LAURA TINGLE:
Thanks, so much, Treasurer. If I could take you to pages – sorry, I was going to save that for Maurice Riley; he always loves it when I go to the budget papers. But you've mentioned the huge step up in defence spending in your speech. And on the spending side, the budget papers show spending stabilising at over 26 per cent of GDP in 2025 and staying there until 2032-33, which is in 10 years' time. Now, spending at these levels was last this consistently high 40 years ago. Yet in last night's budget you haven't allowed for any big increases in spending in government services like hospitals and aged care, new discretionary measures, which have been found to be so wanting in the pandemic. There are increases there but you haven't talked about new measures to address what's happened in the pandemic. Nor have you set out how you might cut spending in the medium term. On the tax side the budget papers show the tax collections miraculously tracking to the 23.9 per cent of GDP for the next decade, which the government says is its target.
The bottom line here is that based on your own figures, there is a massive shortfall between the cost of government services post-COVID and the revenue you will have to pay for them, equivalent to about 2 per cent of GDP. Why aren't we having a discussion in this pre-election budget about what will have to give? Is it really possible to think you can cut spending significantly when we have an ageing population? Or should you be being honest with people and saying that the tax take is going to have to eventually rise to cover this shortfall?
JOSH FRYDENBERG:
Well, thank you very much, Laura. And you're right – there has been substantial increases in the major areas, for example, like health and aged care. So, for example, since 2012-13 funding for aged care has doubled from $13.3 billion to $29.8 billion in 22-23. We've seen similar major investments in mental health. Last budget we announced a $2.2 billion investment in health. The NDIS, effectively spending has doubled since we've come to government. You've now got 500,000 people on the NDIS, and the federal government is providing the majority of that funding support. What our focus is on – has been on is growing the economy, growing the pie so that those deficits reduce as a share of GDP. And what we have seen in the budget last night is that the deficits more than halve over the period of the forward estimates and then more than halve again by the end of the medium term. But you're right – at the end of the medium-term there's still a 0.7 per cent gap between the receipts and the payments. Our focus to meet that gap over the coming period is going to be about growing that pie. That is how we're going to ensure that we can pay for and guarantee those essential services that people rely on, and that's why we bring in projects like the investment in the regions – a $21 billion program across everything from water and transport infrastructure to telecommunications and health, to the Regional Accelerator Program which Bridget is leading the charge on which uses existing programs but in manufacturing, in skills, in recycling, in a whole series of areas – export development grants. By investing in our regions we can unlock those new frontiers of economic productivity and growth, and then we can grow our economy in order to generate more income. I want to also underline the fact that the budget improvement that we have seen last night has been the result largely of a stronger labour market. The fact that the unemployment rate today is at 4 per cent is far better than what Treasury were forecasting, not just at the height of the pandemic, even since. It's been better than even our most optimistic expectations, and as a result our revenues have gone up from income tax and our expenditure from welfare payments has gone down. So there are some, you know, important developments occurring across the economy where we are being required to spend more on aged care, NDIS and defence. And we also are dealing with an ageing population which does see higher demands on our health system more generally. But by growing the pie we can, as we showed last night, reduce our deficits as a share of the economy and steadily do that over time.
LAURA TINGLE:
The next question is from Phil Coorey.
PHIL COOREY:
Thanks, Laura. Hi, Mr Frydenberg. Just back to – bringing you back to the short term and the petrol excise cut, I'm just wondering, should you win the election, can you conceive any circumstance under which you would extend that cut, especially, say, the forecast in the Budget about the price of oil dropping as is forecast by September not eventuating, or is it locked and loaded six months only?
JOSH FRYDENBERG:
We've been very clear, Phil – it's only six months. In other countries, they've done it for different periods of time. In New Zealand, they did it for three months. In countries in Europe they did it for four and five months. We've done it for six months. We've done it at just above 22 cents a litre. In New Zealand, they did it at 25 cents a litre, for example. This is a $3 billion hit to the budget bottom line, but actually what Treasury say is that the reduction in the fuel excise will reduce inflation by a quarter of a percentage point. So it will actually reduce inflation as opposed to leading increasing inflation. That will be welcome. But the reason why we took this step, Phil, was because the cost of living pressures are real. Fuel prices are particularly high and Treasury have forecast that the price of a barrel of oil will come down to $100, as you say, by the end of the September period. So the legislation will be very clear – this cut will end on the 28th of September. It will sunset at that time, and it won't be extended.
LAURA TINGLE:
Mark Riley.
MARK RILEY:
Mark Riley, Treasurer, from the Seven Network. I want to take you to the $420 cost of living offset which will be paid after 1 July. And then the entire offset of up to $1,500 is abolished, yet the cost of living, according to the budget and all forecasts, continues to rise. Doesn't that mean that you go to this election with a promise to effectively increase taxes on 10 million Australians earning under $126,000 a year by $1,500 at a time when the cost of living is rising?
JOSH FRYDENBERG:
The answer is a very clear no. When LMITO was first introduced it was part of a plan to merge with what is our stage 3 – our three-stage tax reduction plan. We then only extended it because we were in the COVID crisis as a fiscal stimulus. It was never meant to be a permanent feature of the tax system. Just as when Rudd and Labor put in place the $900 cheques, that was for a certain period of time. The LMITO was for a certain period of time. But what we have done is put in place long-term structural tax reform. We have legislated more than $300 billion of tax relief with the final stage taking place in 24-25, which abolishes the 37 cents in the dollar tax bracket, sees 95 per cent of taxpayers pay no more than 30 cents in the dollar and creates a much fairer and simpler tax system. While we're on tax, we've also put in place the immediate expensing provisions. We've also put in place the loss carryback provisions. We've cut small business taxes to the lowest level in 50 years, and last night we extended two tax incentives to small business. So after 22-23 taxpayers will be, if they're in that bracket of up to $90,000, they'll be $1,080 better off than they would have been under the Labor Party. They'll pay less taxes under us. That is what your plan is. LMITO was only meant to be temporary.
LAURA TINGLE:
Chris Uhlmann.
CHRIS UHLMANN:
Treasurer, Chris Uhlmann, Nine News. Looking across the forward estimates, at no stage does the government spending drop under 26 per cent. At no stage in the next decade do you forecast a surplus. Gross debt is heading towards a trillion dollars. When it was a fraction of that, you called it a debt and deficit disaster under Labor. You said they'd broken the Burkeian compact of society, which is a bargain between the living, the dead and those yet to be born. Why isn't that the case with you? And as your answering, could you contemplate for a moment, would you accept the answer if it came out of the mouth of Wayne Swan?
JOSH FRYDENBERG:
Well, nothing we'd say would be the same, so I don't accept that. Look, the first thing is people – and this is why I dwelt on this at the start of the speech, Chris. People have to understand the scale of the economic shock that we faced. So we did balance the budget for the first time in 11 years going into the pandemic. That helped build a bit of a fiscal buffer that we could then use to respond as we needed. Global GDP contracted during COVID 3.1 per cent. Global GDP contracted during the GFC by 0.1 per cent. 3.1 per cent for COVID; 0.1 per cent for the GFC. That underscores the extent of the shock. Our economy effectively went into hibernation. I didn't become the Treasurer and think I was going to put in place an economy-wide wage subsidy at a flat $1,500 a fortnight at a cost of $90 billion. I never contemplated that. A cash flow boost of more than $30 billion, doubling the safety net with the coronavirus supplement, having to pay to underpin and underwrite freight routes across the country because people weren't taking domestic flights.We took more than a thousand decisions in response to the biggest economic shock since the Great Depression, and of course the debt burden is higher as a result. But at the first opportunity, we were taking the chance to reduce and then taper and then stop those emergency support payments. And we were criticised for them. Now that the economy is normalising, you're starting to see the benefit of that strong economy to the budget bottom line. Gross debt, Chris, actually peaks at more than 5 percentage points lower and four years earlier in last night's budget than it did at MYEFO. Deficits more than halve over the forward estimates and then more than halve again over the medium term. So I accept that we incurred higher spending during this crisis. I accept that we are spending more than our predecessors on the NDIS, aged care and defence. But I put it to you: what was the alternative? And now we have taken those steps and are seeing a repairing of the economy, it's got a long way to go, but we're doing it without increasing taxes. The same can't be said about those opposite.
LAURA TINGLE:
Andrew Probyn.
ANDREW PROBYN:
Treasurer, Andrew Probyn from the ABC. My question sort of flows on from Chris's. You've got two deficits in the order of $80 billion in a row. On the other side of the Nullarbor, Mark McGowan is going to unveil a surplus of about $8 billion, which is – well, I think it is the biggest surplus in Australian state history. Two and a half billion of that is money that you gave Mark McGowan under this GST deal. Two billion of that came from your home state. Now, before your answer – and that is that no-one could lose and that you topped up every other state and territory that did lose – that's going to cost federal taxpayers $17 billion over the next four years. But that deal ends soon. So your state could go backwards, many other states and territories could go backwards for what is clearly a pretty ordinary piece of public policy. What do you say to Victorians and what do you say to the rest of Australia for having to stump up so many billions of dollars to a state that's doing, thank you very much, very well?
JOSH FRYDENBERG:
Well, the first thing I'd say to Victorians is if you look at the budget papers last night they received more money in GST than the previous year. And we have actually seen about $11 billion extra in GST payments through last night's budget. That's not insubstantial. GST has been going up. What I'd say to the people of Western Australia is it was a Coalition government, a government with then Treasurer Scott Morrison, now Prime Minister Scott Morrison, that righted a wrong. It was wrong that the people of Western Australia could see just 30 cents in a dollar returned to them from the GST. That is wrong. So what we did is we set a floor at 70 per cent, 70 cents in the dollar. And, yes, we dug into our coffers to fund that. But one of the reasons why Western Australia is now seeing a surplus – or two reasons why Western Australia is now seeing a surplus - one is because they didn't have the broadscale lockdowns that Victoria did which were an absolute disaster in my home state – the longest locked-down city anywhere in the world was the state of Melbourne – and on a per capita basis we provided more economic support through COVID to Victoria than any other state. More on a per capita basis to the state of Victoria than any other state. In Western Australia they did not have those large-scale lockdowns and, therefore, they did not see the detrimental economic impact that we saw in Victoria. The other reason why Western Australia is seeing a strong bottom line is, of course, because of commodities. Iron ore today is $140 a tonne. I have it in the budget at $55 a tonne. If commodity prices stay where they are for another six months it will be worth $30 billion more to our budget bottom line. We get federal company tax receipts. They get state royalties. And so this money is underpinning the Western Australian budget. And we took a very conservative position, Andrew, in last night's budget with respect to commodity prices. Metallurgical coal is trading today at $600 a tonne. We had it in the budget at $130 a tonne. Thermal coal is trading today at $300 a tonne. We had it in the budget at $60 a tonne. Iron ore today is trading at $140 a tonne. We had it in the budget at $55 a tonne. We did not do what Labor did – baking in long-term commodity price assumptions that were elevated just because they were at a point in time. We righted the wrong for Western Australia. We ensured that they could get at a minimum 70 cents in the dollar. That was the best thing to do.
LAURA TINGLE:
Andrew Clennell.
ANDREW CLENNELL:
Mr Treasurer, Andrew Clennell from Sky News. You and the Prime Minister say the election is about a choice. In November the Prime Minister said that you could pay more for petrol and have higher interest rates under Labor. The budget papers yesterday said monetary policy is expected to begin to normalise from historically low levels in a tightening cycle from 2022 to 2024, meaning there's going to be interest rate rises – several – no matter who's in power. The price of petrol was historically high even before the war in Ukraine. You and the Prime Minister also say under Labor the spending never stops, yet you’re the highest spending Treasurer in Australia's history having spent $314 billion in stimulus topped up by this $8 billion cost of living package. So you say there's a choice. What is the choice? Is it high spending, high petrol prices, rising interest rates versus the same?
JOSH FRYDENBERG:
Well, the choice is very clear. Our government has delivered lower taxes, as we promised to the Australian people at the last election. Labor and Anthony Albanese said at that time that they had a strong mandate to superannuation taxes, retiree taxes, housing taxes, higher income taxes and family business taxes. We did what we said we would do. Now, after their election loss suddenly they no longer believe in what they said was a core principle for them.
We've delivered one of the fastest and strongest economic recoveries in the world, and no-one can take that away from 26 million Australians. Our economic plan has worked. We have guaranteed the essential services by fully funding Medicare, fully funding the NDIS, seeing aged care funding increase dramatically - $17.7 billion in last year's budget after the royal commission.
Andrew, we have taken the steps that we promised to the Australian people we would at the last election. The Leader of the Opposition is pretending to be someone he is not. He has always stood for higher taxes. He has always stood for higher spending. In fact, they've made $80 billion of extra commitments on everything as silly as $6 billion to have a jab even though you've had a jab. They wanted to pay you an extra $300. They wanted JobKeeper to be extended when we knew it was the time to end it.
So I think there's a very clear choice for the Australian people at the next election. Our government has delivered on what we said we would do. We've laid out our plan for the future. Labor is trying to sneak into government not telling us what they really want to do. And this is where I'll finish on this one. Jim Chalmers, my political opponent, said a few days ago that Labor wanted to be flexible around tax. What does flexible mean? He said Labor will deliver a budget before the end of the year if they are successful. What does that mean? The budget document is our plan that we will take to the Australian election. The Australian people deserve to know what is Labor's plan that will be in their so-called budget before the end of the year.
Thursday night is Anthony Albanese's opportunity. He can't just harp on and character assassinate; he needs to show the Australian people what his plan is. And I doubt he will. So I think that's the test. Show us the plan. We showed you ours, and we did that last night.
LAURA TINGLE:
Michelle Grattan.
MICHELLE GRATTAN:
Michelle Grattan from The Conversation. Treasurer, if you're re-elected, some of your supporters will want the first budget of a new term to be a very tough one to advance fiscal repair much more strongly. They'll want a pale version of 2014. Can you tell us something of how you see that first budget of a new term, and what would you be saying to those urgers who say go hard?
JOSH FRYDENBERG:
Well, I've done three budget in 18 months, I'm not looking forward to the next one in a hurry. Look, I don't want to get ahead of ourselves, Michelle. My focus is on winning the election, explaining to the Australian people the granular detail in this budget; the cost of living relief now, the long-term economic plan, the guarantee of essential services, the further investments in defence and the banking the dividend of a stronger economy with historic low unemployment.
Our plan is set out in the budget. That is our plan. They are our policies. As I said, our political opponents haven't told us what their plan or their policies are. And I'd say to our supporters that you referenced, in this budget there are policies that speak to their very values – lower taxes. That's what Coalitions believe in. We've delivered it. More first homeowners; 160,000 over the last year. The five-year average, the 10-year average has been around 100,000 a year. Supporting eniors with the support that we've provided for self-funded retirees on everything from the drawdown rates to the other programs to allow them to sell down their home and secure their retirement.
Small business is totemic for the Coalition, and, again, there were measures in last night's budget, as well as the lower tax rates. And, of course, we're a Liberal-Nationals coalition. We believe in the regions and the intrinsic power of the regions to supercharge Australia's growth, as they already do. So we've invested more in the regions.
So there's a lot in this budget that speaks to the coalition's values. And, of course, you layer upon that the improvement to the budget bottom line and fiscal responsibility, and that is what my response would be.
LAURA TINGLE:
Sarah Martin.
SARAH MARTIN:
Thank you, Treasurer. Sarah Martin from the Guardian. You've happily told us that inflation would be a quarter of a percentage point higher without the fuel excise cut. Can you tell us how much lower inflation would be over this year and next without the extra 5.6 billion of stimulus that you're putting into the economy through the LMITO boost and the cash payments? And can you tell us what advice you received from the RBA about what effect that might have on interest rates?
JOSH FRYDENBERG:
Well, the first thing is that the Treasury do work with the RBA in assessing the forecasts. So there is good coordination at departmental level. The measures you reference are actually part of the forecasts in the budget. And we do see inflation at 4¼ per cent this year, but that is driven, according to Treasury, largely by those international factors that I was pointing to – higher food prices, higher transport costs, higher fuel prices.
Inflation then comes down in Treasury's own forecast to 3 per cent. And that is below the wages price index at 3¼ per cent. And then inflation comes down again and the wages price index strengthens again. So it's all there in our forecasts.
But I do point out to you, Sarah, that that $8.6 billion package is, in cumulative terms, less than half a percentage point of GDP. So people have to keep in mind the size of the Australian economy. These were very temporary, targeted, responsible measures. This was designed to help people at a time that they needed it most. It built on what we'd already announced, like the LMITO, which people get from the 1st July, like the cuts, the electricity investments have seen price comes down, like the changes of $1.7 billion in last year's budget on child care.
LAURA TINGLE:
Peter Van Onselen.
PETER VAN ONSELEN:
Peter Van Onselen, Network Ten. Early on in the pandemic, Treasurer, you promised to commence budget repair once unemployment was below 5 per cent. As you've been bragging about throughout the budget, it's now at 4 per cent, but there hasn't been any budget repair. Any improvements in the budget bottom line, as you pointed out in your speech today, are not because of budget repair. Why did you decide to break that promise? And do you think Concetta Fierravanti-Wells can stay on the Senate ticket for the Coalition given that she thinks that Scott Morrison is unfit to be Prime Minister?
JOSH FRYDENBERG:
Well, let me deal with that second one first. The members of the Liberal Party – 500 of them – made a decision on preselections on the weekend, and that decision stands. And obviously, I disagree with her assessment of the Prime Minister, a person who I've worked really well with. And I think he's led Australia extraordinarily well through a very, very challenging time for Australia, and the record is there for everyone to see.
In relation to our fiscal strategy, initially I set it out at 6 per cent. And then we transitioned, I said, to back to where we were going into the pandemic with the unemployment rate, which was around 5.1 per cent. But we decided to target this historic low equivalent of effectively full employment. That became a target for us in the fiscal strategy, and we have delivered. And if you look at our fiscal strategy, in the budget it makes it very clear that our goal is to stabilise and then reduce debt as a share of the economy. And that is what you saw, Peter, in last night's budget. As I've said repeatedly, when gross debt gets to 44 per cent of GDP, that is more than 5 percentage points lower than what we forecast in MYEFO and four years earlier than what we forecast. Net debt peaks at around 33 per cent of GDP. These are historically higher numbers, but they're a reflection of the challenges that we face but they're also significantly below that of other commensurate countries.
So all that was about, the fiscal strategy, was driving down the unemployment rate lower, getting us to the point where we could stabilise and then reduce debt as a share of the economy. That's what the budget papers last night show.
LAURA TINGLE:
Patrick Commins.
PATRICK COMMINS:
Thanks, Treasurer. Patrick Commins from The Australian newspaper. You said the verdict is in in terms of Australia's outperformance during the pandemic. You say we're the envy of the world. And all the numbers in the budget would suggest that Treasury's forecasts – you've got unemployment rate falling below 4 per cent, a 50-year low. You've got a $100 billion improvement in the bottom line, wage growth coming in at a decade high – expected to come in. And yet, so by any objective measure the economy is booming. And yet this doesn't seem to be translating into political advantage. Why do you think this is? And what are you as Treasurer going to do between now and the election to change Australians' minds?
JOSH FRYDENBERG:
Well, it wouldn't be inappropriate for me to remind you of what happened back in 2019 when we were written off across the board in the media and the obituary was written and people said it wasn't a question of who would win but by how much. History told a very different story. And our focus has always been to get on with the job. And last night what I sought to do in the budget was deliver the cost of living relief that I know Australians need now, to lay out that long-term economic plan for the future, to guarantee the essential services which everyone relies on and, of course, to invest more in national security and defence given the times that we face.
So the people of Australia will make their decision come the election. That will be their decision. But from now to then and hopefully after then I will spend my time explaining why we have the best economic plan at the most challenging of times to create a strong economy and an even stronger future for them.
LAURA TINGLE:
David Crowe.
DAVID CROWE:
Thank you, Laura. Thank you, Treasurer. David Crowe from The Age of Melbourne and the Sydney Morning Herald. I want to pick up on two of your answers, the first to Andrew Clennell and then your answer to Michelle Grattan. When Andrew Clennell asked about the contrast between the political parties, you challenged Labor about what its future budget would be. But when Michelle Grattan asked you about what your next budget would be, you ducked it completely. Now we have a budget today that shows that you can spend on National Party projects over 11 years. You can spend on cyber security over 10 years. You can cut taxes over 10 years. But you cannot show a surplus over the next 10 years. In your next budget do you have what it takes to bring that under control and to find a way to surplus? Is that what you would do in your next budget?
JOSH FRYDENBERG:
Well, David, I laid out a budget last night for now. Labor hasn't laid out an economic plan for now. So it's it only their next budget because they should be telling the Australian people now what I told the Australian people last night. That would be like for like. They tell the Australian people what their plans are now. I told the Australian people last night what our plans are now. That's the like for like, not the sneaking into government, small target strategy, saying that we will be a mini-me of the government and we'll just wave through the policies that we announce and come up with. And they don't come up with any costings and just think that they can sail into government. Well, that will not happen on our watch.
LAURA TINGLE:
Lania Scarr.
LANAI SCARR:
Lanai Scarr from the West Australian. Thank you for your speech, Treasurer. This week over the past week five women have died as a result of circumstances relating to family and domestic violence. You obviously have a women's budget statement as part of last night's budget where you're investing more into this space. But you're also cutting money to the Australian Human Rights Commission over the forward estimates – a third of their budget is going to be cut. So how do you reconcile that? And if the election is about a choice between your budget and what Labor is going to do, who is actually going to deliver more for women?
JOSH FRYDENBERG:
Well, the Coalition has laid out an extremely strong plan in our women's budget statement on both women's health, women's economic security and women's safety. Last year's budget, as you know, Lanai, had a billion dollars-plus for women's safety focusing on frontline services, safe houses, more legal assistance, grants to help families, particularly women and children. We went even further in last night's budget. So we've actually been seeking to invest more in the areas that really count.
So I think the policies that Marise and Anne Ruston and Jane Hume and Bridget McKenzie and Linda Reynolds and Michaelia Cash, all the women that I sit with and the Prime Minister sits with on our women's budget task force, I think we've laid out a very strong set of initiatives. I can't say what the Labor Party will do. I mean, I only hope this area is bipartisan, to be brutally honest with you. You know, this is not an area to play politics; this is an area that matters to the most vulnerable citizens in our community. And we recognise as part of our five and 10-year plans that this area requires much more investment into the future, and it's a partnership with the states.
So our focus is, I think, seen in last night's document where the money is going. It's clearly going into women's domestic violence and safety and for children particularly. And it's a result of these growing areas of need.