4 June 2019
Transcript - #2019081, 2019

Interview with Laura Tingle, 7.30 Report, ABC News

Subjects: RBA interest rate decision;

LAURA TINGLE:

Josh Frydenberg, what does this decision by the Reserve Bank today actually mean for the economy?

JOSH FRYDENBERG:

Well, its good news for households, people with a mortgage if you've got a $400,000 mortgage, this will be worth about $60 a month to you or $720 a year. It's also good news for businesses because it will lower their interest payments but it is very significant from the Reserve Bank, Laura, because it's the first rate cut in nearly three years.

LAURA TINGLE:

But I suppose the other question is what it actually achieves for the economy. There's been a lot of debate in lead up to today's board meeting about whether lower interest rates can actually help spur growth, which is a pretty significant issue. A commentator in The Financial Review this afternoon wrote "there's no getting away from the fact that GDP growth is very low, inflation is disturbingly low and the labour market is in serious trouble with high levels of underemployment and low level of wages growth, something meaningful has to be done." And there is this debate going on about whether we've reached the end of the effectiveness of low interest rates.

JOSH FRYDENBERG:

Well, The Reserve Bank Governor in his statement made it very clear, in his words that employment growth was strong and as you know unemployment's around 5.2 per cent today, it was 5.7 per cent when we came to Government and the belief of the Reserve Bank Governor and obviously the Board is that unemployment can come down further and because we're in a particularly low-inflation environment, they can cut interest rates as they've done today without raising broader concerns about inflation. The Reserve Bank also made it very clear that their central scenarios for economic growth remains 2.75 percent for 2019-20, so that's still a good economic growth and we are focused on a pro-growth agenda with our budget announcements including more spending on infrastructure, the tax cuts which will put money into people's pockets and the 80,000 new apprentices.

LAURA TINGLE:

Sure. You say the central scenario is still 2.75 per cent, that the Reserve Bank Statement also is talking about the downside risks in the global outlook and I go back to my question; lower interest rates aren't actually going to do much to stimulate growth, at this point of the cycle. Interest rates are already negative, effectively.

JOSH FRYDENBERG:

Well, monetary policy has a role, but so does fiscal policy and that is why, we as a Government, have set out a record $100 billion spending on infrastructure…

LAURA TINGLE:

What does that actually cut in, Treasurer?

JOSH FRYDENBERG:

Well, there are projects already underway and about half of that $100 billion will be over the forward estimates and there is significant nation building projects that we're investing in. But, also the tax cuts. You've heard from the Reserve Bank Governor that the tax relief that is provided in the budget which will see Australians earning up to $126,000 get up to $1,080 in their pocket. It will be very significant in boosting their disposable income, that will boost economic activity and that will be important. But you're also right to point out about the negative sentiment we've seen in the global economy, particularly the rising trade tensions between the US and China and this has seen a downgrade in global economic growth from the IMF and also other warnings from the OECD and other major stakeholders.

LAURA TINGLE:

I suppose one good thing about these low interest rates is that it, presumably, boosts the bottom line for the budget and it also gives you an opportunity, doesn't it, to actually accelerate or increase the spending that you can put into the economy in the short-term. Are you considering doing that?

JOSH FRYDENBERG:

Well, we've made it very clear in the budget what our spending priorities are and that is record spending on hospitals and schools, and as I said, infrastructure spending and apprenticeships, but also the tax relief which will be important. But, we're also managing a balance here, Laura, between ensuring that there is sufficient, strong economic activity, but we're also paying back the debt that we inherited. That's why we've committed to surpluses; $45 billion of surpluses over the forward estimates. That remains our commitment and we will deliver the surplus.

LAURA TINGLE:

You've been putting quite a lot of pressure on the banks to pass this cut on in full. Once again, is there much point in that given that the anecdotal evidence is that people are taking the opportunity just to increase their payments, effectively, rather than free-up money for consumption spending?

JOSH FRYDENBERG:

Well, the Reserve Bank Governor himself has made it clear that in this statement today that the funding costs for the banks have come down significantly and he would also expect that the rate cuts be passed on in full. And I welcome the decision today from the Commonwealth Bank and from NAB and I've been critical of the ANZ for not passing on in full the rate cut because Australian customers, Australian consumers, the public would expect, legitimately, that when there is a rate cut such as this, the first time in nearly three years, that they get to see the full benefits of it.

LAURA TINGLE:

Just finally, Treasurer. There's been a raid on a Canberra Press Gallery journalist today following a story about attempts to bug Australians, if you like, is that an appropriate use of police powers?

JOSH FRYDENBERG:

Well, it won't surprise you, Laura, it would be inappropriate for me to comment on on-going investigations.

LAURA TINGLE:

Treasurer, thanks for your time tonight.

JOSH FRYDENBERG:

All the best.