PETER STEFANOVIC:
Joining me live now is the Treasurer Josh Frydenberg. Treasurer, good morning to you. Thanks so much for joining us.
JOSH FRYDENBERG:
Good morning Pete.
PETER STEFANOVIC:
So there’s another $20 billion on the nation’s credit card, how are we going to pay it off?
JOSH FRYDENBERG:
We will pay it off gradually but the realistic point here is that the debt will be with us for some time to come, and we have encountered a one in a hundred year event in the global Coronavirus crisis and Australia is not immune, and many other countries around the world are seeing similar falls in their GDP or rises in their unemployment. I mean, let’s not forget that between February and May Pete, some two million Australians either lost their jobs or saw their working hours reduced, and as we speak, five million Victorians are in lockdown. So these are really difficult times and that’s why the Government has used its strong balance sheet to support those in need.
PETER STEFANOVIC:
You make a good point there because this is the concern that I have with the announcement yesterday. So you’ve got the support payment reductions that are based on an improving labour market right, but then you’ve got Victoria that’s in lockdown at the moment, there is no vaccine at the moment, there’s not likely to be one this year, so how sure are you that the working environment is going to be better in six months’ time?
JOSH FRYDENBERG:
Well forecasting is difficult in the best of times, let alone in a pandemic. But the reality is jobs are being created, people are coming back to work, and we saw proof of that in the jobs numbers just last week. Pete, more than 210,000 people found work. Now 60 percent of those were woman, and around 50 percent of those were young people, and outside of Victoria restrictions are being eased. Cafés are opening, gyms are opening, people are going to work. Of course, they’re practicing the social distancing requirements, but they’re starting to engage in their normal economic activity. So we’ve really got one country at two different stages and yesterday’s announcement recognises the fact that we do need to transition to lower payments but we do need to provide those payments to those who need it most.
PETER STEFANOVIC:
But you can’t guarantee there’s not going to be another state-wide shutdown, can you?
JOSH FRYDENBERG:
Well no one can guarantee what will happen in terms of this virus. What we do know is that it doesn’t take much to see a second wave and many other countries are facing that at the moment. But what is absolutely critical to our economic recovery is that when there are spikes in new cases that the health authorities quickly deal with those effectively. I think in NSW with their tracing and testing, they have been able to manage the situation which should give us all some hope for the future.
PETER STEFANOVIC:
So will there be a JobKeeper 3.0 if there are other shutdowns?
JOSH FRYDENBERG:
Well look this program is going to run for 12 months and at $86 billion Pete, it’s the single largest economic measure Australia has ever seen. Right now, it’s supporting about 3.5 million workers or 960,000 businesses. That’s about 30 percent of the pre-COVID private sector workforce. What Treasury found is that it’s actually working very effectively, that it’s targeted, that it’s maintaining the formal connection between employers and employees, and it’s saving jobs and businesses and that’s what the Morrison Government has intended.
PETER STEFANOVIC:
You did mention yesterday that you expect about 2.5 million people to come off JobKeeper by the Christmas period, where are they going?
JOSH FRYDENBERG:
Well some will obviously go on to JobSeeker as well because there will be some who actually need that additional support. But most of them will actually see their jobs being supported by businesses that are becoming more viable. I think that’s the key point here, is that businesses are starting to see their economic environment improve, albeit gradually, and that is why we are going to reapply the 30 and 50 percent eligibility test, because it’s important that only those businesses are getting supported with the JobKeeper payment, who need it.
PETER STEFANOVIC:
But what about regions? I mean there’s just no jobs going in regions, so is that where you suspect that a lot of those people who will have to go on JobSeeker will be coming from?
JOSH FRYDENBERG:
Look I think there will be pockets around the country, but it’s important to underline that JobKeeper and JobSeeker are just two elements of a much broader and comprehensive economic response that the Morrison Government has undertaken. A $30 billion cash boost which is designed to support businesses based on the size of their payroll. As you know we’ve been providing cash payments to households. The Prime Minister has just announced a very significant $2 billion skills package, extending the wage subsidies for apprentices. So there’s a whole lot of things that we’re doing, as well as sector support for the aviation sector to support the freight task and maintain flights between capital cities. There are a lot of things that we are doing, Pete, in addition to just JobKeeper and JobSeeker which is helping to keep people in work.
PETER STEFANOVIC:
Sure. What do you expect the unemployment rate to bottom out at?
JOSH FRYDENBERG:
Well the unemployment rate is at 7.4 percent but what I said the other day is it’s not the best indicator of where the unemployment rate really is. That’s the effective unemployment rate which today sits at 11.3 percent, because that takes into account not only the official unemployment rate, but also those who have left the workforce altogether or those who are on zero hours. In the next couple of days, well actually tomorrow, Thursday, I’ll be providing and economic update and that will provide our best forecasts at what the unemployment rate will be and that will obviously show an increase over time.
PETER STEFANOVIC:
I was going to say it’s going to worsen, by how much can you say?
JOSH FRYDENBERG:
Well I’ll be putting that number out tomorrow. But it’s fair to say, we are seeing people come back into work, but we’re also seeing more people come into the workforce, that’s boosting the participation rate, and that’s affecting the unemployment rate.
PETER STEFANOVIC:
Okay, I’ll just return to my first question now about how we are going to pay it off. Coming back to this old argument now, do you rule out increasing taxes to pay it off?
JOSH FRYDENBERG:
Well Pete, we have made it very clear that we are the party of lower taxes and that’s what our track record shows. Since the last election we have legislated the tax cuts that the Australian people voted for. They rejected what our opponents put up, which was $387 billion dollars of higher taxes, and both with income tax and company tax, we have cut those rates. What we see is the future for the Australian economy is to grow it, is to capitalise on our opportunities whether it’s in trade, whether it’s in investment, whether it’s in the mining and agricultural sectors and so therefore we are undertaking a whole series of reforms, designed to boost our economic growth, and as we increase the size of the economy, we can payback that debt.
PETER STEFANOVIC:
You talked about your economic update that’s coming tomorrow, there have been some quotes in the paper, I’m not sure if they’re attributed to you or not, but it has been mentioned that there are some eye watering numbers tomorrow, how would you describe it? Can you give us a preview?
JOSH FRYDENBERG:
Well I did say that on radio the other day. They are eye watering numbers because the Budget bottom line has been really hit by the Coronavirus, no surprises there. They are very big numbers. Again, lots of commentators have put their views out, and we’ll give you Treasury’s estimates tomorrow. But the reality is on both the payments side, we have had a big hit as more people have got this income support from the Government, but also on the receipts side, the revenue side, we’ve seen a big fall as businesses are not making the profits that they were and people are not in jobs in the same way they were, and therefore not paying tax in the same quantities that they were.
PETER STEFANOVIC:
How big is the deficit going to be?
JOSH FRYDENBERG:
Very big.
PETER STEFANOVIC:
Anything more on that?
JOSH FRYDENBERG:
Look it’s a very significant number, but as the Governor said yesterday, the economy can manage the extra borrowing that we’ve undertaken. But Pete, I do want to emphasise that we came into this crisis from a position of economic strength. Our net-debt to GDP was about a quarter of what it was in the United States and the United Kingdom, about one-seventh of what it was in Japan. We had delivered the first balanced budget in 11 years. We were on track for a surplus, even after the devastating bushfires early in the year. So we had brought spending under control, the economy was continuing to grow, and then we were hit with this once in a century pandemic, and that was one hit too many.
PETER STEFANOVIC:
And is there a marker, just on the Victorian border issue, is there a marker on, now that numbers aren’t doubling there seems to be something of a hold on them, is there a marker on when you would like to see them re-opened again? I know this is a way off, but is there a level you’re looking at?
JOSH FRYDENBERG:
Are you taking about the international borders?
PETER STEFANOVIC:
No I’m talking about the Victorian border.
JOSH FRYDENBERG:
Ok well the Victorian and NSW border obviously has been closed based on the medical advice and I’ll leave it to the medical experts to determine the timing of that opening. But what I can say is that we need to manage the spikes in cases, we need to follow the medical advice, and if we can do that, then that will be the best lift you can ever give to the Australian economy and to jobs.
PETER STEFANOVIC:
Just finally Treasurer can I ask on a personal point, how are you holding up? You’re spending a lot of money, you were working until late last night, you’re up again talking to us early this morning, how are you doing?
JOSH FRYDENBERG:
Bit sleep deprived but no different to many other people across the community including a few TV presenters early in the morning I guess. But look this is a very challenging time for the Australian community. My real thoughts and concerns are with those medical professionals on the front line who are doing amazing work on our behalf and of course those people who have tragically lost their job. I mean a neighbour of mine is working for Qantas, he’s obviously been out of work. There are many others across the community whether it’s in the tourism sector, the aviation sector, the hospitality sector, the arts sector, the accommodation sector, people have seen their lives and their livelihoods turned upside-down by this pandemic. So we need to maintain our strength, we need to obviously stay safe, but by coming together and working together, we can get to the other side. And yesterday’s announcements, Pete, will be a big relief to the Australian people.
PETER STEFANOVIC:
Well Treasurer, appreciate your time this morning as always, thanks for joining us we’ll talk to you again soon.
JOSH FRYDENBERG:
Thanks Pete.