PETER STEFANOVIC:
Joining us now to discuss is Treasurer Josh Frydenberg. Treasurer, good morning to you. Thanks for joining us.
JOSH FRYDENBERG:
Nice to be with you.
PETER STEFANOVIC:
I've just noticed on the Sydney Morning Herald this morning, virus emergency plan has been activated, the US overnight talking more disruptions, so it does seem to be worsening, could it cause a recession in Australia?
JOSH FRYDENBERG:
Look, that's not the word that I would use. What I would say though, is the economic impact is very significant already and, of course, the virus continues to evolve. It's just the latest economic shock that has faced the Australian economy and it's a shock that's beyond our control. We've seen the trade tensions between US and China, we've seen the extended drought, we saw the fires, floods and now the virus. I've just returned from the G20 meeting in Riyadh where this was obviously the number one topic and the International Monetary Fund has assessed a global growth in light of what has occurred. But we are going into this situation in a much stronger position than many other countries. The Australian economy is remarkably resilient.
PETER STEFANOVIC:
Well, SARS was uncontained for eight months, though, Treasurer, so back to that original question though, I mean it's not the word you would use but is it still possible, recession, I mean?
JOSH FRYDENBERG:
Look, we'll wait and see what the December quarter numbers are. I get those next Wednesday. Then we will see what happens in the March quarter, which is where the virus would have the biggest impact. That won't be out till June. But there's no doubt it's having a significant impact across the economy but, as you know, we've taken precautionary measures to put the travel restrictions in place and those travel restrictions have seen the number of people who have been infected with the virus be much smaller than in other nations.
PETER STEFANOVIC:
What about a per capita recession?
JOSH FRYDENBERG:
Look, again, I'm not going to get into that territory. What I am going to say, though, is that the Australian economy is remarkably resilient. We've seen our labour market remain strong, we've seen the housing market stabilised, we have maintained our AAA credit rating. The Australian economy, according to the International Monetary Fund, will grow faster than in the United States, in the United Kingdom, France, Germany, Japan and Canada this year, and I do know that we've obviously done the work to ensure that the economy is in good health.
PETER STEFANOVIC:
How much do you expect coronavirus to take off GDP?
JOSH FRYDENBERG:
I think it will take off more than the bushfires, and the bushfires have been assessed by the Reserve Bank and by Treasury as taking about 0.2 percentage point and that's off both the December and the March quarters in a cumulative number. But in terms of the exact number, Treasury is still doing that work and obviously the virus continues to evolve and depending on how long the travel restrictions are in place, and how the virus evolves globally, will obviously impact that final number.
PETER STEFANOVIC:
Is 0.5 per cent off the mark?
JOSH FRYDENBERG:
Look, I'm not going to speculate until I've got a final number from Treasury and I've yet to receive that number.
PETER STEFANOVIC:
Will there be a surplus this Budget, Treasurer?
JOSH FRYDENBERG:
Well, as you know, the Budget numbers are updated twice a year, prior to Christmas and then on Budget night in May, so you will have to turn on then. But I do know this is going to hit the economy and I do know that our focus has been, in relation to the fires and in other shocks that we've faced, on getting the support to the community in need. That's been our primary focus, not the surplus.
PETER STEFANOVIC:
If you were a betting man, what odds do you give yourself?
JOSH FRYDENBERG:
Well, my job is, as the Treasurer, to steer the economy and the nation through these pretty challenging times and with the Prime Minister and my colleagues, I’ll continue to do that.
PETER STEFANOVIC:
It is, there's no doubt that it is challenging times economically. A year ago, though, you mentioned that you celebrated the fact that the Budget was back in black. Do you regret saying that?
JOSH FRYDENBERG:
Well, the Budget is in balance for the first time in 11 years. That's a significant achievement. No one can take that away from us…
PETER STEFANOVIC:
In balance, though, not back in black.
JOSH FRYDENBERG:
That's a significant achievement because Australia is now living within its means and we've done that while also cutting taxes, while also rolling out a ten year $100 billion infrastructure program at the same time creating new apprentices and spending record amounts on schools and hospitals. So our fiscal management has been disciplined, it's been considered, it's producing results and it's actually helped prepare Australia for what is a very challenging, global health crisis.
PETER STEFANOVIC:
Treasurer, just finally, Larry Fink from Black Rock mentioned this morning that perhaps companies should start to rethink supply chains and reliance on China. Do you agree with that?
JOSH FRYDENBERG:
Well, we obviously have a very close economic relationship with China. They take about a third of our exports, they're the number one source of students and tourists to this country and I think those international supply chains have helped reduce the costs to the Australian consumer. That being said, we're always looking to expand our economic partnerships around the world and just a few weeks ago we celebrated a new free trade agreement with Indonesia, a country of 270 million people. So whether it's with China, Indonesia, Japan, Korea, the Transpacific Partnership, this Government has been absolutely committed to free trade knowing that one in five Australian jobs are related to trade.
PETER STEFANOVIC:
But doesn't this once again prove that we are perhaps over reliant on China?
JOSH FRYDENBERG:
Look, I think what it does prove is how important China is to the global economy. China, today, is four times bigger economically than it was at the time of the SARS virus in 2003. Australia obviously has closer economic relations with China since that period. But that's created jobs here and it's also lifted people out of poverty in China so it's been a win/win for Australia and for China.
PETER STEFANOVIC:
Okay, Treasurer Josh Frydenberg, really appreciate your time this morning. Thanks so much for joining us.
JOSH FRYDENBERG:
Good to be with you.