SABRA LANE:
Treasurer, welcome back to AM.
JOSH FRYDENBERG:
Nice to be with you Sabra.
SABRA LANE:
The Budget is a month away, it sounds like you’re bringing forward legislated tax cuts to help kick start recovery. Is that the key to your plan?
JOSH FRYDENBERG:
It’s one aspect of the economic plan that we are working on in the context of the Budget. As you know, we legislated $158 billion worth of tax cuts after the last election, they were in three stages. Tax cuts put more money into people’s pockets, that means more spending, more spending means more jobs and that’s obviously critical in the context of the economic recovery.
SABRA LANE:
There’s one fly in the ointment in regards to that. Yesterday’s figure showed that people are saving money at record levels, a record high rate of 19.8 per cent. Is there a risk that if you bring forward those tax cuts that people will feel very reluctant about spending it, that they’ll just keep squirrelling it away?
JOSH FRYDENBERG:
Well the high savings rate and you’re right it’s extraordinarily high right now, reflects the fact that the restrictions have been put in place and people have been unable to spend the money as they otherwise would at the local café, restaurant or shop and…
SABRA LANE:
Sure, these figures are for June and in England for example, they had an ‘Eat out for England’ program to give people confidence to get out there and spend. Are you going to need something like that?
JOSH FRYDENBERG:
Well some of the states are already undertaking such programs including Tasmania recently, which we welcome and we would welcome other states following that lead. But as the restrictions are eased and more people get back to work, there’ll be greater propensity to consume and to spend. In seven out of the eight jurisdictions’ jobs are coming back. Of the 1.3 million Australians who lost their job or saw their hours reduced to zero since the start of the crisis, around 700,000 are now back at work. Clearly in Victoria, while stage 4 restrictions are in place and people are feeling reluctant to go out, then that’s going to have an impact on the bottom line and on spending.
SABRA LANE:
ABS figures do show that spending in lower incomes and vulnerable Australians, that they are spending their COVID supplements and that is stimulus, keeping businesses ticking over. How mindful is the Government about that in plotting the recovery and considering what the long term rate for JobSeeker should be?
JOSH FRYDENBERG:
Well as we’ve said, we’ll consider at the end of the year what we do with the JobSeeker rate. What we recognise is that those on lower incomes, or those out of work have a higher propensity to consume, but at the same time we need to get the balance right. What we need to do is ensure that there is still the ability and the incentives for people to go out and find work, that’s going to be critical to the recovery.
SABRA LANE:
How many jobs will you have to aim to create in the Budget, given I think the forecast is another 400,000 people are expected to join the unemployment queue by Christmas as JobKeeper payments and JobSeeker taper off?
JOSH FRYDENBERG:
Well obviously, we would love to get back to where we were pre-COVID levels and that unemployment rate was at 5.1 per cent as recently as February. It’s now 7.5 per cent, Treasury’s estimating it to get to 10 per cent by the end of the year. The better indicator of there the labour market is, is what is called the effective unemployment rate which takes into account not just those who have lost their jobs but also those who have left the labour force altogether or seen their hours reduced to zero. That’s what we’re focused on. That has come down but with Victoria is about to go up again and we’re going to try get it down after that.
SABRA LANE:
It seems the Government might be preparing to break a promise on the legislated commitment in regards to compulsory superannuation guarantee?
JOSH FRYDENBERG:
Well again, we are considering our options in light of COVID-19. You’ve heard from no less an authority than the Governor of the Reserve Bank of Australia who said that an increase to the superannuation guarantee will lead to less income. Less income leads to less spending. Less spending leads to less jobs. Don’t get me wrong. I’m all in favour of superannuation. I think it’s very important that people save for their retirement. But there is a trade-off, and the trade-off is between wages and saving for retirement.
SABRA LANE:
Sure, and it was a promise. Does that weigh on you at all? Does it weigh on the Prime Minister? Because he made the promise.
JOSH FRYDENBERG:
Well, again, we’re still working through our options. We haven’t taken any decisions, and I do point out Sabra to you and your listeners, that the legislated increase is not until July 1 next year.
SABRA LANE:
The lockdown in Victoria and the closed borders in Queensland, Tasmania and Western Australia, that all means that the economic pain continues. Are you able to quantify the cost of all of that?
JOSH FRYDENBERG:
Treasury are working through those numbers. We know for example, with tourism that over a third of the dollar that is spent in tourism relates to interstate tourism. So there is a heavy economic impact of having those strict border closures. But it’s not just an economic story, it’s also a health and wellbeing story. It’s breaking today that a Grandmother of seven who had brain surgery in Sydney but is a Queensland resident has now being forced to quarantine in a hotel room instead of being able to go into her home to recover. Now, football officials have just been let into Queensland en masse to hang out at the pool bar, whereas someone who’s recovering from brain surgery has to quarantine in a hotel room as opposed to their home. And there’s been lots of other perverse outcomes of these strict border closures on health issues.
SABRA LANE:
The National Cabinet will discuss tomorrow definitions around COVID hotspots. The Prime Minister says he wants a definition come rain, hail or shine. How confident are you that leaders will actually agree to that?
JOSH FRYDENBERG:
Well he is putting to them a definition, having had that worked on by the medical experts. It’s clear that we need a common definition of a hotspot. It’s one that has clear metrics, it’s transparent, it’s going to allow a more targeted response. Because it’s just not on, Sabra, that you can be a Victorian school teacher two kilometres from the South Australian border...
SABRA LANE:
You’ve just made that point….
JOSH FRYDENBERG:
And unable to go to teach a class because you’re not deemed to be an essential worker.
SABRA LANE:
Are you confident that leaders will agree to it?
JOSH FRYDENBERG:
I’m hopeful that some will. I don’t necessarily know that all will. But again, that will be a discussion that the Prime Minister and the Premiers and the Chief Ministers will have tomorrow. Let’s wait and see. But, we’re all Australians and I think people recognise the fact that these strict border closures are leading to suboptimal outcomes both on the economic side, but also in terms of health and wellbeing. But we need to remember, this is not about States’ rights, this is not about State parochialism, this is about all of us being in this together as Australians.
SABRA LANE:
Treasurer, thanks for talking to AM.
JOSH FRYDENBERG:
Good to be with you.