SABRA LANE:
Treasurer welcome back to AM.
JOSH FRYDENBERG:
Nice to be with you Sabra.
SABRA LANE:
The banks are extending their loan repayment holidays by another four months to help struggling businesses, but for those in real hardship, even before COVID, and whose business models have structurally changed and are unlikely to thrive, do you support the banks winding up those enterprises that aren’t a going concern?
JOSH FRYDENBERG:
Well, the banks have made it very clear to us that they’re going to continue to support their customers because they know there is going to be another side to this pandemic. And these are difficult times and they’ve already provided $260 billion worth of loan deferrals, initially for six months, now for another four months, and I think the banks, like the Government, are very focused on ensuring that businesses have their best opportunity to survive.
SABRA LANE:
Most will, but there will be some that won’t.
JOSH FRYDENBERG:
There will be some that don’t, and there will be some structural adjustments across the economy. But this is a very severe economic downturn; unlike the 80s and 90s recessions, the shock has been both on the supply and the demand side, in terms of the reduction in hours worked. It’s already greater than what we saw in the 80s and the 90s. Monetary policy doesn’t have a lot of room to move as it did in the Global Financial Crisis. So it’s coming down to fiscal policy and, as you know, the Government has been there with $260 billion of income support and other economic support.
SABRA LANE:
Before the Melbourne lockdown, you say that there were positive signs across the economy. What does the lockdown now mean for Australia and what kind of help is the Federal Government prepared to give Victoria?
JOSH FRYDENBERG:
Well, this is a major challenge to the economic recovery. This is going to have an impact well beyond the Victorian border. It’s already starting to play out in consumer confidence numbers that have been down in the last two weeks, and Victoria’s about a quarter of the national economy. Now, we have been there with JobKeeper and the cash flow boost, which together have provided more than $10 billion into the Victorian economy. We’ve got more than 220 ADF personnel that have been deployed and more than 800 Commonwealth officials. So we’re ready to do what is required to support Victoria, and Daniel Andrews himself has said whenever he’s asked the Prime Minister for support the answer has been an unequivocal yes.
SABRA LANE:
The lockdown is costing about a billion dollars extra a week, is that right?
JOSH FRYDENBERG:
Up to a billion dollars a week, and it was announced by me, in the context of my May Statement in Parliament, that going back to those restrictions, that were in place before the National Cabinet agreed their staged approach to ease those restrictions, the cost to Victoria is up to a billion dollars a week and that will fall heavily on businesses.
SABRA LANE:
Dan Andrews said yesterday that he had spoken to the Prime Minister about what extra help the state might need. You are due to hand down a mini budget in just over a fortnight, might you have to extend programs like JobKeeper, which is legislated to end in September?
JOSH FRYDENBERG:
You’re right that it is legislated, like JobSeeker, to end at the end of September, and the six-week lockdown announced by Daniel Andrews takes you to the end of August. It’s an important point. But there will be another phase of income support. It will be targeted, it will be temporary, it will be designed to get help to people who need it most. But we recognise there are some sectors that are going to be slower to recover than others. We’ve already announced sector-wide support for construction, for aviation, for tourism, and of course the situation in Victoria means that that state will be behind others in the recovery.
SABRA LANE:
And does that shutdown change what you’re planning to do in a fortnight?
JOSH FRYDENBERG:
It’s being factored in. It will impact on the numbers in terms of our forecast for growth, for unemployment, and, as I say, Victoria is a big part of the national economy. This is not time for a State of Origin. This is not State v State. We’re all in this together, and what happens in Victoria, and the progress that we can make in containing the virus, will be to the nation’s benefit.
SABRA LANE:
On the longer term recovery, is the Government looking at the legislated personal income tax cuts and considering bringing them forward?
JOSH FRYDENBERG:
Well, as you know, there were three stages to those legislated income tax cuts, and the benefit was very clear. We’re creating one big tax bracket between $45,000 and $200,000, where people pay a marginal rate of no more than 30 cents in the dollar. So we are looking at that issue, and the timing of those tax cuts, because we do want to boost aggregate demand, boost consumption, put more money in people’s pockets, and that is one way to do it.
SABRA LANE:
People aren’t spending though, business is super cautious. We saw that from the Reserve Bank Statement yesterday. It noted that people are looking to cut costs, and that confidence is a huge problem, and that’s feeding into people not spending. How worried are you by that?
JOSH FRYDENBERG:
Well, the recovery is a confidence game. The JobKeeper announcement that we made was not only an economic boost, it was also a psychological boost. And so going into the decisions that we need to take for that 23rd of July statement, we’re very conscious of maintaining confidence across the economy. But the Reserve Bank did point out that the conditions had stabilised, that the downturn was not as severe as initially feared, and that the significant fiscal and monetary support that has been provided has made a difference.
SABRA LANE:
Just quickly, is Hong Kong and China a safe place for Australian businesses and workers now given the new travel warning about the potential for arbitrary detention?
JOSH FRYDENBERG:
Well, we want Australian businesses to thrive and prosper, whether it’s in Hong Kong, China or elsewhere. They have to be very conscious, though, of some of the risks. And we undertake objective assessment of those risks and that is reflected in our travel advice, which as you know has been upgraded because we have been concerned about arbitrary arrests and detention and so, therefore, we are providing those words of caution to Australians who are in China or are thinking about going to China.
SABRA LANE:
Is it safe?
JOSH FRYDENBERG:
Look, I think it is a situation that is fluid. Australians have to be very cautious, but if they go about their ways in a safe manner then, hopefully, they have nothing to fear.
SABRA LANE:
Treasurer, thanks for talking to AM.
JOSH FRYDENBERG:
Good to be with you.