Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 12 March 2020
NANCY HUNGERFORD: Welcome back to Street Signs. The Australian markets, like many across the region, are deepening their sell-off this morning. Overall, the market is off almost five per cent. This even as the Government has unveiled a multibillion stimulus package to buffer its economy from the virus. Let’s get straight out to Will Koulouris for more. Will.
WILL KOULOURIS: Good morning, Nancy. That’s exactly right, $17.6 billion package, a lot of it frontloaded to before June 30, $11 billion of that with the hopes of really stimulating the economy. And joining us now to discuss the measures introduced by the Australian Government today, very pleased to welcome the Minister for Finance, Mathias Cormann. He’s joining us live via satellite in Perth. Thank you so much for joining us, Minister. Just firstly, I wanted to talk about the impact of the package. $11 billion to come before June 30, are you confident though that this is enough to really shore up any kind of risk of a recession occurring in Australia?
MATHIAS CORMANN: The package that we have put forward represents about 0.9 per cent of GDP, so it is a pretty significant package, but it is scalable. If more was to be required depending on how the situation evolves, we would be able to scale that up, but it is a very significant package initially to support businesses stay in business, to support Australians keep their jobs and indeed to provide targeted support to Australians receiving various forms of welfare payments.
WILL KOULOURIS: Overnight, we had the German Chancellor Merkel saying that basically 70 per cent of the population there could get impacted. I have seen some modelling from the Government here in Australia that’s suggesting that up to around 75 per cent of our workforce could be affected. Just how much room do you have to further stimulate should the issues get worse in terms of the virus impact here?
MATHIAS CORMANN: We have been working on the basis that this is a pandemic for a number of weeks now and we have been preparing on that basis in terms of preparedness of our health services. We provided an additional $2.4 billion yesterday to boost our health services preparedness. Now today, the economic stimulus announcement is because we understand that this is going to be a very significant economic challenge as a result of a health shock. We have provided a very significant initial response. Because we have worked so hard over the last six and a half years to repair our Budget position, returning the Budget to balance, we are in a position to do more if more is required.
WILL KOULOURIS: The idea has been bandied about in terms of perhaps issuing a moratorium on the superannuation payments. That could be an injection of cash without necessarily needing to have the Government spend any kind of money. Is that something that you’d consider?
MATHIAS CORMANN: We have been very focused on providing tax relief to business to encourage and incentivise increased investment by, for example, expanding the instant asset write off. As long as businesses invest more by 30 June 2020, they will be able to immediately deduct up to $150,000 investments for businesses with a turnover of $500 million a year. We have also provided cash flow support and we are providing direct support to Australians on various forms of welfare payments. It is a simple approach, but it is an effective approach, it is a scalable approach. The measure that you mentioned would, I suspect, create a level of controversy at a time when we need all Australians to pull together in the same direction.
NANCY HUNGERFORD: Minister, when you mention that you stand ready to do more if needed, can you give us a better idea of what it is that you’re looking out for that would trigger additional stimulus? Is it a certain dent to the economy that would be worse than you currently anticipate or further spread of the virus? What would it take to have to put forward even more stimulus?
MATHIAS CORMANN: We have been acting on advice on what the expected impact of the spread of the coronavirus is likely to be economically on the Australian economy and economic growth in the March and June quarters. There is a lot of uncertainty around all of this as to how long it will take. We don’t really know how long we are going to be dealing with this. We expect that further decisions are likely to be required, but we can only act on the best available information in front of us and right now that is what we have done. As the information becomes better and clearer and as we reach the peak of the epidemic and get a better read on where this is headed economically, we might be able to recalibrate further.
TANVIR GRILL: Do you think the recession risk is something that you will have to face inevitably given the fact that there has been such immense pressure on travel and trade that despite your best efforts, a technical recession is still something that you might have to face sooner rather than later?
MATHIAS CORMANN: Our focus is on keeping the Australian economy growing. We are into our 29th year of continuous growth. We went into this challenging period in a comparatively strong economic position and in a stronger fiscal position as a result of the work that we have done over the last six and a half years. Moving forward, we will just continue to make the best possible decisions in the circumstances to support business, to support working Australians and to give ourselves the best chance for the strongest possible recovery on the other side because what we do know is that this is going to be a temporary challenge. We don’t know for how long, but we do know that it will be a temporary challenge. The fundamentals in the Australian economy are strong and we are working to maximise the opportunity for the strongest possible recovery on the other side.
WILL KOULOURIS: Now Minister, we actually saw consumer confidence drop to a five-year low yesterday. In this plan today you’ve basically afforded a lot of money towards low income earners to really generate some kind of consumption and impact, do you think though that perhaps the middle income earners that aren’t getting any kind of support aren’t going to view this very favourably at all?
MATHIAS CORMANN: No I don’t believe so. We have provided $300 billion worth of income tax relief in our last two Budgets and disposable incomes in the final six months of the 2019 calendar year have grown at the fastest rate in about six years. I think that Australians understand is that this is a time when we all have to pull together. We are facing a significant economic challenge. We are providing significant support to business to keep working Australians in jobs. At the lower income end, at the income supported end of the spectrum, I think that all Australians understand that there are particular challenges and indeed, the stimulus towards that segment of the population is, economically, particularly effective.
WILL KOULOURIS: Minister, thank you so much for your time, it’s been an absolute pleasure. That’s Minister Cormann, the Finance Minister of Australia, on the coronavirus stimulus package that the Government has announced.