5 June 2019
Transcript - #2019076, 2019

Interview with Neil Mitchell, Mornings, 3AW

Subjects: RBA interest rate decision; National Accounts.

NEIL MITCHELL:

My question to the Treasurer; the economy is not great, is it?

JOSH FRYDENBERG:

Well, look, the fundamentals of the Australian economy are sound. We've seen 320,000 new jobs being created over the last year and over 1.3 million since we've come to Government. We've retained our AAA credit rating, we're one of only ten countries in the world to have such a rating from the 3 leading rating agencies. We're opening up new export opportunities with free trade agreements and we've heard from the Reserve Bank Governor yesterday that employment growth is strong. So, the fundamentals are sound…

NEIL MITCHELL:

But a lot of people are suffering, why? I mean, why do I see the closed shops? Why do I have small businesses telling me they're struggling and there's no money around. Is this an east coast thing? It's a two speed economy, obviously.

JOSH FRYDENBERG:

The reality is the economy is facing some challenges, significant challenges…

NEIL MITCHELL:

What are they?

JOSH FRYDENBERG:

Internationally, they're the escalating trade tensions between China and the US and one in five Australian jobs are related to trade and we've seen a deterioration in the global economic outlook as a result of that. Domestically, we've seen a softening in the housing market. We've also seen the impacts of flood and drought which has affected farm GDP by over 5 per cent. And so we do face these challenges but that's why we need to maintain the strength of our economic plan as set out in the budget with the infrastructure spending, the tax relief and the new apprentices.

NEIL MITCHELL:

What happened yesterday with at least two of the banks not passing on the full interest rate cut? Doesn't that undermine the strategy? Clearly the Reserve Bank and you were fairly supporting them were reducing interest rates as a stimulus. Now, the fact that the bank is saying 'terrific, we'll put that in our back pocket.' That must undermine the strategy, doesn't it? 

JOSH FRYDENBERG:

It's very disappointing to see both the ANZ and Westpac not pass on in full the benefits of those rate cuts for their customers and their customers have a legitimate expectation that they would have seen the full benefit of that rate cut. And we saw the Reserve Bank Governor depart from usual practice and actually call on the banks to pass on this rate cut in full. Now, the Commonwealth Bank and the National Australia Bank have both passed it on and we welcome that. And for their customers who have a $400,000 mortgage, this could mean an extra $60 in their pockets each month, about $720 a year which will come on top of the tax relief which is also important.

NEIL MITCHELL:

But doesn't it undermine the strategy? I mean, at least two of the banks are saying no you can't have the full interest rate cut which means the impact of the interest rate cut is weakened.  

JOSH FRYDENBERG:

Well, for their customers…

NEIL MITCHELL:

For everybody. It undermines the whole strategy.

JOSH FRYDENBERG:

Well, for the Westpac customers they're getting a 20 basis point cut, so they're still getting a cut. And for the ANZ customers, they're getting an 18 basis point cut. But this was the first rate cut in almost three years and the Reserve Bank Governor made very clear his intention and his expectation that the banks pass on this rate cut and for those that didn't, it's very disappointing.  

NEIL MITCHELL:

Un-Australian?

JOSH FRYDENBERG:

Well, they're your words. What I've said…

NEIL MITCHELL:

Well, I'd say that because what they're doing is putting it in their pocket rather than putting it in our pocket which stimulates the economy; that harms the country. Is that wrong?

JOSH FRYDENBERG:

Well, the reality is their funding costs have come down and so there is no reason why they shouldn't pass on these cuts in full. And we've also just been through a banking Royal Commission where Commissioner Hayne made very clear that the culture within the banks fell below the public's expectations and that the banks were putting profits before people. And it's fair to say that many customers of both the ANZ and Westpac would be today scratching their head, asking themselves are they being best served by their bank? Should they be shopping around and looking for a better offer?

NEIL MITCHELL:

Well, you won't say un-Australian. Is it greedy? Is it putting profits before people? Is it putting profits before the benefit of the country?

JOSH FRYDENBERG:

I'll say, again, it's very disappointing. The Reserve Bank Governor has made it clear they should pass it on. I've made it clear in my private conversations with them they should pass it on, as well as in my public comments and it's up to them to explain to their customers why they will not see the full benefit of yesterday's rate cut.

NEIL MITCHELL:

Did you belt them around the ears a bit?

JOSH FRYDENBERG:

I was very clear.

NEIL MITCHELL:

You can't do anything, I mean, really it is their decision.  

JOSH FRYDENBERG:

Well, ultimately, they're businesses. They've got to act in the best interests of their customers and their shareholders. But, if they're not delivering for their customers, their customers will walk.

NEIL MITCHELL:

Accounts figures today. The markets say we're contracting. Can you rule out the possibility we're headed towards recession?

JOSH FRYDENBERG:

Again, I say to you Neil and to your listeners that the fundamentals of the economy are sound. We've seen strong employment growth, we've seen new opportunities for our export orientated businesses. We've seen business investment being solid and we've also seen our AAA credit rating being maintained.

NEIL MITCHELL:

So, you don't see a danger of recession?

JOSH FRYDENBERG:

Well, I don't use that word. What I'm saying to you is the economy continues to grow, but we do face some challenges. And it reinforces the importance of our economic plan as set out in the budget. Tax relief will put into the pockets of Australians earning up to $126,000 a year up to $1,080. So, if you're a couple listening to your show today, you're a teacher and you're a tradie, you both each earn $60,000, you'll get $2,160 in your pocket when these tax cuts are passed.

NEIL MITCHELL:

This is true, but we're not growing fast enough, are we? And certainly the markets think the National Accounts figures will show that.

JOSH FRYDENBERG:

Well, we're in our 28th consecutive year of economic growth. So, we shouldn't be down on our performance. And again, the Reserve Bank Governor yesterday said the rate cut was not in response to a deterioration in the economic outlook. What the bank has identified is the ability to reduce unemployment further without causing inflation concerns and that's the key to their decision yesterday.

NEIL MITCHELL:

Would it be fair to say that the banks haven't learned anything from the Royal Commission?

JOSH FRYDENBERG:

Well, it's fair to say that some of the banks have disappointed their customers and certainly disappointed the Government.

NEIL MITCHELL:

Is immigration an important part of this? Is it positive or negative in the position we're in?

JOSH FRYDENBERG:

Well, immigration is important for Australia because it helps make us the great country that we are…

NEIL MITCHELL:

Not so socially, I mean economically.

JOSH FRYDENBERG:

Economically, it is important but I want to distinguish between the notion of immigration, which I strongly support, but also about managing population growth, where I think as a country, we could do better. And that is why we have announced a whole series, for example, in Victoria, the congestion-busting policies, the fact that the Melbourne to Geelong Fast Rail will help unlock the potential of our regions while also busting the congestion in our cities.

NEIL MITCHELL:

The deeming rate which is the rate deemed to be earned on investments for pensioners and some others on welfare, will you review… I know it's not your area, but will the Government review this? Because at the moment they deem you, any investment over fifty grand to be earning 3.25 per cent. I'd welcome anybody who earns 3.25 per cent

JOSH FRYDENBERG:

And as you know, in the Howard era it was above five and a half per cent. I mean, deeming is a simplified why to access the income…

NEIL MITCHELL:

It's a rort.

JOSH FRYDENBERG:

… but it's a simplified way to access the income from a range of assets. Now, it's set by the Minister, as you know, the Social Services Minister, and he continually monitors it. And we need to obviously continue to make sure it's appropriate and reflects the returns across a whole range of investment choices.

NEIL MITCHELL:

Who can get 3.25 per cent on a simple bank deal?

JOSH FRYDENBERG:

But the point is, Neil, it's not just savings in banks that people have. They also have shares and, as you know, from your shares you can be earning, and many do, above the cash rate. So, it's looking at the whole suite of financial assets that somebody may have.

NEIL MITCHELL:

Good to talk to you. Final message to those people who are closing shops and struggling in small business. What is the message? Is it 'hang in there'? What do they do?

JOSH FRYDENBERG:

We have the economic plan to strengthen the Australian economy.

NEIL MITCHELL:

When?

JOSH FRYDENBERG:

Well we are now…

NEIL MITCHELL:

They're closing their doors.

JOSH FRYDENBERG:

I'd say to all those businesses: firstly, we have been creating new small businesses, we have announced significant support for small businesses in the Budget and prior to that including greater access to finance, tax relief, the Instant Asset Write Off, pay on time changes… We're backing small business because they're the engine room of the economy in Australia and when you have a go, you get a go.

NEIL MITCHELL:

So hang in there.

JOSH FRYDENBERG:

Absolutely.

NEIL MITCHELL:

Thank you for your time.

JOSH FRYDENBERG:

All the best.