JOSH FRYDENBERG:
Tonight's budget demonstrates Australia's world leading economic recovery. Growth is higher, unemployment is lower, wages are strengthening. Australia's economic rebound has been nothing short of remarkable. It's been ahead of all major advanced economies.
Unemployment is forecast to hit 3.75 per cent by the September quarter and be sustained at that level. This would be the lowest unemployment rate in 50 years. Wages have been upgraded in every year of the forecast and while inflation has picked up off the back of supply chain disruptions and Ukraine, it remains well below that of other countries and is expected to moderate in years ahead.
Risks to the outlook remain, including the pandemic, but Australia is well placed to manage those risks. The clear fiscal strategy that we put in place to avoid a scarring of the labour market, which was Australia's experience during the previous recessions of the 80s and the 90s has worked. Our budget has turned the corner. In this budget, we are banking the dividend of a stronger recovery. With the deficit more than halving as a share of the economy across the forward estimates and the bottom line improving by more than $100 billion. Gross debt peaks at more than five percentage points lower and four years earlier than previously forecast. In this budget, we're delivering temporary, targeted and responsible cost of living relief for Australians now. Cutting fuel excise in half for six months, helping Australian families and small businesses. A $250 cost of living payment paid automatically to six million Australians on income support, including pensioners, veterans, carers and concession cardholders. A $420 cost of living boost to some 10 million working Australians, low and middle income earners in particular, with that payment being made through the tax system, the Tax Office. We're making medicines more affordable for Australian concession and non-concession cardholders who regularly use scripts. This is a permanent change.
In this budget we've also set out our plan, a long term plan to create more jobs with further investments in skills, small businesses, our regions, energy, infrastructure, the digital economy. In this budget, we're also guaranteeing the essential services that Australians rely on with significant new investments, in particular, in women's safety. And finally in this budget, there's more spending on defense and national security, including the biggest ever investment in Australia's defensive and offensive cyber capabilities.
When I delivered my first budget, about three years ago to this very day, no one could have foreseen COVID delivering the biggest economic shock to Australia since the Great Depression. And now we face a very real threat to the international rules based order by Russia's aggression in Ukraine. Australians can be very proud of what they have achieved together over the last couple of years through the pandemic. And through the economic plan that we outlined tonight, in the budget, they can be very confident about their future as well.
SIMON BIRMINGHAM:
Thanks, Josh. The hard work of Australians, the resilience of Australians and the policies across Australia have delivered some of the best outcomes economically for Australia compared with the rest of the world. But we remain in very uncertain times. The aftershocks of COVID are real. The disruptions caused by Russia's war on Ukraine are real. The impact that's having in terms of global pressures on inflation and elsewhere, are things that must be carefully managed. And so in the budget that we are delivering today, it is a budget that delivers the dividends of the success, successful management of Australia’s [inaudible] policy sense, and in the hard work of Australians from the last couple of years. But it seeks to apply those dividends in a careful, cautious and responsible way to set Australia up for the future and to help Australians with the challenges of the immediate term. The dividends for Australia include seeing the budget bottom line $100 billion better off; better off because payments by government are down 6.2 per cent in 2021-22 and 4.9 per cent in 2022-23. These are the largest real decreases in government payments in more than 50 years. We said that COVID supports would be temporary and targeted and we've made sure they have been temporary and targeted and we've made sure that we withdraw them in the appropriate way. We see that revenue is up strongly thanks to a stronger economy, but most overwhelmingly thanks to a stronger labour market delivering the benefits of sustained revenue gains right throughout the forward estimates. Crucially that's enabling deficits to be substantially lower. Deficits will fall from 3.5 per cent of GDP through the forward estimates to 1.6 per cent of GDP and over the medium term to 0.7 per cent of GDP. That is a halving of previous projections in relation to the size of deficits. It means the gross debt and net debt are lower in each year of the forward estimates and across the medium term. We are rebuilding Australia's capacity to respond to the challenges of the future. The strength of the Australian economy in the labour market is most crucial to that. Unemployment standing at 3.75 per cent by the end of the year. That will be the lowest unemployment rate in my lifetime, almost in Josh's lifetime. It will be a demonstration, as it already is at four per cent, of the fact that our strong labour market is not only making the difference to the budget bottom line, but making a difference to the lives and opportunities of Australians. The dividends of a stronger economy allow us to deliver a stronger budget bottom line, but also for responsible investment in targeted, temporary cost of living support to respond to the spikes we're seeing in global oil prices and the pressures that's applying on households. Support for low and middle income earners, support for payment recipients, support through a reduced petrol excise that doesn't just help households, but helps across other parts of the economy, support through cheaper access to medicines. The long term economic plan, continued investment in infrastructure and small business, in our regions, in skills, in the digital economy, manufacturing, energy security and achieving net zero emissions, all while still investing in the essential services. The NDIS fully funded through realising the difficult decisions that we took around accepting the actuarial reports on the NDIS over last year. Additional funding in aged care, building on last year's budget. In mental health, building on last year's budget, continued strong funding for education, social safety net increases and flows through the States and territories of increased GST funding, untied funds for them to invest in their essential services, whilst also helping to ensure that Australians can get ahead from those seeking to buy their first home to self funded retirees who again share in the dividends of the stronger economy. And perhaps most notably in these globally uncertain times, the national security investment to keep Australians safe and secure. This budget demonstrates that Australians can rely on the Liberal and National Parties in government to keep our economy strong, to keep them safe in their jobs and to keep our nation safe in the most uncertain world.
JOURNALIST:
Treasurer, you're going to say in your speech tonight, this is not a time to change course. This is a time to stick to the plan. The $250 payments and also the prices at the bowser are going to be felt in April during an election campaign. Is this just a pre-election spendathon budget? And also on the iron ore price; today it was trading at US$152 a tonne. You're anticipating in the budget that by the September quarter it'll be down to US$55 a tonne. Is that just more than just being conservative? Are you not being responsible in regards to the forecast there?
JOSH FRYDENBERG:
Well a couple of points to make. Firstly, in relation to the LMITO at over $4 billion is higher than what the one and a half billion dollar, $250 payment is. That's not provided till after 1 July when people put in their tax returns and unless you know different, the election is expected before then. So I think that's a very important point to note. We've used the existing systems. That's why we went with LMITO, through the tax system where low and middle income earners, up to $126,000 can get $420 on there, up to $1,080 today, which can see a two income family $3,000 better off from the 1st of July. We went with the $250 payment through that existing system, with the social services because they know who they are, those 6 million people, the pensioners, the veterans, the carers, those concessions card holders, the system can provide for that money to go out the door, and that should be there in a matter of weeks. On the issue of the iron ore price, we have historically been conservative, but the other side of politics was not when it comes to baking in long term commodity price assumptions into their budget numbers. You remember Wayne Swan at that time, said iron ore well above $100 was baking in those long term numbers. We have not. We have been conservative, not just with iron ore, which, as you say, is trading at those high numbers. We've factored in at $55, but also metallurgical and thermal coal, which are at record highs today. You've got metallurgical coal, at over $600, thermal coal at $300. We have them in the budget at $130 and $60 respectively. If these high prices stay in place for the next six months, as they are, that will be worth an additional $30 billion to the budget bottom line. But we haven't hypothecated expenditure based on that revenue. And I'll tell you why; it's because the world is very uncertain right now. One of the main economic consequences of what is happening in Ukraine has been the disruption to commodity prices. We've seen the price of a barrel of oil up 50 per cent since the start of the year, we've seen wheat prices up by 40 per cent since Russia invaded Ukraine and we've seen the price of these energy related commodities like coal go up [indistinct]. That is not a situation that can occur long term. So that's why we've been prudent. And as you know, Lanai, we update our forecast, not just a budget, but also at MYEFO, which is at the end of the year.
JOURNALIST:
Just on the fuel excise Treasurer. We've got economists who say it's a bad idea. We've got motoring organisations that think it won't be passed on to consumers. So isn't it an irresponsible measure simply to buy votes ahead of the federal election?
JOSH FRYDENBERG:
And you've got Australian families who will think it's a good idea to pay less at the bowser.
JOURNALIST:
Are the economists wrong?
JOSH FRYDENBERG:
Well, in terms of economists, there's always a variety of opinions. But what I can tell you about this cut for the fuel excise, it's actually going to put downward pressure on inflation. And according to Treasury, the higher fuel prices will lift inflation by a full percentage point, but the cut to the fuel excise will take that down by a quarter of percentage point. And that's factored in to our numbers. But, David, with the price per litre of fuel above $2 today, that's putting significant pressure on family budgets and these costs are non negotiable for many team workers. So this is a temporary measure. It's only there for six months in the legislation. It will be very clear that it ends at six months, but it will provide cost of living relief now. And I do also point out to you that our cousins across the ditch in New Zealand provided a 25 cents a litre reduction in fuel. They did that for three months. In France, in Ireland, in other countries, they have also reduced the fuel excise or fuel taxes as a result of the pressure families are facing.
JOURNALIST:
Just on the cost of living package, the it’s about $8.5 billion..
JOSH FRYDENBERG:
8.6…
JOURNALIST:
[Inaudible], how confident are you that it’s not [inaudible] inflation [inaudible] in a matter of months?
JOSH FRYDENBERG:
Well, the key is we've factored in, Treasury have factored in the measures in this budget to their forecast, and you can see that inflation is at four and a quarter in 21-22, and then it comes down to three and the wages price index is sitting at three and a quarter which is above inflation in 22-23 and then they've got inflation coming down after that. So that's Treasury's best estimates and they do work with the RBA ahead of finalising their own forecasts. In relation to how are you sure it's going to be passed on? Well, you may not see it yet, it's under embargo but the ACCC are putting out a release, and I spoke to the Chair of the ACCC, the head of the ACCC, Gina Cass‑Gottlieb. They made it very clear, they have a petrol monitoring taskforce within the ACCC and they have made it very clear that they will be seeking to ensure that retailers pass on these lower fuel costs and they do not engage in misleading and deceptive conduct. And in the release, the ACCC says "we will contact petrol retailers to set out our clear expectations that the savings are passed on to consumers and advise them that we will be monitoring their margins. We will also continue to inform consumers of retail behaviour. If retailers make false or misleading statements to consumers that they have passed on the savings when they have not, the ACCC will not hesitate to take appropriate enforcement action". But Patricia, it will take, as I say in my speech tonight, a couple of weeks for these reductions to pass through, because, of course, it depends on how quickly retailers fill their tanks. If you're in a regional area, you may fill your tanks less often than if you're in a city petrol station. So obviously, that will work its way through the system but the measure is in place for six months.
JOURNALIST:
Can I just ask about the funding for the regions. You’ve got a significant $7 billion fund for hubs, another $2 billion for the regional accelerator program. Can I just ask how much of that funding was guaranteed to the Nationals as part of the net zero negotiations and how it’s economically justified?
JOSH FRYDENBERG:
Sure, Sarah. Well, the first thing is the regions are a priority for the Coalition. And so we are agreed, Liberals and Nationals, that our regions are hubs for economic growth, for jobs, for investment, and particularly for benefiting from the growing middle class in our regions. So we have chosen in these four areas in the Northern Territory, Queensland, Pilbara and the Hunter, areas which are linked to major ports, which in the case of Darwin is proximate to the markets of Asia, which can use their natural advantages to capitalise on further investment. So it's part of our plan, which is the most important thing. Liberals and Nationals agreeing that this is a priority for jobs. It's an exciting new frontier for Australia, and it's about where we're going to derive that productivity and that growth. The Pilbara is obviously known for its iron ore, but what we're looking at is upgrading the Port of Dampier and other opportunities to capitalise on this. The regional accelerator program, the $2 billion for that; they are using existing programs. So you might have seen in the breakdown, the export market development brands, for example, the modern manufacturing initiative, the recycling initiative. We're putting more money into university infrastructure in our regions. There's a lot in this budget for the regions because we see that as an area of growth. And one of the permanent structural shifts for our economy post COVID is more people are moving to the regions. You're seeing that in property prices, for example, in the regions, people want a bigger land and house package, and they want that peace of mind, they don't want to be locked down in the cities. And so people are moving to the regions. This is a great opportunity. So there's a big $1.3 billion telecommunications package in the region. There's a big set of health measures in the region, for example, access to MRIs. There's obviously water infrastructure programs there, some of which are going to have to be done in conjunction with the states. Then there's the transport stuff. And then, of course, you've got the regional accelerators. So it's part of a deal with the Australian people to deliver more jobs and more growth in our region.
SIMON BIRMINGHAM:
Adding briefly to that one, it's important to realise that around 67 per cent of Australia's exports are generated out of regional Australia. Around 82 per cent of Australia's goods exports are generated out of regional Australia. Regional Australia is a wealth generator for all Australians. And so these investments, focussed as they are on complementing our Agriculture 2030 Strategy to lift agricultural exports by investing in water, infrastructure and security, by complementing our strategy in relation to development of hydrogen industries, ports and hubs around the country. They're all about ensuring that regional Australia, which we rely upon so much at present for wealth generation in Australia has every opportunity to continue to be a big and a growing wealth generator into the future.
JOURNALIST:
So the jobless rate is expected to hit a 50-year low at 3.75 per cent later this year and yet in real terms, wages are only set to rise by a quarter of a percent - it gradually rises to one per cent in a few years time. Do you acknowledge now that a low jobless rate doesn’t necessarily equate to higher wages and what is in your budget that’s actually going to give workers more than a one per cent pay rise in three years time?
JOSH FRYDENBERG:
A couple of points in response. The wages price index is one indicator of earnings, another is called AENA which is in the national accounts and that was above 3 per cent in the December quarter. And in these documents you will see that Treasury is expecting that broader earnings indicator to be at five per cent, which is above inflation by the end of the June quarter. So that effectively takes into account people moving within the workforce, people getting more promotions and more payments. And so that's a broader measure which does indicate there is movement. But as you also can see in the numbers that we print, inflation which has been spiked by international factors, and I want to emphasise that, the events in the Ukraine have seen, as I said, not only wheat prices going up, COVID has disrupted supply chains so much that shipping costs are five times today what they were pre-pandemic. That passes through as well to higher cost of living. But what Treasury have also updated is what the economists call the NAIRU and they have updated that at four and a quarter percent. So if we drive down the unemployment rate, we will see upward pressure on wages.
JOURNALIST:
[Inaudible]
JOSH FRYDENBERG:
Well the comparison that we've outlined here is the wages price index versues inflation. And while in this year inflation is above the wages price index, that equation changes in 22-23 and beyond.
JOURNALIST:
Treasurer, the challenge in offering cost of living relief is that it's often perceived by the public as being a drop in the ocean. We've got things like allowing more people to buy a house with a 5 pr cent deposit but that's offset by the fact that in many regions houses have gone up by 40 per cent. You've got pensioners getting $250, their grocery bill has gone up on average four per cent. Is this way of targeting relief that you have done in this budget really an acknowledgment that there's not actually that much government can do to mitigate cost of living pressures if the wages aren't going up?
JOSH FRYDENBERG:
There's a few things to mention there. These are not the only measures that we take to reduce the pressures and cost. So the measures we took in last year's budget $1.7 billion for childcare, focusing on particularly with families with two or more children in child care see substantial benefit for some 250,000 families. The measures that we have taken to drive down electricity prices by 8 per cent in the last two years, remembering they doubled under Labor, that's also very much addressing cost of living pressure. And then of course we've delivered $40 billion of tax relief since the beginning of the pandemic, that's more money into people's pockets. And as I said, if you're a middle income earning family and you now receive between $48,000 and $90,000 in your salary, you will get $3,000 as a household when you put your tax return in from the 1 July. And if you run two cars, you'll be, as a result of this measure in cutting the fuel excise, $30 a week better off or $700 for the six months. The other point I've mentioned is around indexation, and there's an estimates variation of around $10 billion for the five payments that have been made as a result of high inflation. So if you're a single pensioner, you've received an extra $20 a fortnight from the 20th of March, and over the next six months, that's equivalent just over $260. And so that combination of the $250 payment is meaning pensioners are receiving over $500. So I don't say all of that to in any way not focus on the cost of living pressures. They are very real, and that's why we take my actions tonight. But we've also put in place a series of measures that are designed to help those families.
JOURNALIST:
Treasurer, on regional health, you say that you're going to invest $100 million dollars over four years to increase the number of people studying medicine at regional universities. How are you going to ensure or incentivise those people once they've finished studying to actually stay in the regions?
SIMON BIRMINGHAM:
We took a measure in MYEFO last year which is all about helping to encourage medical practitioners, once they're working in the regions, to stay in the regions because of the payment differentiations they receive under the Medicare benefit schedule. So the investment we're making here in relation to getting more young regional Australians trained as doctors in regional university settings, having those placement experiences in regional medical settings, and then going to work as doctors in regional communities, is building on a series of initiatives, including changing those incentive arrangements to keep them there and to provide the mechanisms to encourage people. We know this is a real challenge that regional communities face. And if a local town can't hold on to a local doctor, then it becomes harder to get other people to move there and to live in those communities. So it's why we've continued to invest and respond there. But the extra medical places have also built on the measures we took in relation to the Murray Darling Medical School a number of years ago, which we've started to see signs of success. And that's why we want to expand that, to help set regional Australia better up for a medical workforce that will stay there in the future.
JOURNALIST:
Can you talk to the overall health funding decline over the forward estimates, isn’t COVID and indeed our ageing populations still at considerable risk and secondly why is it so hard to say the phrase "climate change" in the budget papers?
JOSH FRYDENBERG:
Well it's not. Firstly, in my speech, I mentioned climate change, I mentioned net zero emissions, and that is a very strong [indistinct] by our government. And there's an energy transition taking place, and there are some $22 billion that is being invested by our government to leverage some $80 billion plus of private sector investment in that technology and the transition that we have laid out; hydrogen hubs, for example, clean hydrogen, carbon capture and storage, large scale low cost solar are all things that we're investing in. Climate change is a very important global issue and we are responding with significant investments. In relation to health, we've put tens of billions of dollars of extra funding into health through COVID and everything from testing and treatments and vaccines and PPE and working with the GPs and working with the pathologists and ensuring that there’s a surge workforce from the private hospital system to the public hospital system. So actually, we're spending more money on health and hospitals, and I'm sure Simon on expenditures, Simon might want to reference that. But in fact, what has occurred under us on the health side is a record spend, and I just want to point out it's also in mental health as well. There was a more than $2 billion package in last year's budget. We’ve built on that in this year's budget. More HeadSpace sites, more services, more digital delivered services, and of course, there's also more drugs that we’re listing on the PBS which are very important.
SIMON BIRMINGHAM:
Very briefly in that you've got some competing factors at play there. As I said in my introductory remarks, we are being true to our commitments that COVID measures would be temporary as we said they would be. That applies across areas of health response as well as the economic response, which does have some minor impacts in relation to payments through to the States and territories. But at the same time, all of the States are receiving increased GST dividends, untied funding as a result of a stronger economy, giving them greater ability to respond in relation to funding of their hospitals, their schools, their local infrastructure or other priorities they identify. Our funding in relation to hospitals remains, of course, demand driven in relation to responsive to the services that are provided through hospitals and those systems. Our additional investments in other areas of health, in primary health care, in mental health, in aged care, these all ensure that as a Commonwealth, the trajectory of aggregate health spending is only going up. And of course, the focus on that has to make sure that we get the effectiveness and efficiency in all of those areas, particularly in terms of areas such as outcomes in aged care, as we redesign home care places into the future, as recommended by the Royal Commission.
JOURNALIST:
Treasurer, do you believe that your own state of Victoria is being dudded on the GST? And if not, can you explain why?
JOSH FRYDENBERG:
Well, certainly not. In fact, there's $11 billion of increased GST payments that have been made in this budget, and obviously GST is flowing in higher rates to Victoria. Victoria raises an issue about their own COVID spin during the pandemic. What I have been very clear about is that the GST arrangements are set and that means that there will be a review at the appropriate time by the Productivity Commission, and until that time, these arrangements remain in place. That is the best way for the GST to be handled. But in terms of Victoria's take from the GST, these budget papers show that it increased.
JOURNALIST:
[Indistinct] almost $10 billion in cyber capabilities over ten years. Do you have any more detail or concrete examples of what those offensive and defensive capabilities are actually going to look like?
JOSH FRYDENBERG:
Well, obviously this is aptly named REDSPICE, this program, but it's a recognition of threats that Australia faces. It's not the first and it won't be the last investment that we make in Australia's cyber capabilities. We've been rolling out already substantial investments in this regard, but this is a game changer. This takes it to the next level. This is everything from computer programmers and software engineers to data analysts to the hardware itself. As you know, we've worked hard to secure those partnerships whether it's through the Quad or through the AUKUS arrangement and we need to ensure that we have the latest technology, the best technology to keep Australians safe. And that includes being able to equip ourselves adequately within the cyber realm. And as I mentioned, obviously of 1900 additional people being in work.