QUESTION:
(Inaudible) gives us a lot of confidence about where the Government is taking the economy and also the support the economy is going to need over the coming months and years. The measures you announced with respect to insolvency changes are going to be pretty key for a lot of small businesses in coming months, particularly as they face the ending of payment deferrals. In some cases, we have businesses that are facing deferrals with respect to payroll tax. Now, payroll tax seems to make little sense at a time when we were looking to grow jobs in the economy. So, I just want to ask with respect to the Council on Federal Financial Relations which you chair, when is the Council on Federal Financial Relations going to look at how we can reduce the burden of payroll taxes for the many businesses around Australia that currently are facing problems with employing more people?
JOSH FRYDENBERG:
Payroll tax is the largest source of revenue for state coffers, more than $25 billion a year. If you look at my state of Victoria, more than a quarter of their revenue is coming from payroll tax. In the Northern Territory, it is nearly half. Different states have payroll tax at different levels. So again, in Victoria it cuts in at around $650,000 whereas in New South Wales it cuts in at a higher rate, around $900,000 and I think it is going up to around $1 million in terms of the payroll. Now, some states have waived payroll tax obligations in the near-term, some have deferred those obligations. We obviously would prefer if states waived as opposed to deferred that impost on business. But you would be familiar with what the Governor of the Reserve Bank said recently about the need for the states and the capacity of the states to provide more economic support in this crisis. He nominated around $40 billion or around 2 per cent of GDP, over the next couple of years from the states. So I think there is a real opportunity here on payroll tax for the states to lock-in some permanent reforms which reduces the cost of doing business because the payroll tax for example, in Victoria, could equate to about $3,000 per worker. It is certainly going to be a drag on employment into the future. So, there is an opportunity not just to provide relief in the short-term but some structural reform at the state level to get more people back. Our focus because we don't operate payroll tax, that’s a state tax, our focus on backing small business has as you know been reducing the company tax rate which will come down to 25 cents in the dollar next year from 26 today as well as the instant asset write off which has provided and Guy Debelle referenced this in his speech the other day, which has supported investment by small businesses. So we’re focused on tax incentives and cutting the company tax rates for businesses. It would be welcome if the states did some more of the heavy lifting on the payroll tax.
QUESTION:
Treasurer, you talk about the phase one of the fiscal strategy. It seems like in this phase there is still a lot of government support for the economy. How long do you think this is going to last? How long before we can move on to phase two of the strategy?
JOSH FRYDENBERG:
Well I nominated the unemployment rate being substantially below six per cent as being a turning point to move from phase one to two. Obviously we’ll print the numbers in the Budget as to where the trajectory is on unemployment. I welcome the fact it came down to 6.8 per cent over the course of the last month but you would’ve heard me say in the speech that we expect the unemployment rate still to rise before the end of the year. Not as high as what Treasury was first forecasting at ten per cent, but to increase nevertheless. This first phase of the new fiscal strategy will provide this opportunity for the automatic stabilisers to continue to operate. And that’s really important because if we lifted taxes to chase the lost revenue, as a result of these automatic stabilisers at work, we would be hurting the recovery. If we cut essential services to make up for the increased payments that are coming from more people on welfare then we would be hurting our recovery. So our focus is allowing those automatic stabilisers to work, maintaining that targeted support, the temporary support, where appropriate to do so, and some of it may be industry specific for example what we’ve done with HomeBuilder in the housing sector. But we're also focused on those structural reforms and today I announced a very significant one and tomorrow there will be another significant structural reform which doesn't hit the budget bottom line but which actually improves the economy and strengthens the economy. It’s those supply-side reforms, which the head of the Productivity Commission Michael Brennan was talking about just yesterday. Industrial relations are another element to those supply-side reforms. They don't cost the taxpayer, but they deliver for the taxpayer. So that’s what we’re focusing on. So we believe that this first phase of the fiscal strategy will be very supportive of getting more people back into jobs. You get more people into jobs, you grow the economy and you therefore improve your Budget position.
QUESTION:
Thanks, Treasurer. John Kehoe from the Financial Review. You talk about moving from phase one to phase two once the unemployment rate is comfortably below 6 per cent, that’s obviously not going to happen in the next 6, 12, probably even 18 months. Will the Budget envisage that point being reached within the four year forward estimates period?
JOSH FRYDENBERG:
Again I’m not going to pre-empt John what numbers will be in the documents for you to read in the lock-up in less than two weeks’ time. But we will print those numbers, and it will indicate, obviously, the trajectory on employment.
QUESTION:
And just a supplementary there on the debt goal, the nominal value of gross debt is probably likely to hit a trillion dollars or exceed it. Am I right in interpreting that actually, your focus is not going to be on reducing the absolute dollar level of debt in the medium, but it’s actually just going to be to reduce the debt to GDP ratio?
JOSH FRYDENBERG:
Again, as you know, I laid this also out in an earlier Press Club speech, which is, if you can achieve trend growth, which is about two and a half, to two and three quarter percent, with low interest rates, and with a balanced budget, you can reduce the proportion of debt to GDP about one and a half percentage points a year. Now ultimately, that will be the goal. But our focus right now is getting people into work. This is what the Budget is all about; getting people back to work, and you will see a range of measures designed to do that. We cushioned the blow, now we are boosting aggregate demand, and putting in place the structural reforms. Once you get into that position where people are back at work, and you’ve got the unemployment rate down below 6 per cent, you can start to move to the next stage of stabilising your fiscal position, and ultimately reducing debt to GDP as a proportion. If we were to increase taxes, or if we were to cut essential services, it would impede the recovery. It would be the wrong call at the wrong time.
QUESTION:
Just in regard to welfare payments and JobSeeker, Anne Ruston said the other week that this could be extended if needed, as much as needed, what does that mean? If unemployment remains at a certain level, further support of that nature will be considered? If state lockdowns happen, further support of that nature would be considered? What are the factors that will be taken into consideration for ongoing support beyond the end of the year?
JOSH FRYDENBERG:
Well, the first thing to say is that the JobSeeker rate, which effectively we doubled the safety net, is still going to remain at that elevated rate until the end of the year. The other change that we’ve introduced is that income free area, where we have allowed people to continue to work lifted to $300, allowed people to continue to work while not affecting their level of support under JobSeeker. We will reassess the situation closer to the end of the year - in early December. But the Prime Minister has signalled very clearly that we are leaning in to providing additional support for those who need it into next year but we’ll make that decision at that time.
QUESTION:
Colin Brinsden, AAP. You’re talking about the unemployment rate rising again. Is it a time to be trimming JobSeeker and JobKeeper? I know you’re extending them, I know you’re going to answer me with that. But, is it actually a time to be reducing that rate?
JOSH FRYDENBERG:
Well, it’s important to acknowledge that when we legislated, originally JobKeeper, it was for a 6-month period. We’re now extending it for another 6 months so it goes out to the end of March, and it does transition over time as JobSeeker does. We need to achieve labour market mobility. We need to encourage that through the economy. What you’ll see in the Budget is additional measures including additional spending measures, which are designed to get those people who are on unemployment benefits today into work. So we are continuing the elevated support for JobSeeker. We’ve continued JobKeeper for an extra six months - the single largest program - and in a state like Victoria, which has obviously been hit hardest with the stage 4 restrictions, some 60 per cent of the people who are on JobKeeper nationally will be from that one state alone. So we’ll continue to provide additional support to keep that focus on job creation across the economy.
QUESTION:
Just a follow up from the last one, Treasurer. We’ve seen government and business truly collaborating to solve problems through the COVID crisis, and look, we really hope that that model continues. As we come out of COVID, and to support a business-led recovery, we’ve got to get the regulations so that they don’t become a burden and friction in the system to prevent us getting the outcomes we want. So, relating to my previous question, with respect to the Council of Federal Financial Relations because I know this is on their agenda, in terms of deregulation, how do we create an environment where we can have this collaborative engagement between business and government that will support a business led recovery?
JOSH FRYDENBERG:
Well the National Cabinet and the Council on Federal Financial Relations which will be meeting this Friday, and it’s the meeting of state, territory treasurers and myself, and I chair that meeting, will again be prosecuting the case on deregulation. One of the important agreements that we’ve reached in recent weeks is around occupational licensing. I mean, currently there’s about 800 different sets of licences for manual trades alone and we are looking to harmonise occupational licensing across the country, which will be a very significant economic achievement and will help build labour market mobility between states. We’ve also been focusing through the National Cabinet process and as a Government on cutting green tape. And looking for faster approval processes and we’re working bilaterally, for example, with Western Australia on processes to do that. In terms of deregulation, we’ve made other changes, to help, to make it easier to start a business, other changes to help food exporters, through cutting their burden, today’s insolvency changes are again going to be a constructive, productive, supply side reform and we’re looking for other opportunities to cut red tape. So, one of the areas actually, which is again in the state remit which we’ve been discussing extensively among Treasurers, is around zoning and planning laws. Something that the Productivity Commission has indicated in the Shifting the Dial Report. Victoria has actually been a model in how they’ve reduced the number of commercial zones. Other states could learn from that experience. We’ve had the Productivity Commission brief the Treasurers on those very points.
QUESTION:
Treasurer, given the three P’s are going to be sustainably lower, productivity, participation and population, what role do you envisage for a highly skilled immigration program to negate some of that. We’ve already got a reasonably skilled migration program but going even further and targeting the best people from around the world to try and lift some of those three P’s.
JOSH FRYDENBERG:
Well, as you know, we’ve announced new initiatives to identify talent offshore and to bring it to Australia. Skilled migration will continue to be very much to Australia’s advantage and given some of the challenges globally in dealing with COVID-19 and Australia’s strong relative performance on both the health and the economic front, I think we will be a welcome destination for many people overseas to come here, to live, to work, to start a family. And we are very much focused on identifying those people and those opportunities, because that is in Australia’s interest. Immigration, I’m looking at Zed Seselja, I’m looking at myself, and probably nearly everyone here - either first, second generation migrants, certainly migrants at some point in time, but this country has been a welcome home for people right around the country. Whether they are coming through the humanitarian stream, the family reunion stream, or as skilled workers on skilled visas. There are great opportunities here in Australia, and we are focused, as a government, on lifting those opportunities and creating those opportunities for people right around the world.
QUESTION:
Just a follow up on the skilled migration question, there are calls from the Migration Council of Australia to focus in on how we can make it better for those who are already here. Not just attracting new talent, but there are concerns that when people are here it can be difficult to match up skills with jobs that they’re qualified for. Is this being looked at, is this going to be part of, sort of, future plans and considerations?
JOSH FRYDENBERG:
We have initiatives across the labour market, which are seeking to better link up employer and employee, alike, whether they are a skilled migrant or whether they are a long term Australian citizen. And that is one of the issues that we’re driving through the Skills Commission, and Adam Boyton, and the like, is trying to identify those areas of need and to be able to link up those employers and employees and have those training courses reflect those areas where there is going to be need in the economy. Last question.
QUESTION:
Treasurer, the PM has talked about how this Budget is going to have a full suite of measures about boosting aggregate demand, but then you’ve also talked about boosting productivity and the potential growth in the economy. So, is this Budget also going to be mainly aggregate demand focused? Are you going to try to blend the two in the policies that are revealed in the Budget?
JOSH FRYDENBERG:
Look, there’ll be elements of the Budget that go directly to aggregate demand, but they also, simultaneously, go to productivity. And the perfect example is infrastructure; by investing in the right infrastructure you can create jobs, but you can also get product from the paddock to the plate a lot quicker; you can move it from the farm to the export market. So, there is going to be a real focus in the Budget on regional Australia, a real focus in the Budget on infrastructure, and achieving that goal of boosting productivity. Labour market reform is important, tax incentives for business to invest is obviously something that we have highlighted, boosting Australia’s investment by business will be very important to our future productivity; so, we are absolutely working those options through in the context of the Budget, and, of course, the red tape reductions, are all designed to boost productivity. So, there will be a suite of measures designed to strengthen the economy, to get more people in work, and, by getting more people in work, we can improve our budget position. Thank you very much.