JOSH FRYDENBERG:
Household balance sheets are strong and confidence is high. Businesses are responding to our policies to invest and to hire. Our economic plan is working, but the job is not done. But you wouldn’t want to be in any other country, but Australia. I’m just going to go through quickly, Sam, just some very quick slides. First slide is what we’re seeing today, 1.8 percent for the quarter with GDP growth, and 1.1 percent through the year. As you can see, those last three quarters represent cumulatively the strongest economic growth in more than half a century. The next is what has happened to the size of our economy, compared to what it was going into the pandemic. It’s a very important slide. Pre‑pandemic, in the December 2019 quarter, this is Australia’s output. This is Australia’s output today. It came down, and it went significantly down, and has had a very strong recovery continuously since then. The next slide.
This tells the story of Australia’s strong economic recovery, and Australia’s performance, which has been better than any other of the major advanced economies in the world, 0.8 percent higher than when we were going into the pandemic. This compares to the United States, Canada, Japan, France, Germany, Italy, and the United Kingdom. Australia, ahead of any major advanced economy, sees it’s economy today bigger than it was going into the pandemic.
The contributions to GDP growth, and this is the private sector‑led recovery. Household consumption, as you know, between 50‑60 per cent of GDP, had another jump. Dwelling investment off the back of HomeBuilder contributed significantly. New business investment, particularly machinery and equipment was very strong. New public final demand netted itself out. Change in infantries as businesses, retailers and wholesalers were building their stock. Ownership transfer costs, that’s in relation to the housing markets, stamp duty, conveyancing and the like, and then exports, and that’s a refunction of the fact that imports are strong because of the machinery and equivalent investment that we saw across the country.
Consumption by category ‑ this is a very interesting slide as well. As restrictions have eased around the country, Australians have gone about doing what they love, going to the cafes, going to the restaurants, taking a trip, whether it’s on a plane, or visiting a hotel. And that is a strong performance in the services side. Obviously back down here, it’s coming off very high numbers in the previous quarter.
Dwelling investment is a very strong story for Australia. So in terms of new builds of homes, the strongest numbers we have seen in more than two‑decades. Up substantially at 6.4 per cent.
Machinery and equipment, as you know normally in a recession, you see a dip in business investment. Businesses put their hands in their pockets and they become a bit more risk averse. We put in place in the Budget, last year’s significant, immediate, expensing provisions. This has supercharged machinery and equipment as you can see at 10.3 per cent up over the quarter.
Farm GDP, again the Winter crop is a very strong story, 38.9 per cent through the year. Obviously a very high number in the last quarter, again being up.
Compensation of employees, this is the wages bill for the economy. Basically it’s reflecting the fact that people are getting back into work. It’s the jobs and the wages together. Wages and profits is a share of income, again, people getting back to work, wages as a share of the overall income is increasing.
This is an important slide because it does show that households have reduced their savings ratio, but not by a lot yet. If you go back to pre pandemic, it was just below 5 per cent as the household savings ratio. Then it scooped up all the way above 20 per cent and now it’s come down to about 11.6 per cent, so marginally it’s come down but again it reflects that households are becoming more confident. But we would expect that as the confidence continues to build and restrictions ease, then that number can come down in future. Sam.
QUESTION:
Treasurer, how can you stand there bragging that our economy is performing better than OECD nations when you have failed to act faster on offering your own Victorian constituents, many of whom have been stood down without pay now for a week, soon to be two weeks? And why doesn’t that failure to act make you feel as a human being, ashamed?
JOSH FRYDENBERG:
Well Sam I won’t take the bait of that question, but what I will say is that the facts are that we have put as a Government have done an unprecedented amount of economic support into Victoria and we have existing programs and existing support that continues to roll out in Victoria. Now, I have seen the announcement today, from the Victorian Government about the extension of that lockdown. The Treasurer has put a call in to me, I haven’t spoken to him, he’s been standing up, I’m now standing up, I haven’t spoken to him as yet. So I will speak to the Treasurer from Victoria, will consider that request and the Prime Minister no doubt will speak to the Acting Premier and our Health officials will also talk to them. But our position in relation to the first week of the lockdown is very firm, namely that a short lockdown, the states have a capacity to provide that response. As they did, and we welcomed it, $250 million. The facts of the matter have been that we have already delivered around three times what the state has delivered...
QUESTION:
That doesn’t help those workers now. That doesn’t help them now. Why haven't you planned for this? Even if you do stand up some sort of JobKeeper style scheme, it’s going to take time for those people to get money, they’re not being paid.
JOSH FRYDENBERG:
Well as you know, there are a series of supports, including our welfare system, Sam, which applies in terms of JobSeeker and what we have done is we’ve removed the waiting period, we’ve also removed the mutual obligation requirements as they apply in Victoria. But the Budget, where we saw $41 billion in additional economic support provided in the Budget was based on an assumption that there would be further outbreaks across the country. The pandemic is very much with us. And so the assumptions were based on the need to continue to provide support to the economy.
QUESTION:
Treasurer, on consumption, you’ve said today how delighted you are with consumption. It’s 0.7, which is a big contributor to your 1.8 per cent growth. Of that consumption, two thirds has come from Victorians dipping into their own pocket. Shouldn’t you now dip into your pocket as thanks to them, given that the Government is following the medical advice to extend the lockdown?
JOSH FRYDENBERG:
Well what we did see, is we saw, other than the Northern Territory, strong numbers across the states. Queensland was the lowest of the states, but we saw a strong growth, particularly led by WA, I have to add, and we also saw a strong growth coming out of Victoria….
QUESTION:
Two thirds of the state..
JOSH FRYDENBERG:
It wasn't two thirds of the overall number. What we have seen, in terms of consumption, it was up by 1.2 per cent Andrew and consumption contributed 0.7 per cent to the overall GDP. But we saw strong growth in New South Wales, strong growth in Western Australia and across the other states. But our support to Victoria has helped deliver the continued economic recovery across the country. Our support to Victoria has been on the highest on a per capita basis anywhere across the country. I mean, I noticed that Sam wrote about New South Wales getting marginally more JobKeeper payments than Victoria. But the key indicator is to look at it on a per capita basis to compare the sizes of their economies and the number of people in work. And the number of people in work and the number of people who received it in Victoria was a higher proportion than we saw across other states. So, our support for Victoria has been there. This has been a very difficult time for Victorian businesses and Victorian families with the extension of lockdown. These are decisions that the Victorian Government makes, it’s not for me to question ...
QUESTION:
But you’re suggesting then, in that answer, in just what you said then, you said there’s an alternative to what they’re doing now. Do you believe there’s an alternative to Victoria extending this lockdown?
JOSH FRYDENBERG:
Again, it’s not for me as Treasurer to question their medical advice.
QUESTION:
Well I think you just did, didn’t you?
JOSH FRYDENBERG:
No. What I have said is our health officials will talk to their health officials to understand the decisions they’ve taken. I mean, as you know Andrew, the way the lockdowns have worked is that it’s the state government who decides which schools are open, which years of the schools are going to. It’s the state government that decides which regional areas are subject to which conditions. It’s the state government that decides whether, you know, self‑employed people can work or whether it’s others on particular industries and sites can work. I mean, I noticed one, what they’ve been saying out of Mildura, a regional city more than 50,000 Victorians, more than 500 kilometers from Melbourne, they haven't had a case as I understand it for 13 months, yet they were subject to the same restrictions over the course of the last week. Now there’s something to question that Victorians are asking, they’re not for me to provide the answer, that’s for the Victorian Government. Our health officials will speak to their health officials. And most importantly, our Prime Minister will speak to their Acting Premier and I will speak to their Treasurer.
QUESTION:
Treasurer, when you speak to the Treasurer, you said in answer to Sam’s question, that obviously the states have the same ability you have to borrow and to support the state, but you said you’ll consider that request…
JOSH FRYDENBERG:
Yes.
QUESTION:
So what is in the realism of consideration, what sort of support will you consider for Victorian that’s additional to what’s available through the transfer system and welfare?
JOSH FRYDENBERG:
Mark, I know you would like me to pre‑empt that consideration, I haven’t even yet heard or seen the request from Victoria. I will talk to Tim Pallas. I have a constructive relationship with him, despite his comments in recent days. We all have a sense of humour about that. But I will speak to him. The Prime Minister will speak to James Merlino. Our health officials will talk and we’ll consider that in due course.
QUESTION:
Victoria is asking for either a localised extension of JobKeeper or a dollar‑for‑dollar support for business, equivalent to what Victoria and their request for support for businesses. Which would be the more likely approach? Simon Birmingham did say that a localised JobKeeper was a difficult thing to do, he said that this morning. Is that right?
JOSH FRYDENBERG:
Again, I’ll have that discussion, but as you know we brought JobKeeper to an end, it was a particular program introduced at a particular time, effectively it was to help the country and businesses through a period of hibernation.
QUESTION:
Will it be something separate from JobKeeper, any Federal support?
JOSH FRYDENBERG:
We took the right decision to end that program at that time. That was the right decision, it was consistent with the advice from Treasury, it was consistent with the story that we are seeing today across the national economy, the strength, the unemployment rate fell in the month of April to 5.5 per cent. We saw 33,800 new full‑time jobs created, as the Treasury Secretary said yesterday at the Senate estimates, since the end of JobKeeper, we have seen 150,000 people come off unemployment benefits. That was very much the right call. What we need to think about obviously, given the pandemic is still with us, is how we approach this on a national basis. It is not about Victoria, or individual cases, it is about on a national basis, and we will stick to our principles, namely, our approaches will continue to be national, sustainable, where support is offered it is through existing systems, those principles have served us well, Greg, from the start of this crisis, and they will continue to serve us well. But I want you to understand that with Victoria, I will be speaking to the Treasurer, I will hear him out. Our position with respect to the first week of the lockdown was based on the view that with a short lockdown, a state has the capacity to respond as they announced, and that the Budget anticipated that there would be lockdowns, further lockdowns. I will speak to Tim Pallas later today, I have got Question Time in a few minutes, and consider his request.
QUESTION:
At the time of handing down the Budget, you describe those assumptions around lockdown and around borders as quite conservative, we are now seeing increasingly new outbreaks involving new variants of concern, which could not have been anticipated, with Victoria repeatedly saying that this one of the factors that makes this outbreak different, do you think it is best that we revisit those assumptions, and more accurately look at the impact of those variants of concern, they are more infectious? And was your comment that it is conservative, perhaps not properly preempting, things like the Indian variant?
JOSH FRYDENBERG:
The assumptions were based on the new information we had at the time, and they are again assumptions, not policy decisions of government. But the Indian variant, or indeed the lockdown in Victoria more broadly, does remind us of the challenges that we faced. I note the Prime Minister and others were heavily criticised at the time that they took a very cautious approach to Australians coming back from India, given the situation over there and the variants of that virus. This is a very difficult time, we're still in the middle of pandemic, there is no, despite the strong national account numbers today, there is no reason for anyone to be complacent about our economic recovery. But the Budget was predicated on the fact that there would be further outbreaks, and we have seen those outbreaks.
QUESTION:
Are we to interpret what you're saying today that you are now open to offering Victoria more assistance as this lockdown enters its second week?
JOSH FRYDENBERG:
Again, Chris, I want to speak to the Treasurer first, I want to understand what his plans are for support through the state, he has already announced his first package, our health officials want to understand the various reasons and the thinking behind it because in the snippets that I have seen, some students are going back to school, but not all of the students are going back to school. But I tell you, as a Victorian, it has been devastating for our state. If you take the period, Chris, since the end of that first national lockdown, and now this number will be longer after today's announcement, but Victorians have been subject to 140 days of lockdowns, if you take stage three and stage four, whereas the average across the other states is just six days. And that is an incredible contrast. To know that in New South Wales, as I understand it, the students have not been at school for, I think it was 29 days, in Victoria some students have not been in school for 21 weeks. This has been a terrible time in Victoria over the course of this pandemic, much more so in terms of what Victorians have gone through than other states. So I will listen to Tim Pallas, the Prime Minister will speak to James Merlino, and our health officials will talk, and we will consider what they say.
QUESTION:
Treasurer, talking about concern about children, you had figures this week showing the median house price in Melbourne is now $908,000, it is $1.2 million in Sydney, this has been contributed by ultralow interest rates and government own policy, can you ever see your children being able to afford to live near their dad, near their mum and dad in Melbourne, has the housing market got so out of whack that future generations are being priced out of our capitals?
JOSH FRYDENBERG:
Shane, it is not an Australian phenomenon, the rising house prices you see that in other like countries, and it’s, particularly right now, a function of ultra‑low interest rates. Historically low interest rates. What I am pleased is there is a larger number of first home buyers in the market today than there have been for more than a decade, and programs like HomeBuilder have been very helpful in getting families and first home buyers into the market. Indeed, more than 130,000 applications for HomeBuilder have been made, and is expected to generate more than $30 billion of residential housing related economic activity. The other thing that is pleasing is that when you look at the homeloan data from the banks, it is predominantly owner occupiers who are making the investments in the housing market. That might not always be the case, I know that the prudential regulators are watching investor activity in the housing market, but various programs that the Federal Government and the state governments have put in place are helping to get more people in the market. In the Budget, we obviously put a real focus on homeownership, for example, in terms of the downsizer contributions that people can put into super, we reduced the eligible ability age threshold from 65 to 60, so that people can downsize their home and free up more of the housing stock for younger people. We obviously had the home loan guarantee schemes, which are going to enable people to get into the housing market with small deposits, in the case of single parents, as low as 2 per cent.
QUESTION:
That sort of policy increases prices. I'm thinking about your kids, will they ever be able to afford to buy a place near their parents?
JOSH FRYDENBERG:
Again, we have seen a rise in housing prices, but I think that the measures that we have introduced will enable more first home buyers to get in the market. Obviously, there is both a supply and demand side to this equation. We don't have the levers, Shane, as you know around supply as much of the states do, in terms of land release. But yes, house prices have got up, but as you would know, household assets tend to be around five times household debt, so Australians have a capacity to meet these higher obligations, but with interest rates at historic lows, we also see more people get into the housing market for the first time. Thank you.