Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 12 March 2020
DAVID INGLES: The theme of the day has been policy support, fiscal and monetary. We are headed over in fact now to Australia where we got a latest announcement earlier this morning. That market there in fact, just to bring that up is down five per cent. Haidi.
HAIDI STROUD-WATTS: Yeah, look the markets aren’t convinced that this is the shot in the arm that the economy will need, but certainly this is what the Government has come through with. They have unveiled this fiscal stimulus plan to try and buttress the economy in the face of the slow down in China, the global slow down in demand the various impact of the coronavirus outbreak. And the impact spread really threatens to tip Australia into its first recession since 1991. So almost thirty years without a recession. Let’s get some more views on this. Joining me now from Perth is the Finance Minister, Mathias Cormann. Minister, great to have you with us.
MATHIAS CORMANN: Good to be here.
HAIDI STROUD-WATTS: I think the general consensus from the economists that we have spoken to reacting to the fiscal stimulus plan is that it’s enough to get us through to the first Budget. What can we expect after that?
MATHIAS CORMANN: We are dealing with a very significant challenge. It is a temporary challenge. But we don’t know at this point how long this will last and what the intensity is going to be at its peak. The reason there is such volatility in markets all around the world, not just in Australia, is because the market is finding it very difficult to price the risk. The package that we have announced today is a significant package. It represents just under one per cent of our GDP. It is designed to support business and individual Australians through this period, but also to set us up for the strongest possible recovery on the other side, by providing incentives for businesses to invest now into their success post this period.
HAIDI STROUD-WATTS: The Prime Minister was very optimistic about having a strong bounce back out of the back end of this. Do you see a V shaped recovery?
MATHIAS CORMANN: Whether it is a U shaped recovery or a V shaped recovery as the world experienced post-SARS, what we do know is that on the other side of the bottom there is a big line going up. We want Australia to be in the best possible position to maximise the strength of the recovery on the other side. This is a very significant public health challenge with very significant economic implications for people in countries all around the world. We go into this in Australia in a comparatively strong position. We go into it in a comparatively strong economic position having been on a 29 year continuous growth trajectory, with growth strengthening towards the end of the last calendar year. Our Budget position has significantly improved over the last six or so years. So we do have the capacity to provide that necessary support. The package that we released today is scalable. If more is required down the track we will be able to make those judgements as well.
HAIDI STROUD-WATTS: You’ve said yourself that this is something that could see an impact going as long as nine months from now. We’ve seen other economies projecting even more longer term and dire projections than that. In terms of what a potential second fiscal package would look like, this one was about one per cent of GDP, so equivalent roughly in that sense to what we saw during 2008-2009. Will the second package also be to the scale that we saw during the Global Financial Crisis?
MATHIAS CORMANN: I am not going to speculate on what we may or may not need to do down the track. We have done as much as we believe needs to be done right now based on the information in front of us. We will continue to assess the information and the data as it comes through. As the situation becomes clearer in terms of the speed of the spread of the coronavirus which we have been treating as a pandemic for a number of weeks now - as more information about the economic impact comes to hand we will continue to make judgements. But right now we have put our best foot forward to support business stay in business, to keep Australians in work and to provide targeted direct support to income supported Australians, those on welfare payments.
HAIDI STROUD-WATTS: The package is pretty heavily skewed towards the second quarter in terms of when most of the funding gets released. In your view, is that enough to avoid a recession?
MATHIAS CORMANN: Again, it is a package that presents about 0.9 per cent – or just under one per cent – of our GDP. In fact, up front it is even more than that. Over the forward estimates, the cost is about $17.6 billion in the initial financial year and the period thereafter. It represents about $22.9 billion in terms of gross fiscal impact. It is a very significant package, but as I have indicated, it is scalable. As more data and more information comes to hand we do have the capacity to add to it if that is required.
HAIDI STROUD-WATT: Does this undermine the budgetary considerations for the country?
MATHIAS CORMANN: This is a temporary challenge. It is a significant challenge but it is a temporary challenge. What we are doing here in terms of fiscal stimulus is put forward a whole series of significant but temporary measures. We are not baking in any structural burdens on the Budget. You might recall that our last Budget update showed that the Budget was in surplus every year over the forward estimates and over the 10-year medium term period. We are not imposing a structural increase in payments on the Budget. We are very much focused on providing temporary relief, temporary support. As significant as it is, when we are on the other side of this and we experience the strong recovery that we are very confident will occur, the Budget will bounce back at that point in time as well.
HAIDI STROUD-WATT: Minister, just on Friday you said that the Government wouldn’t be embarking on a cash splash in that reckless Gillard-Rudd fashion and yet today, the Government, the PM and the Treasurer, did announce this multibillion dollar cash handout to pensioners, to jobseekers, to lower income families. So I’m wondering what the thinking was behind the turnaround.
MATHIAS CORMANN: There is no turnaround. What I said on Friday is 100 per cent consistent with what we announced today. Those who are students of political and fiscal history would remember that we supported the initial Rudd-Gillard Government stimulus package, which included cash payments to welfare recipients which is what we are doing today. We did not support the second reckless and irresponsible cash splash which involved payments for pink batts, putting pink batts into roofs to take them out again because of the houses being put on fire, overpriced school halls and the indiscriminate cash payments to just about everyone right around Australia. That is not something that we are supporting. That is not what we are doing. Our cash payments here are very much focused and targeted at the lower income and the income supported welfare recipient end. That is the segment of the population that needs that particular support. But it is also the segment of the population where these sorts of payments have the biggest impact in terms of economic stimulus moving forward.
HAIDI STROUD-WATT: There is also criticism that not enough of this goes income broader household hands for spending. Are you concerned about the sentiment impact that the coronavirus will have just in terms of what you’re seeing when you look out onto the streets, at restaurants, particularly if large gatherings and other events will be cancelled?
MATHIAS CORMANN: The most important thing that we can do for sentiment and confidence is to protect people’s jobs. We are providing substantial investment into protecting people’s jobs. We are providing cash flow support and investment incentives to businesses employing nearly 10 million Australians. We are providing direct payment support to about 6.5 million Australians. This is a far-reaching package. It is designed overwhelmingly to protect people’s employment as the economy goes through a very difficult period and as businesses around Australia are going to find it hard to hold onto staff as their revenues go down. That is what we are focused on doing. That is what we believe is appropriate in the current circumstances that we are facing.
HAIDI STROUD-WATT: Minister, thank you so much for your time as always. The Australian Finance Minister Mathias Cormann there joining us out of Perth.