QUESTION:
Thank you Treasurer. How flexible is the Government prepared to be with further financial assistance, given with winter approaching, the experts warn that there will be more outbreaks of COVID-19 and a second wave?
JOSH FRYDENBERG:
Well Sabra, obviously we will continue to do what is necessary. That's been our consistent position through this crisis and where there is a demand we will be there to support the Australian people. But as you know, we've already outlined some $320 billion worth of economic support, which equates to over 16 per cent of GDP, $200 billion of which is direct support. The other support is through loans and guarantees and support for the financial system. That is a very significant amount by global standards and in the case of Australia's history, the most that we've ever seen. So, we're now in the implementation phase of our programs. The JobKeeper program has seen over 725,000 businesses register, more than 4.7 million Australian workers will be covered by that program. That money will be flowing out this week. I believe that that support, together with our other programs, will be what is required to continue to help people through this crisis.
SABRA LANE:
I’ll remind my colleagues, one question per person. Shane Wright.
QUESTION:
Thank you Sabra. Shane Wright from the Age and the Sydney Morning Herald, Treasurer. It’s no secret that immigration has been pivotal to Australia's economic success over the last 30 years. The Prime Minister mentioned last week that the forecast for 20-21 is 85 per cent fall in *inaudible*. How will that affect your economic recovery plans? Does it mean that you actually have to start looking at ways to encourage more people back into the country post-virus?
JOSH FRYDENBERG:
Well Australia’s very proud of the fact that we have welcomed immigrants. And I am a product of it, indeed everyone here is, in one way or another, and I think that will continue to be our approach. But you’re right, it will affect the economy. And as long as the borders are closed, obviously, the movement to Australia of international students and as well permanent migrants, will be restricted. And that is a fact that not only Australia but many other countries will be going through. But you’re right, it will have a significant impact on the economy, but we have allowed for that in our forecasts.
QUESTION:
Michelle Grattan from The Conversation. Treasurer, do you think that the crisis has exposed significant problems with Australia's supply chains and their vulnerabilities? If you do think that, how do you think it should be addressed, whether by diversifying sources, becoming more self-sufficient and how do we avoid protectionism in this process?
JOSH FRYDENBERG:
Well there is already work going on this particular issue, undertaken by Treasury, the Department of Industry and, indeed, the COVID Commission under Nev Power. There are some areas, Michelle, where we are self-sufficient. We're a country of 25 million people but we produce enough food for 75 million people. There are other areas where we’ve shown that we need more work, and I'm thinking particularly about the rush to get some of this PPE equipment and other manufactured goods in the health space, which we had to rely on many ways and means in order to secure that. So these are questions that we will address in the aftermath of this crisis, but we're already undertaking the thinking around it. But the Prime Minister has made very clear, we’ve got to play to our strengths. We’ve got to play to our comparative advantages. And that does not mean we produce everything, or need to produce everything in this country, but we do need to ensure that in areas where there are going to be materials that could be absolutely necessary in times of crisis, that we won't be left vulnerable to disrupted supply chains. An area where we have already taken some action is fuel security. As you know, Australia's fuel stocks are below where we would like them to be and the Minister’s been working on securing extra supplies. But, again, storage of those supplies, or more storage of those supplies into the future, may be required.
QUESTION:
Treasurer, Andrew Probyn from the ABC. Some ABS stats came out today showing that something like one million people lost their job between March 14 and April 18. Given that you did increase JobSeeker well above Newstart, and given the fact that you're saying that unemployment in previous recessions went up in a lift and came down in the stairs, are you seriously putting to the nation that the JobSeeker payment, the higher JobSeeker payment, will return to the rather measly Newstart levels once the six month period is up?
JOSH FRYDENBERG:
Well we’ve been very clear that the measures we’ve announced are temporary, they’re targeted, they’re proportionate and we’ve used existing systems. These were the principles that we adopted. That ABS data you referred to is pretty consistent with where Treasury's forecasts are for unemployment to hit 10 per cent in the June Quarter, to rise from that 5.1 per cent we saw in February and 5.2 per cent we saw in March. But we’re very conscious, Andrew, that the way to get people off the unemployment benefits is to get them back into the workforce, to encourage economic activity, and that's why the lifting of the restrictions is so important. The quicker we lift those restrictions, the more economic activity we generate. Those enablers that I was talking about, those sectors; education, child care, transport and logistics, even opening our cafes and restaurants will mean that farmers will have a home for their produce. And we’ve actually now seen rains in recent weeks and months that is making a real difference to the capacity of the farmers to produce more from their land. And so, we need to find a home for that produce and getting those cafes and restaurants and other activities open as quickly as possible, will be a way of getting more people back into work and reducing that unemployment.
SABRA LANE:
Is that a long way of saying yes, it’s going to go back to the Newstart level?
JOSH FRYDENBERG:
Well we’ve been clear that these measures are temporary, and the JobSeeker supplement, the $550 was temporary.
QUESTION:
Tom Connell from Sky News. You mentioned there the ratings agencies, obviously our previous path towards a surplus and paying off debt is gone. Are you working towards setting any sort of limit in terms of debt-to-GDP, what will you be guided by? Or if not, why not?
JOSH FRYDENBERG:
Well in terms of debt-to-GDP, we entered this crisis with debt-to-GDP around 20 per cent. And that was a quarter of what was in the US, the UK, and as I said in the speech, a seventh of what it was in Japan. That has given us a capacity to respond without some of the burdens that other countries have had going into this crisis. We believe that living within our means is going to be critically important. Before this crisis, our interest bill on our debt was around $19 billion a year. That is about as much as we spend on schools, double what we spend on child care. So every time you lift your debt and you increase your interest payments that is money that has to be found across the economy. So we have set a, we have got a limit, in terms of what is legislated through the Parliament, that’s $850 billion. Obviously we are working hard to keep it well below that. But what we’re focused on right now is spending the money where it is necessary to avoid some of the challenges that we’ve seen around the rest of the world.
QUESTION:
Patrick Commins from the Australian. My question goes to the post-COVID economic recovery effort and the reform effort. Given a budget deficit that some expect to run into the hundreds, billions, are we able to afford company tax rates as a part of that reform effort or bring forward household income tax cuts?
JOSH FRYDENBERG:
Well the first thing to say is, as a Government we’ve always looked for opportunities to cut taxes and you referred to personal income tax cuts, which if you combine the last two Budgets, that’s $300 billion dollars’ worth of tax cuts. And what is important is that we have returned a bit of the bracket creep and we’re ensuring now we’ve got a flattened, simpler system so that 94 per cent of tax payers will pay no more than 30 cents in the dollar. One big tax bracket between $45,000 and $200,000. When it comes to company tax, I’ve said before I think the rate here in Australia is uncompetitive. We have cut SME company tax rate, legislated down to 25 per cent, but you’ve also got larger companies that are paying a higher rate. We did announce in the first package an accelerated depreciation initiative which would see businesses with a turnover of up to $500 million be assisted with a 50 per cent accelerated depreciation. That’s an added benefit to some of those bigger companies. But at 30 cents in the dollar here in Australia for larger companies, 21 cents in the dollar in the United States, 19 cents in the dollar in the United Kingdom and 17 cents in the dollar in Singapore, Australia has now the second highest company tax rate to Portugal in the OECD. That is a reversal of the position we were when we got the 30 cents in the dollar. So look, we’re not in the rule-in rule-out game. What we are doing though is looking at how can we continue to compete for capital. And tax rates, like flexible workplaces, like infrastructure, like deregulation, they’re all key factors that businesses consider when they establish their businesses around the world but also when they decide to hire more people. Capital is mobile, business is not very sentimental. And so we have to ensure we have the most competitive environment possible.
QUESTION:
Phil Coorey from the AFR. You and the Prime Minister have outlined your guiding principles for the economic recovery; keep the tax burden low, industrial relations, deregulation. What about spending restraint? Is it likely you’re going to have to cut spending where you can, and in that context will there be any revisitation of the Audit Commission which was prepared for the Abbott Government and not really acted on?
JOSH FRYDENBERG:
We’re not cutting services. In fact we’ve been spending more on essential services and that has been a direct product, Phil, of responsible economic management. Because at the same time we inherited a $48 billion deficit and turned it into a balanced Budget, we increased health spending and education spending to record levels. And obviously we’re rolling out the National Disability Insurance Scheme as well, which is a major bipartisan and important initiative for the country. So we’ve been able to spend more money in those essential services areas, list more drugs on the PBS and at the same time bring the Budget back into balance. It’s that fiscal discipline, it’s that spending restraint by reducing the wasteful spending that is going to be really important into the future.
QUESTION:
Treasurer, Mark Riley from the Seven Network. Some of your state Treasurer colleagues are talking about some significant reform; removing stamp duties or reducing them, and payroll taxes. It’s pretty obvious they’ll be coming to you and talking about the GST to compensate for that. Is your message going to be that there will be no discussion on the GST rate and that they’ll have to find other ways of compensating for those lost revenues, accepting that it’s about 30 per cent of their state revenues through stamp duties alone?
JOSH FRYDENBERG:
Well you’re right that stamp duty is one of the largest, in some states the largest source of revenue for them. And I’ll also point out that the Productivity Commission and the Shifting the Dial report Mark, refer to the fact that stamp duties reduce mobility because it is effectively a transaction tax and also increase house prices. So I congratulate the State Governments. This is efforts being led by New South Wales and Victoria on the work that they are doing. But when it comes to these state taxes and the state tax mix, these are very much in their domain. We will continue to have discussions with them about a whole range of issues. We’re meeting as Treasurers every week and in certainly in the case of Tim Pallias and Dominic Perrottet, it’s a very productive relationship about a whole range of issues.
QUESTION:
Peter van Onselen from Network Ten. Treasurer you made a very cogent point that historically in a crisis when the unemployment rate goes up fast it takes a very long time to come down. Given that the ABS data that we’ve seen referred to today shows that most of the industries that unemployment is spiking are industries that employ people who are not eligible for the JobKeeper payment, will you take personal responsibility in the years to come if it takes a long time for that unemployment rate to fall?
JOSH FRYDENBERG:
Obviously I disagree with your assumption there. I mean in some of these higher employing sectors there are a lot of casuals who have been there for 12 months or more, there’s a lot of part time workers and there are a lot of full time workers. All those are eligible for the JobKeeper payment predicated on the fact that their employer has seen a reduction in their turnover. This program, which Treasury estimate will see six million workers benefit from, is extraordinary in its scale and its scope. We accepted a definition which is established in the FairWork Act, as to what is a long-term casual and we applied that. It’s also important to understand we are employing the JobSeeker payment of $1100 a fortnight, which is available to some of those people who weren’t able to access the JobKeeper payment if they were in that category. But what we have sought to do is maintain that formal relationship between the employer and employee through this crisis even if that worker is stood down, because that’s going to encourage and make it easier to have that bounce back on the other side.
QUESTION:
Katherine Murphy from Guardian Australia. Treasurer in April 2018, standing where you are right now you told this Club that Australia needed to find sensible, workable, affordable market based solutions to transition to a low emissions future. Furthermore you said the alternative would be policy paralysis, more expensive short-term government interventions and higher power prices. Now today one of Australia’s largest business groups the AI Group has said that the two biggest challenges currently before us are the COVID recovery and also achieving net zero emissions by 2050. Are they right?
JOSH FRYDENBERG:
In terms of meeting emissions reduction targets that Australia has signed up to, that is very much a focus of the Morrison Government. We’ve made great progress on that. At the same time, we’re investing in new generation in the energy space and we’ve been following the ACCC’s recommendations about more transparency and competition in the retail and the wholesale market. I think all of those interventions, while Coalition Government’s don’t really like to make those regulatory interventions, I think they’ve been necessary in that sector. So we believe that those changes we’ve made on the generation side, on the regulatory side are helping to reduce prices but also to reduce our carbon footprint.
QUESTION:
Treasurer, Katina Curtis from the AAP. We’ve got a generation now facing the possibility of long-term joblessness and another generation coming up behind them facing possible poorer education outcomes because they’ve been learning at home and the probability that they’re going to find it harder to get a job after they’ve been to uni or done training. How is Australia not going to avoid taking the hit to our productivity and hence our growth in the future?
JOSH FRYDENBERG:
You touch on an important area in terms of skills and getting people back into the workforce. One of the comments that have come through regularly in my dialogue with businesses big and small, is that through this crisis there is going to be greater digital take-up across the economy. It was already a transition that was occurring, more people working from home, more people having virtual meetings, e-commerce is going to accelerate in this post-crisis environment. It’s going to be important that young and old workers have access to those skills. So, the Joyce Review was the one we commissioned in terms of the skills space, setting up a national skills commission, working with the states on the issue of TAFE, in particular but also accreditation. Accreditation of skills are one of the recommendations out of the Shifting the Dial Report, which was raised in the conversation with state treasurers last week. There is work that is being undertaken across jurisdictional lines in order to try and get those skills and accreditation changes to enhance the economy. It is one area among many that we will be focused on for reform once we get through this crisis.
QUESTION:
Treasurer, Mark Kenny from the National Press Club Board and also ANU. You talked about the cliff that we were facing when you considered the JobKeeper program. There is another cliff coming, of course, when that ends in October. Will you consider any sort of transitional programs, perhaps innovative thinking like income contingent or revenue contingent loans that would provide liquidity in the economy but not appear on the liability side of the budget?
JOSH FRYDENBERG:
Well in terms of loans, as you know we announced a $40 billion program with the banks where we would co-guarantee 50/50 loans to small and medium-sized businesses of up 250,000 for three years and we would also ensure there was no interest payments that were required in those first six months. So we have some of those programs. But I think Mark, you make an important point which is as we come out of this crisis, there are going to be sectors of the economy that are going to come out more slowly than others. This is an issue that the Government is thinking about. For example, you’re going to have travel restrictions in place on international borders longer than you’re going to have domestic restrictions in place. So that’s obviously going to have a real impact on tourism, for example. One of the imperatives of getting domestic flights going again once the suppression strategy has really taken hold and obviously we’ve made great progress on that, is that we can get the domestic tourism markets going, as well as the freight task. So there are going to be sectors of the economy that are moving out of the crisis quicker than others. I’m very pleased that through this crisis, construction and to a degree manufacturing, have been going strongly. The other point I would make is Australia is increasingly a services orientated economy. 70 per cent of our economy is services. So when you’re looking at the indexes of activity, you see a much bigger drop over this period in services, I’m thinking hospitality, accommodation, tourism – than you are in manufacturing. We have to think about smoothing that transition for businesses and for workers into that recovery phase and that is the thinking that we have underway.
QUESTION:
Lanai Scarr from the West Australian Newspaper. Treasurer, you’ve spoken today about the fact that 85 per cent of mining businesses were operating this month, essentially helping the economy to keep running. Will you categorically rule out any changes to revenue raising for the sector in the post-COVID rebuild?
JOSH FRYDENBERG:
Like I said earlier, Lanai, our focus is on lower taxes where we have the opportunity to do so. That is our proven record. We weren’t the Party that went to any elections with a mining tax. We are very much focused on ensuring that sector gets the benefits that they need. We have a whole series of incentives in place to support the mining sector for companies big and small.
QUESTION:
Tim Shaw, National Press Club Board. Can I just follow on from Mark and from Patrick’s questions in a post-COVID economic environment. It is contradictory what you said today. We’ve got some of the highest company tax rates in the world, yet we’ve got one of the lowest consumption taxes in the world. Have you and the state and territory treasurers talked specifically about the short-fall in their GST receipts? Based on $4 billion a week, we’re dropping at the moment, that’s more than $400 million in GST. What, if any, have those state and territory treasurers had with you regarding the GST?
JOSH FRYDENBERG:
Well, we just had the GST relativities confirmed following the advice of the independent assessor in that case, and obviously some states got more than they were hoping for and some got less. And it’s just swings and roundabouts. It moves from year to year. Some are happy and some would like more, but obviously the impact on GST is a reflection of the impact on consumption. The quicker we can get people to work, the quicker we can get kids back to schools – and I point out; South Australia, Western Australia, Northern Territory, around 70 per cent if students are back in school. That's a really positive thing. And New South Wales and Queensland have already signalled that they want the kids back at school by the end of the month. That’s a positive development because that will impact on the labour force, that will therefore have an impact on consumption, and that will obviously flow back to state coffers through the GST.
QUESTION:
Claire Bickers from the Adelaide Advertiser. Treasurer, my question goes to the restructuring on the other side of this. What sort of opportunities do you see for smaller states in growing their economy after this? What sort of silver linings are there in terms of the industries or the avenues that they might look to, to regrow their economies?
JOSH FRYDENBERG:
Well for example in infrastructure, I think there’s going to be a real demand for new projects particularly to pick up some of the workers that may have lost their jobs in other sectors. I think that’s going to be important. Education, particularly skills training is going to be extremely important as well and that adds much to our economy. Obviously universities are going to have to focus on how to rebuild their market share after seeing the international student market drop off so significantly. There’s going to be challenges in the tourism space. But I think there’ll be opportunities across the economy, certainly the health sector is going to see a boom in terms of opportunities there in both innovation, research, development, but also in manufacturing. I think Michelle's question about global supply chains, I think this will be a global conversation now about the reliability of some global supply chains and I think that will create opportunities for niche manufacturers here in Australia and elsewhere to take on new production in areas that may have been previously offshore.
QUESTION:
Matt Cranston. Treasurer, much has been made of the enormous Government debt-to-GDP coming through. But household debt to GDP in Australia is twice that of the US. Yes, there’s been obviously big fiscal response from you guys, interest rates are at record lows, and there’s been some deferrals of interest as well. The question is, surely as Treasurer you have some figures or some numbers in your head as to the capacity or the buffer that households have to handle that debt when it comes through in just a few months. That’s what businesses want to know, that's what they want to get a grip on, is your understanding of what that buffer is?
JOSH FRYDENBERG:
Well household debt will be a function in some degree by what happens with unemployment. People have a job, then they can meet their mortgage payments, and indeed their other expenses. But as you know, household assets are about four to five times what household debt is, so there is a position here in Australia where we can get through these issues. The Governor of the Reserve Bank has previously commented on household debt, and the issue saying it‘s a manageable issue, and obviously we’re very conscious though the best way to help household budgets is to get people into work.
SABRA LANE:
Everybody, please join me in thanking the Treasurer Josh Frydenberg.