Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 6 March 2020
LAURA JAYES: Live now to the Finance Minister who joins us from Perth this morning. Thanks so much for your time, Mathias Cormann.
MATHIAS CORMANN: Good morning
LAURA JAYES: You are working on a stimulus package at the moment. Is the purpose of it to avoid recession?
MATHIAS CORMANN: The purpose of it is to ensure that we can keep business in business and keep Australians in their jobs. We are going to enter a pretty challenging period, both from a public health and from an economic point of view. But we also know that on the other side there will be a strong recovery. We want to ensure that we put Australia in the strongest possible position to maximise the strength of the recovery on the other side of the challenging period we are about to enter into.
LAURA JAYES: Treasury yesterday outlined a 0.7 per cent hit to the GDP in the June quarter. Is that about what you were expecting?
MATHIAS CORMANN: We take advice on these things. The Treasury Secretary yesterday indicated, consistent with what the RBA Deputy Governor told Senate Estimates on Wednesday night, a 0.5 per cent hit to the March quarter. We are working our way through how we can ensure that through this challenging period ahead of us and beyond, that we put ourselves in the strongest possible position. It is important to note that the December quarter national accounts showed that the fundamentals of the Australian economy are sound. Economic growth was strengthening. Employment growth remained very strong. We had the strongest growth in disposable income in the last six months of 2019 in five and a half years. Things fundamentally were heading in the right direction. But this is an economic shock. This is an event beyond our control that we will have to deal with. We are making judgements to put ourselves in the best possible position.
LAURA JAYES: A 0.7 per cent hit to GDP doesn’t mean much to most people. So can you give us an idea what that might mean in dollar terms. Is it in the order ten billion dollars in terms of a hit to the economy? Is it more? Do you need to spend around that?
MATHIAS CORMANN: This is all other things being equal. We are making decisions to ensure that we keep the economy growing. That we put ourselves in the best possible position for the strongest possible recovery on the other side. We are making judgements, and we will be providing stimulus in the short term, but while keeping a very careful eye on the long term structural health and sustainability of our Budget position nevertheless. These are the judgements that we will be making over the next little while. People should expect an announcement in relation to a stimulus package well before Budget time.
LAURA JAYES: Well before Budget time. Does this mean we are looking at the June quarter now? You’ll have this ready to roll well before the first of April?
MATHIAS CORMANN: We would expect to be making relevant announcements in the next few weeks.
LAURA JAYES: Okay. Business will be the focus as you’ve outlined. What is the best way to keep cash flowing and stimulate the economy? We have seen a lot of ideas thrown up. A lot of things the Treasurer has confirmed that the Government is looking at. What is the best way to get that money out as quickly as possible?
MATHIAS CORMANN: In the end you have to consider what the problem is that we are dealing with. Because of the level of uncertainty and anxiety generated by the risk of the coronavirus spreading, one of the effects is the impact on investment. Investment needed to be boosted in any event. But this coronavirus economic shock will have a further downward effect on business investment. So we really do need to find ways to incentivise business to bring forward investment decisions in anticipation of a strong recovery on the other side of the challenging period we are about to go into. Whatever we can do to unlock business investment to keep business in business, to ensure that business keeps Australians in jobs as we go through this period. These are the sorts of things that we have to very much focus on.
LAURA JAYES: It’s about keeping people spending as well. Economists are saying perhaps a one-off increase to the Newstart allowance might be a good way to get cash flowing in the economy. Is that on the cards?
MATHIAS CORMANN: I am not going to start speculating here on what we will and will not do. What I will say is our focus on making sure that business remains in business, that business keep Australians in jobs. We want to ensure that we bring forward investment that will help us strengthen growth beyond this period. Beyond that, what other measures might sensibly be able to be pursued, these are matters for discussions over the next few days and weeks.
LAURA JAYES: Fair enough, so business the focus here. Will there be any relief for individuals?
MATHIAS CORMANN: Again, I am not going to go through a shopping list of measures. We are taking advice. We are discussing these matters with Treasury, Finance. We have had a discussion earlier this week with the Governor and Deputy Governor of the RBA. We have had the Deputy Prime Minister write to State and Territory governments to identify any infrastructure projects that we might be able to get cracking on swiftly. Across the board, we are assessing what needs to be done. We are looking for opportunities to make a targeted, responsible, scalable intervention to support the economy through this period.
LAURA JAYES: Don’t expect cheques in the mail though.
MATHIAS CORMANN: We will not be pursuing a cash splash in the reckless Rudd-Gillard fashion, no.
LAURA JAYES: You did vote for it during the GFC, your side of politics.
MATHIAS CORMANN: No. I think that that is a rewriting of history. We supported the initial first phase, a quite proportionate stimulus package. We were very concerned and totally opposed to the major reckless cash splash that followed.
LAURA JAYES: Okay, well how big is the budget deficit going to be now?
MATHIAS CORMANN: The half yearly budget update in December showed a $5 billion surplus for the 2019-20 financial year. The next update in terms of the fiscal position for 2019-20 and the forward estimates will be the budget on the second Tuesday in May. Clearly, there has been an impact already in terms of revenue. There will likely be an impact on the spending side of the budget, both because of what is happening in the economy and because of policy decisions that we are making. But what precisely those numbers will be, that will be updated and reconciled in the Budget.
LAURA JAYES: What are the new mugs going to say? Back in black was the last budget. What’s it going to be this time around?
MATHIAS CORMANN: We were of course back in the black when we released the budget in April 2019. Let me say, if we had not done the hard yards to repair the budget mess we inherited, if we had not done the hard yards over the last six and a half years, we would be going into this challenging period in a much weaker position. We are going into this period in a much stronger position because of the hard work that we have put in to ensure that spending growth was brought under control, to ensure that we brought the budget back into balance in 2018-19. That we had a forecast surplus position over the forward estimates and the medium term. This is an external economic shock. It is something that happened beyond our control, but we are dealing with it. We are in a better position to deal with it because of the work we have done.
LAURA JAYES: Well I hope Scott Cam is stimulating the economy. He gets paid more than you it occurred to me this morning and he hasn’t made one public appearance in six months. Are you jealous?
MATHIAS CORMANN: I want to see him do the job that he was contracted to do. It is a very important area. We want him to inspire young people to pursue apprenticeships and careers in the trades. So I am sure that he will work very hard.
LAURA JAYES: Mathias Cormann, thank you, live from Perth this morning.
MATHIAS CORMANN: Always good to talk to you.