5 June 2019
Transcript - #2019077, 2019

Interview with Kieran Gilbert & Laura Jayes, AM Agenda, Sky News

Subjects: RBA interest rate decision; China-US trade tensions.

KIERAN GILBERT:

Joining us now is the Treasurer, Josh Frydenberg. Treasurer, thanks very much for your time.  First up, the banks not listening. You, the Governor of the RBA, have criticised Westpac and ANZ for not passing it on, but it doesn't change much.

JOSH FRYDENBERG:

Well the National Australia Bank and the Commonwealth Bank have both passed through in full to the customers the twenty-five basis point rate cut and I think that is significant. It's disappointing that the ANZ only through passed eighteen basis points and Westpac twenty basis points but the overall message for households and for businesses is that they'll see lower interest payments as a result of the RBA's decision. This was the first rate cut in nearly three years and if you're a mortgage holder with a $400,000 mortgage, this could be worth sixty dollars a month to you or just over $7,000 a year, and that's not insignificant to help meet the cost of living pressures.

LAURA JAYES:

As you say - a new record low, the first time the RBA has moved in almost three years. Is this what a healthy economy looks like?

JOSH FRYDENBERG:

Well the fundamentals of the Australian economy are sound and you saw that from the Governor's statement, he said that employment growth was strong. He said that there wasn't a deterioration in the economic outlook and he did point through to the challenges we're facing both domestically and internationally. Particularly, the escalation in global trade tensions. 

But what we've seen, Laura, over the last year, is 320,000 new jobs being created, eight out of ten new jobs being full time and over 1.3 million jobs being created during the Coalition's time in government. Our AAA credit rating has been maintained, we're one of only ten countries in the world to have a AAA credit rating from the three leading credit rating agencies. We're in our 28th year of consecutive economic growth and we've got a pro-growth agenda as laid out in the Budget, particularly the tax relief, with a $100 billion of infrastructure spending and the 80,000 new apprenticeships.

KIERAN GILBERT:

On the infrastructure spending, how soon does that kick in? Because the RBA has made it clear they want some structurally improvements as well. This is the big one on your agenda but a lot of this is in the out years in terms of your spending predictions.

JOSH FRYDENBERG:

Well, Kieran, of the $100 billion, nearly $50 billion is in the forward estimates. There are projects that are already turning the sod.  I mean, look at what we're doing, for example, with the second airport in Sydney. We've got obviously Snowy 2.0 being another major infrastructure project…

KIERAN GILBERT:

Can you expand it? And expedite it?

JOSH FRYDENBERG:

Well, we've got major projects underway. We'd like, for example, to build the East West Link. We just need Daniel Andrews to give the okay to that, and we've got $4 billion waiting for that particular project.

LAURA JAYES:

So you still need him to give the okay. That was a promise during the election campaign that you would build it no matter what.

JOSH FRYDENBERG:

No, we made it very clear, Laura, that obviously this project was a priority for us. We've taken it to the two previous elections, that we've been successful with the Australian people.  But Daniel Andrews has said he wouldn't give the approval.

So that is why it's a contingent liability in the Budget, it does need the approval of the State Government to go ahead, and we'll continue to make the case for that particular project but, as you know, with Victoria, we're working closely with them on a fast rail between Melbourne and Geelong and we put $2 billion in the Budget for that, and we've allocated $5 billion dollars for the Melbourne Airport Rail Link which Victorians have waited half a century for.

KIERAN GILBERT:

In the absence of tax cuts for the companies which, of course, you wanted to extend to all business, why don't you adopt Labor's Australian investment guarantee, which allows any sized company to claim twenty per cent of assets worth more than twenty thousand dollars? That seems like a good idea and is backed by a lot of business groups. Why don't you adopt that?

JOSH FRYDENBERG:

Well, it also had been criticised as well. We do have strong support for businesses with research and development. But also at the same time, our focus has been on the small and medium sized businesses, Kieran. As you know, we've cut taxes down to 25 per cent, we've legislated for those changes for SMEs in the Budget. What we saw was the extension of the Instant Asset Write Off to $30,000, and the extension to companies with a turnover of up to $50 million. We're encouraging big business to pay small and medium sized businesses on time, we've put in place a $2 billion Securitisation Fund to increase access to finance. We're taking a whole host of measures to strengthen the SME sector, because we recognise that's where so many millions of Australians are employed.

LAURA JAYES:

There's not many monetary levers left in terms of the RBA, so it comes down to you and the fiscal levers available to you, Josh Frydenberg. What are those levers? Infrastructure spending being one. Does this also make the need for tax cuts, income tax cuts to be passed? You know, is that any more or less urgent?

JOSH FRYDENBERG:

Well it's certainly urgent, in that we outlined in the Budget, $158 billion dollars' worth of tax relief and that followed from Scott Morrison's last Budget where there was $144 billion dollars' worth of tax relief, relief that we legislated without the support of the Labor Party and importantly, we're now calling on the Labor Party to support our tax package as a package. They don't get to pick and choose after the election which parts they support.

The reality is the Australian people have endorsed our tax cuts and these tax cuts are focused on the low and middle income earners. We're creating one big tax bracket, Laura, between $45,000 and $200,000. We're reducing the tax rate to 30 cents in the dollar so that 95 per cent of tax payers pay a marginal rate of no higher than 30 cents in the dollar.

This is long term, structural reform which will simplify and strengthen our tax system, combined with what we're doing immediately for tax payers, with tax payers who earn up to $126,000 getting up to $1,080 in their pocket and that's not insignificant for them.

KIERAN GILBERT:

The Prime Minister has spoken very strongly overnight in support of free trade, cautioning world leaders to be more than just the sum of our deals. This is quite a clear crack at Donald Trump, isn't it?

JOSH FRYDENBERG:

Well, the Prime Minister is making very clear that Australia's interests, and indeed the global economy's interests are in reducing some of these escalating trade tensions and ensuring that disputes are settled amicably and the World Trade Organisation is one such body for doing that. And the Prime Minister pointed out that one in five Australians are employed in relation to trade and that we as a Government have put a priority on opening new trade opportunities for Australian businesses and we've done that by entering into free trade agreements with China, with Japan, with Korea, with the Trans-Pacific Partnership and most recently, Indonesia.

So when we came to Government, about 26 per cent of our two-way trading relationships were covered by free trade agreements. Now it's above 70 per cent and that number will grow. So, we want to see the WTO strengthened…

KIERAN GILBERT:

… Donald Trump does nothing to do that. He doesn't strengthen it, he weakens it.

JOSH FRYDENBERG: 

... but in the words of the Prime Minister,  we want to amend and mend the WTO, not end it, and that is really important for Australia to be a good advocate for those changes.

LAURA JAYES:

Is the China-US trade war having a real term effect on our economy now? Are you seeing that in some of the data we're getting through? And what do you expect the National Accounts to say today about the growth in our economy?

JOSH FRYDENBERG:

Well, let's just wait and see, Laura, for that. That will come out later this morning. In terms of the global trade tensions – yes, it is impacting on the global economic outlook and again, the RBA Governor referred to that in his speech last night at the RBA dinner and he pointed out that these escalating trade tensions were becoming a real factor for the economic outlook. So, we'll continue to encourage cool heads to prevail and continue to push Australia's interest which is in favour of free trade, open trade and the amicable settlement of disputes.

KIERAN GILBERT:

Josh Frydenberg, we appreciate your time.

JOSH FRYDENBERG:

Always good to be with you.