Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 12 March 2020
PATRICIA KARVELAS: During the Global Financial Crisis the then Treasury secretary Ken Henry told Prime Minister Kevin Rudd to go hard, to go early, to go households and today, that is exactly what the Morrison Government has done. The Prime Minister unveiling this $17.6 billion stimulus package to deal with this economic damaged caused by the coronavirus pandemic. And the best evidence of them going hard and going households is this specific measure where welfare recipients will get this one off cash payment of $750. Now that includes many, this scale is huge. We’re talking Newstart recipients, the disability support pension, carers allowance, youth allowance, veterans support payments, and key here, there are other categories too, but key here family tax benefits. So families as well, and that’s a whole lot of households. Of course aged pensioners as well and there are 2.5 million of them. Now this is all about stimulating the economy right. This is about going households and spending that money now. There has been other developments today as well. We’ve got this announcement really from Greg Hunt, which is at this stage just an idea, a review potentially, of people coming to Australia from Europe. We don’t actually know whether the Government will go down this road. We know that the US President Donald Trump has gone down this road. And now the Government is putting that on the table. A short time ago I spoke with the Finance Minister Mathias Cormann. And we did talk about that travel ban. In fact he talked to me just before Greg Hunt had said this has been reviewed.
Mathias Cormann, welcome.
MATHIAS CORMANN: Good to be here.
PATRICIA KARVELAS: During the GFC, then Treasury secretary Ken Henry told Kevin Rudd to go hard, go early, go household. Isn’t that exactly what you have done today?
MATHIAS CORMANN: The important thing to remember is that we supported as a Coalition the first stimulus package under the Rudd Government. What we criticised as reckless and irresponsible was the second $42 billion plus package, which gave us pink batts, overpriced school halls, and payments to just about everyone, which we felt was excessive. What we are doing here is much better targeted in terms of the direct payments that you referenced. It is targeted at the welfare end, at the income support end of the population. The package overall is very much skewed towards supporting business to invest into the strength of the recovery on the other side, but also to support business cash flow so that they can keep their employees.
PATRICIA KARVELAS: I think it was just a week ago that you said there weren’t going to be these cash payments, Rudd-style payments. But that is exactly what we got today. What changed?
MATHIAS CORMANN: That is not true. What I said last Friday is one hundred per cent consistent with what we are doing today. We are not providing an indiscriminate payment to just about everyone across Australia in the way that the Rudd government did, which we appropriately criticised at the time. What we are doing as part of a $17.6 billion package over the forward estimates, about $4.8 billion is going towards targeted payments to support welfare recipients. I think that Australians in the circumstances that we are facing as a nation on the back of a significant public health challenge with serious economic implications would expect us to do precisely what we have announced today. That is support investment, support investment by business into the strength of the recovery on the other side, but also to provide cash flow support so that businesses can hold onto their workers and to provide targeted support to individual Australians who are particularly vulnerable.
PATRICIA KARVELAS: Will this package be enough to avoid Australia sliding into a recession?
MATHIAS CORMANN: This package represents about just under one per cent of GDP. It is a very significant package. It is proportionate to the challenge we are facing. It is targeted. But it is also scalable. We will continue to review all of the data and all of the information. As more information comes to light about the speed at which the virus spreads across Australia and across other parts of the world and the economic implications of all of that, we will be in a position to continue to make judgements as appropriate. Importantly, the reason we are able to make those judgements is because as a result of the significant Budget repair effort over the last six and a half years, we are now in a much stronger fiscal position. Australia compared to other countries went into this in a comparatively stronger economic position than others. So we are in a good position to deal with this. We are well prepared from a health point of view. We made a $2.4 billion commitment yesterday to further boost the preparedness of our health and aged care services to deal with this coronavirus challenge. But also economically and fiscally we are in a good position to deal with this.
PATRICIA KARVELAS: When will you make an assessment about whether a second stimulus package may be necessary and could it realistically be as soon as the May Budget?
MATHIAS CORMANN: The preparation work for the Budget is ongoing. That has been going for some time. This coronavirus challenge has evolved very rapidly. The economic implications of it have evolved very rapidly. There is still a lot of uncertainty about how it will play out. How long it will take. The reason you would have seen volatility in the markets here in Australia and all around the world, is because the markets are finding it very difficult to cost the risk. That is the reason why we have just to continue to make assessments. What we have put forward today is very significant. We believe it is probably sufficient for the period to the end of June. But over the next few weeks and months and as we finalise the preparations for the Budget, of course we will continue to make judgements as to what might required over the somewhat longer term based on what we are observing.
PATRICIA KARVELAS: You just made a reference to this, but the Australian share market has plunged today. Were you expecting a kind of bounce from this announcement today? Are you surprised by the reaction?
MATHIAS CORMANN: No. Market volatility is not unexpected in the circumstances. There is a significant level of uncertainty on how this disease will play out, how the spread of this virus will play out both in a public health and an economic sense. The fundamentals of the Australian economy were strong when we went into this. We are very confident that on the other side of this the economic fundamentals in Australia will be very strong again, that we will have a very strong recovery. In the meantime we are going through a challenging period and we are making a significant temporary investment to support business, to support Australians, to ensure that we are in the best possible position on the other side. There is a level of uncertainty there that has led to volatility in markets all around the world.
PATRICIA KARVELAS: Is negative growth in the March quarter now essentially unavoidable?
MATHIAS CORMANN: I am not in a position to provide you with the data on what the outcome of the March quarter will be...interrupted
PATRICIA KARVELAS: But what is your assessment about where this is going?
MATHIAS CORMANN: Treasury has indicated that the coronavirus is likely to have a half a per cent negative effect on GDP growth in the first quarter. Now we did have half a per cent growth in the December quarter. We had 0.6 per cent growth in the September and in the June quarters. We have to wait for the national accounts data to come out for the March quarter before we can conclusively say what the impact has been on the March quarter. At the moment there has been a level of assessment, which we have shared candidly with the community. But in the end, our focus is on keeping the economy growing, keeping business in business and Australians in jobs. The package today is a very significant package. I hasten to add here, these are all significant but temporary measures. We are not baking in structural increases in payments that will be burdens on the Budget for the next decade, which was another component of the Rudd Gillard approach where we are quite different in the way we are approaching this here.
PATRICIA KARVELAS: If you don’t avoid a recession given the Rudd government did avoid a recession. Will that be in your view a verdict your package was unsuccessful?
MATHIAS CORMANN: Right now we are not interested in the politics of all of this. I do not believe and we do not believe that the Australian people are interested in the politics of this. We are doing absolutely the best we can in the context of a very unique global challenge, which in many ways is significantly more complex than a financial crisis. The global financial crisis was comparatively quite straightforward on how to deal with. That is not to take away anything from what was done at the time. That is just to make the observation that in relation to the global spread of the coronavirus, there is a whole series of things that are quite unique that we do not yet know, that we cannot assess with any certainty just yet. Right now, we are working hard to stay ahead of curve. We will continue to work hard to stay ahead of the curve. If you compare Australia’s response with the response internationally, I think you will find that we are in a comparatively strong position.
PATRICIA KARVELAS: This is different to the GFC and in fact the Prime Minister, you, others have been making this point. Is there a risk that the worry in the community, which is based on the kind of medical advice that’s been offered, will mean that people will be apprehensive about going out and spending their cash payments, especially if we see school shutdowns, workplace shutdowns, people quarantining. Does that dynamic shift the way people might behave in response to this?
MATHIAS CORMANN: We are very confident that the $4.8 billion in cash payments, in direct cash payments to pensioners and Newstart recipients and other welfare recipients, we are very confident most, if not all of that will find its way into the economy very quickly. Yes, there will be disruptions in terms of community life. Of course there is a level of anxiety out there. We are saying to people still, be sensible, follow proper health precautions and proper hygiene methodologies in the context of the threat we are facing as a community. But go about your normal life as much as you can in the context of what we are dealing with.
PATRICIA KARVELAS: This $1 billion to support Australia’s tourism sector was a surprise to me, it was an element we hadn’t heard much about. We knew you wanted to do something to help this sector but now we have the quantum. What safeguards will you put around this to ensure there isn’t waste or even potentially pork barrelling?
MATHIAS CORMANN: In the current climate, we are going to make the appropriate judgements. This is not a fund for pork barrelling. I am a bit surprised that you would … interrupted
PATRICIA KARVELAS: I just asked the question, I didn’t say you had done pork barrelling.
MATHIAS CORMANN: I am a bit surprised. I think it is self-evident that the tourism sector has been particularly hard hit. The tourism sector nationally was hard hit by the bushfire crisis because of the way that played out in terms of brand perceptions internationally. This comes hard on the heels of all of that very, very significant impact. I think that all Australians would expect us to look at specific sectors that are particularly hard hit to make judgements on what appropriate supports could be directed towards those sectors. That is what we have given ourselves the fiscal capacity to do. Over the next few days and weeks we will make judgements which will be announced once these judgements have been made on how that is best done.
PATRICIA KARVELAS: Mathias Cormann, just on a few other issues which are very linked, but not entirely just on the stimulus package. Donald Trump addresses his nation today. He’s suspending all travel from Europe to the US for at least a month with the exception of the UK. That’s going to have a pretty big hit to the economy. Australia won’t be immune to that, will it?
MATHIAS CORMANN: That is the point that we have always made. 2019, which seems such a long time ago, when the escalating US-China trade tensions were putting downward pressure on global growth, we made the point then that lower global growth has implications for Australia. The decision you have just referenced now to the extent that that will put downward pressure on growth and it would, that will have consequences in terms of our domestic economic outlook. That is why we have got to continue to review our decisions on the basis of evolving information. We are in the middle of an evolving situation. There will be decisions in other parts of the world that will have implications for us. We have to continue to respond to that intelligently to put Australia in the best, strongest possible position to deal with this period, but also to maximise the strength of the recovery on the other side… interrupted
PATRICIA KARVELAS: It does beg the question. I know we have banned Italy now in the last couple of days, but should Europe be banned for Australia as well?
MATHIAS CORMANN: That is not the advice that we have in front of us. We have taken very early and very strong measures at this stage in relation to China, South Korea, Iran and Italy. We do not have direct flights between Australia and the Schengen area of Europe, mainland Europe, which is where that ban has been applied when it comes to the United States. But that is not the advice that we have in front of us at the moment. We have consistently acted on the basis of expert medical advice when it comes to these matters. That is what we will continue to do.
PATRICIA KARVELAS: In Europe, we are seeing schools close and mass gatherings banned. Evidence from China suggests these measures have actually been effective. Does Australia need to look at these measures too? We have the Grand Prix on the weekend. Should we be actually shutting down these events now as a precaution?
MATHIAS CORMANN: We are not going to make these decisions based on political considerations. We will continue to do what we have done so far. That is to absolutely and totally act based on the medical advice. The medical advice at this point is not suggesting that as a course of action. You have to remember in Australia, comparatively speaking the numbers are very, very low in terms of the numbers of infections they are very low and except for some small pockets they are relatively wide spread. At this point in time, that is not the advice in front of us. But of course if the advice were to change, then our approach to these things would change accordingly.
PATRICIA KARVELAS: So in terms of the urgency of this legislation, do you intend for this to pass as soon as Parliament returns? Will Labor get on board?
MATHIAS CORMANN: At these sorts of moments, I am very confident that this is a moment where the nation comes together. I do not believe for one second that this will be a partisan political issue. I am very confident the Labor Party, as a party of government will rise to the occasion as they have done in relation to these sorts of matters in the past. This will very much be a unifying moment in the Parliament. Whatever legislation needs to be passed through the Parliament to deal with this challenge will be passed very much in a non-partisan, unified fashion.
PATRICIA KARVELAS: Minister, thank you so much for your time.
MATHIAS CORMANN: Always good to talk to you.