PATRICIA KARVELAS:
The Treasurer, Josh Frydenberg, joins me now. Welcome back to RN Drive and of course, Happy New Year.
JOSH FRYDENBERG:
Happy New Year to you too, Patricia. I was enjoying reading your tweets about your travels around the country.
PATRICIA KARVELAS:
Oh look, I wasn't afraid to share. But let's get to the serious stuff, which is of course jobs, growth and peoples standard of living. What are the buffers you're building into the economy?
JOSH FRYDENBERG:
Well, essentially paying back the Labor debt that we inherited. Let's not forget that when…
PATRICIA KARVELAS:
…okay, your first comment, I've got to pick you up on it; Labor debt. You've been in Government for two terms, the question is, what buffers are you building in to the economy?
JOSH FRYDENBERG:
Well, there wouldn't have been any debt if the Howard and Costello years had continued as they did, because they obviously paid back the debt that they inherited from the Labor Party and it left surpluses and money in the bank. Now, that was squandered through the Rudd - Gillard years, and now, we have through very difficult and hard decisions at the Expenditure Review Committee process, reduced the rate of spending growth and we will deliver a budget surplus on April the 2nd this year. So, what we are doing is ensuring that the debt levels come down. We will see surpluses at around 1 per cent of GDP over the medium-term and this will enable Australia to better respond to the crises when and if they occur at an economic level.
PATRICIA KARVELAS:
You highlighted a lot of new challenges to the Australian economy and of course, today, they've been outlined internationally by the IMF. But, your speech today didn't contain anything new. Why was that?
JOSH FRYDENBERG:
Well, my speech was an outline of the economic plan that we have rolled out and continue to roll out. It did outline in some detail about the tax cuts that we have legislated, both 3.3 million small businesses and for 10 million Australian income earners, the instant asset write off, the $75 billion infrastructure projects that we are funding, the $200 billion defence industry plan, the record spending on…
PATRICIA KARVELAS:
…sure, with respect Treasurer, that is just a list of things that you've been doing. There is no new strategy to deal with what the IMF has been talking about, also the slowing economy of China. I mean, there is no new strategy there.
JOSH FRYDENBERG:
These things actually matter to your listeners and to the people of Australia because these actually are the policies and the initiatives and the support that we are providing to enable people to have a better life. Now, when it comes to the strength of the Australian economy, lets not forget that we inherited an economy where unemployment was at 5.7 per cent. Through the work that we have undertaken, unemployment has fallen to 5.1 per cent, and we've created more than 1.2 million new jobs and a record number of women and young people are finding work. In terms of growth, we inherited an economy where growth was at 2.1 per cent. Now, it's at 2.8 per cent. So, our economic plan to your question, Patricia, is working….
PATRICIA KARVELAS:
…Okay, most economists agree that wage growth will be crucial to the ability of households to absorb some of these economic shocks. But wage growth is expected to remain pretty stagnant. Does the Government have a plan to tackle it?
JOSH FRYDENBERG:
Well, wage growth has been gradual. I would like to see it to be stronger…
PATRICIA KARVELAS:
…Okay, but what's your strategy to tackle wage growth?
JOSH FRYDENBERG:
It's through our tax plan, it's through our infrastructure plan, it's through greater flexibility in the workplace. In fact, we saw the biggest jump in wage growth in three years in the September Quarter at 2.3 per cent. Now, this compares to inflation which is running at 1.9 per cent. So real wages aren't growing as much as we would like, but if you look at the last Monetary Statement from the Reserve Bank Governor and statements that they have made prior to that, they say that the outlook for the labour market is positive and that actually over time, we will see increases in wages. But, what Australia is going through in terms of real wages, Patricia, is not confined to just our country, we are actually seeing it in the United Kingdom and elsewhere…
PATRICIA KARVELAS:
…But the things that you've outlined aren't going to lead to higher wages, are they?
JOSH FRYDENBERG:
…Absolutely…
PATRICIA KARVELAS:
…I mean, how can you demonstrate to me that your tax cuts are going to lead to higher wages because there has been no evidence of that.
JOSH FRYDENBERG:
Well, actually, that is not right. When you create incentives for people to grow their businesses, for example our small business tax cuts. When you create incentives for more people to go to work and to invest, that actually enables the economy to grow…
PATRICIA KARVELAS:
…That is an economic theory you're outlining to me, you're not actually pointing to evidence…
JOSH FRYDENBERG:
...Well, let me actually do one contrast for you which is economic fact. And that is, Labor is proposing a 50 per cent increase in the Capital Gains Tax. The Centre for International Economics, which is an independent institution, said that actually as a consequence of Labor's high tax agenda with the CGT, we will actually see wages fall by $600. Now, that is a fact from a proper analysis by an independent body.
PATRICIA KARVELAS:
You've warned against what you say of punitive taxes proposed by Labor…
JOSH FRYDENBERG:
…Correct…
PATRICIA KARVELAS:
…But the Shadow Treasurer, Chris Bowen, says these measures will actually boost Government revenue. And of course, Government revenue being boosted at a time like this, at a time that the IMF is warning about, is necessary. He's right, isn't he? That you need that buffer?
JOSH FRYDENBERG:
He is wrong and he is dreaming.
PATRICIA KARVELAS:
But don't you need that buffer, that is the question.
JOSH FRYDENBERG:
Well, actually, his policies will dampen economic activity. And that Centre for International Economics report points exactly to that fact. That if you actually raise taxes…
PATRICIA KARVELAS:
…but they will boost Government revenue which is what is needed.
JOSH FRYDENBERG:
Well, not necessarily. What they are actually going to do is stamp out entrepreneurship and punish…
PATRICIA KARVELAS:
…Okay, but you can't say on one hand that these are higher taxes and then say there is not going to be more money to the bottom line, because it clearly is…
JOSH FRYDENBERG:
No, because what you are failing to understand, Patricia, is the consequential impact across the economy of a high tax agenda. You see, if you punish aspiration, if you make it more difficult for businesses to employ people, if you deny people the opportunity to save for their retirement or if they do, you punish them for doing so, then actually you shrink the economy and you ensure that the economic pie is smaller to redistribute. Now, that is the flaw in the Labor Party's approach and independent economists, for example when it comes to the property market, have pointed out that if you abolish negative gearing as we know it, which is Labor's plan, then housing prices will fall, with impacts on real economy and household consumption as well as rents going up…
PATRICIA KARVELAS:
…Okay, there is a lot of contested research on what you are talking about. I want to move to another topic, it's been the biggest story of the day. Late last year, Scott Morrison intervened to guarantee all pre-selections for sitting MP's in New South Wales. Why has he parachuted Warren Mundine into Gilmore where Grant Schultz has already been pre-selected.
JOSH FRYDENBERG:
Well, I know you'll want to talk about the internals of the Liberal Party probably for more of the interview than the global or national economy…
PATRICIA KARVELAS:
…I've actually given the global economy a very significant amount of time on national radio, but you answer my question. Why has he done this?
JOSH FRYDENBERG:
In terms of the pre-selection and the candidates for state divisions…
PATRICIA KARVELAS:
…The Federal Parliament, though…
JOSH FRYDENBERG:
…That's right, but they're state divisions. In this case, the national seat of Gilmore or the national seat of Higgins, those processes will be conducted by the state divisions of the Liberal Party.
PATRICIA KARVELAS:
Okay, but you are the Deputy Leader of the Liberal Party. Grant Schultz is running as an independent. In a statement, he said "the leadership of Scott Morrison has taken the Party to the days of Eddie Obeid and the faceless men of Labor."
JOSH FRYDENBERG:
Oh, look, he can make whatever comments he wants, but the reality is the pre-selection processes are run by the state divisions and I'll leave it at that.
PATRICIA KARVELAS:
Given the low numbers of women in the Liberal Party, should you think about parachuting some women into seats, too?
JOSH FRYDENBERG:
Well, as you know, and this has been much debated over the summer period. We would like to get more women into the Federal Parliament…
PATRICIA KARVELAS:
…So, why not do what you've done with Warren Mundine. Since you did it with Warren Mundine, why wouldn't you do it to increase the numbers of women that the Liberal Party has in the Parliament?
JOSH FRYDENBERG:
Well, and I am sure you will get to this, but in the case of Higgins, we made it very clear that we would like to see a female replace Kelly O'Dwyer…
PATRICIA KARVELAS:
…That is one seat, but you need to do a lot more work to get the numbers up.
JOSH FRYDENBERG:
Well, and that's what we are doing. Our target is to get to 50 per cent by 2025. And if you look at a number of the women running for us both at the Senate and at the House of Representatives level, they're really impressive candidates. For example, Hollie Hughes who has worked with kids with disabilities who is leading our Senate ticket in New South Wales. Linda Reynolds, who is leading our Senate ticket in Western Australia is the first female Brigadier in the Army Reserves…
PATRICIA KARVELAS:
…just to be clear, do you think this strategy that we have now seen with Warren Mundine for this seat of Gilmore should be used for women in other seats?
JOSH FRYDENBERG:
Well, look, I'm not going to entertain you on that one…
PATRICIA KARVELAS:
…I would just like to get your views as the Deputy Leader of the Liberal Party.
JOSH FRYDENBERG:
I'm sure you would like to talk about the internals of the Liberal Party…
PATRICIA KARVELAS:
…But, it's not. It's about who represents us in the Federal Parliament.
JOSH FRYDENBERG:
And that will be a decision for the people of Gilmore. And as for the pre-selection process, that will be a decision for the state divisions…
PATRICIA KARVELAS:
…So, you don't have a view about whether this kind of strategy should be used to get more women into the Parliament?
JOSH FRYDENBERG:
Well, my view is that if you want to keep talking about the Liberal Party's internal politics that means less time to talk about the national economy…
PATRICIA KARVELAS:
…No, I asked you question about representation, it's an issue about representation. It's called Democracy and it's important.
JOSH FRYDENBERG:
Well, of course the representation is critical. I can tell you about some fantastic candidates that we've got running…
PATRICIA KARVELAS:
…But I'm asking you whether you support this strategy.
JOSH FRYDENBERG:
Look, I will support who the Liberal Party chooses as our representative in Gilmore and that person will take to the election a very strong economic record for the Party that they represent it…
PATRICIA KARVELAS:
…Do you think Warren Mundine would be a good candidate?
JOSH FRYDENBERG:
Look, Warren Mundine has many strengths and he is well-known in public life.
PATRICIA KARVELAS:
This is a seat being vacated by Ann Sudmalis, who resigned because she was being undermined by branch members, many of whom resigned today. How do you think she would be feeling?
JOSH FRYDENBERG:
Well, I am sure you will invite her on to your show.
PATRICIA KARVELAS:
What do you make of it though?
JOSH FRYDENBERG:
Patricia, you're asking me to opine on the attitude or the feelings of another person. That is a pretty ridiculous question.
PATRICIA KARVELAS:
It is not ridiculous. It's a good question and you should answer it.
JOSH FRYDENBERG:
Well, I'm not going to entertain such a question.
PATRICIA KARVELAS:
Okay, at least you're being honest that you're just not going to entertain the question. Do you accept, though, that what has happened in the seat of Gilmore by parachuting Warren Mundine in is actually going to cause enormous internal upheaval for the Liberal Party?
JOSH FRYDENBERG:
Well, now you're matching the number of questions on the economy by the number of questions on Gilmore. Well…
PATRICIA KARVELAS:
…I probably am. If you'd answered them, then I wouldn't have to.
JOSH FRYDENBERG:
Like I said, I'm the Treasurer. I've just delivered a major speech at the Sydney Institute. It was all about how there are some global headwinds in the international economy and how we domestically we also face some challenges. But our economic record is strong and our economic plan of lower taxes, more flexible workplaces, greater infrastructure spending and free trade agreements is delivering record number of jobs for the Australian people.
PATRICIA KARVELAS:
Josh Frydenberg, thanks for joining us.
JOSH FRYDENBERG:
Always good to be with you.