QUESTION:
If this is what economic Armageddon looks like, to use your language. The next quarter is going to look worse, surely?
JOSH FRYDENBERG:
Well, as I was saying, we were on the edge of the cliff. What we were facing was an economist’s version of Armageddon. We have avoided the economic fate, and the health fate, of other nations, because of the measures, Andrew that we have taken as a nation. The social distancing requirements, the work that we have done on isolation and quarantine, the travel bans. That has seen the number of cases reduce dramatically. Now, as a result of our success on the health front, we are now starting to see the restrictions being eased, and as you know, National Cabinet set out a three step plan, for removing those restrictions, which Treasury forecast once done will deliver about $9.4 billion a month to the economy, and see 850,000 people get back to work. Now, the June quarter, the economic impact will be severe. Far more severe than what we have seen today. That’s what Treasury’s advice to me is.
QUESTION:
Treasurer, that’s what the next quarter is about, isn’t it?
JOSH FRYDENBERG:
Well, based on what we know from Treasury, we’re going to see a contraction in the June quarter which is going to be a lot more substantial than what we have seen in the March quarter. The Finance Minister and I will be providing a detailed update on the economic numbers now in July, as opposed to June, and we’re doing so because we’re going to announce at the same time, the outcomes of our JobKeeper review. As you know, that is being conducted through the course of this month, and we want the outcomes of that review to be within the numbers that we announce in July. We also have that three step process, Andrew, that has been agreed by National Cabinet, and the intention was for those three steps to be completed by July, and that should allow us to get a better sense of where the economy is at that point in time. Lanai.
QUESTION:
Treasurer, was it actually a good thing then that people panic bought toilet paper? And, you know, given the mining sector has been so strong, what is the Government going to do in order to cut red and green tape to get more projects off the ground?
JOSH FRYDENBERG:
Well, as you know, we’re working with the West Australian Government to facilitate a speeding up of the environmental approvals, and to reduce the red tape for major construction projects, and I think this will be one of the advantages of National Cabinet, is that we can have these discussions where state and Federal Governments share responsibilities. In relation to your first point about the panic buying, well that was done, well I don’t support panic buying in any point in time. Certainly, some of those images we saw in the aisles of the supermarkets, you know, the spats that we saw over toilet paper, were completely unnecessary, but it was at a time when people were expecting that we may move to a lockdown, and that didn’t eventuate because of the success we had in flattening the curve. Mark.
QUESTION:
Is Australia in recession today?
JOSH FRYDENBERG:
Well, the answer to that is yes, and that is on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be.
QUESTION:
What you need to do to get us out of this recession is reverse consumption. So, is your advice to Australians to spend more? Or, are you restricted from saying that because of the state of the unemployment market?
JOSH FRYDENBERG:
Well, I think we will see consumption come back in accordance with the improvements we’ve seen in consumer confidence. So, as I said, nine consecutive weeks in consumer confidence rising, making up 95 per cent of those losses that we saw in March. Consumption will pick up as the restrictions are eased. And that is really important to understand. As restrictions are eased, people can start to go out to the pub or to their shopping centre. And, just a couple of days ago, I was in a pub in Hawthorn. There were eleven people in that pub who were on JobKeeper. Workers, whether they were in the kitchen or whether they were in the front bar. The fact that those restrictions are now being eased and they can have customers come through the door will mean that that transition off that support will be easier for a business like that, as well as we’ll see an increase in consumption as a result of those restrictions being eased. Michelle.
QUESTION:
(Inaudible), anticipating following the June review into JobKeeper, there’ll be a major overview of that program, or do you think you’ll just be doing tweaking?
JOSH FRYDENBERG:
Well, again, the Governor of the Reserve Bank has said it’s very sensible to do a review at the midway point, what we need to do, Michelle, is understand where businesses are in the recovery stage. We want to understand whether the quantum, that $1,500 payment, continues to be the right amount, also bearing in mind that some people are getting paid more than they would otherwise get by virtue of having a flat payment. But, in the context of an economy, where the restrictions are being eased, and people are getting back into work, we need to assess and particularly paying a focus to certain sectors as well, we need to assess the continuation of that JobKeeper program in that context, and it’s too early to pre-empt what the outcomes of that review will be, but any Government decisions about the review will be incorporated into that statement that the Finance Minister and I will make in July.
QUESTION:
Is it now resembling a more mini budget if you are actually going to have policy measures in there?
JOSH FRYDENBERG:
You can call it what you like Phil, but there will be significant detail in that announcement because as you know, the Budget will be in October.
QUESTION:
Treasurer, you pointed out that business investment was weak in the March quarter and that it’s going to lag during the recovery. You want a business-led recovery, so what can federal and state governments do to improve business investment through the back half of this year and indeed in following years?
JOSH FRYDENBERG:
Well this exactly, John, goes to what the Prime Minister what he was talking about in his speech to The National Press Club. The supply-side reforms, the work on skills. Giving employers the confidence that the skills coming out of our institutions are matching the needs of their business. Cutting the red tape so that less time is spent by business, filling in forms and more time is spent growing their business and innovating. Focusing on the digital economy, and as you know in the financial services space we have been doing a lot of work there with the consumer data rights and other initiatives, so that we can enhance the portability of consumer data, and that we can enable our economy to grow and to capitalise on the changes in the digital economy. The work that we are going to be doing on the industrial relations side, to create more flexible workplaces, that is going to be critical to giving business confidence into the future. Tax reform, is something that is on the agenda, and as you know we have passed significant tax cuts. In the last two budgets, more than $300 billion of tax cuts, but we also had, in our first tranche, investment allowances. We had an instant asset write-off, which was extended from a $30,000 to $150,000, and also those who were eligible for it; that that cohort was expanded. We also put in place the 50 percent accelerated depreciation initiative as well to support businesses with turnover of up to $500 million. So whether it’s infrastructure tax, industry relation, skills, deregulations, that’s what is going to drive business confidence. You see business confidence has only picked up about a third of its losses from March, whereas consumer confidence has picked up 95 per cent of its losses since March. As those restrictions have eased, consumer confidence has come back. But the same can’t be said in the equivalent amount for business confidence, and we want to see more business investment. As I pointed out, the mining sector, off the back of continued demand for commodities, the relatively high prices for example iron ore, was in MYEFO at $55 a tonne, free on board, it’s now trading at $90 plus a tonne. That is off the back of some supply constraints in Brazil but also continued demand out of China. Mining investment continues at pace. Business investment in the non-mining sector is more challenging. The final thing I would say is around dwelling investment, see, we started seeing improvements in the housing sector with prices stabilising and loan approvals, particularly for first homebuyers increasing and then also we saw auction clearance rates above 70 per cent and now in this environment of low interest rates it was becoming pretty appealing for people to enter the housing market. But with this downturn, following the Coronavirus, we are going to see a hole there in dwelling investment and that is why as a Government, we are working on an imminent announcement to support the housing sector, to support construction, recognising it is a long pipeline of not just those who are tradies but also those who are in the timber mill or are providing other equipment or other things for a house to be built.
QUESTION:
Treasurer you have mentioned the importance of working with states in the coming months and years as part of this recovery. Tax reform would obviously be a part of that and somes, Victoria and New South Wales both have flagged looking at dumping stamp duty. Would the Federal Government consider helping those states bridge that divide in the revenue as they transition their states?
JOSH FRYDENBERG:
Look, I’ve been asked this many a time. I support the states looking at the reform of their tax system. That’s to be welcome. And the Thodey Review is one initiative from New South Wales which is looking at that issue among others. And I also understand the motivations around stamp duty and land tax but also states have got their own balance sheets, they’re going to have to make their own choices. It’s a discussion that we continue to have at the CFFR level about broader reforms, but I would say to the states that they’re also going to have to find within their own balance sheets the ability to fund any reforms that they put a priority on.
QUESTION:
Treasurer, just on you talk about it being a consumption story…
JOSH FRYDENBERG:
Today.
QUESTION:
...sure, but also needing consumption to recover. Are you confident that the measures that you’re looking at for the construction section will actually be enough to encourage people to take that big risk, that big step and spend what money they have got?
JOSH FRYDENBERG:
We’ve been talking very closely, Michael Sukkar as the Housing Minister has been leading this initiative. We’ve been talking to our counterparts, I’ve been talking to the State Treasurers, the Prime Minister raised this issue at the National Cabinet, and I have to say the states have a number of their own housing initiatives whether it’s the social housing, other first home buyer schemes and the like, a number of states have their own initiatives. We think that the states will see what we’re doing and support it, and certainly that’s the indication from conversations to date. And we think based on the consultations we’ve had with the sector, that this will be a very welcome initiative which will support new builds and will also support extra economic activity and therefore more jobs.
QUESTION:
There’s almost 1.7 million people on JobSeeker, a record number. What do you say to those people about when they might be able to find a job, and a lift in the jobs market? And separately, regarding Virgin, are you worried that Bain or Cyrus, their applications, they may flip Virgin and you’ll see job losses across that company?
JOSH FRYDENBERG:
Well, as to Virgin, as you know there’s a voluntary administration process. I said at the start of that, that this was not Ansett, that this airline will work through the process with Deloitte, and I’m very hopeful of getting a market lead solution and certainly the large number of interested parties would indicate that that is the case. So, it’s too early for me to comment on what the outcome of that process would be. In relation to JobSeeker, of course, we recognise that this is a very difficult time in the job market, and also we recognise that a number of businesses may increase the hours of their staff before they take on new hires. Because that would be easier for them to do, is go and increase hours as opposed to take on new staff, and we actually saw a major reduction in the number of hours worked across the economy, in fact we’re starting to see it play out in these numbers. But what we need to do to get more people back to work is to lift those restrictions in accordance with the medical advice. 850,000 people will be back at work as a result, Shane, of stages one, two and three. Some restrictions like the international borders will be, those restrictions will be in place longer, but that’s why I’m hopeful that some of the states will lift their state borders because I think that will lead to more jobs, particularly in the tourism sector.
QUESTION:
Given these numbers are largely based on the bushfires, does this show that your promised surplus was in doubt before the pandemic?
JOSH FRYDENBERG:
Firstly, these numbers reflect the pandemic. The impact on consumption as a result of this one in a century event. When it came to the bushfires, as you know, Treasury, RBA, others, talked about 0.2 of a percentage impact on the National Accounts, but that was over the December and March quarters. This story today is the result of very difficult health decisions that have had a very severe economic impact. This is the economic consequences of the health decisions that we’ve had to take, and we were on track to deliver a surplus, even after the bushfires. We delivered the first balanced budget in 11 years, but clearly with this once in a century pandemic, the impact on the economy has been very severe, the impact in the June quarter will be even more severe. We’ve climbed this mountain before, we’ll climb it again. Thank you.