11 July 2019
Transcript - #2019098, 2019

Interview with Ross Greenwood, Money News, 2GB

Subjects: Tax cuts; infrastructure spending.

ROSS GREENWOOD:

The Treasurer Josh Frydenberg is on the line. Many thanks for your time, Treasurer.

JOSH FRYDENBERG:

Nice to be with your listeners.

ROSS GREENWOOD:

Okay. This is the interesting part about this. You’re in the role as Treasurer, you’ve promised a surplus, and yet people out there are saying that times are tough and that maybe you’re not understanding just how tough times are. How do you respond to them?

JOSH FRYDENBERG:

Well certainly some people are doing it tough, and we have seen particularly in the drought and flood stricken parts of our country, communities being really hit with the worst possible natural disasters. We’ve also, as you’ve alluded to in your opening, seen a softening in the housing market, and that affects consumer confidence and household consumption, it’s about 60 per cent of GDP. So that’s important too. We’ve also seen globally the impact of the trade tensions between China and the US weigh negatively on the global economic outlook, with investment decisions deferred. So that hasn’t been good news either. But on the flip side of all that, the Australian economy has proven to be remarkably resilient and what the Governor has said today was that the fundamentals of the Australian economy are strong, we’re in our 28th year of consecutive growth, we’re one of only 10 developed economies to have a AAA credit rating from the three leading credit agencies, and will deliver a surplus for the first time in more than a decade. So there is some positive aspects to the economy, but we don’t understate the challenges that we face.

ROSS GREENWOOD:

Okay, because if we look at the numbers. One of the reasons you’ve been able to deliver that surplus is because of iron ore prices because sadly there was a dam collapse in Brazil which meant that Vale stopped exporting iron ore for a period to China, which meant that the iron ore prices doubled which has given you an almost $8 billion dollar boost to the Budget. The problem is that the overall economic growth has slowed back into the ones, not into the twos, or even the threes, that you might have hoped for when you set out Budgets and when you also planned for future tax cuts. The real issue is if eventually that iron ore price comes back you’ve got problems if the economy has not responded in the meantime.

JOSH FRYDENBERG:

Well, it is true that the terms of trade have been very strong, reflecting some of the supply constraints in the iron ore market. That being said, we have budgeted for a $55 a tonne iron ore price, whereas the current price has been hovering around $100. Now, that is a boost to the Government’s coffers, but we have not relied upon that in relation to predicting a surplus in 2019-2020. So we do have quite conservative assumptions when it comes to our commodity forecasts and we have seen some strong aspects of the economy, particularly the employment growth where over 1.4 million new jobs have been created since we’ve come to Government, with eight out of every 10 jobs being created over the last 12 months being full time.

ROSS GREENWOOD:

Are you conscious of Standard & Poor’s, S&P global ratings, coming out and saying, you know, if you the Treasurer, if you the Finance Minister do not deliver that surplus as promised, that could compromise Australia’s AAA credit rating. Is that in your mind?

JOSH FRYDENBERG:

Well I am very conscious that a surplus is very important to maintaining our credibility with the credit rating agencies, but it’s also much more than that. It’s about actually paying down the debt that we inherited and doing so in a responsible way that ensures future generations do not have to pick up the tab for the last. I mean, that understanding of fairness or intergenerational equity is fundamental to us as Liberals and Nationals in the way we approach the economy. If it wasn’t for the Howard and Costello years where they paid back Labor’s debt, we wouldn’t as a country had the fiscal flexibility to respond to the GFC when it hit, with the ability to spend through that economic cycle. So, we are going to pay down debt, we are going to deliver a surplus, but we’ve also, as you know, just passed through the Parliament $158 billion of tax cuts which will see money going to more than 10 million Australians, and that will also boost the overall level of economic activity.

ROSS GREENWOOD:

Okay, and given the current rate of economic activity in the ones, are you still confident that the Budget can afford those tax cuts and not fall back into deficit? Because that’s one of the things that has been predicated on these tax cuts, the $158 billion, is that you can keep the Budget into surplus over the next 10 years?

JOSH FRYDENBERG:

We’re very confident of the economic settings that we’ve established, and the Budget forecasts that I laid out to the Australian people on April the 2nd very much took into account the tax cuts going through the Parliament. Everything was costed, everything was funded, and as you know, our political opponents didn’t go the election promising tax cuts as we did, they went to the election promising tax hikes and that would have been exactly the wrong thing for an economy that is now facing some challenges. But again, I come back to where I started, Ross, which is that the fundamentals of the economy are sound and the Reserve Bank Governor has underlined that today. But we have an economic plan and that plan was set out in the Budget when we were very conscious of the challenges that the economy faces and it involves tax cuts, $100 billion of infrastructure spending and a major skills package with 80,000 new apprentices.

ROSS GREENWOOD:

Okay, so last night on the program I spoke to Infrastructure Australia about exactly that, about the infrastructure, and whether if things were to slow down from now whether there’d be enough infrastructure in the pipeline to go.  Because one of the faults of the Labor Government when the Global Financial Crisis hit was that there was not enough infrastructure ready to go. They say there’s 18 projects there. There’s about $58 billion worth of projects and some are in planning, sure, but they said some of the short term stuff, say New South Wales, its roads maintenance program is said to be $2.2 billion behind, and so that could almost be done instantly. But this is not your business in some ways. That’s the state governments’ business. So do you also have to encourage and cajole the state governments to start to spend some money on infrastructure if it’s required to help the economy out?

JOSH FRYDENBERG:

Well, look, of course. It’s both State and Federal Governments that have responsibility for infrastructure spending, and local governments pay an important role too and we actually do provide money to the states for their road maintenance programs. So it’s not just the big greenfield sites that we’re investing in. The projects for example, a second airport for Sydney, an airport rail link in Melbourne that Melburnians have been waiting for for 50 years, or the other upgrades that we’re promising, or the fast rail on the east coast of Australia. All of that is part of major nation building projects but there are a lot of smaller projects that can bust some of the congestion in our suburbs, in our cities, which can also be done by the states.

ROSS GREENWOOD:

So the people who are listening here, who have called in this week and chatted to us about what they think the economy is like right now, what do you say to them? Because many of them are feeling pretty much down in the mouth. They’re worried, they’re concerned about their jobs, they’re worried about the amount of work they’re getting, you know. Is there a confidence booster for these people?

JOSH FRYDENBERG:

Well certainly in terms of job security, my message to them is the Government is doing everything we can to create new jobs and we’ve been very successful in doing it. There is more people now in work in Australian than ever before, and as you know, Ross, the participation rate which measures the percentage of the people who are actually in the workforce is at a record high. More women are in the workforce and some of our childcare reforms are part of driving that outcome, but also more seniors are in the workforce and we’ve made some changes to the welfare system to enable people to work a bit longer…

ROSS GREENWOOD:

I’ll pick you up there on one small thing. In that part there, the desperation. Doesn’t that show the desperation? They need the cash because their electricity bill’s gone up. So people are working longer into their retirement years, people are finding, you know, that they need a second income in the family so maybe a mother goes out and has more hours, or a father, whomever it might be. But it’s one of these things where the people, because they’re not getting these pay rises, they’re having to work a bit harder.

JOSH FRYDENBERG:

Well cost of living is of course a pressure on all families, and in that respect, the cut to the interest rate will make a positive difference to the reduction in the mortgage payments that many families will have to confront. We have taken some reforms, made some reforms in the energy market which is starting to see results. As well as in the childcare space, major boost to subsidies for families to enable parents to get back into the workforce if that’s a choice they want to make, they want to make for themselves. So we are taking steps to alleviate cost of living pressures but I am also very conscious that those pressures exist on Australian families.

ROSS GREENWOOD:

Okay, just one final one for you. The $1,080 that many Australian families will receive by way of tax cuts when they put their tax return in this year. Would you like those people to save that money or to spend it?

JOSH FRYDENBERG:

Well the good news is that over one million Australians, as of today, have put in their tax return for the 18-19 year. This is a massive jump, Ross, on the numbers we saw for the commensurate period last year and as you say, they’ll get up to $1,080. More than 10 million Australians. I want them to spend it on the priorities that are important to them and their families. It’s not for me to tell them to not go on a holiday or to not do a home improvement or to spend at one shop over another. That’s a choice for them but from the people I have spoken to who are working at businesses around the country. They are looking forward to getting their refunds here and being able to spend that in the economy at their local shop, which will then of course stimulate more activity as well as create more jobs.

ROSS GREENWOOD:

I tell you what, always good to have him on the program, and Josh Frydenberg, I appreciate it this evening.

JOSH FRYDENBERG:

Great to be with you this evening.