17 December 2018
Transcript - #2018094, 2018

Interview with Ross Greenwood, Money News, 2GB

Subjects: Mid-Year Economic and Fiscal Outlook

ROSS GREENWOOD:

Treasurer, Josh Frydenberg, many thanks for your time.

JOSH FRYDENBERG:

Good to be with you, Ross.

ROSS GREENWOOD:

I just want to start, you've come out today with announcing the first budget surplus Australia has seen since the Howard Costello Government handed one down in 2007-08. You announced that, ten years of surpluses potentially to come. You know, the Government gets out of their debt, great story. And then Andrew Broad turns up with his astonishing resignation and a salacious tale. Can you get some clear air, ever?

JOSH FRYDENBERG:

Well, look, I can only think that the vast majority of Australians are going to be more interested in what's happening to their taxes, to the nation's economy, to jobs growth…

ROSS GREENWOOD:

You'd like to think that, but this is New Idea, for goodness sake…

JOSH FRYDENBERG:

Well, you know, some of the radio announcers, not you Ross, but some others and some TV presenters, no doubt, will want to talk about that issue. I am more interested as the nation's Treasurer in steering the country in the right direction and the Mid-Year Economic and Fiscal Outlook statement that has just been released, does indicate that the Australian economy is on the right track. It does indicate that we are growing faster than any G7 country in the world, except the United States. It does show that our AAA credit rating has been reaffirmed. It does show that we have created more than 1.1 million jobs. And it does show that next year we will deliver the first budget surplus in more than a decade.

ROSS GREENWOOD:

And, it is better than expected. So can you understand why your political party is right now so far behind in the polls and you find yourself in this predicament that you might hand this astonishing, growth-based budget to Bill Shorten and to Chris Bowen.

JOSH FRYDENBERG:

Well, we won't and you will see that between now and the next election the debate start to focus more on the national economy because that is what drives the important economic and social outcomes for Australians. The only reason why we can now spend record amounts on education and health, put more than 2,000 drugs on to the PBS - cancer, lifesaving drugs- is because we have a strong economy. That is what we are able to achieve to deliver the increased defence spending that we are seeing, the strong border protection, the national security resourcing that we are doing. All of those things flow from having a strong economy. And the contest at the next election, Ross, will be between a Coalition which has a track record of bringing the budget back to surplus, creating jobs and lowering taxes and a Labor Party that believes they can tax you from the cradle to the grave. They can tax you into prosperity with $200 billion of new taxes, including on your income, your business, your savings, your property and your electricity bill.

ROSS GREENWOOD:

But Josh, you're a good politician, you are not blind to the numbers. You know the numbers in the budget, you know the political numbers. Your party is way behind in the polls. I mean, this is a massive…

JOSH FRYDENBERG:

So was John Howard, Ross. So was John Howard in many of the elections that he went on to win. Things tighten up as people start to think about the consequences of their decision at the ballot box. And what they have seen with Bill Shorten and the Labor Party, even over the last few days at their national conference, is that it's not going to be the Labor Party that is in charge; it's going to be the CFMEU and the unions. The Labor Party is going to allow the union law-breakers to become the union lawmakers. They are going to lead the CFMEU and the other unions to a level of industrial disputation that we haven't seen in this country for decades. The $200 billion of higher taxes, including the ones on the property sector, will mean that everyone who owns their own home will see their home worth less and everybody who rents their home will end up paying more. That is the consequence of Labor in action.

ROSS GREENWOOD:

In the MYEFO statements today, you've foreshadowed that the nation will virtually be out of net debt, so, $351 billion currently. But in ten years' time, 2027-28, the nation would basically be out of debt at that stage. A phenomenal achievement. The only problem is that it's almost a straight line down. It doesn't take into account any economic upheaval, overseas consequences of a global downturn, or maybe even a China-US trade-war. Is Australia in the type of shape that it can withstand those type of upheavals if they do come?

JOSH FRYDENBERG:

Well, Ross, actually we have been relatively conservative and prudent when it comes to our economic forecast. And in this MYEFO, we have downgraded the growth forecast both for China and the United States, taking into account the impact of those trade tensions. And as you know, those trade tensions have so far only been confined to about two per cent of world trade but if they were to expand, then Australia would be hurt by it because the United States is our number one investment partner and China is our number one trading partner. So, we are continuing to call for cool heads to prevail in that. But, the other area where we have been quite prudent and conservative in our forecast has been around commodity prices. Again, this is the contrast with Labor…

ROSS GREENWOOD:

So US$55 a tonne for iron ore, US$93 a tonne for thermal coal for making electricity and US$120 a tonne for metallurgical coal which promises to…

JOSH FRYDENBERG:

From September next year.

ROSS GREENWOOD:

That's right. So these, even against today's prices, are relatively modest…

JOSH FRYDENBERG:

Correct.

ROSS GREENWOOD:

… but you also point out that if there is a move of $10 in either iron or coal, it has a significant and detrimental impact, either positively or negatively, on the budget outcome.

JOSH FRYDENBERG:

A $1 billion plus impact on the budget. So, we obviously know that Australia, with a very strong resource sector, is tied somewhat to what is happening in international commodity markets. But, the mistake Labor made when they were last in office, we will all remember Wayne Swan promising those surpluses that never materialised, was that they had very rosy commodity forecasts. And they were also talking about a massive jump from one-year of deficit to the next year of surplus; it was a $44 billion difference. In contrast, we have been steadily improving the budget bottom-line and, as you know, announced today for the year 2018-19, the deficit will fall from $14.5 billion to just $5.2 billion.

ROSS GREENWOOD:

So, you're pretty close this year.

JOSH FRYDENBERG:

So, we are getting pretty close, that's right. And next year, we are going from a surplus which was predicted to be $2.2 billion to being $4.1 billion. So, this has been a steady, improved trajectory which is a result of decisions we have taken to restrain the amount of expenditure. So, we've actually got expenditure down now to 1.9 per cent growth, which is the lowest level in 50 years.

ROSS GREENWOOD:

Is that largely because, just to explain to people, is that largely because we have more people employed, so therefore fewer people on Newstart allowances. So you get more tax in the door and you actually pay less out the door in Newstart allowances. Same thing with aged pensions, with more age pensioners deciding to remain in the workforce or even a change in age pension laws, it means that more are working, earning and paying taxes and less are claiming age pensions. Is that broadly what's going on?

JOSH FRYDENBERG:

Ross, that is part of it. For example, the jobseeker payments have come down by over $1 billion in this MYEFO as a result of more people being in employment. So, that is part of that story. The other part of the story is that we are actually targeting our spending in a lot better ways and ensuring that we get bang for the buck, value for the dollar for the taxpayer. We are considered and sensible and methodical when it comes to our spending decisions. And, Scott Morrison, as the former Treasurer, and Mathias Cormann who has been Finance Minister throughout, can take a lot of credit for that.

ROSS GREENWOOD:

The other thing, also, in this budget you also managed to discover $9 billion. I call it a hollow log, you can call it a war-chest, whatever you like. This is under an item called decisions taken, but not yet announced. It's $9 billion, that is election promises, isn't it?

JOSH FRYDENBERG:

Well, we have to make future decisions and future announcements…

ROSS GREENWOOD:

Come on, Josh…

JOSH FRYDENBERG:

…about matters in relation to that. But, what I can tell you is that we are committed, Ross, to lowering taxes…

ROSS GREENWOOD:

Is that going to be targeted to [inaudible] electorates, do you think, during the election campaign?

JOSH FRYDENBERG:

Every step we take, in this MYEFO and in next year's budget, is about growing the Australian economy and delivering better services and infrastructure needs and the defence of the nation that people expect and deserve.

ROSS GREENWOOD:

But that $9 billion is not the tax cuts that you will announce because you need a lot more money for that. Because as Chris Richardson tells me, the $9 billion is basically half a sandwich or half a milkshake, so it's not enough. So, where does the money come from for the real tax cuts that you will announce before the budget?

JOSH FRYDENBERG:

Look, I will let you speculate on…

ROSS GREENWOOD:

There is no speculation, you're going to do that, you know that. Because this budget is going to improve even between now and April when you hand down the actual budget of 2018.

JOSH FRYDENBERG:

Well, Ross, the only thing I can guarantee you tonight, is to say that on the 2nd of April next year, when I am sure you are up here in Parliament House again, the Coalition, the Liberal and National Governments under the Prime Ministership of Scott Morrison, will deliver the first budget surplus in more than a decade. That is not luck, that is the product of hard decision making on the spending side and on the revenue side over the last five and a bit years. The Labor Party always thinks that the Liberals are lucky when they get into Government and they are unlucky when they get into Government. It is not like that. What it is, is disciplined decision making. And when Labor left us with the books when we came into Government, unemployment was 5.7, 5.8 per cent. It is now 5 per cent. Growth was only 2.1 per cent, it is now 2.8 per cent. Non-mining investment was down 4.4 per cent…

ROSS GREENWOOD:

So, how can you be so far behind in the polls…

JOSH FRYDENBERG:

…it is now up 9.7 per cent…

ROSS GREENWOOD:

…when you've got all of that going, how can you be so far behind in the polls?

JOSH FRYDENBERG:

Well, Ross, when we talk about policy, when we talk about the economy, when we talk about national security, people like what we say and what we do.

ROSS GREENWOOD:

What happens when we talk about New Idea?

JOSH FRYDENBERG:

Well, when we talk about issues about ourselves, they turn off.

ROSS GREENWOOD:

Josh Frydenberg, Treasurer, many thanks for your time.

JOSH FRYDENBERG:

Good to be with you, Ross.