YOUSEF GAMAL EL DIN:
On Coronavirus, earlier you said that it would be significant but it would still need some time until you get a better understanding. What does your modelling tell you at the moment?
JOSH FRYDENBERG:
You’ve heard the Reserve Bank say that it will affect the Australian economy by about 0.2 per cent in the March quarter. The Treasury is still working through the numbers. Obviously, that will depend to some extent on how long the travel restrictions are in place. We already are seeing an impact on the Australian economy in terms of international tourists, in terms of international students, two major sectors across the economy. There is also some disruption to international supply chains with a number of Chinese factories remaining closed. So, we will continue to monitor the situation but we do know that the Australian economy is remarkably resilient.
YOUSEF GAMAL EL DIN:
There are some voices coming out of the G20 saying that this might be a chance to reflect on some of the developed economies dependent on China. Australia is arguably one of the counties at the top of that list. Would you agree with the assessment to begin with is Australia too dependent on China?
JOSH FRYDENBERG:
We have embraced China’s economic success. Indeed, we have been a great beneficiary of it and so too have the Chinese people. I mean, hundreds of millions of people have been lifted out of poverty and Australia has been able to export to China, and not just resources and agriculture, but increasingly, services as well. We welcome the fact that China has become such an economic powerhouse. In terms of our exports, about a third of those goes to China. In terms of international students, they’re the number one source of international students to Australia and so too with the international tourists. We have seen since the SARS epidemic back in 2003, the Chinese economy is now four times bigger. So the impact of the Coronavirus will be more significant on, obviously, the global economy, and too on the Australian economy. But we have diversified in terms of our relationships with countries like Indonesia. We’ve recently inked a free trade agreement with them. We’ve supported and embraced and concluded the multilateral Trans-Pacific Partnership as well as having free trade agreements with Japan and Korea.
YOUSEF GAMAL EL DIN:
You mentioned the UK, you mentioned the EU. Do you have a timeline in mind for reaching an FTA with them?
JOSH FRYDENBERG:
In terms of the United Kingdom, following Brexit, I think we will be a very early cab off the rank in terms of working through the details through a formal negotiation process. Both the Prime Minister, Boris Johnson, and our Prime Minister, Scott Morrison, have talked about the priority of that deal and I think our economies are complimentary in many respects already the United Kingdom is our second biggest investor and that relationship is very strong. With the European Union, we’ve already concluded a number of rounds of trade negotiations. So no doubt that will accelerate over the period ahead and again, that relationship is an important one, it’s a diverse one, and a free trade agreement would be in the interests of both the European Union and Australia.
YOUSEF GAMAL EL DIN:
And with the UK, what is realistic in terms of a timeline? Is that something that is going to be by the end of the year? Maybe by 2021?
JOSH FRYDENBERG:
I think as soon as possible. As you know with all these agreements, there are obviously issues both sides wants to push and they have to be negotiated.
YOUSEF GAMAL EL DIN:
The RBA has delivered three rate cuts and the conversations we’ve had suggest that it hasn’t really come through with the kind of results that investors were hoping for. Yes, it’s invigorated price growth a little bit when it comes to housing, unemployment is up to 5.3 per cent last month. Is it time for the Government to start taking more steps on the fiscal side?
JOSH FRYDENBERG:
In terms of monetary policy, you’re right. It has been accommodative with the cash rate coming down to 0.75 per cent which is the lowest on record. In terms of the housing market, it has stabilised, prices have started to rise and that’s a good thing because household consumption is around 60 per cent of GDP and if people are confident in the value of their homes, then they are more confident to spend across the economy. In terms of fiscal policy which is the remit of the Federal Government, and me particularly as Treasurer, we have brought forward infrastructure spending, just over $4 billion in our Mid-Year Economic and Fiscal Outlook statement which was done prior to Christmas. We’ve announced more than $1 billion of extra funding and support in relation to the drought since the last election and we’ve recently announced a $2 billion National Bushfire Recovery Fund without increasing taxes which is over and above existing payments and allowances we provide to the states. So, there is a number of programs which has seen the Government spend in the areas of need. But we’ve also been successful in bringing the unemployment rate down.