QUESTION:
Treasurer this result, phenomenal result, has largely been driven by a massive sugar hit of spending and debt. As you know, after you have the sugar, there’s a bit of a come-down, you feel a bit fat and lazy afterwards. What do you have in your mind -
JOSH FRYDENBERG:
You speak for yourself.
QUESTION:
- that makes you feel that this is going to be sustainable? That this recovery is going to be sustained?
JOSH FRYDENBERG:
Well firstly what I want to say is, it’s still a very bumpy road ahead. There’s still some major challenges. There’s a long way to go and literally we do not know what’s around the corner. We’re rolling out the vaccine, the recovery’s gaining strength, but JobKeeper is coming to an end in March. And you’ve heard the Treasury Secretary and you’ve heard the RBA Governor speak about the impact that that may have on the labour market at the end of March, early April. But at the same time, we are continuing to provide other supports to the economy, and that includes the JobMaker Hiring Credit, the tax cuts which will see more than $1 billion a month go into the pockets of Australian families. The infrastructure investments that we brought forward, the 340,000 training places. All of those initiatives will help support the economy going forward. Including, as I said, the $240 billion that has been accumulated on balance sheets that has yet to be spent. It’s very important to underline that fact. But what this December quarter shows is that, even as the Government support was halved, Government support was effectively halved in the December quarter, you still saw 320,000 jobs created and 3.1 per cent economic growth. And we can’t continue with the JobKeeper Program. It is already the most expensive economic support program Australia has ever seen, at an estimated cost of around $90 billion. And Treasury’s advice to me was very clear last year, that there are particular characteristics and features in that program that become more pronounced as the economic recovery takes hold, in particular, it hampers labour mobility across the labour market, and it helps prop up businesses that may not be sustainable in the long-term. So the programs such as JobKeeper will come to an end. Those supports are tapering off. But there is other economic support that is going to help continue that momentum.
QUESTION:
Treasurer, just on JobKeeper -
JOSH FRYDENBERG:
Yes.
QUESTION:
Reports today that Qube, the port operator, received $30 million in subsidies, at the same time remaining profitable and paying executives bonuses. So, did the ATO get it wrong in approving that and does the money need to be repaid?
JOSH FRYDENBERG:
Well, the first thing to say is that the ATO have done a remarkable job. They deployed thousands of their staff to administer this program. And the Australian Audit Office undertook a review of the ATO’s response during COVID and said, very clearly, that their response had been very effective in managing risk. So the ATO have done a remarkable job. But at the same time, businesses received the JobKeeper payment based on the law at that time, which was an anticipated fall in turnover, based on the size of the business it was either 30 per cent or 50 per cent, or, in the case of a charity, 15 per cent. That was the basis for which these companies took the JobKeeper payment. Now, some of those businesses have been successful on the other side of COVID, and a lot of those businesses have graduated off JobKeeper in the back half of last year. I would welcome any business paying back JobKeeper if they are in the position to do so, I have been abundantly clear about that. But the law at the time was very clear as well, and our focus as a Government was to get money out the door to support those who were in need. You remember those images of thousands of our fellow Australians lining up outside Centrelink, there was fear across the community, and JobKeeper was this economic lifeline that helped save the economy in its time of need. So I would welcome that company, or any other company, repaying JobKeeper if they’re in a position to do so.
QUESTION:
Treasurer, Queensland’s Deputy Premier says that 50,000 tourism workers will lose their jobs when JobKeeper ends. Will there be more federal support for those people or does Queensland need to do more for them?
JOSH FRYDENBERG:
Well, Queensland, of course, can do more, and we would welcome if the Queensland Government did do more. As I’ve also said, repeatedly, we have delivered to Queenslanders, from the Morrison Government, three times more than the Palaszczuk Government has committed to over four and a half years. So we have done the bulk, the vast bulk of the heavy lifting with respect to the economic response in Queensland. Now, we are considering other economic measures that we put in place post JobKeeper. But what is critical for the tourism sector is that those borders remain open. Now, I spoke to Alan Joyce, he told me that in January he cancelled 1500 flights, QANTAS and JetStar, into Queensland alone. That’s flights into Maroochydore, that’s flights into Hamilton Island, that’s flights into Cairns and into Brisbane. And that is hundreds of thousands of passengers who had their bookings cancelled, which meant that money that was otherwise going to be spent in Queensland’s tourism industry, that was not spent. So we would welcome the Palaszczuk Government spending a bit more on Queenslanders as part of the COVID response, but as far as the Morrison Government is concerned, we have done the vast bulk of the heavy lifting, we’ve had the back of Queenslanders and we will continue to have the back of Queenslanders.
QUESTION:
Treasurer, can I just ask for your view on a recommendation to the Royal Commission that some sort of tax increase to fund the Aged Care challenge. Do you have an open mind towards that, or do you prefer a more user-pay system with people with retirement savings?
JOSH FRYDENBERG:
Well, the first thing to say is, on the Aged Care response, we will properly consider that eight-volume report, very carefully, and the Prime Minister has said, and he and I have already had some preliminary discussions, and it is patently obvious that there is going to be more spending from our Government on Aged Care, as we have already done so, since coming to power. We have substantially lifted the number of home-care packages, we have taken that from about $13 billion of spending to more than $23 billion of spending on Aged Care. But it’s not just about money, it’s also about respect, safety, and governance, and workforce. There are a number of the issues that were raised in the context of the Aged Care Royal Commission. We will consider those various ideas and recommendations, and of course we know the Commissioners had different approaches with respect to the levy on tax proposals, but it is fair to say, Phil, our Government’s track record has been about delivering lower taxes. That’s been our track record, and that’s what we consistently see from Coalition governments.
QUESTION:
Could I just ask a follow up, Treasurer. Could an option be maybe be diluting the stage three tax cuts? [Inaudible]
JOSH FRYDENBERG:
I will let you work out the combinations of permutations.
QUESTION:
It sounds like a no.
JOSH FRYDENBERG:
I will let you do the combinations of the permutations, and the speculation. But as far as we’re concerned, we take this report very seriously, we will consider it in great detail, as it deserves, and the Prime Minister is personally very heavily invested in this topic, he commissioned the report, and he wants to see the best possible Aged Care system in Australia. Michelle?
QUESTION:
Could I ask about the labour market? We still have high unemployment and yet we have labour shortages in certain regions, and I’m not talking fruit picking here, and in certain sectors. Do you need more detailed information about what’s happening on the ground, and do you need a more nuanced labour market approach? And what do you think are the reasons for this mismatch?
JOSH FRYDENBERG:
Well, you’re right that the feedback from employers is that there are some workforce shortages and we’ve seen that in recent data put out by the National Skills Commission, including in the papers today. That is why we’ve also focused not just on the quantum of the JobSeeker Payment but also on the mutual obligation requirements, because that is going to be important in ensuring that people are taking jobs and are available for the jobs when they present. In terms of the labour market data, we are getting fortnightly data from ABS payroll jobs numbers. What I’ve found pretty interesting looking at the data, is the CBDs across Australia have been particularly hit. You’re seeing occupancy in the Melbourne CBD just over 30 per cent. You’re seeing Sydney’s CBD at just over 40 per cent. So you are seeing some pressure on the CBDs and that is having an impact on the labour market there, and of course tourism is another area. But I have also been encouraged by the early data that I’ve seen for JobKeeper in this March quarter. Based on the preliminary ATO data for January which saw an extra 600,000 Australians come off JobKeeper, with roughly 2.1 million that came off in the December quarter. So that is a positive sign but we are trying to do everything possible through the mutual obligations and the other systems that we have in place to connect employers with employees.
QUESTION:
But aren’t there more fundamental or other issues involved here in these shortages?
JOSH FRYDENBERG:
Well in terms of fundamental issues, it’s about reskilling people up, and we’re focused on that in terms of what we’ve done with the states, the partnership there with 340,000 new training places. But it’s also about putting those who are out of work in contact with proper providers and proper managers through the mutual obligation requirements. I also want to point out the JobMaker Hiring Credit. Michelle it’s quite interesting if you look at the labour market statistics, for those aged 35 and above, the employment levels are today higher than they were pre-pandemic levels. That was quite surprising. Over the age of 35, more than a percentage higher in terms of employment levels. Whereas for those under the age of 35, the employment levels are 3.3 per cent lower. Now that is one of the reasons why we have targeted younger people with the JobMaker Hiring Credit, by providing up to $200 a week to those employers to take on someone who has been unemployed, who is a younger person, and support them to work. We looked at previous recessions here in Australia and that labour market scarring effect was very significant, particularly in the 90s recession, where it took a decade to get the unemployment level back to where it was, and it took 15 years for the younger people to get that unemployment back to where it was. So we’ve learnt from those experiences, and we’ve put in place new programs.
QUESTION:
Treasurer can I ask you a question about comments made by the Chief of the Defence Force?
JOSH FRYDENBERG:
Before we go there, let’s finish with the National Accounts.
QUESTION:
You said you had (inaudible) QANTAS the other day and Alan Joyce. Are you warming to the idea of giving the aviation sector more support when JobKeeper ends?
JOSH FRYDENBERG:
We’re very conscious of the needs of the aviation sector for continued support, we’re very conscious of that. The aviation sector, unlike other sectors, has been hit by the international border closures. So has international education might I add and obviously so too has tourism, but we also recognise the need to maintain domestic sovereign capability in our aviation sector. So yes, there’s already been substantial support, but Michael McCormack, the Prime Minister, myself, the Finance Minister, the Trade and Tourism Minister, we’re all very much focused on other initiatives that we may be considering with respect to aviation and other areas of need.
QUESTION:
Treasurer, to what degree do you believe that the snap lockdowns through this summer will weigh on the economic growth in the March quarter, and do you think the rollout of vaccines should change the calculus of the state - territory leaders around implementing responses and restrictions to future outbreaks?
JOSH FRYDENBERG:
Well I think that those sharp lockdowns will have an impact on the economic performance of the March quarter. But as to the exact precise nature of that impact, time will tell. As I wouldn't want to make the prediction with respect to that. With regards to the calculus for state leaders, absolutely. I think the nature of that equation does change with the rollout of the vaccine. The rollout of the vaccine will build confidence, not just in our health professionals but build confidence amongst the broader [inaudible] is to, how to deal with future border closures and other related issues. Shane?
QUESTION:
Treasurer, the Reserve Bank again said yesterday that it was keeping rates probably relatively low till 2024, you’ve just had the strongest six months growth on record, does that make you think that your fiscal policy is going to have to drive growth over the next two to three years given the RBA can’t, it can’t do any more on the monetary policy side?
JOSH FRYDENBERG:
Well you’re right that they have very little room, although they have been boosting liquidity as you know, in the secondary market with their bond borrowing, and I think that's been certainly welcomed by industry. I’m not hearing any problems to do with liquidity out there. And as you know, they’re targeting the three year bond yield and they’ve been active in the market in recent days. As you know Shane, this is quite different to other crises, in that fiscal policies had to do the bulk of the heavy lifting. If you remember back to the GFC, the cash rate was cut by more than 400 basis points. Here it’s been cut by 65, and the cutting of the cash rate during the GFC by more than 400 basis points, was the equivalent of $100 billion stimulus over a 12 month period. We didn't have the luxury in this crisis, hence we’ve used our balance sheet in an unprecedented way to support consumption and to support the economy more broadly. We’ll have to continue to use our balance sheet, we’ll have to continue to use fiscal policy and we’ve set out our fiscal strategy ahead of last year’s Budget for those two with the unemployment rate getting comfortably below six per cent before we move to the next phase. I think we’ve laid that out pretty clearly, it’s interesting what’s happening in the international bond market at the moment. Janet Yellen’s made some public comments and I spoke to her obviously yesterday as well. People like Janet Yellen and Jerome Powell, they see this as a sign of confidence in the global economy and the market actually expecting that inflation will pick up and that the global economy will start to normalise over time. That’s a positive sign from their perspective. Now, of course, when bond yields increase it has an impact on the cost of borrowing. But the good news for Australia is more than 70 per cent of our bond purchases that we’ve outlined have already been undertaken and so we’ve been in the market with 10 of our bonds being of various states and we have said that the weighted cost of borrowing would be about 0.9 per cent, we did that in the Budget. I think we’re well placed, in terms of our cost of borrowing, we’re certainly well placed in terms of our debt levels. John.
QUESTION:
Thanks Treasurer, just on aged care and retirement income, surely the two are interlinked, you gave a speech last week pointing out Callaghan Review showed that people build up quite healthy retirement income balances, including superannuation in the home, but they don’t deploy those in retirement, they essentially leave them as an inheritance to their children. In the context of funding aged Care, is it time that we had an honest, mature conversation about perhaps people are in more fortuitous circumstances with a higher retirement income balance to maybe make more of a contribution to their own aged care when they can afford to do so?
JOSH FRYDENBERG:
Well, I mean, these are all inputs into a broader conversation and I think everyone accepts that. The Callaghan Review, as you say, John, made some interesting findings with respect to that but, again, the way we’re going to fund aged care is by growing the Australian economy. It’s going to require increased investment and increased spending. We have an aging population and clearly have growing demand, you can see that, for example, in the homecare packages, even though we’ve tripled the number of available, you continue to see increased demand. So, we will, John, continue to carefully deliberate and consider these issues. We won't be frontrunning them, you know, what we will do is work behind closed doors and as the Prime Minister has indicated, Greg Hunt has indicated, that we’re looking at a Budget context for our full response.
QUESTION:
You said Treasurer, that businesses coming off Jobkeeper, particularly, you know, this year, which is terrific. There are businesses still on JobKeeper who are in limbo and have no idea about their future. You said, last week, that you would consider further support in targeted areas for those businesses and you’ve said it again today, the 28th March is in three and a half weeks, businesses need to give, at best, two weeks’ notice to their employers, some of them, in sectors that do work for universities, or for other, you know, trade movement affected sectors, fear that they’re going to have to let go of their workers, and you’re holding out the promise of some people. It’s getting very close, what do you say to those businesses who think, or maybe if there’s nothing, I’m going to have to let go of my workers, and I’m going to have to give them notice next week?
JOSH FRYDENBERG:
Well the first thing to say is, Peter, that JobKeeper has not been the only economic support that we’ve been providing.
QUESTION:
You’ve got to promise more.
JOSH FRYDENBERG:
And we are working through those options, but what we’ve also been about is that JobKeeper is coming to an end. And one of the reasons why we were very clear early on about that fact is for the very point that you raise, that businesses have to prepare. They either have to restructure, they have to adjust. Our focus, all along, has been to give every business its best chance of success. But we also recognise that not every business will be saved in of course this huge economic shock. So, in response to your question, we are still working through those options. We’ll have more to say about that before the end of March. But everything that I’m seeing in terms of the National Accounts and in terms of the broader economy, is pointing to a recovery across the economy. Now yes, there are regions and sectors that you’ve very rightly pointed out some of those sectors that are continuing to do it very tough, but our support will be ongoing. We are working through those options and we will have more to say about that. Thank you.