and if they vote 50 plus one in favour of that plan, then the current management, the current board, will stay in place and trade out of this crisis.

LISA MILLAR:

It’s not going to exacerbate this issue, is it, that we’ve been talking about, of zombie companies that have basically just been ticking along because of JobKeeper?

JOSH FRYDENBERG:

Well, you still need that support of the creditors. You still need 50 plus one. And that is an important safeguard that's in place to ensure that those businesses, that the creditors think will be viable on the other side, can restructure and can stay in control.

LISA MILLAR:

No one is going to be surprised with your speech today, where you are officially ditching any hope of getting back to surplus, and you're going to be concentrating on spending. Are we ever going to be out of debt in our lifetime?

JOSH FRYDENBERG:

Well, of course, that is the goal. But we know the economic shock has been like no other. Not just for Australia, but also for the rest of the world. Australia has fared a lot better than other nations. But there is still a big hole in the economy. So, that's why plans and policies, like JobKeeper, as well as the $750 payments, the cash flow boost to help small businesses with working capital, have been so important. But, what you'll see in the budget, in just two weeks' time, is the transition out of those income supports, helping to get people into jobs, we're also undertaking supply side reforms. Today's announcement about insolvency is an example of that. It doesn't hit the budget bottom line, but it can be significantly important and helpful to businesses to be able to trade out of this crisis; cutting red tape, other tax incentives, bringing forward infrastructure, are other measures that we're looking at.

LISA MILLAR:

Now, the JobSeeker supplement is going to be reduced tomorrow. A lot of people are worried about that. Labor wants to know, what’s the Treasury modelling saying about how many jobs are going to go because you are cutting this payment?

JOSH FRYDENBERG:

Well, we've actually extended the payment.

LISA MILLAR:

[Talks over] Yeah, but it's cutting, tomorrow, it’s going, if you’re a single, it’ll go down to about $58 a day.

JOSH FRYDENBERG:

And, before this crisis it was significantly lower than that. And what we’ve said is that, at the end of the year, Lisa, we will revisit that rate for the JobSeeker Coronavirus Supplement and that, of course, we're leaning in to provide continued support. So, we recognise that people are doing it tough. This money is really important to them. But we also know that the best thing we can do to help people who are on JobSeeker is to get them into a job. So you'll see other initiatives in the budget, in two weeks' time, that are designed to help create more jobs across the economy; and in the most recent unemployment numbers, we saw the rate come down, Lisa, from 7.5% down to 6.8%, the single biggest drop in 32 years, and 111,000 jobs were created. A lot of those jobs are going to women, a lot are going to young people, and that is very welcome.

LISA MILLAR:

Treasurer, Paul Keating didn’t miss, yesterday, with the RBA, he says, basically, they are late to the party, they need to be helping the Government more. Does he have a point?

JOSH FRYDENBERG:

No, he doesn’t. This was a very nasty, personal, vindictive, unnecessary, misguided attack by Paul Keating. The Reserve Bank has done very well through this crisis. Unlike other crises, they didn't have room to move on monetary policy. During the GFC, the cash rate came down by 425 basis points. That was equivalent to $100 billion stimulus into the economy. But because the cash rate was already low, during this crisis, it could only come down by 50 basis points. But, what the Reserve Bank did, is that they pumped liquidity, some $75 billion, into the banking system, to stabilise it, which was good news for customers, and then they also purchased government bonds on the secondary market, some $60 billion worth of government bonds. So, we have worked very closely with the Reserve Bank. I note that, this morning, distinguished economists like Warwick McGibbon have really slammed Paul Keating for his comments. And, you have to ask the question, why did he make these comments just two weeks after the Reserve Bank had made some comments about the superannuation guarantee and the trade-off between wages and that increase? Many people are left wondering, what are Paul Keating's motives behind this nasty, unnecessary attack? And, I have to say, we, as a government, value the independence of the Reserve Bank when it comes to monetary policy. We, as a government, are in control of fiscal policy, but the Reserve Bank is in charge of monetary policy, and the Reserve Bank has come a long way from the time when Paul Keating said that he had the Reserve Bank in his pocket and it just followed whatever he wanted. That is not the case today, the Reserve Bank is independent, and he shouldn't be attacking the Bank like he has.

LISA MILLAR:

Josh Frydenberg, thanks for your time.

JOSH FRYDENBERG:

Thank you.