4 July 2019
Transcript - #2019092, 2019

Interview with Laura Tingle, 7:30, ABC

Subjects: tax cut package; energy prices; gas prices; Age Pension.

LAURA TINGLE:

The Treasurer, Josh Frydenberg, joins me now. Treasurer, just in the last half hour you've got $158 billion of tax cuts through the Parliament. That's obviously a major win for the Government, but a lot of people will still want to know how the Budget can afford it.   

JOSH FRYDENBERG:

Well, I think this is a major win for the Australian economy and a major win for Australian taxpayers because more than ten million taxpayers will get up to $1,080 in their pocket once they put in their next tax return and the money will flow, Laura, from next week. We'll also see about $8 billion a year come into the economy as a result of the tax cuts not just in this year's Budget, but last year's Budget legislated $144 billion of tax cuts. And this move to provide tax relief to low and middle income earners has been welcomed by the Reserve Bank Governor who said it will boost household consumption and therefore boost economic activity. 

LAURA TINGLE:

That's certainly true but critics, including The Grattan Institute, based on your Budget papers, say that it looks like you're going to have to cut spending by $40 billion over the next few years to fund this and keep in surplus and certainly the Budget papers show a fall in government spending over the next few years. Can you just explain to viewers why that doesn't equate to deliberate spending cuts?

JOSH FRYDENBERG:

We're not cutting spending. In fact, what we're seeing is spending on hospitals go up by 59 per cent as a result of the five-year agreement that we have struck. We're seeing school funding going up by 62 per cent per student. We're investing $100 billion in infrastructure, creating 80,000 new apprentices. What we're doing is growing the economy. So there are no cuts, what we are focused on is growing the economy.

LAURA TINGLE:

So, you mentioned the first round of tax cuts delivering a stimulus. It's going to be equivalent to the one that Labor provided in the first round of responses to the GFC in 2009. What does that say about the state of the economy?    

JOSH FRYDENBERG:

Well, actually the reason why we're providing these tax cuts is because of the values that underpin our policy; that's reward for effort, encouraging aspiration, enabling Australians to earn more and to keep more of what they earn. That was the dividing line at the election that we've just had. Labor was promising $387 billion of higher taxes and we were telling the Australian people we would deliver the tax cuts. Now the Morrison Government has delivered the tax cuts that the Australian people have voted for. We've done that against the will of the Labor Party and the Labor Party have acted against the will of the Australian people.

LAURA TINGLE:

But you've also said during the election campaign that the economy was in good shape. We've certainly got the slowest rate of economic growth since the GFC. How does that possibly tally with the Government's rhetoric during the election campaign?   

JOSH FRYDENBERG:

Well, there is a couple of points here. Firstly, the economy does face challenges and the Prime Minister and myself, Mathias Cormann, we've all been upfront with that. We've had a severe drought and obviously floods that has seen farm GDP come back by 6.8 per cent over the last year. We've seen a slowdown in the housing market from its previous highs. And then the global trade tensions between China and the US have weighed on the global economic outlook; all of which affects us here at home. But at the same time, the fundamentals of the Australian economy are sound and we saw the Reserve Bank Governor just say a few days ago that employment growth is strong, unemployment is at its lowest level in seven years. We saw more than 40,000 jobs being created last month. A record number of women and seniors are in the workforce and a record number of young Australians have got jobs over the last year. At the same time, we've got a AAA credit rating from the three leading credit rating agencies and we've got a Budget that's coming back into surplus for the first time in more than a decade…

LAURA TINGLE:

But the Reserve Bank Governor has also said that you need to do more that monetary policy alone isn't enough because the economy is weak and employment is not strong enough. What are you prepared to countenance to fix that?  

JOSH FRYDENBERG:

Well, we certainly agree with the Reserve Bank Governor that monetary policy shouldn't be doing all the heavy lifting, that's why we set out in the Budget the plan which involves not only tax cuts but also record infrastructure spending as well as the apprenticeships and we've got a very ambitious trade agenda that the Prime Minister has been pursuing with Simon Birmingham. We've also got a deregulation agenda as well as support for small business with a new securitisation fund and a whole series of other measures. So, we believe that fiscal policy should be working together with monetary policy to create jobs. That's what we're keen to do. But let's not forget, Laura, Australia is in its 28th consecutive year of economic growth. We shouldn't talk down the economy. We should be realistic about the challenges it faces, but we also have a plan to get us through.  

LAURA TINGLE:

There's been a widespread plea to lift Newstart and that's been boosted by the case that it would help economic activity. Why not do that? The Reserve Bank has endorsed that idea. Have you as Treasurer received that same advice from Treasury that you should actually do something about Newstart as an economic stimulus measure?   

JOSH FRYDENBERG:

Well, we have said that we're not changing Newstart and the reason why is Newstart recipients, 99 per cent of whom, receive other benefits so it might be a parenting benefit or another benefit. The other thing about Newstart is two thirds of the people on Newstart move on to a job within 12 months and what we are focused on is creating the environment in the economy to create more than 1.3 million new jobs. Workforce participation rates are now at a record high and we are creating jobs with our policies which is enabling people to get off Newstart which is, of course, the best outcome for them but also the best outcome for the economy.    

LAURA TINGLE:

The Government has angered older people by not doing anything about the deeming rate, particularly since the last interest rate cut. Are you going to do something about this?   

JOSH FRYDENBERG:

Well, we are going to have a very serious look at this through our expenditure review committee process and we will do that very shortly. The last time the deeming rates were changed was in March 2015. There's a lower deeming rate and a higher deeming rate and let's not forget it affects about one in four of the aged pensioners. So it doesn't affect every one of them but it's also assessed on financial assets, not just bank deposits. You also need to bear in mind that whether its managed funds or shareholdings, the returns can be greater than they are when you've got money in the bank. But we are very seized of this issue, we think it's a serious one and we will have a very close look at it very shortly.

LAURA TINGLE:

Finally, Treasurer, the tax cut package was the centrepiece of your economic policy. What are you going to do for the rest of the term? Are you going to be doing things that you didn't spell out to voters during the election campaign?   

JOSH FRYDENBERG:

Well, I know in my own portfolio I'm going to be busy now legislating the consumer data right which enable Australians to share their data to get better deals on their energy bill or on their telephone bills or with their banking services. We're also focusing on our drought relief fund and legislating that. There's a whole series of other things that we are focused on in the Treasury portfolio and across Government.

LAURA TINGLE:

Thanks for your time tonight, Treasurer. 

JOSH FRYDENBERG:

Thank you.