NEIL MITCHELL:
First to Federal Treasurer, Josh Frydenberg. Good morning.
JOSH FRYDENBERG:
Good morning, Neil and good morning, Victorian listeners.
NEIL MITCHELL:
Thank you for your time. What you’re looking at in the Budget is the best-case scenario, if we get a vaccine. Have you modelled or projected what happens if we don’t?
JOSH FRYDENBERG:
Well, obviously that will make it more challenging economic times. We did model a situation where you have a second wave of cases in a State like what we’ve seen in Victoria and that would cost the economy about $55 billion and see a reduction in GDP of around 1 per cent over two years. So we have looked at a range of scenarios. Obviously, this Budget has some assumptions in there but the environment is very uncertain, it’s very fluid and it’s primarily a health crisis but if there is no vaccine, then it’s going to take longer to open those borders and that will, in fact, impact on the Budget bottom line.
NEIL MITCHELL:
Okay, but if we, God forbid we have that situation, but if we have that situation, what’s the answer? Do you borrow more money?
JOSH FRYDENBERG:
Well, I don’t think you should get hung up on the assumption about the vaccine because...
NEIL MITCHELL:
Your Budget’s based on that assumption.
JOSH FRYDENBERG:
Well, actually, it’s focused on delivering more jobs today. So whether there was a vaccine or not, Neil, we would still be proceeding with the JobMaker hiring credit. Whether there was a vaccine or not, we’d still be proceeding with the business investment incentives. Whether there’s a vaccine or not, we’d still be providing those two $250 payments to pensioners, to veterans, to carers, and others on income support.
NEIL MITCHELL:
But the question still stands, if it doesn’t happen, what do you do? Do you borrow more money?
JOSH FRYDENBERG:
Well, again, we will continue to manage events and the situation as it unfolds, but there is a positive sign across the economy that we are suppressing the virus, that restrictions are eased, and as a result jobs are coming back. In the last three months, Neil, 458,000 new jobs have been created, 60% of those have gone to women, 40% have gone to young people and what Treasury say in this document last night is that, but for the initiatives that we have undertaken, the unemployment rate would hit 12 per cent this year and next.
NEIL MITCHELL:
Look I won’t, and this is the last attempt on it, but is there an option if it doesn’t go well, is there an option to borrowing more money? Is there anything else you can do?
JOSH FRYDENBERG:
Well, again, the debt level does increase over time but that’s a function of what is happening not just on the payment side but also the receipt side. So our debt level will increase but we can manage that debt. But the key focus for us is about getting people back into work because we’ve studied closely Australia’s experience during the 80’s and the 90’s recessions and in both cases it took a long time to get the unemployment rate back below 6 per cent from where it started. In the 1980s it took six years. In the 1990s it took a full decade. We obviously want to move a lot quicker than that.
NEIL MITCHELL:
Well, money in pockets, have you worked out what will the average household get?
JOSH FRYDENBERG:
Again, if you’re on $60,000, you will pay $2,160 less tax this year than in previous, prior to this plan rolling out. People will get money through the changes in the tax system but obviously, our policies are also designed to provide more incentives for businesses to hire young people and there’s also a loss carry-back provision which enables a business in Victoria that may be loss-making today but previously profitable, to carry those losses back and get a tax refund from the Australian tax office.
NEIL MITCHELL:
Do you want people to spend that money, is that the aim?
JOSH FRYDENBERG:
Well, ultimately they will make their own decisions as to...
NEIL MITCHELL:
Of course, what would you like to see?
JOSH FRYDENBERG:
I expect more money to be spent by households across the economy as the restrictions are eased. What we’re seeing right now, particularly in Victoria, is more people saving money because they can’t go out to their local cafe, pub, or restaurant or take a holiday to their favourite tourist destination…
NEIL MITCHELL:
But is that the message? Is it spend, spend, spend?
JOSH FRYDENBERG:
Well, the message is for people to spend the money as they know best because it is their money. But my expectation is more people will spend money, particularly as those restrictions are eased.
NEIL MITCHELL:
What will the weekly interest bill be on our borrowings by, say, the end of this financial year?
JOSH FRYDENBERG:
Again, it is going up. Prior to this crisis, we were paying about $17 billion a year in interest. That was as much as we spend on education. That is now coming down, our interest bill, because of the lower interest rates but we’re obviously paying more on our debt, but again, it’s manageable.
NEIL MITCHELL:
So how much is it?
JOSH FRYDENBERG:
Well again, you will have to look at the Budget documents but our interest bill is significant, but it does decline over time as we obviously get a more sustainable debt position.
NEIL MITCHELL:
I don’t have the Budget documents in front of me, you wrote it. Do you know the figure?
JOSH FRYDENBERG:
I don’t have the interest number right in front of me right now.
NEIL MITCHELL:
Okay, how long, interest rates are low, how long are we locked in for on low interest rates?
JOSH FRYDENBERG:
We’re borrowing money for three year, and ten year, and even longer periods. The money that we’re borrowing is obviously at a lower interest rate today than on previous borrowings and where we can, we also refinance our loans as well.
NEIL MITCHELL:
Immigration is dropping. That’s going to hold us back, surely, and particularly in Victoria?
JOSH FRYDENBERG:
The immigration numbers are obviously a challenge, too. Net overseas migration will be negative for the first time in 46 years and non-population growth will be at its lowest level in more than 100 years, Neil. Again, that’s a function of closed borders and the COVID crisis. It’s the situation that we find ourselves in with a one in 100 year event. The three drivers of economic growth are population, participation, and productivity and we have benefitted from strong population growth. It’s also created some challenges, too, in congestion in the cities and the like, but that’s why we’ve been heavily investing in infrastructure.
NEIL MITCHELL:
I see the analysts are telling me that New South Wales has done very well again ahead of Victoria. Shouldn’t have Victoria got a special boost, given that we’re in a deeper hole than anybody else?
JOSH FRYDENBERG:
Well, Victorians have got from the Federal Government over $28 billion.
NEIL MITCHELL:
What did New South Wales get?
JOSH FRYDENBERG:
Well I don’t have the New South Wales number exactly in front of me right now, but I can tell you that Victorians will make up the majority of people who are on JobKeeper in both the December and the March quarter.
NEIL MITCHELL:
Well, that’s because they’re out of work.
JOSH FRYDENBERG:
And through no fault of their own, and that’s why we’re supporting them with the demand- driven program such as JobKeeper. But Victoria, but Neil I just want to point out something to you, 60 per cent of Australians who are on JobKeeper will come from Victoria over December and the March quarters. There will be more people on JobKeeper from Victoria than from all the other states combined. Victoria have done very well out of our infrastructure announcements in this Budget and then there will obviously be other support programs that apply nationwide that will be very beneficial to Victorians.
NEIL MITCHELL:
We don’t have long so I was going to ask you about building dams. By gee, I thought we couldn’t build dams, there wasn’t enough rain.
JOSH FRYDENBERG:
Well, you can’t in Victoria.
NEIL MITCHELL:
I was going to say, will there be any dams in Victoria or we’ve got to use the desal plant one day?
JOSH FRYDENBERG:
There are dams being built. Wyangala dam, the Dungowan dam, there’s the Emu Swamp dam, these are in New South Wales and in Queensland. And...
NEIL MITCHELL:
Any in Victoria?
JOSH FRYDENBERG:
...obviously dams are being built across other States but in Victoria they haven’t seemed to have been built because there is a reluctance on the part of the local government.
NEIL MITCHELL:
So you can’t build a dam here without getting approval from the State Government?
JOSH FRYDENBERG:
Well, we can’t build a dam anywhere without getting State Government approvals. It hasn’t been a priority for the State Government in Victoria but our focus has been providing new investments in water infrastructure and we’re doing that right around the country.
NEIL MITCHELL:
The eligible asset write-off, what does that mean? What’s an eligible asset?
JOSH FRYDENBERG:
Well it’s a depreciable asset. So it’s machinery, it’s equipment…
NEIL MITCHELL:
Or computers.
JOSH FRYDENBERG:
If you’re a farmer who wants to buy a new harvester, normally you would write that off over the course of six years or more, now you can do that in year one. If you are a manufacturer that wants to upgrade your production line you can now do that all in year one. If you are a trucking business that wants to buy a new lorry, you can do all that in year one. This will bring forward, significantly, investment in infrastructure and bring forward investment in machinery and equipment, and that will create jobs and it’s Treasury’s forecast that the combination of that loss carry-back measure and also this investment incentive measure will create 50,000 jobs.
NEIL MITCHELL:
I run a widget shop and I need a new cash register for my widget shop, that’s alright?
JOSH FRYDENBERG:
That’s for the business, that would be an asset that you can write-off.
NEIL MITCHELL:
I need a new computer for my business.
JOSH FRYDENBERG:
It also includes projects, initiatives, purchases such as that.
NEIL MITCHELL:
Self-funded retirees, again, seem to have missed out. What is there for them?
JOSH FRYDENBERG:
Firstly, self-funded retirees benefit from a stronger economy. Their investments in the stock market depend on having profitable businesses there and...
NEIL MITCHELL:
They’ve seen it go down the gurgler over the past year.
JOSH FRYDENBERG:
...and our measures are designed to boost business.
NEIL MITCHELL:
So is there anything for them other than you saying oh well, the stock market might help out? Are you giving them anything?
JOSH FRYDENBERG:
Well again, self-funded retirees, like the rest of the Australian community, are benefitting from a stronger economy, we’ve avoided a change in the franking credits and the retiree tax which was the battle line of the last election…
NEIL MITCHELL:
But pensioners are getting two $250 slings, there is help for businesses, what is the help for self- funded retirees?
JOSH FRYDENBERG:
The help for self-funded retirees is from a stronger economy and they invest their savings...
NEIL MITCHELL:
So nothing specifically.
JOSH FRYDENBERG:
...as you say, they have taken a hit, whether it’s in the stock market or other fixed interest investments, they take a hit as a result of a...
NEIL MITCHELL:
So nothing specific?
JOSH FRYDENBERG:
...of an economy that has faced the pandemic. They will benefit from having a stronger Economy. That will mean more dividends from the business to them and that means stronger retirement savings.
NEIL MITCHELL:
One quick one, I know you need to go. Hospitals are going to be under pressure, the waiting lists have increased and will continue to increase. What about spending on hospitals?
JOSH FRYDENBERG:
Record spending on hospitals and we see in this Budget that Victorian health and hospitals have increased by $802 million. So a significant boost for Victorian hospitals and health programs out of this Budget compared to last year’s Budget.
NEIL MITCHELL:
Do you think this can change the public mood? It’s a pretty grim mood around the country.
JOSH FRYDENBERG:
I think you summed it up well at the start, Neil. That this Budget is about creating confidence, giving people hope and showing that there is a plan. And this plan is all about jobs. These initiatives, Treasury expect to help create around a million new jobs over the next few years and the counterfactual is but for the measures in this Budget, the unemployment rate would reach around 12 per cent this year and next year. That’s significantly above where it’s forecast to be. We can manage this debt during this challenging time. What we have done is invest heavily in Australia’s future. It is a plan and it will create jobs and it will create hope.
NEIL MITCHELL:
Thank you for your time.
JOSH FRYDENBERG:
Always good to be with you.