NEIL MITCHELL:
On the line, Federal Treasurer Josh Frydenberg. Good morning.
JOSH FRYDENBERG:
Good morning, Neil. And good morning to your listeners.
NEIL MITCHELL:
Now, you’ve had this scheme going for a while. What’s changed?
JOSH FRYDENBERG:
Well, we have had this scheme since the start of the pandemic, and more than 70,000 loans have gone out worth more than $6 billion but to be eligible you have to be on JobKeeper recently in the March quarter. And we’ve removed that requirement, so now small businesses and medium‑sized businesses that have a turnover of less than $250 million can get loans of up to $5 million for up to 10 years with the first two years being repayment free. And we’ve partnered with the banks and other lenders, and the Commonwealth will take on 80 per cent of that responsibility by guaranteeing that loan and the other 20 per cent being the other lender and the idea is to provide that support to small businesses for either working capital, to refinance their existing loans or indeed to expand their business by purchasing machinery and equipment.
NEIL MITCHELL:
So, they’re a bank loan that you guarantee, right?
JOSH FRYDENBERG:
Correct.
NEIL MITCHELL:
Yeah. Okay. And how much has been taken out so far?
JOSH FRYDENBERG:
More than $6 billion. More than 74,000 loans.
NEIL MITCHELL:
Okay. How does it work? I run a widget factory. I employ 30 or 40 people. I’m in strife. What do I do?
JOSH FRYDENBERG:
Well, you go and see one of the banks that are partner lenders and we have got a list of those that are available, and then you talk them through your individual circumstances and the size of the loan, and the purpose of that loan and you reach that agreement with the banks. So, they’ll put their own credit checks across the potential borrowers, but because we’re guaranteeing 80 per cent, there’s going to be a greater willingness to enter into these loan agreements with the particular business. I want to also point out, Neil, to your listeners that it’s on top of the other programs that we’re running to support small and medium-sized businesses like those 50–50 grants that we’ve agreed with the states that are nearly $2 billion in total for just this most recent lockdown in Victoria.
NEIL MITCHELL:
Well, for my widget factory I borrow $500,000; that’s all fine, and I don’t have to pay anything back for two years. Correct?
JOSH FRYDENBERG:
You can get up to two years repayment free, and obviously that’s a decision that you’ll need to enter into with the particular borrower.
NEIL MITCHELL:
But am I accruing interest in that time?
JOSH FRYDENBERG:
You are, and it gets capitalised on the loan. But for many people, as their businesses are rebuilding that is a decision that they will take based on individual circumstances.
NEIL MITCHELL:
So, it’s not free money. It’s not free money you’re going to pay back. In fact, it’s a cost that’s building. You’re getting the money interest free, repayment free, but it all comes to a crunch in two years. You’ve got to pay –
JOSH FRYDENBERG:
It’s called capitalising your loan, and the interest capitalises and it builds up. It’s going to be based on the individual circumstances for a business and the fact that we’ve already seen more than 74,000 of these loans being entered into, indicates there’s a willingness on behalf of small business to get this support, because as you and I know, Neil, small business has done it really tough during this pandemic. I was speaking to one small business owner, a single mum, she had five employees in her CBD business. Normally, in that CBD business in Melbourne, she would be busy, but her revenue turnover is down by more than 90 per cent and the building in which she has her shop has gone from having 3,000 people a day to just 30 a day. So, this is why they’re looking at potentially closing permanently.
NEIL MITCHELL:
I know this is not your responsibility, but you are a Victorian and it will concern you. I’m getting a message from business that, in fact, the New South Wales assistance package is far better. You can get financial support if your downturn is 30 per cent. In Victoria, you’ve got to be 70 per cent.
JOSH FRYDENBERG:
No, that’s not correct. In Victoria, there’s different types of schemes that we’ve supported in partnership with the State Government. There’s actually a grant scheme and these are the $2,800 grants that have been going out to businesses across a range of sectors so if you’re a hairdresser or a gym or you’re a cafe where you do not have to actually show that 70 per cent reduction. Then there’s separately a hardship fund for businesses that are not eligible for those payments, and that is where you do have to show a higher turnover. They’re different schemes; you’re right.
NEIL MITCHELL:
Well, is the New South Wales one better?
JOSH FRYDENBERG:
They’re different.
NEIL MITCHELL:
Is it more generous?
JOSH FRYDENBERG:
Again, they’re different and the one that we’ve done with the Victorian Government has been very effective in getting the money out the door quickly, even quicker than what we’ve seen in New South Wales.
NEIL MITCHELL:
The Chapel Street traders have raised this. I know you know that area well. They say, quote, “In Sydney you’re eligible for financial support as soon as you have a downturn of 30 per cent. In Victoria, if you’re 69 per cent down, you get zero. Chapel Street businesses are getting zero unless they can prove a 70 per cent downturn.” Is there somewhere they should be applying?
JOSH FRYDENBERG:
Well, as I said, there are different types of Victorian grants. You don’t have to be down 70 per cent if you’re in one of those eligible sectors, and there are a lot of businesses across Victoria, more than 90,000, that are in those eligible areas, and then there’s thousands of businesses that are outside those areas that are getting additional support – for example, alpine businesses in Victoria being supported by us; large hospitality venues are getting up to $20,000 grants from us.
NEIL MITCHELL:
I’ve also got a message from people who work in the perishable products; they say they’re not getting help.
JOSH FRYDENBERG:
Well –
NEIL MITCHELL:
Perishable products like seafood, meat, produce et cetera. They’re not eligible.
JOSH FRYDENBERG:
IF they’ve seen the turnover decline and they can fit into the hardship fund or if they’re in the eligible businesses that are listed by the State Government, then they can also be entitled to those –
NEIL MITCHELL:
Apparently, they’re not. I haven’t checked this, but they tell me they’re not listed.
JOSH FRYDENBERG:
Well, again they need to speak to the State Government, because that is a pretty exhaustive list of businesses that are eligible. I understand that not every business is being covered, but also, I understand the extreme cost and burden that is being placed on small business. And, by the way, Neil, this is why we need to stick to the plan agreed to by National Cabinet, because the small businesses who are ringing into your program or indeed whose owners or staff are listening in to your program, they need to know that there is a light at the end of the tunnel. They need the hope that comes with the 70 per cent and 80 per cent vaccination targets and the plan to reopen at that point. And if we don’t open at 70 or 80 per cent, when do we open? When can our kids in Melbourne and Victoria go back to school? When can our small businesses open?
NEIL MITCHELL:
As you told me last week, people will get sick, and people will die. The question is how many people we find it acceptable to lose. That’s the reality.
JOSH FRYDENBERG:
Well, this is where the Doherty Institute have been pretty specific about the number of cases, and they’ve been very clear –
NEIL MITCHELL:
I’ve seen that. There’s a bit of disagreement with them too. There’s some significant disagreement from the University of Melbourne and ANU. They are talking about 30,000 deaths. Doherty is talking about, in the ideal circumstances, about 20 deaths in a year.
JOSH FRYDENBERG:
But they do point out that we need to learn to live with COVID because in their words, zero COVID forever is unrealistic. They also point out that Australia has been living, for example, with influenza, where there are 200,000 cases a year in Australia, 600 deaths, yet we’ve learnt to live with it. I just put it to you, Neil, that there is no alternative for our country than to learn to live with COVID. That’s why we’ve sought the best medical advice to reach those targets of 70, 80 per cent. And the good news is that Australians and Victorians are rolling up their sleeves in record numbers to get the jab.
NEIL MITCHELL:
A couple of other quick things if I might. Iron ore prices dropped 40 per cent in the past month. I assume this is related to China’s track down on steel production. What on earth is that going to do to Australia if the iron ore price goes through the floor?
JOSH FRYDENBERG:
Well, for every $10 it’s worth about a billion dollars plus in revenue in the iron ore price, but don’t forget we’ve always been very conservative in our assumptions that we put in the budget. So, in the budget that I handed down just in May of this year, we had an assumption that the iron ore price would fall to $55 a tonne and, as you know, it’s above $100 a tonne and it’s reached, you know, much higher numbers more recently –
NEIL MITCHELL:
It’s gone down 40 per cent. It’s on 181 at the moment, but it’s gone down 40 per cent.
JOSH FRYDENBERG:
It does fluctuate and, of course, the higher it is, the more revenue we’re getting at both a State and Federal level but our assumption in the Budget, our numbers in the Budget in terms of revenue forecast were projected on a $55 a tonne iron ore price, and we’re well above that.
NEIL MITCHELL:
Okay. Is it right our debt is $836.5 billion?
JOSH FRYDENBERG:
Yes.
NEIL MITCHELL:
Some of your backbenchers are getting edgy about that, saying there must be significant spending cuts or increased taxation to get it down. Are they right?
JOSH FRYDENBERG:
Well, again the expenses and the fall in revenue have been the result of a once‑in‑a‑century pandemic. We’ve been hit not just on the program and the extra costs that we’ve incurred with the programs but also because economic activity has been curtailed and therefore revenue has been curtailed –
NEIL MITCHELL:
Yes, but do we have to catch it up –
JOSH FRYDENBERG:
– the best way to pay that debt is to grow the economy, and that is what we are intending to do. But again, it goes to the broader point that you and I are discussing, and that is you stick to the plan, you get businesses to reopen and the economic cost of COVID comes down. We can’t keep spending the way we are indefinitely, and that’s why I’ve said very publicly the Premiers and Chief Ministers should have no expectation that our record unprecedented economic emergency support that’s going out the door right now will continue when we get to those 70 and 80 per cent numbers.
NEIL MITCHELL:
Talking to Josh Frydenberg, Federal Treasurer. Just quickly the housing boom, surely it will not last, is it? Just looking at it, mortgage demand is dropping, clearance rates are down, affordability has crashed; surely, we have to have a downturn in the housing market?
JOSH FRYDENBERG:
Well, the housing market functions on both supply and demand factors. Supply because we don’t have a lot of new housing stock coming on board and that’s –
NEIL MITCHELL:
But hang on; we’re building so many. You put $3 billion in construction in –
JOSH FRYDENBERG:
Well, there is greater demand than supply and those issues about planning are at Local and State Government levels. The demand side has been driven first and foremost by historically low interest rates. So, the cash rate, you know, 10 basis points, is the lowest on record and there’s no expectation that that will go up in the short or indeed in the medium term. It’s also being driven by Federal and State programs like HomeBuilder, which have provided grants for people to enter the housing market. That’s been important because that’s created jobs in the construction sector.
NEIL MITCHELL:
But I guess what I’m getting at is there any hope for kids for young people in the future to be able to afford a house, because a lot just can’t? Is it going to come back to them?
JOSH FRYDENBERG:
It might surprise you to know, Neil, that first home buyers are in the market now at the highest levels they’ve been in a decade. So, young and first home buyers are getting into the market. But you’re right. It is expensive and a lot of people are getting into the market, as I did, with a significant mortgage.
NEIL MITCHELL:
But okay, superannuation, just quickly; I had a caller who said they wanted to be able to – their husband needed to access their superannuation. Are you going to have another look at that?
JOSH FRYDENBERG:
Not right now. We did do it last year. $30 billion went out the door and it really did help a lot of people because, at the end of the day, it’s access to their own money.
NEIL MITCHELL:
And you’re still at the lodge with the Prime Minister?
JOSH FRYDENBERG:
I am. Yeah, I am.
NEIL MITCHELL:
Who’s got control of the remote on the couch? Who does the dishes, or you’ve got people to do the dishes for you?
JOSH FRYDENBERG:
No, there’s no‑one there. Someone does come in when we’re not there, effectively. But when we’re there, it’s pretty much me and him and the dinners have been in the fridge and, you know, the other night it was spaghetti bolognese, last night it was schnitzel, and we bang it in the microwave like any other family –
NEIL MITCHELL:
Any disagreements? Do you sit there – do you and Scott Morrison sit there and watch The 7.30 Report and boo?
JOSH FRYDENBERG:
No, we don’t watch The 7.30 Report. We watch some funny TV shows, though, and movies.
NEIL MITCHELL:
What? What have you seen?
JOSH FRYDENBERG:
Oh, we watched “Yes, Prime Minister”. That was pretty funny the other night.
NEIL MITCHELL:
Oh, I hope you learnt from it!
JOSH FRYDENBERG:
Oh, you get to see how the public servants run the show. That’s what it’s all about.
NEIL MITCHELL:
That’s the worry. Thanks very much for your time.
JOSH FRYDENBERG:
Great to be with you, Neil.