18 December 2018
Transcript - #2018100, 2018

Interview with Tony Pilkington, Mornings, 5AA

Subjects: Mid-Year Economic and Fiscal Outlook.

TONY PILKINGTON:

Treasurer, good morning, welcome to FiveAA.

JOSH FRYDENBERG:

Good morning and nice to be with you and your listeners, Tony.

TONY PILKINGTON: 

You're taking a break over Christmas? Going away with family? What do you do? As the Federal Treasurer, do you actually have some time off over the Christmas New Year holidays?

JOSH FRYDENBERG:

Yeah, a little bit of time at the beach with my family but it's going to be a busy year next year obviously with an election, with a budget to deliver, with the final report into the Royal Commission into the banks, so it's going to be one busy year.

TONY PILKINGTON:

Treasurer, just on a personal note, family, tell us about it, wife, how many kids and what ages?

JOSH FRYDENBERG:

A couple of young kids, just four and two, very, very special and, you know, that's why we do the job. We want to do the job to create a better country for our children and for all Australians and yesterday was a step in that right direction with the midyear budget update which showed the state of the books are in their best condition for more than a decade, Tony, and that's good news for your listeners because it means we can deliver better education, health, infrastructure, defence programs that they need and deserve.

TONY PILKINGTON:

Cynics would say, of course, with Newspoll suggesting that you could be in for a hiding come June of next year, May or June of next year, time of the federal election, cynics would be saying, okay, these figures all of a sudden come from out of nowhere. You would dispute that. You would say, no, these are actually based on sound economics.

JOSH FRYDENBERG:

Well, if someone says that they're obviously reading a Labor press release and not listening to the Treasury officials and the expert economists because we've been building towards these good numbers for a long time with a steady improvement in the economic trajectory of the country. Let's just remember when we came to government in 2013, unemployment was higher, growth was lower, investment had fallen off a cliff, and there had been $240 billion of accumulated deficits run up by the Labor Party, with another $120 billion to come in the future years. We've now turned that corner, we've halved the rate of spending growth, we've provided tax relief to more than 3 million small businesses and around 10 million individual Australians. And at the same time we're seeing the budget come into surplus next year which will be the first time in over a decade. That's what you get from a strong economy, from prudent management, disciplined, decision-making.

TONY PILKINGTON:

Treasurer, what are the concerns? I mean, one of the concerns has to be the possibility of an escalating trade war between the United States and China, also the downturn in housing prices and the fact that some people are arguing there is a very, very small increase in wages being paid in this day and age?

JOSH FRYDENBERG:

Well, let's take those individually. Firstly, you're right. Trade tension between China and the US, if they escalated, could have an impact here in Australia. The United States is our number one investment partner, China is our number one trading partner. So we've called for cool heads to prevail. Let's remember that the tariffs that have been exchanged between those two countries have only applied to about 2 per cent of world trade.

TONY PILKINGTON:

If, indeed, this war between the two, this trade war were to escalate, what would be the effects from an Australian point of view? From Australia's trade point of view?

JOSH FRYDENBERG:

One in five Australian jobs are related to trade and China is our number one trading partner. So we don't want to see any escalation in these conflicts between those two countries over trade. So we're calling on all parties to abide by the international open trading system and its rules-based order, that's in Australia's interests and undoubtedly that's the world economic interest.

In terms of the other issues you raised, the housing market, well, prices have come down for more than twelve consecutive months in the capital cities and this is from previous highs. But the biggest danger in the housing market comes from Labor's plans to abolish negative gearing, as we know it, and increase the capital gains tax because what that would mean is for all your listeners, anyone who owns their own home, will see it worth less under Labor's plan and anyone who rents their own home will end up paying more because by taking investors out of the market, you're taking people out of the market who would otherwise charge lower rents in the expectation of an after-tax capital gain. So, that is a really big danger to the Australian economy what Labor is proposing.

On wages, you're right, wages growth has been slow but we saw the biggest jump in three years recently with a 2.3 per cent increase in wages compared to about 1.9 per cent for inflation. But the only way you get improvements in wages is by growing the economy, investing in productivity-linked infrastructure and cutting taxes and they're the things that we're doing.

TONY PILKINGTON:

Treasurer, the stock market expected to go down a little again this morning. For those of us who are self-funded retirees, and have got most of our money invested in the stock market, this is a continuing worry, the fluctuations and the downturn in the stock market.

JOSH FRYDENBERG:

Well, the stock market goes up and down, of course, but the only way that stocks and the companies do well is if you have a growing economy. That's why we're determined to invest in the infrastructure that we need, that's why we're determined to have a flexible labour market to stop the union crushing productivity in the workplace. That's why we're determined to cut taxes, as we have done. So they're our policies which is to support Australian companies.

But the other, again, big danger to self-funded retirees is the fact that Labor is going to be taking away the benefit that self-funded retirees get from franking credits. I mean, this is going to hurt 900,000 individuals and 200,000 self-managed super funds. If you're an individual, on average, you will be about $2,000 worse off. If you're someone in a self-managed super fund, the self-managed super fund will be about $12,000 a year worse off. They're big numbers and that's going to be a product of Labor's big tax grab.

TONY PILKINGTON:

Treasurer, we thank you for your time. I can imagine how busy you are. Enjoy the break. What have you got, a couple of weeks off? Three weeks off? How long do you actually kind of put the feet up?

JOSH FRYDENBERG:  

It's sort of on and off, as you know. There will be plenty of responsibilities, plenty of phone calls and probably plenty of reading to do but if I get some turkey, time on beach and a bit of cricket and the odd kick of the footy I'll be happy.

TONY PILKINGTON:

Good on you. Josh Frydenberg, thanks for the time this morning. Enjoy Christmas and New Year.

JOSH FRYDENBERG:

Thanks, Tony.