5 September 2018
Transcript - #2018005, 2018

Interview with Ross Greenwood, Money News, Macquarie Radio

Subjects: National Accounts; economic growth; leadership; jobs; household savings; and wages.

ROSS GREENWOOD:

Many thanks for your time, Josh.

JOSH FRYDENBERG:

Nice to be with you, Ross.

ROSS GREENWOOD:

I should say, many thanks for your time, Treasurer. Just, let's go through the National Accounts. You would be pleased, absolutely delighted, I would imagine at the rate of economic growth in Australia today.

JOSH FRYDENBERG:

I think all Australians should be delighted with the news tonight because what it did show today with the National Accounts for the June quarter is that through the year real GDP growth is up 3.4 per cent, which is the fastest since 2012, which as you know was during the height of the mining boom.

It is more than any G7 country, it's far ahead of the OECD average of 2 ½ per cent per year and it was above median market expectations.

ROSS GREENWOOD:

With all of that Josh, why did your political party throw out your Prime Minister last week? Because normally when you throw out a Prime Minister, the economy is not doing well and you are going to lose an election because of the under-performance of the economy and because there are no jobs being created. You've got exactly the opposite situation right now.

JOSH FRYDENBERG:

We have always made clear through the Prime Ministership of Tony Abbott, Malcolm Turnbull and now Scott Morrison that the Coalition has been the party to deliver record jobs growth.

We have had over 1 million jobs being created and over the last year, 330,000 new jobs have been created. The participation rate is near record levels. More women, more seniors and more younger Australians, importantly, are coming into the workforce.

ROSS GREENWOOD:

So should I imply from that that the leader is actually not important in the whole scheme of things so long as the Coalition's policies are in place?

JOSH FRYDENBERG:

Of course the leader is important and of course the party is important and of course the philosophy is important, Ross. And the Liberal Party's philosophy is about lowering your taxes, taking government out of the lives of ordinary Australians and putting in place the nation building infrastructure that can increase people's mobility.

ROSS GREENWOOD:

If that were true, you wouldn't have the disunity in your own party, which led ultimately to the leadership challenge last week.

JOSH FRYDENBERG:

Of course the recent weeks have been ones that we would not seek to repeat and as you know, Australian politics, whether it is a Labor or a Liberal government has seen these leadership challenges and changes.

But we have drawn a line under that and our focus is on delivering for the Australian people. They are our masters and my job is to create their jobs and that is what I will do.

ROSS GREENWOOD:

Is this as good as it gets, Josh, for the Australian economy? I look down the track and I know that these numbers are looking backwards. They have been brilliant up until now.

Coming in front of us, I can see the impact of the drought that will probably hit in the next six months or so, especially when there are no crops in the ground in many parts of New South Wales and Queensland. Right now, we see farmers actually selling off stock – particularly lamb and sheep which are at record levels right now. But then that means they have got to restock into the future.

And when I look forward, I also see a slowdown in housing construction, one of the biggest employers in Australia, so therefore, consequentially, a slowdown in retail sales because when people buy new houses, they generally also buy furniture and fridges and all that type of thing. So what I would ask you is as Treasurer, do you believe this is as good as it gets?

JOSH FRYDENBERG:

No, I do believe we can continue the momentum. This reflects the fundamentals of the Australian economy, because what was so important about these numbers was that the growth was broadly based.

We saw increases in household consumption. We saw increases in dwelling investment. We saw increases in public final demand, which is a euphemism for government investment – like in infrastructure. And we have also seen exports continue to grow.

ROSS GREENWOOD:

Sure but that is looking backwards. Now look forwards for me because you know the drought is going to have an impact, you know that the slowdown in home building ultimately is going to have an impact on the economy.

JOSH FRYDENBERG:

Let's take both those issues separately. Firstly the drought – you are right that it is devastating. And we have seen some evidence of de-stocking but at the same time the Government is doing everything to ensure that these people in the drought-stricken parts of Queensland and New South Wales get the support, and that the communities get the support that they need.

We are making available more loans, counselling, tax breaks – a whole series of initiatives that are designed to help them through this difficult period.

When it comes to dwelling investment, what these numbers do show was that dwelling investment expanded by about 1.7 per cent in the June quarter and 3.8 per cent higher through the year and that there is a pipeline of dwelling construction that will continue to play out.

ROSS GREENWOOD:

Treasurer, one thing that really worries me about these National Accounts, good though they are, now don't get me wrong, I cannot criticise the fact that Australia's economy is growing faster than both the Government, the Budget and also the Reserve Bank had forecast…

JOSH FRYDENBERG:

And the rest of the world.

ROSS GREENWOOD:

And indeed. So, kudos for that, but on the other side…

JOSH FRYDENBERG:

It's not an accident either, Ross. So, don't take this for granted. It's really important your listeners understand that governments can make a difference here, they can set the strategy and the tone and the framework which allows private sector companies to invest and to grow.

ROSS GREENWOOD:

Okay, but households savings are right now at an eleven year low, so households during the aftermath of the Global Financial Crisis were saving between at eight and ten per cent of their incomes, are now saving at just one per cent of the their incomes. Their wages have been squeezed, their prices have been going up, they don't feel the wealth that the country is seeing right now and as a result of this you can see it in that household savings.

It could very well be in the future that they're biting into their income, that they're actually spending more than they're earning. That cannot be a healthy thing for Australian households or indeed for their appetite for the political climate that we have now with the government.

JOSH FRYDENBERG:

Well, I'll say a couple of things to that. If you actually look at the Howard years and the household saving ratio, there are actually negative numbers during that period, so even though the economy was growing strongly, people weren't saving.

Now, as you rightly point out, the saving ratio has come down dramatically from where it was at the time of the GFC. But this is actually reflecting the fact that we have record low interest rates and that the intended effect of having these record low interest rates is that people can spend with confidence.

And if you look at the household consumption numbers, Ross, they're spending on a range of areas. They're spending on recreation, on culture, on food and that is a good thing for the economy and reflects their consumer confidence.

ROSS GREENWOOD:

But, at some point, you're going to have to try to find ways to get wages to grow because otherwise they're not going to be so happy when they realise they're going to have to cut into their savings to support their lifestyle.

JOSH FRYDENBERG:

Well, I recognise that real wages growth has been slow and the Reserve Bank put out a statement yesterday, as you know, they kept the cash rate at 1.5 per cent where it has been for some time

But in that statement they pointed to the fact unemployment will continue to come down, that they are starting to see a tighter labour market in some sectors of the economy and that as more employment comes on board then it will eat into the spare capacity in the market and that's when we'll start to see real wages grow. And that is something that the Government is working towards.

ROSS GREENWOOD:

Just a final thing for you, Treasurer, that is what age do you imagine you'll be when you retire?

JOSH FRYDENBERG:

Well, obviously, I'll be a lot older than I am today!

ROSS GREENWOOD:

I understand that, but have you got a number for me? What are you thinking? Are you thinking about, what?

JOSH FRYDENBERG:

Well, that would be a stab in the dark.

ROSS GREENWOOD:

Go on, have a stab in the dark! How long have you got in you?

JOSH FRYDENBERG:

Well, put it this way. My father's a surgeon and he is working into his 70s. My mother too, who is a professional, she's a psychologist, she too continues to work hard. So, I think, it depends on the individual. I think people should be entitled to retire, provided they put their savings, as they become a senior.

But at the same time, for those who want to work, we need to create conditions where they can. And in Scott Morrison's last budget, he did make an allowance for new opportunities for people to add to their income without losing their pension.

ROSS GREENWOOD:

You've got it in you to be a federal politician until you're in your 70s?

JOSH FRYDENBERG:

Well, certainly some people have!

ROSS GREENWOOD:

But, you're not saying yourself, are you?

JOSH FRYDENBERG:

I'm loving the job, regardless of the portfolio, this is certainly an exciting one, Ross, and one that you know a lot about – Treasury – it's very important to the economy. I'm not thinking I'll be a Treasurer into my 60s, but I certainly hoping I can do it for some time yet.