4 June 2019
Transcript - #2019074, 2019

Doorstop interview, CPO, Melbourne

Subjects: RBA interest rate decision; ANZ; News Corp; G20

JOSH FRYDENBERG:

Today, the Reserve Bank of Australia has cut the official rate by 25 basis points to 1.25 per cent. This is the first movement in interest rates since August 2016, almost three years ago. In explaining the announcement, the Reserve Bank Governor has said "today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target." Significantly, the Governor went on to say "employment growth has been strong and the central scenario remains for the Australian economy to grow by around 2.75 per cent in 2019 and 2020."

This rate cut will be welcome news for Australian households and businesses and it will mean lower mortgage costs and lower interest payments. It is the Government's expectation, indeed it is the public's expectation, that banks should pass on in-full to consumers the benefits of reduced funding costs as a result of the Reserve Bank's decision.

The impact of a 25 basis point cut on a $400,000 mortgage is the equivalent of saving around $60 a month or $720 a year. A timely boost for households facing cost of living pressures and this will be in addition to the tax relief outlined in this year's Budget which will see those on incomes of up to $160,000 get tax relief up to $1,080. The combination of the tax cuts and today's RBA decision could see a two-income family, for example a teacher and a tradie, each earning $60,000 a year with a $400,000 mortgage almost $3,000 a year better off as a household. I repeat that, the combination of the tax cuts outlined in the Budget and today's RBA decision could see a two-income household, of say a teacher and a tradie each on $60,000 a year better off by nearly $3,000 a year as a household.

Today's decision and the Morrison Government's tax cuts, come at a time when the Australian economy is facing significant challenges both internationally and domestically. Escalating trade tensions are contributing to growing uncertainty in the global economic outlook and the impact of flood and drought and fires and a softening housing market have weighed on the economic outlook here at home. This is why the Morrison Government is implementing a pro-growth agenda with tax relief, the most significant tax cuts and tax reform since the Howard Government, a record $100 billion infrastructure spending plan and an investment in skills with the creation of 80,000 new apprentices. These initiatives are part of our economic plan to create 1.25 million new jobs over the next year five years to help strengthen the Australian economy to meet the challenges we face both internationally and domestically. Are there any questions?

QUESTION:

You said you wanted the big banks to pass on the full cut. ANZ has just announced that it is cutting variable home loan rates by 18 basis points, so it's passing on most but not quite all of the cut. What do you make of that? 

JOSH FRYDENBERG:

Well, I think the ANZ has let down its customers. This is deeply disappointing from the ANZ. We heard from Commissioner Hayne just months ago that the banks were putting profits before people. Actions like this don't give the Australian people any comfort that the banks have changed their behaviour. And as Treasurer of Australia, I have made it very clear to the banks that the public have a legitimate expectation that they will see the full benefits of rate cuts such as announced by the RBA today.

QUESTION:

So, does that mean that what the RBA said its rate cut (inaudible)… employment more progress towards the inflation target. Does that make that a lesser sure trajectory given the banks are not likely to pass on the full rate cut then? 

JOSH FRYDENBERG:

Well, we want to see the other banks pass on the benefits of these rate cuts and there will be rate cuts to mortgage holders. And the fact is, if you have a $400,000 mortgage and the banks pass on the 25 basis point reduction, that could be worth around $60 a month to you or $720 a year. That's not an insignificant amount of money for people facing cost of living pressures. So, the benefits to the economy from this rate cut will not be insignificant, but it is important that the banks hear the message from the Australian people that they should pass on the benefits of these rate cuts to their customers, to the Australian consumers. And in this respect, I think the ANZ have let down their customers.   

QUESTION:

Treasurer, isn't the question of how much they should pass on? You've said that the benefits of a sustained reduction in costs, a 25 basis point reduction from the Reserve doesn't necessarily reduce their funding.

JOSH FRYDENBERG:

Well, we have heard from the Reserve Bank Governor that there has been a reduction in funding costs for the banks. And as you know, banks raise their money from a whole series of sources; they raise it overseas, they raise it from deposits and they have seen a reduction in their costs. Indeed, in my conversations with the banks' CEOs and Chairmen, they've made it clear that some of their funding costs have come down. So, this is a 25 basis point reduction. It's the first movement in around three years and so, in that sense, it is significant. But, we would expect that the Australian people would see the benefit of these reductions in rates and the decision by the RBA and I'm very disappointed in the decision by the ANZ today.  

QUESTION:

Just on the rates as it is now, Joe Hockey considered three per cent an emergency level. So, 1.25 per cent, I mean, is that a sign of economic ill-health, do you believe?

JOSH FRYDENBERG:

Well, we think the fundamentals of the Australian economy are sound and indeed, you've heard from the Reserve Bank Governor today. He said employment growth has been strong and the central scenario remains for the Australian economy to grow by around 2.75 per cent for 2019 and 2020. That was the comment from the Reserve Bank Governor today in their statement. But, what we've seen in the Australian economy is more than 320,000 jobs created over the last year. And indeed, over the last month we've saw 28,000 new jobs and over the last year, eight out of those 10 jobs have been full-time. And, as a Coalition Government, we've helped create 1.3 million new jobs. So, we've seen very strong employment growth.

We've also seen non-mining business investment being solid. We've seen Australia maintain its AAA credit rating, one of only 10 countries in the world to have a AAA credit rating from the three leading agencies. We're in our 28th year of consecutive economic growth. We have entered into new free trade agreements with a whole series of countries and I think it's one of the greatest successes of the Coalition Government. Obviously, the China, the Japan, the Korea free trade agreements, most recently Indonesia and the Trans-Pacific Partnership, and with one in five Australian jobs being related to trade, these free trade agreements entered into by the Coalition Government, have created new opportunities for Australian businesses and for Australian jobs.

So, the fundamentals of the Australian economy are sound, but what the Governor has made clear today is that they can provide this interest rate cut as a means of driving unemployment even lower without raising inflation concerns. But, the focus for the Coalition Government, for the Morrison Government, is our pro-growth agenda. We will continue to push ahead with the tax relief which should be passed by the Australian Parliament and indeed, by the Labor Party, in full. And our $100 billion infrastructure package as well as our plans to create 80,000 new apprenticeships.      

QUESTION:

With the breaks about the raid on News Corp journalist, Annika Smethurst, News Corp helped the Coalition win the unwinnable election, is this how you thank them?

JOSH FRYDENBERG:

Firstly, I think that is a ridiculous statement to be honest. The media, the fourth estate, we need to respect them and respect their independence. We were successful in this election because the Australian people could identify with our message about creating a stronger economy, the fact that we've created over 1.3 million new jobs and because Bill Shorten and the Labor Party were persisting with a high taxing, high spending agenda which would have led to a weaker Australian economy. As for those matters that you raise, with investigations still underway it would be inappropriate to comment on the specifics. 

QUESTION:

Treasurer, can I ask you another question just about the passing of the cut and I'll leave it. It's 25 basis points; are you saying no ifs, no buts, you expect the full 25 points to be passed on?   

JOSH FRYDENBERG:

I do. But, again, the banks are businesses and they're answerable to shareholders and they are answerable to their customers. And in the case of the ANZ, they have to answer to their customers and those mortgage holders as to why they haven't passed on in full that rate cut. You see, the Morrison Government is on the side of the Australian people. We're not doing the bidding for the big banks. The big banks have to explain themselves and after what they've been through with the Royal Commission, you would expect that the banks were more sensitive to the Australian consumers, to their own customers' concerns. And when the Reserve Bank Governor makes it very clear that bank funding costs have come down and that they're making a decision to reduce rates by 25 basis points, there is a legitimate expectation that this rate cut is passed on in full to the customers of the banks. Now, I think in that case, the ANZ have a lot of explaining to do to their own customers.

QUESTION:

You're heading to the G20 Finance Ministers' meeting soon. What's your message to Australia's economic partners and what are you hoping to learn from them?

JOSH FRYDENBERG:

Well, I'll be meeting with my counterparts from around the world at the G20 meeting in Japan, including with the US Treasury Secretary, Steve Mnuchin, who I spoke to not that long ago. We'll be seeking in those discussions to understand what's some of the trade issues that you've seen develop globally which are creating uncertainty, which have impacted on trading volumes, and to better understand how some of the other countries are dealing with the economic challenges that they're facing. Many of the other countries within the G20 are also dealing with low domestic inflation environments and it will be interesting to have a discussion about global trade tensions, the impact of Brexit and of course, to exchange notes on what is happening in our own domestic economy. So, there is also good opportunities for working with other countries on a whole range of issues. For example, a multinational tax agenda, the base erosion profit shifting agenda through the G20 and the OECD will be something I will be discussing with my counterparts and the impact of the digital economy and the issues around that. So, there will be plenty to discuss with the international trade tensions, the global economic environment, which the IMF and the OECD have said is essentially at a delicate point and also the multinational tax agenda as well. Thank you very much.