6 September 2018
Transcript - #2018008, 2018

Interview with Sabra Lane, AM, ABC Radio National

Subjects: National Accounts; economic growth; jobs; wages; pension age; and the Liberal Party.

SABRA LANE:

Josh Frydenberg, welcome to the program.

JOSH FRYDENBERG:

Good morning.

SABRA LANE:

If growth's going gangbusters, why are so many Australians not feeling so good?

JOSH FRYDENBERG:

Well, more than one million Australians are feeling better for having a job under the Coalition. We've seen record jobs growth, more than 400,000 jobs created last year, more women; more seniors; more young people coming into the work force. And these numbers released yesterday are very encouraging because what they show is that the Australian economy has good momentum. We are growing faster than any G7 country, much greater than the OECD average, and we've seen the best results since the mining boom in 2012.

SABRA LANE:

The figures, though, show that wage growth is flat, while business profits are booming, and consumers are also drawing down their savings which is quite a worry. If you add in the falling house prices, some people are really though feeling it quite differently - they're not feeling that boom.

JOSH FRYDENBERG:

I think the first thing to say is that you do want profitable businesses, because profitable businesses hire people and nine-out-of-ten Australians across the economy are employed in the private sector. And what we've seen in the numbers is household consumption is up, and that's a function of employment. Now you're right that wage growth has been low, the wages price index is up 2.1 per cent for the year and the compensation of employees – which is the overall wages and salary bill across the economy, is up 4.8 per cent. But what we need to ensure is that the labour market continues to tighten as more jobs are created, and the Reserve Bank thinks that will lead to a growth in real wages over time.

SABRA LANE:

But that growth will be very gradual.

JOSH FRYDENBERG:

Correct.

SABRA LANE:

The Reserve Bank Governor has warned it will be gradual. People can't expect that wages are going to go up to 3 per cent, can they?

JOSH FRYDENBERG:

Well the wages growth will be gradual, as you say according to the Reserve Bank, and will come as this spare capacity in the market is eaten into by more people being employed. We've seen around the world slow wages growth, so Australia is not particular in that, but what the Reserve Bank said in their statement on Monday when they kept the cash rate at 1 ½ per cent…

SABRA LANE:

Tuesday.

JOSH FRYDENBERG:

What they said on Tuesday when they kept the cash rate at 1 ½ per cent was that they are seeing wages growth in some sectors like the health sector.

SABRA LANE:

But yeah that wages growth, what should people expect? You look at the savings ratio - household savings ratio is now down to 1 per cent, its lowest level since, well, a long time really.

JOSH FRYDENBERG:

Well, we actually saw negative savings ratios in the Howard-Costello years when the economy was growing well, but you have to...

SABRA LANE:

Sure, but it's gone from 10 per cent in 2008 to 1 per cent now. People are dipping into those savings to help them spend.

JOSH FRYDENBERG:

But Sabra, the reason why it was so high in 2008 was because that was during the GFC and people weren't feeling confident about the economy. What we're now actually seeing is the product of these low interest rates, we're actually seeing their intended effect - namely that people are spending with confidence in the economy. Consumer confidence, business confidence are above 20-year historical averages and we're actually seeing people spend in a range of different areas. Twelve out of the 17 consumption categories were up, people were spending more on recreation, more on culture, more on food, as well as other essential items.

SABRA LANE:

When are workers going to receive a decent lift in their own income? When are they going to feel that "Ok, I feel like now I'm a benefit of this booming economy"?

JOSH FRYDENBERG:

Well Sabra, two points. Firstly, we're getting a stronger economy and we're particularly getting strong jobs growth and that's really, really important. For example, over the last year 95,000 young Australians found work. That's the best result in 30 years. But the other point is as this employment growth continues to take hold, we will eat into that spare capacity, we will see a tighter labour market - companies competing for labour, and that's where the Reserve Bank says that real wages will gradually increase.

SABRA LANE:

Many people listening to this this morning will be totally befuddled, thinking "if the good ship Australia is going so well, why did your party just toss the Captain overboard"?

JOSH FRYDENBERG:

Well, as you know, there are lots of reasons for leadership changes. I, for one, stuck with Malcolm Turnbull to the end. The reality is though, we've had five good years of economic management through the Tony Abbott leadership, through the Malcolm Turnbull leadership, and now through Scott Morrison's leadership, who was indeed the Treasurer and did a lot of the work that led to yesterday's numbers. The Coalition has an economic plan, and that plan is working – lower taxes for businesses…

SABRA LANE:

But do you concede that voters would be really confused? The economy is going so well, why did the Government tip your leader out?

JOSH FRYDENBERG:

Well, I think voters would be confused by what's gone on in Canberra over the last decade let alone what's happened during the Coalition years, what happened during the Labor years. And of course changing Prime Ministers is never good for the public's confidence in our parliamentary system. But what they do know is that the Coalition has a better economic plan than Bill Shorten, he will lift taxes by $200 billion dollars, he will eat into your retirement savings, he will hit your companies, he will hit your property, he will hit your income with higher taxes. We're reducing taxes, we've legislated it and that's a big difference - Scott Morrison will be leaving money in your pocket, Bill Shorten will be taking it out.

SABRA LANE:

Does your party need to change its rules to stop it from changing leaders so easily?

JOSH FRYDENBERG:

Well John Howard, who is a doyen of our party, rejected that idea when it was raised the other day.

SABRA LANE:

What about you?

JOSH FRYDENBERG:

My view is that of course the parliamentary party should always be determining, their leadership of the party - different to the Labor party where they involve the party membership. But we're right behind Scott Morrison. The next election, as he's indicated sometime next year, will be a real test between our economic plan and Labor's economic plan of high taxes.

SABRA LANE:

The Coalition announced four years ago that it would lift the pension age to 70-years, arguing that 1,000 people a week were becoming eligible for the pension, and the long-term reform was quote "essential and unavoidable". What happened to it being essential and unavoidable?

JOSH FRYDENBERG:

Well we couldn't get it through the Parliament, that's the first thing. This was one of the 2014-15 Budget initiatives we couldn't get through, and you could only do it with bi-partisan support. So, as you know the…

SABRA LANE:

So it's not essential and it is avoidable now?

JOSH FRYDENBERG:

Well as you know the pension age is being lifted to 67 and that was done with the support of the Labor Party. But our focus is on how do we get more seniors into the workforce, keep them in the workforce, allow them to take more money home without affecting their pension? And, for example, the Pension Work Bonus was one of the initiatives that Scott Morrison announced in this year's Budget which will allow people of pension age to keep more than $7,000 additional money that they earn through their self-employed businesses without affecting their own pension.

SABRA LANE:

I think one of the things that really annoys voters is that politicians say one thing and then do another. The Government said it was essential and unavoidable four years ago.

JOSH FRYDENBERG:

We've also said we will create a million new jobs, and we've done that.

SABRA LANE:

Voters and listeners can make up their own minds about that. There are some really strong comments from Julie Bishop overnight about the behaviour that she's witnessed and experienced here at Parliament House. She says that it wouldn't be tolerated anywhere else, and for the Liberal Party, it's not acceptable in 2018 to have less than 25 per cent of our parliamentarians as female. What are you going to do about it?

JOSH FRYDENBERG:

Well I agree with what Julie Bishop has said, in fact…

SABRA LANE:

Unacceptable?

JOSH FRYDENBERG:

In my first comments to the party room after being elected as the Deputy Leader was to say to colleagues that we need to get more women, into not just marginal seats, but into safe seats and more women at the top table. And Scott Morrison has done that, he's lifted the number of women in Cabinet to six, and as you may remember when Julie Bishop went into Cabinet in 2013, she was the only female. But Julie was also making a broader comment about the atmosphere and culture in Parliament House, the adversarial nature, the sometimes confrontational nature, and that is something that of course we all need to be very conscious of, and to mitigate against.

SABRA LANE:

Yeah, we here this time and again, we heard it specifically after Julia Gillard lost the Prime Ministership. People seem to pay lip service to this stuff, and it continues.

JOSH FRYDENBERG:

Well, it's not good enough, is it? And, you and I both work in this building, and we know it's a pretty tense place at times, relationships get stretched, and there's not always good a relationship across the political divide. I'm fortunate that I've been able to develop some good relationships across the political divide, and I think that helps keep some sanity in this place. But certainly when it comes to getting more women into Parliament, that is an objective that we are promoting and pursuing, and already, Scott Morrison has acted on it by putting more women into the Cabinet.

SABRA LANE:

Treasurer, thanks for joining AM.

JOSH FRYDENBERG:

Good to be with you.