NEIL MITCHELL:
On the line is the Federal Treasurer, Josh Frydenberg. Good morning.
JOSH FRYDENBERG:
Good morning, Neil, nice to be with you.
NEIL MITCHELL:
Thank you. Well, the rest of the country is in an optimistic space, Victoria isn’t. You must do something extra for Victoria, mustn’t you?
JOSH FRYDENBERG:
Well, the point of the JobKeeper announcement, yesterday, is that these programs are demand-driven, which take into account the turnover for particular businesses and therefore the eligibility of their employees…
NEIL MITCHELL:
Well, so it’ll be cut regardless, won’t it?
JOSH FRYDENBERG:
So, Victorian businesses will find themselves, obviously, better placed to benefit from those programs because of the lockdown that we find ourselves in. But in terms of the steady transition in the payment, let’s not forget that the flat $1,500 payment will continue to the end of September, and between the end of September and the end of December, it will gradually come down to a $1,200 top payment and a $750 lower payment.
NEIL MITCHELL:
But that’s part of my point. I mean, Victoria, unlike the rest of the country, is going to have more people needing it, but they’re going to get less, aren’t they?
JOSH FRYDENBERG:
Well, at the end of the day, we can’t sustain indefinitely…
NEIL MITCHELL:
Can’t you look after Victoria a bit more, though?
JOSH FRYDENBERG:
But we have Neil, as you know. It’s just one element of a comprehensive suite of measures that we’ve announced including a $30 billion cash flow boost.
NEIL MITCHELL:
That is true, and, to be fair, that’s true. But my point is that Victoria is not getting any special treatment, but it’s in a special position now.
JOSH FRYDENBERG:
Well, in terms of health supports, and the ADF support and the Commonwealth officials, it’s certainly getting much more support there, as needed. I mean, we’ve got more than 1,200 Defence Force personnel on the ground in Victoria, we’ve got more than 800 Commonwealth officials...
NEIL MITCHELL:
But there’s no economic assistance, other than what the rest of the country has got.
JOSH FRYDENBERG:
But there is…
NEIL MITCHELL:
But other than what the rest of the country has got, there’s no special deal for Victoria, is there?
JOSH FRYDENBERG:
Well, the point of these programs, and the way that they’re structured, they will be of particular benefit to Victoria. And I also want to point out that the State Government…
NEIL MITCHELL:
Well, because Victoria is in deeper trouble that’s why.
JOSH FRYDENBERG:
Correct.
NEIL MITCHELL:
Well, that’s why we need a special deal.
JOSH FRYDENBERG:
But that’s why these programs being extended will be particularly welcome in Victoria. You see, the point of the JobKeeper payment was to get businesses to the other side of the coronavirus. Now, it’s fair to say, right now, across the country, we’re at different stages. In Victoria, we’re in lockdown. Outside of Victoria, the economies are opening up, and you saw that in the jobs numbers that came out from the ABS last week. 210,000 new jobs were created in the month of June. 60 per cent of those were women, 50 per cent were young people, and it was double what the market was expecting. So, there’s no doubt, as the virus has got under control in other states, they are seeing the benefits, while in Victoria we’re obviously paying a heavy price.
NEIL MITCHELL:
And when you look at what you’re doing, what you saw, you’re pretty optimistic, aren’t you, really? With the exception of Victoria, you are optimistic?
JOSH FRYDENBERG:
Look, we’re very conscious of the challenge, we know that it’s very uncertain, and that we know that the economic trajectory will very much depend on how successful we are in dealing with outbreaks. But, certainly, Victoria is behind the pack.
NEIL MITCHELL:
Yeah. Are you aware of the term ‘zombie business’?
JOSH FRYDENBERG:
I am, and those are businesses that are being propped up, that will not make it to the other side, and there may be some of those. But my view is we need to give every business the best possible chance of getting to the other side.
NEIL MITCHELL:
So, it’s not ‘good money after bad’, is the argument being put.
JOSH FRYDENBERG:
Well, there will be some businesses that will fail, and there will be some businesses that even with the assistance being made available, will not stay in business. But what we want to do is ensure that every business has its best possible chance. Because, particularly sectors like hospitality, or tourism, or aviation, where they are benefitting from open borders, and international borders being open, they’re going to take a hit for some time yet because international borders will remain closed for some time yet.
NEIL MITCHELL:
How are you going with tax cuts? Are we going to get them early?
JOSH FRYDENBERG:
Again, those are decisions to be taken at the time of Budget. What I’ll be updating the country on tomorrow is our economic forecasts for the 2019/20 year and the 2020/21 year, taking into account, obviously, all the measures that we’ve announced, not just in relation to the bushfires but also in relation to COVID.
NEIL MITCHELL:
I know you won’t confirm it, but the figure being thrown around is a suspected $200 billion deficit, over time.
JOSH FRYDENBERG:
Well, Neil, they’re nothing to celebrate. They’re eye watering numbers, and they reflect the dire economic environment created around the world by the Coronavirus. This is, without doubt, the biggest economic shock this country has ever faced, and we’re not out of the woods yet. And it’s affected not just the spending side, as you can imagine, but also the revenue side has been badly hit because businesses are not turning the usual profits and therefore paying tax, and people are not in as many jobs as they were previously, and therefore, not paying as much tax.
NEIL MITCHELL:
Well, I was talking to one of your predecessors, Peter Costello, about it recently, and he said his real worry is the kids and the grandkids are going to pay for this, long term. Do you agree?
JOSH FRYDENBERG:
Well, he did a fantastic job of delivering budget surpluses, and paying back the $96 billion of debt that he inherited. We too had inherited deficits that were rising and, obviously, debt levels that were rising. What we did is we stemmed the tide of that increase in spending, and we provided tax cuts, and we delivered the first balanced budget in 11 years. We were on track for a surplus…
NEIL MITCHELL:
Sorry, we haven’t got a lot of time, but I mean, I understand what you’re saying…
JOSH FRYDENBERG:
But that’s the reality.
NEIL MITCHELL:
You’re talking about your level of management, and I agree, you know, you’re not in this position because of mismanagement. We’re in this position because of something beyond the control of all of us…
JOSH FRYDENBERG:
But even more than that, Neil, we’ve put ourselves in a position to spend through this crisis, because we got the books under control.
NEIL MITCHELL:
Yep, fair enough. But is Peter Costello right? Will our kids and grandkids have to pay for this?
JOSH FRYDENBERG:
Absolutely.
NEIL MITCHELL:
That’s frightening. How?
JOSH FRYDENBERG:
Well ultimately, the high debt burden needs to be met by the Government. What we want to do is not see any reduction in the services, or increases in the taxes, that’s not our track record…
NEIL MITCHELL:
What’s the option?
JOSH FRYDENBERG:
The option is to grow the economy, which requires reforms. They’re the reforms that the Government has outlined, whether it’s on the skills side, or whether it’s on flexible labour markets, or whether it’s on tax reforms, or whether it’s on infrastructure rollout. All of that can build to a stronger economy. When you have a stronger economy, you can manage the increased debt.
NEIL MITCHELL:
So, you will have left Treasury, done your time as Prime Minister, and be right out of Parliament by the time we pay it off?
JOSH FRYDENBERG:
I’m not going to take the bait on that one.
NEIL MITCHELL:
No, I didn’t think you would. Who will we be in debt to? Where does the money come from?
JOSH FRYDENBERG:
Well, what happens is, when the Government spends money, in this crisis, it’s borrowed money. And the Australian Office of Financial Management issues Government bonds, they’re bought by international banks, or international governments, indeed, and we pay a coupon on that bond, meaning effectively an interest rate, and then we get the money to spend. So, it’s a whole range of purchases in the international bond market, but the good news for your listeners is when we’ve issued these debts, Australia is seen as a very reliable partner, and they’re been taken up.
NEIL MITCHELL:
But, part of my point is, though, not a lot of countries have got any money to throw around at the moment. Where will it come from?
JOSH FRYDENBERG:
Well, again, it’s international institutions, superannuation funds, pension funds, globally, are some of those who buy government bonds.
NEIL MITCHELL:
China?
JOSH FRYDENBERG:
Of course, China is in the market in these areas as well but, at the end of the day, we are using borrowed money, to spend as we need it. You can’t do that indefinitely, for programs like JobKeeper, and that’s why we’ve set out a pathway, a transition, which provides the support to those who need it most, while also reducing the payment over time.
NEIL MITCHELL:
You need to get away, but two quick things. You got a dispensation to go back to Canberra, do they sort of confine you to Parliament House, or are you allowed…
JOSH FRYDENBERG:
Pretty much. Absolutely. And, more than that, confined to my office, other than when I’m going up and back to the Press Gallery. But I’m wearing a mask outside my office, and obviously, I’m very conscious of my responsibilities. Coming from Victoria, they’re paying particular attention to me.
NEIL MITCHELL:
What sort of mask?
JOSH FRYDENBERG:
Well, they’re surgical masks, they’re obviously masks that are disposed after one use, and I think it’s a good thing that, not only are people social distancing, but people are adopting the use of the masks.
NEIL MITCHELL:
I couldn’t agree more. But Donald Trump wears one with the US Presidential Seal on it. You couldn’t get one with ScoMo’s face on it, could you?
JOSH FRYDENBERG:
Mine is a boring light blue, I can tell you that - that you would see in any hospital ward.
NEIL MITCHELL:
Well, I was talking to an infectious diseases expert, a short while, a respiratory specialist, a short while ago, and he said ‘treat it like your underwear’.
JOSH FRYDENBERG:
Well, as long as you don’t put it in the same place.
NEIL MITCHELL:
Don’t take it off and throw it on the kitchen table, because you wouldn’t do that with your underwear, would you?
JOSH FRYDENBERG:
That’s, well, I think the reality is everyone needs to see this as part of our daily life in Victoria for the foreseeable future, hopefully we can suppress the curve, or flatten the curve and suppress the rise in new cases, and people can get back to life as we knew it.
NEIL MITCHELL:
Thank you so much for your time.
JOSH FRYDENBERG:
Always good to be with you.
NEIL MITCHELL:
Federal Treasurer, Josh Frydenberg. Your calls in a moment.