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2 December 2021

Interview with Neil Mitchell, 3AW

Note

Subjects: National Accounts;

NEIL MITCHELL:

Federal Treasurer Josh Frydenberg on the line. Good morning.

JOSH FRYDENBERG:

Good morning, Neil. Nice to with be you and your listeners.

NEIL MITCHELL:

Massive amount in household saving here. What’s your message? Spend, spend, spend, spend? Is that it?

JOSH FRYDENBERG:

Well, we’ve seen $220 billion accumulated on household balance sheets. That’s a combination of the government’s economic support, Neil, but also the fact that during lockdowns people haven’t been able to spend as freely as they otherwise would at cafes, at restaurants, taking a holiday or, indeed, in retail. But what we saw last year is that after restrictions eased and those lockdowns ended the savings ratio actually halved and consumption spiked to a record high. So this time around, again, as lockdowns end and restrictions ease and people get about their normal daily lives the expectation is that we’ll see more spending and some of that accumulated savings will be run down.

NEIL MITCHELL:

Is that what you want? Is that what the economy needs? Hit the kick, get out and spend?

JOSH FRYDENBERG:

Absolutely welcome that additional economic activity because that will create more jobs. But it’s not just households that have accumulated more money on their balance sheets, it’s also businesses. There are some $150 billion that’s been accumulated on business balance sheets, and that’s money that will be invested in new machinery and equipment, expanding additional businesses and the like. And, again, that will be good news for the economy.

NEIL MITCHELL:

Are we saying spend on Australian or imports? Are you accepting that we will spend on imports?

JOSH FRYDENBERG:

Well, obviously some people will spend on imports, like cars, for example. We’ve seen a big jump in car sales. But we’ve also seen issues with supply‑side constraints and the ability to get those cars in quick time. But, of course, if people can buy Australian, I would encourage them to do so.

NEIL MITCHELL:

Okay. Interest rates. Both the US Fed and the OECD are both saying we will need to look at earlier increases in interest rates than our own Reserve Bank has predicted. Are they both right and our Reserve is wrong?

JOSH FRYDENBERG:

Well, the inflation in Australia has been more muted than the inflation increases that we’ve seen around the rest of the world. And that’s one of the drivers behind higher interest rates. What we have heard from the Reserve Bank has been a pretty unequivocal message, at least they’re being consistent for some time, that they’re not expecting an interest rate rise in the near term, although the market has started to price in an expectation that there will be an interest rate rise. And the cash rate is at a historic low of just 10 basis points, and that’s what is driving particularly the higher house prices as people, you know, fear of missing out, and people getting into the housing market and they can borrow more money at a lower rate.

NEIL MITCHELL:

And that’s part of the problem, isn’t it? If people are overcommitting in housing or elsewhere and interest rates go up, bang, they’re gone, they’re in trouble. Doesn’t that worry you?

JOSH FRYDENBERG:

Well, I’ve actually supported APRA which is the prudential regulator, tightening some of the restrictions to ensure the financial stability in the housing market. And what they’ve done is that they’ve lifted from 2.5 to 3 per cent what is called the serviceability buffer. So if you go to get a home loan, you are not only assessed on the basis of being able to pay that home loan back at the existing cash rate or the existing mortgage rate, but actually now at a 3 per cent increase on that. And that will help ensure that people can meet their mortgage repayments.

NEIL MITCHELL:

Okay. Are we heading for war on the waterfront, do you think, with the unions?

JOSH FRYDENBERG:

Well, there’s a pause till the 10th of December with Patrick’s. And obviously we would encourage parties to resolve that issue because we don’t want Australians being denied goods at Christmas. But, clearly, the unions have a bit of form when it comes to this.

NEIL MITCHELL:

Government willing to stand up to the unions on this?

JOSH FRYDENBERG:

We’re looking at our options. We’re engaging with the parties, and let’s just wait and see what happens. But, again, until the 10th of December there is a pause and it’s in everyone’s interests that there is not industrial action because this is not just an important time of year when people are getting their goods provided through the ports but also it goes to the cost of goods to the public. If there’s industrial action it obviously increases prices and freight.

NEIL MITCHELL:

Are you concerned our fragile relationship with China could hold back our economic recovery?

JOSH FRYDENBERG:

Well, China remains our most important trading partner. The two‑way trading relationship, Neil, is worth more than $250 billion a year.

NEIL MITCHELL:

It’s our most belligerent trading partner as well, isn’t it?

JOSH FRYDENBERG:

It’s mutually beneficial in that they’re buying our resources to help their industrial development and at the same time, you know, we buy a lot of imported goods from them and we have Chinese students and Chinese tourists and the like. But we’ve also been very clear and consistent that we’ll continue to defend the national interest, whether it’s around foreign interference, whether it’s around foreign investment, whether it’s around human rights and other issues that are important to all Australians.

NEIL MITCHELL:

I know this will interest you as a former tennis player – a very good tennis player – but the WTA says no more tournaments at the moment in China or Hong Kong. Do you support that?

JOSH FRYDENBERG:

Well, obviously that’s a decision they’ve taken, but I am, you know, as concerned as they are about the wellbeing of this Chinese tennis player. And she has obviously shown her face in a couple of what looked set pieces to camera, but the fact that she’s not being seen more publicly and more regularly is a cause of concern.

NEIL MITCHELL:

Should we review our involvement in the Winter Olympics in Beijing?

JOSH FRYDENBERG:

Well, we’re taking lots of views into account, but I’m not about to make a call on your program about that.

NEIL MITCHELL:

Now, I did ask the Prime Minister when I last spoke to him whether he’d ever told a lie in public life. Have you?

JOSH FRYDENBERG:

No.

NEIL MITCHELL:

No? All right. Well let’s go. Well, let’s be honest then. Would you like to lead the Liberal Party one day?

JOSH FRYDENBERG:

Yes.

NEIL MITCHELL:

After the next election, if you lose it?

JOSH FRYDENBERG:

Well, I’m not going to say we’re about to lose it. I’m hoping and looking forward to, you know, the Liberal Party and the National Party winning at the next election. But, you know, I’ve made no secret of the fact that, you know, I’m a big supporter of Scott Morrison. I’m his Deputy Leader. I’ve been very loyal in that role, and I think he’s led Australia magnificently through this pandemic, so much so that we now have one of the highest vaccination rates in the world, one of the lowest fatality rates in the world, and one of the strongest economic recoveries in the world.

NEIL MITCHELL:

Do you think Daniel Andrews has been talking up the pandemic for political reasons?

JOSH FRYDENBERG:

Look, I think there’s been a bit of politics there. But, again, I’m not going to get into a slanging match with Daniel Andrews. I’ve made my views very clear on a range of issues.

NEIL MITCHELL:

You’ve done it in the past. Should Malcolm Turnbull shut up for the benefit of the Liberal Party?

JOSH FRYDENBERG:

I think it’s always important that we respect Prime Ministers and former Prime Ministers, and I put Malcolm Turnbull in that category. But at the same time he respects the rights of the current parliamentary team to decide the policy and the direction of the Coalition right now.

NEIL MITCHELL:

I can see why you haven’t told a lie, you’re sitting on the fence. Is it a good thing, is it a relief for the parliamentary party, that Christian Porter is leaving?

JOSH FRYDENBERG:

No.

NEIL MITCHELL:

You’d rather he stayed?

JOSH FRYDENBERG:

Well, he was a valued member of our team and he would have absolutely been within his rights to run again. But I read his statement and obviously I’ve spoken to him as well. And the toll on one’s family life is very real in this job. And, you know, Christian made it clear in his statement about the impact that it’s had. And he’s got young children, and his next career no doubt in the law will obviously give him more time to spend with his family. And I think people from Western Australia, indeed, you know, have to travel even further to get to a sitting fortnight, and that’s very draining. And when you do it year after year it has its impact.

NEIL MITCHELL:

I’m told you have to get away. Thank you for your time. I hope we can talk in the next year. Thank you for your help this year. And we’ll play some more truth or dare next year. What about that?

JOSH FRYDENBERG:

Always ready. Thank you.

NEIL MITCHELL:

Thank you very much. Federal Treasurer Josh Frydenberg.