PATRICIA KARVELAS:
The Treasurer joins me now. Treasurer, welcome.
JOSH FRYDENBERG:
Good morning, Patricia. Nice to be with you.
PATRICIA KARVELAS:
Treasurer, you said only recently that crisis-level spending must stop amid the improving economy. But you have just announced $30 billion in new spending. Why have you abandoned the spending discipline you wanted to apply to the Budget? Is it just to win the election?
JOSH FRYDENBERG:
Well, actually, we have banked the dividend of a stronger economy with a more than $100 billion improvement to the Budget bottom line. We see deficits more than half, Patricia, over the forward estimates, and then more than halved again over the medium term. This has been driven by having more people in work and fewer people on welfare. We haven't baked in high commodity prices for an extended period. That's a mistake that our political opponents did when they were last in Government. But we've also responded to the needs of Australians right now with cost of living relief and, as you say, through the fuel excise, through the boost to the LMITO as well as the $250 payment for millions of pensioners, carers, veterans and others on income support. We ended the emergency economy-wide support like JobKeeper and COVID disaster payments –
PATRICIA KARVELAS:
But this is economy-wide support. This is cash that goes into pockets as soon as April and then July.
JOSH FRYDENBERG:
But there is a need right now for this targeted, temporary, responsible support. And what we have done in this Budget is seen a material improvement to the bottom line. We also see Australia on the cusp of a historic low for unemployment at three and three-quarter per cent for the first time in 50 years. That's not just a number on a page, Patricia; it's actually real people's lives.
PATRICIA KARVELAS:
Okay. Now you wanted crisis spending to stop because of the risk to inflation. How much will this Budget add to the pressure on prices and then interest rates? Won't that be the real legacy of this Budget?
JOSH FRYDENBERG:
Well, the principal driver of the high inflation rate is actually international factors. And fuel tops that list and then, of course, higher food and transport costs with shipping costs during COVID five times higher than they were going into the pandemic. What Treasury have actually said is our cut to the fuel excise will reduce inflation by a quarter of a percentage point. So it actually points downward pressure, and the measures that we've announced in the Budget for cost of living consist of less than half a percentage of GDP. So if you put it in the overall context of the size of the Australian economy, these are very measured, considered decisions and Treasury have, of course, factored in our announcements in the Budget to their inflation forecasts, which sees inflation at four and a quarter per cent this year but then coming down next year.
PATRICIA KARVELAS:
You say it's temporary support. But longer-term, you're scrapping the low and income tax offset. So, yeah, people get the sugar hit now, but actually in a year's time, Treasurer, they just lose that entirely.
JOSH FRYDENBERG:
Well, the low and middle-income tax offset was always a temporary measure which was actually a fiscal stimulus. And we haven't continued it on beyond this year where people get it. But what we have done is engaged in real structural reform to our tax system in a three-stage plan. And that is rolling through and that's already seeing lower taxes. And then there's the third stage that comes in 24-25 when we abolish a whole tax bracket – the 37 cents in the dollar tax bracket – and 95 per cent of Australian taxpayers will pay no more than 30 cents in the dollar. So, again, it's part of a longer-term plan which creates a fairer and simpler tax system.
PATRICIA KARVELAS:
Sure, but for those groups, they'll be actually paying a thousand dollars more in tax. They won't get that money next year. So short-term sugar hit, but, Treasurer, can you confirm they lose it next year?
JOSH FRYDENBERG:
Well, we aren't continuing the low and middle-income tax offset indefinitely. What we have said was it was always a temporary measure and we bring it to an end. But actually, people are paying lower taxes because we have engaged in structural reform which sees the changes to the thresholds and to the rates, which is good news for taxpayers.
PATRICIA KARVELAS:
There's $8.6 billion on a cost of living package. Isn't that confirmation that real wages will continue to fall this year?
JOSH FRYDENBERG:
Well, the numbers actually show that inflation is at a four and a quarter per cent this year, and that is above the wages price index. But then that changes from next year on. And you actually see inflation moderate down to 3 per cent, you see wages increase to three and a quarter and then it continue to strengthen. So there's a positive story around wages largely driven by the low unemployment rate where you've got a tighter labour market and you've got employers, Patricia, competing for employees, therefore paying more for their services. And so that is a positive sign. But, as I said, higher inflation is driven largely by international factors right now.
PATRICIA KARVELAS:
But 52 of the 55 wage forecasts that have been previously made have been wrong. Why should workers trust this?
JOSH FRYDENBERG:
Well, the last Budget last year when I made a wages forecast, it ended up coming in higher than what I had forecast. And what we do know is Australia is seeing one of the lowest unemployment rates that the country has ever seen. And as a result of that, you do get upward pressure on wages. There's also another wages indicator, which shows that wages are starting and earnings are starting to increase. And that is good news for the economy.
PATRICIA KARVELAS:
Okay. But, Treasurer, on wages, your own Budget papers say that there is limited recent experience in Australia with an unemployment rate below five per cent –
JOSH FRYDENBERG:
True.
PATRICIA KARVELAS:
– adding to the uncertainty about how wages will respond in such an environment. Your own Budget papers.
JOSH FRYDENBERG:
Well, what we're seeing is the lowest unemployment rate in 50 years.
PATRICIA KARVELAS:
Yeah, but the Budget papers say you don't – that it's not clear how actually the response will take place. So, can you really guarantee this?
JOSH FRYDENBERG:
Well, it just follows that when you have a tighter labour market and employers are looking for workers then they're going to pay more for their services. And that flows through to the pockets of hard-working Australians. But we recognise, Patricia, that inflation is higher. At three and a half per cent today it's less than half of what it is in the United States at 7.9 per cent but it's higher than what was previously forecast. And that's why the tax relief which we've been providing since we've come to Government – some $40 billion since the start of the pandemic – is actually putting more money into people's pockets. We're seeing lower electricity prices – down by 8 per cent in the last two years – we've invested more in child care –
PATRICIA KARVELAS:
Okay.
JOSH FRYDENBERG:
all of which is making a difference.
PATRICIA KARVELAS:
If you're just tuning in, the Treasurer Josh Frydenberg is my guest. Treasurer, the Budget papers include almost $3 billion in cuts to payments from 2024. No details regarding what you'll be cutting. What's the big secret?
JOSH FRYDENBERG:
Well, we're actually seeing more investments in the essential services, more investment in schools, more investment in hospitals –
PATRICIA KARVELAS:
Yeah, but that wasn't my question. What's this $3 billion?
JOSH FRYDENBERG:
I don't know what you're actually referring to specifically. What I can tell you is we have not been cutting essential services. We've been investing more –
PATRICIA KARVELAS:
No, so –
JOSH FRYDENBERG:
– and what we saw last night.
PATRICIA KARVELAS:
From 2024 in the Budget papers, $3 billion in savings. So what are they?
JOSH FRYDENBERG:
Well, again, I don't know which page and which document you're referring to.
PATRICIA KARVELAS:
When do we get to find out, Josh Frydenberg, about what that $3 billion is about?
JOSH FRYDENBERG:
Well, I can tell you – there's more spending on the things that matter for the people of Australia in this Budget. What we –
PATRICIA KARVELAS:
But, with respect, that's not my question.
JOSH FRYDENBERG:
Well, I don't know exactly which document and which page number you're referring to, Patricia. So you might think –
PATRICIA KARVELAS:
Are you honestly not across the $3 billion in cuts from 2024?
JOSH FRYDENBERG:
Well, I can tell you that we're investing more across all the important areas, whether it's aged care, whether it's NDIS, whether it's mental health, whether it's women's safety, whether it's listing more drugs on the PBS and, of course, providing the cost of living relief.
PATRICIA KARVELAS:
So, will we get to know what this is about before the election? What the $3 billion of cuts pertain to?
JOSH FRYDENBERG:
Well, as you know, the Treasury Secretary and the Finance Secretary put out what is called PEFO once an election is called. That flushes out all the decisions in the Budget that may be decisions taken but not yet announced, so everyone does get to see all the numbers. But what we have clearly done in this Budget is put in place that cost of living relief, that long-term economic plan to create more jobs, the guaranteeing of the essential services and further investments in national security. It's a very, very strong story. It's one that sees the unemployment rate come down to a historic low. It's one that has responded today the crisis to see our recovery faster than any other major advanced economy in the world. And it's one that is a Budget for the times.
PATRICIA KARVELAS:
Your colleague Concetta Fierravanti-Wells has unloaded on Scott Morrison. She's described him as a ruthless bully who has no moral compass. He's not fit to be Prime Minister she says. If that's what someone from your own side thinks of Scott Morrison, what will voters make of him?
JOSH FRYDENBERG:
Well, I, obviously, have a very different view. You know, Scott Morrison has provided very strong leadership through a very difficult time for our country with the biggest economic shock since the Great Depression. What we have seen in Australia is, you know, some setbacks along the way, but there was no playbook for the pandemic. The members of the Liberal Party – some 500 of them – met on the weekend to decide the pre-selections in New South Wales. We respect the decisions of the membership of the party. And, you know, from my own personal experience Scott Morrison has been a very good partner for me in helping to steer the economy through this time.
PATRICIA KARVELAS:
But here we have a senator saying that she thinks he's a bully. Aren't you concerned by that, Treasurer?
JOSH FRYDENBERG:
Well, again, that's not my experience dealing with the Prime Minister.
PATRICIA KARVELAS:
But aren't you concerned that she would have had this experience?
JOSH FRYDENBERG:
Well, my experience of Scott Morrison is a very positive one working with him. And in terms of the pre-selections and people's responses to that, their decisions and matters for the membership of the party which made those decisions last Saturday day.
PATRICIA KARVELAS:
Thank you for your time, Treasurer.
JOSH FRYDENBERG:
Always a pleasure.
PATRICIA KARVELAS:
And that's the Treasurer Josh Frydenberg.