JANE NORMAN:
Treasurer, I thank you for your speech today. You’ve said that growth is key but according to the economic update, one thing that is barely growing is the population. Overseas migration is down, the fertility rate has fallen, given that you can't reopen the borders just yet, what incentives are you going to provide Australians to start having more babies, to try and encourage the next baby boom?
JOSH FRYDENBERG:
Well you are absolutely right, but that population growth effectively being halved from 1.2 down to 0.6 that takes into account the migration levels but also the fertility rates. I think the best thing that we can do to encourage more children being born across the country is obviously to create a strong economy for them to be born into. We have provided lots of incentives for families. We have provided much increased funding for child care, and, of course, we are very much supporting families across the board in terms of our policies. So I won't go as far as to say, like Peter Costello, one for the mother, one for the father and one for the country, but what I can say is that people should feel encouraged about the future and the more children that we have across the country, together with our migration will build our population growth and that will be good for the economy.
JANE NORMAN:
Alright. If I can just remind journalists to stick to one question per person and also just to stand at the microphone until the answer completed. But our first question is from Sarah Ison at the West Australian.
JOURNALIST:
Treasurer, you pointed out how well we are doing compared to other countries, on some of the things that have helped the economy not be as bad as it could be, the PM has said our trade with China has been stronger than it ever has been, especially in the resources sector. You’ve said the resources sector is one of the bright spots of our economy. How long are either of these trends though, how long can we expect them to last, given tensions with China have been growing over the last six months and also the forecast for resource investment is down from MYEFO. We were forecasting 12 per cent next year, yesterday it’s gone down to 9.5. Are these two strengths set to fade in coming years?
JOSH FRYDENBERG:
Well, actually, we are starting to see strong investment come back in the mining sector and the reason being, as you know, it went from an investment stage to a production stage, and now it is getting back to the investment stage. And we are very confident and optimistic about our resources sector and particularly because the demand continues from China and from other countries. I mean, we have seen the iron ore price being elevated at around $100 a tonne. We have it in our update yesterday, pretty modestly, at $55 a tonne with an extended glide path. So the China Australia relationship is absolutely critical. It is not just important in terms of resources, it is much more broadly. If you look, for example, from Western Australia, which is the key iron ore producer for our country, we are supporting China with 66 per cent of their iron ore. Now, that is key to their economic development. That number has elevated over time as Brazil has had some supply constraints. So we are very much focused as a Government on ensuring we have a strong economic partnership with China. It is mutually beneficial, it’s more than $200 billion annually, but at the same time when it comes to our relationship with China, we will have our principled, consistent and clear positions. So for example, when it came to the outbreak of coronavirus, we supported an independent inquiry by the appropriate international health agency, and we don't take a backward step, and we are very pleased a number of other countries supported that call. So we will continue to speak out for Australia's national interest with China, as the Prime Minister has repeatedly said, we haven't done anything different, but at the same time that economic partnership is critical to both our countries.
JOURNALIST:
But the Brazil supply constraints, surely they’re not going to last forever, won’t that then change things once that…
JANE NORMAN:
Sorry, if we could keep questions to one person, sorry there’s just too many journos today.
JOSH FRYDENBERG:
Well, in terms of China, it will continue to have strong demand, be it with Brazil coming on with their additional supply or on its own.
JANE NORMAN:
Alright, next question from Phil Coorey from the Fin Review.
JOURNALIST:
Hi Treasurer, Phil Coorey from the AFR. On your employment forecast for both effective and real unemployment rate, is that predicated on an extension of the Fair Work Act exemptions for recipients and non-recipients of JobKeeper, and are you prepared to make that exemption say, just for three months, or no more than six, to secure the chances of getting Labor on board.
JOSH FRYDENBERG:
Look, it’s based on decisions at this point in time. But what we are obviously seeking is an extension of those IR flexible arrangements that we agreed with the initial rollout of JobKeeper. And as you know, those IR arrangements only continue till the end of September. So we will require new legislation and we are endeavouring to put that legislation to the Parliament. At the same time we put our extension of JobKeeper because in order to implement what we announced the other day for the March quarter, we will need new legislation as well. But I want to emphasise why we believe we need this additional labour market flexibility. It goes to the responses that businesses themselves are giving, namely 75 per cent of these businesses have said that they have used these more flexible arrangements, these JobKeeper directions that they can make, around whether it’s duties or whether it’s a change in hours or whether it's changed location, to help them get through the COVID crisis. Now we want that extended not just for those JobKeeper eligible businesses that will continue with the program after September, we want JobKeeper businesses who are using that program today to continue to get it. Because we are in such a difficult economic environment that those businesses if they were eligible for JobKeeper today, have met that threshold of their reduced turnover of 30 or 50 per cent, depending on their size. So they have been through a distressed period and they are still going to be struggling to get back on their feet while no vaccine is around. So we would like those temporary changes to continue. We are saying until the end of March because that is what we have announced. The other key point I want to make, Phil, is that there are lots of protections in there for the employees. You have to give notice, you have to consult, you have to have a reasonable request, it has to be a safe working environment, it has to be consistent with the business’ purpose and their usual operations. There is also still the protections for the employees, as there should be, around occupational health and safety, around adverse actions, around coercion, around unfair dismissal. So these changes are absolutely sensible, given the economic environment that they are in. There is an alignment of interests here between employers on the one hand and employees. And if you look at the number of cases that have gone to either the Fair Work Commission or the Fair Work Ombudsman, there are not a large number of cases consisting the breadth of this program, 3.5 million workers and nearly one million businesses. So we very strongly believe that the JobKeeper flexible arrangements should continue until the end of March, not just for this cohort of businesses that will continue to receive JobKeeper, but also for those businesses that are currently today on JobKeeper.
JANE NORMAN:
Patrick Commins.
JOURNALIST:
Thanks Treasurer, Patrick Commins from The Australian. You talked a little about the reform agenda that you have, the growth agenda, and then back earlier this year when the coronavirus was first hitting the economy, Philip Lowe was talking about we can't return to business as usual. If you get all of your wish list here, if you do get the IR reforms, is this enough to achieve that stepped change in potential growth to get us out of debt, to get us back on an even stronger growth trajectory? Is that some of the way, most of the way, everything we need to do?
JOSH FRYDENBEG:
Well the reform agenda is never done. And you have got to seek every opportunity and that's why I'm really encouraged by that spirit of collaboration with the Treasurers, who National Cabinet has now meeting every fortnight. So we meet in alternative fortnights to the meeting of National Cabinet and we have a range of issues that are on our agenda; bringing together the various national partnership agreements, tax reform, deregulation, occupational licensing. All those issues are on our agenda, we have already played a role in helping to secure the five year health agreement, there’s lots of things we have been doing as Treasurers as part of that broader economic relationship. So I'm encouraged about what we can do with the states in this new spirit of cooperation, this new opportunity. There’ll obviously be more announcements about reforms in the context of the Budget, but what the Prime Minister has already outlined is a very significant range of measures that we have under way, whether it is the skills agenda, I mean just last week, we announced a $2 billion skills package, including $1.5 billion for the extension of the wage subsidy for 180,000 apprentices. Also importantly, this new agreement with the states around efficient pricing and around creating 340,000 new training places. So there is a lot of reforms, whether it's skills, infrastructure, tax, flexible industrial relations or cutting red tape that I think will drive further reform and further growth. And obviously what I referred to in terms of meeting this higher debt burden is if we can get back to balanced budgets which Mathias knows all too well, which we were able to achieve for the first time in 11 years, together with those lower interest rates, together with trend growth which is about 2.75 per cent, then we can see our debt levels as a proportion of GDP come down by 1.5 per cent per year. Now that’s a gross debt level which is expected to get to 45 per cent. That is going to be a significant step forward for the country.
JANE NORMAN:
Next question is from Shane Wright from the Sydney Morning Herald and the Age.
JOURNALIST:
Treasurer, Shane Wright from the Age and SMH. According to PWC, my daughter who is born in 2006 will be 54 by the time the debt run up over the last six months is paid off. Is that correct? And going to your point about interest rates, the Budget updates released yesterday, does that assume that record low interest rates, the lowest that we've had in 450 years are going to continue and allow you to benefit from really low interest rates repayments on that debt?
JOSH FRYDENBERG:
Well, certainly this debt burden will be with you, with me, with our children in the years as head. It is just the harsh reality of what we are doing, but as Mathias said yesterday, what was our other alternative? What else could we have done except spend through this crisis to support Australians? Now in terms of what our expectations are about interest rates, obviously that takes into account medium-term projections and they’re going to be in the context of the Budget, what we announced yesterday, given the uncertainty was numbers for 2019 - 2020 and 2020-2021. You've heard very clearly, Shane, from the Governor himself that we are expecting low interest rates to be around for some time. Now, that’s not good news for savers. It is good news for borrowers. In terms of the Government, it means that there is more work for fiscal side of public policy as opposed to the monetary policy side, because monetary policy doesn't have that room to move, it did during the GFC, 425 basis points the interest rates came down equivalent to around $100 billion stimulus to the economy over 12 months, we don't have that luxury, interest rates only came down by 50 basis points in the context of COVID-19. So I say to your daughter…
SHANE WRIGHT:
Molly.
JOSH FRYDENEBRG:
Molly, we are going to be paying back this debt for some time to come, but if we continue to adopt fiscal discipline, not austerity, we are rejecting the austerity. We are not a Government of austerity. We are a Government that will support the economy at a time that they need it. But we will also be disciplined. We will also be very disciplined as a Government, and we will grow that economy and I do want to point out that the Australian economy, pre-COVID was 16 per cent larger, than it was when we came to Government. So we've done it before and we will do it again.
JANE NORMAN:
Andrew Probyn.
JOURNALIST:
Treasurer, Andrew Probyn from the ABC. You talked before about how you’d extended the early withdrawal of super.
JOSH FRYDENBERG:
Yes.
JOURNALIST:
The industry itself reckons that in the time since you announced that half a million people have completely wiped their super balances and by the end of this program, it could be about three quarters of a million. Does it bother you, because many of those people are low-paid, women, young people, a bit older than Molly, that are up to about $50 billion of effective stimulus has come from the savings of some of Australia's most vulnerable workers, and will you extend this program? Are you going to consider extending this program beyond next year?
JOSH FRYDENBERG:
Well, what we have announced is to extend that program to the point that people can draw down, not just until September, but they can draw down until the end of the year. We have done so in terms of two lots of $10,000 Andrew. Now, this is the people's money. What the survey data shows is that 57 per cent of people have been using it for their day-to-day expenses including rent and food and grocery bills. We are living through a pandemic. These are unusual times…
JOURNALIST:
You said 30-something per cent also towards their savings…
JOSH FRYDENBERG:
Correct.
JOURNALIST:
Isn't super the best savings that people have got?
JOSH FRYDENBERG:
Well if people want to make that choice as to whether they want to put that money into the bank and then use that money as they need it to spend through this crisis, then that is a decision for them. A number of people have paid down for example, their home loans. What we do know, is that more than 2.5 million Australians have seen fit to draw down on their super, to do so tax-free, because the Government has made that allowance. I also want to point out, Andrew, that pre-COVID, there was the opportunity to draw down on your super in the case of hardship. If you are going to lose your home or if you had difficult health circumstances you were able to access your super. This is clearly a crisis for many Australians, so giving them access to their own money, I think, is a good thing.
JANE NORMAN:
Katharine Murphy from The Guardian.
JOURNALIST:
I have a serious question, Treasurer. But I want to know first of all about the greyhound who you mentioned in the correspondence. Is the greyhound alright?
JOURNALIST:
The greyhound sadly passed away. A tragic accident, but it was a beautifully handwritten note and she obviously had thought very carefully about it and she said, “I'm an 83-year-old” in inverted commas, they are two bad words. She was very humorous and I would love to be able to speak to her one day. It was just one of the many letters that we as politicians, whether it's Zed or Mathias or I or the Prime Minister, receive from people who are really benefitting through difficult circumstances through some of these decisions and supports payments being made.
JOURNALIST:
Sorry to bring us down like that. Here’s the serious question…
JOSH FRYDENBERG:
Well, she was up-beat, given her circumstances.
JOURNALIST:
You have said that growth will shrink the debt. You have said that you are not a Government of austerity, but yesterday at your press conference you also made it clear that the Government has abandoned its fiscal rules of requiring that new expenditure be offset. So is the Government's Budget strategy now, 'Trust us’, or will there be a new budget strategy and if so, what is it?
JOSH FRYDENBERG:
We are working on that fiscal strategy of course because we are living in such a different world and we will have more to say at Budget time and both Mathias and I indicated that yesterday. But what we do have Katharine, is an ability to grow the economy. We have done that before. Let's not forget where the economy was pre-COVID. We had employment growth at around 2 per cent which was twice the OECD average. We had the first balanced Budget in eleven years, and Australia was living within its means. We had welfare dependency at the lowest level in 30 years and we had legislated the biggest tax cuts in more than 20 years, $300 billion worth of tax cuts over just the last two budgets alone. So we had put the economy in a strong position to deal with this crisis by being able to spend with the financial firepower that we needed. Now going forward the key is not higher taxes, the key is not to cut essential services. In fact, spending on essential services has been going up by this Government, whether it's hospitals or whether it’s schools. What we will continue to do is create incentives. When we put in place tax cuts or business incentives or try to cut red tape or go to the supply side of the equation, that's going to be critical. I noticed in the Financial Review today, they were saying not everyone is a Keynesian and thinking about income support. It is important to go to the supply side. Thatcher, Reagan, that's an inspiration. Supply side can actually help create and strengthen the economy and that is what we are determined to do, provide a boost to aggregate demand where appropriate, but to encourage supply-side reforms because that will be important to the recovery.
JANE NORMAN:
Treasurer, we are getting close to 1.30, but given your speech went a little overtime, are you happy to go overtime?
JOSH FRYDENBERG:
Sure.
JANE NORMAN:
Thanks. Katina Curtis from the AAP.
JOURNALIST:
Thanks, Treasurer. Looking at the numbers that you released yesterday, wages growth is looking pretty low and that is not surprising, but wages have been stagnating for some time now. Are you worried that if people don't get more in their pay packets for quite a while that that will hinder economic growth because they just won't have the money to go out there and spend?
JOSH FRYDENBERG:
Well consumption was down quite significantly and consumption is 60 per cent of GDP. So boosting aggregate demand and the ability of those who have a propensity to spend is an important part of the economy. So our $750 cash payments, including to Jenny in South Australia, was really important because not only did it help them meet their bills, but it also helped boost aggregate demand across the economy and so we are seeking to put more money into people’s pockets. That is what tax cuts do, for example as well. But, at the same time, the key to driving wages to go up is going to have a tighter labour market. After a pandemic, or even in the middle of a pandemic, when the labour market has had such a shock, there is going to be spare capacity. So that is an understandable or an inevitable consequence of what we have gone through and when there is spare capacity in a labour market and less competition for labour, then you are going to see an impact on wages.
JANE NORMAN:
Mark Kenny.
JOURNALIST:
Treasurer, Mark Kenny from the ANU and the Press Club Board. Just going back to Jane's opening question briefly. I am a bit confused, the PM said we should come out from under the doona early on when talking about restrictions. You seem to want Australians to go back under the doona, is that correct?
JOSH FRYDENBERG:
Not at all. Although the doona is probably big enough for two of us. I think it is really important that we follow the medical advice and that is the Prime Minister's very clear view. With respect to Victoria, it is very unfortunate what has happened there because more than five million of my fellow Victorians are going through lockdown, whereas in other states and territories, the economies are gradually opening up. So the impact on the economy is very much tied to what is happening on the health front and therefore, we need to follow the medical advice. People who don't should be dealt with accordingly, but it is really important that we follow the medical advice at this time.
JOURNALIST:
I should apologise, Treasurer, I was really referring to the fertility question.
JOSH FRYDENBERG:
Oh, right okay.
JOURNALIST:
It was meant to be funnier than it was.
JOSH FRYDENBERG:
I am glad the broadcast has ended now.
JOURNALIST:
Now to my substantive question which was about international comparisons and the situation you face. Your colleague Mathias Cormann made the point yesterday, "What else should we do?" It was a legitimate question. It was a question also that Labor was faced with back in 2008. Many of us in this room covered that, so it wasn't that long ago. There was a lot of corrosive politics around it and certainly in the years after it, suggestions that money was wasted and everything else. I am wondering if now from inside this crisis, you acknowledge some of that was overheated. It didn't do anyone any good. The fact you were able to come here as a Treasurer on top of near enough to 30 years of unbroken growth was a function of the success of policy back at that stage. Does your party owe at least an accounting for its behaviours in the years after that GFC?
JOSH FRYDENBERG:
We were very consistent that spending would be supported, but not to bake in structural changes to the Budget and we have been very careful in our response to this crisis, unlike what we saw with Labor, back in the GFC and you have raised Labor, I haven't. If you go back to what we saw under them, they baked in structural spending. 99 per cent of our spending is over two years, 2019-20 and 2020-21. The other major point to make is that the pandemic we face is the largest economic shock that the world has ever seen. I mean, in terms of quantum, the OECD have said that the impact on the global economy from this pandemic will see it contract by 0.6 percent, whereas under the GFC it contracted by 0.1 percent. That is effectively 60 times the size. So it is a really clear point of difference. We are dealing with something here of a size and a scale that we haven’t seen before. Our spending is very temporary, it is very targeted. It is guided by the principles that took us into this crisis that will take us out of this crisis.
JANE NORMAN:
We will have to leave it there. We have two more questions before we will really actually run out of time. Tim Shaw.
JOURNALIST:
Thanks Jane. Tim Shaw, Director of the National Press Club, Treasurer. The High Court and the Federal Court are going to hear issues relating to the proportionality of restrictions imposed by states on trade. Treasury set some very big targets, more than half of the workers going back to work in the next six months, Christmas. Outside of the law courts, who are the referees that can assist? Is it the COVID Commission pivoting to be able to receive submissions from business basically saying, we can't be profitable in the next six, nine, twelve months under these current regimes? What do you say to those businesses?
JOSH FRYDENBERG:
These are the sort of issues that National Cabinet can discuss, in terms of the impact of cross-borders and the like. No doubt that Andrew Barr is somebody that I have worked with across the table in the Council of Federal Financial Relations, but issues around borders are no doubt discussed in the broader context of what happens at National Cabinet. What we want to see is business given the opportunity to thrive and to be a key part of the recovery. Nine out of every ten jobs is in the private sector. So we’ve got to allow our businesses within the medical advice parameters to thrive as part of the recovery.
JANE NORMAN:
The final question for today from John Kehoe.
JOURNALIST:
Thanks Treasurer, John Kehoe from the Australian Financial Review. Good to see you have gotten over Carlton, after the siren loss last weekend. More seriously though, the assumptions in the Budget, they assume that Victoria’s lockdown will only last six weeks. That is looking a little bit doubtful but let’s wait and see. The border between New South Wales and Victoria and South Australia will open up next month and also that there won't be any other back sliding by states on the three stages agreed to by the economy. I also have been speaking to the credit rating agencies today, as you would know the AAA rating, it was reaffirmed yesterday, is not only dependent on the Commonwealth but it is the combination of the Commonwealth and the states, including Victoria. They are doing a lot of spending now on the virus. Their economy is slowing down. Are you concerned that the situation in Victoria is going to weigh on the Budget assumptions yesterday and potentially even the Commonwealth’s AAA credit rating?
JOSH FRYDENBERG:
Well, I do note that Victoria and their announcements yesterday about their economy also used that assumption of the six week lockdown. So from that state in response to obviously the pandemic and the changes to their own budget position, they used the same assumption that we did. Now, we can only make forecasts in this very difficult and uncertain environment based on decisions that have been taken and we don't know how successful or unsuccessful states and territories will be in the future in dealing with outbreaks, should they occur. There are lessons to be learnt from Victoria, particularly about the quarantine experience, but what we do know is that states have been effective and territories have been effective in dealing with new cases. There will be new cases and it is how effective they can be tested and traced and contained and quarantined and how effective the social distancing laws are that will be very important in the future. I do point out that when it comes to state contributions, we welcome what Victoria has announced and we welcome what other states have announced. The states cumulatively have announced around $40 billion worth of support. That is both balance sheet and also direct economic support. We have announced $269 billion of economic support. So the Federal Government has done a lot of the heavy lifting and I think that is really important. But we do also welcome the announcements from the credit rating agencies overnight for Australia to be one of only a handful of countries to are retain its AAA credit rating is very important and it does give us confidence about the economic climate that we are dealing with, even despite the uncertainty that our decisions that we are taking are helping to take Australia in the right direction.
JANE NORMAN:
Ladies and gentlemen, let's conclude on that note. Please thank the Treasurer.
JOSH FRYDENBERG:
Thank you.