Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 17 March 2020
FRAN KELLY: A second economic rescue package will be rushed out within days as the coronavirus continues to smash a range of sectors in our economy, including small businesses, in tourism, hospitality, in particular, and also the airlines. The emergency measures will be fast-tracked through Parliament next week, along with the $17.6 billion stimulus package that was announced by the Prime Minister just last Thursday. This carnage from the virus continues to overwhelm the share market, which yesterday suffered its biggest decline since the stock market crash of 1987. And on a very human level, the country is bracing for tens of thousands of deaths, as many as 150,000 under a worst case scenario being spoken of by our chief medical officers. The Finance Minister Mathias Cormann is in our Parliament House studios. Minister, thank you very much for joining us.
MATHIAS CORMANN: Good morning. Good to be here.
FRAN KELLY: Before we get to the economy, a lot of worry being expressed by people listening about this forecast that’s in the Sydney Morning Herald today. It comes from the Deputy Chief Medical Officer suggesting that if you do the sums as he says, 150,000 Australians could die from COVID-19. That’s based on a one per cent mortality rate and 15 million of us contracting corona. That’s the worst case scenario, but the best case scenario is pretty troubling. 50,000 deaths. These are alarming numbers. Are these the numbers the Government is working on?
MATHIAS CORMANN: Well no. Firstly, what is published in the Sydney Morning Herald today is not a forecast, it is not a predication. The Deputy Chief Medical Officer was asked a hypothetical question in relation to a hypothetical scenario. The Government’s plan is to slow the spread of the virus so that we can save lives. We won’t be able to stop the virus spreading, but we can slow it down and by slowing it down we will ensure a more constant flow of patients into hospitals and we will ensure that we can appropriately prioritise our most vulnerable patients.
FRAN KELLY: Okay. And to slow it down the Government has talked a lot about this, the flattening the curve and social distancing is key to that, banning large gatherings of people. At the moment, gatherings over 500 are banned. Will lives only be saved if we lock down a lot tighter? The US has just announced a ban on gatherings of more than 10 people, will we follow suit?
MATHIAS CORMANN: We continue to receive medical advice. The National Security Committee will continue to meet. We have a series of meetings today of the Expenditure Review Committee, the Cabinet and the National Security Committee. Some other parts of the world, in particular Europe and also the US, are somewhat further advanced in terms of the spread of the virus there. We will continue to act as advised. As the Prime Minister indicated yesterday in relation to some of these things, it is important to time these decisions in the right way, sometimes, in relation to for example schools, not to act too early because you can have counterproductive consequences.
FRAN KELLY: In terms of gatherings, National Cabinet meets tonight I think, and we have been told that it will be looking at other gatherings of people, what limit to set that at, it could be set at 100 people. Have you modelled what that will do to the economy in terms of restaurants, caterers, entertainers, cinemas? How many businesses are likely to go under?
MATHIAS CORMANN: The coronavirus is having a very severe impact on our economy, as it is having a severe impact on economies around the world. There are sectors of the economy that are particularly severely impacted. Tourism and hospitality obviously are two of those sectors. As the situation continues to evolve, and it is evolving very rapidly, necessarily the Government’s response to it, including our economic and fiscal policy response, will continue to evolve. Yes, we had a series of meetings yesterday to review and consider how we can further strengthen the level of support to those businesses and those workers who are most severely impacted. We will be having further discussions in relation to that today and obviously the Parliament is meeting next week, which is our first opportunity to legislate our stimulus package. Between now and then we will be making further announcements with a strengthened response to provide the appropriate support to business and workers. Many businesses, sadly, will close. Many workers will lose their jobs. We need to ensure we can provide the appropriate support for a strong bounce back on the other side. And it is also the case that while some sectors are severely impacted in a negative way, other sectors, for example shopping centres, have significant demand right now and probably capacity to hire more people to deal with the demand in front of them.
FRAN KELLY: As Coles is just doing, but in terms of this second package which is what you’re talking about here, this support, where are you going to target that? Is that at particular sectors like tourism, like hospitality, even airlines perhaps?
MATHIAS CORMANN: There are various sectors in the economy that are particularly severely impacted and yes, we are thinking very carefully about how we can provide the most appropriate support both through the transition during this challenging period, but also to maximise the strength of the recovery and the bounce back on the other side. I am not going to pre-empt what those decision points will be, but we will be making announcements as soon as we can and certainly in good time for the package to be legislated next week.
FRAN KELLY: So we spoke earlier to Ralph Norris who was the CEO of the Commonwealth Back during the global financial crisis. He said, and Bill Evans, the economist, agreed, what’s needed is targeted bailout funding for small businesses. Is this what this package will be? It won’t be stimulus like we saw, it won’t be cash grants to small businesses, it will be targeted economic support packages for particular businesses or sectors?
MATHIAS CORMANN: I am not going to speculate now in terms of our response, except to say it is going to be significant and it is going to be proportionate to the challenge that we are facing and that challenge is rapidly increasing. As we have always said, our stimulus package is scalable and we will continue to scale it up as required. That is what we intend to do in good time before the legislation has to go before the Parliament next week.
FRAN KELLY: And is there a limit on it or are you just going to do what’s needed? How big will this be?
MATHIAS CORMANN: It will be appropriate and it will be proportionate and it will continue to be scalable as required.
FRAN KELLY: Airlines are obviously struggling. They pay more than a billion dollars in fees I think to Airservices Australia. Would you consider waving those levies for a year? Is that the sort of direct targeted support?
MATHIAS CORMANN: These are all of the things that are on the table for consideration and we will make these judgements as soon as all of these discussions have been concluded.
FRAN KELLY: I mentioned Bill Evans and Ralph Norris earlier. They were both suggesting the Government could take a leaf out of the Bank of England, the central bank in the UK, which is basically providing very cheap access to banks to lend to businesses. This notion of perhaps guaranteeing 80 per cent of the bank loans to struggling small to medium sized businesses. The banks will be key to this. Will the banks be given help to roll over business loans?
MATHIAS CORMANN: At this stage, the banks actually continue to be in a strong position. It is not just a matter of supply of finance, it is also a matter of demand for finance and that is obviously the side of the equation that we will continue to consider. The Reserve Bank here in Australia, the same way as the Bank of England, has made significant decisions, both in terms of monetary policy but also in terms of other activities and that will continue. Monetary policy and fiscal policy are working very much in concert, but these judgements, the monetary policy side of the equation, these are obviously matters for the Reserve Bank to continue to consider independently.
FRAN KELLY: You talked about the many workers who will lose their jobs. That’s already happening and we’ve all heard the stories and read stories of casual workers in particular who don’t have their shifts at the local café or the local cinema and certainly all the theatres. The arts world has effectively now closed down, all those jobs are gone. I have had a lot of people texting in over the last few days saying will the Government guarantee that no one will get evicted in this time. The people who can’t pay rent in our capital cities, rents are pretty hefty. Is the Government considering any measures like that to make sure that this doesn’t make the most vulnerable even more vulnerable?
MATHIAS CORMANN: We are very seriously considering what appropriate supports we can provide, in particular to the most vulnerable across our community and specifically those that are most severely impacted. This is going to be a tough period. There will be a strong recovery on the other side, but it is going to be a tough period. We are all in this together. We are going to come up with the best possible way to get ourselves through this period.
FRAN KELLY: So is that a yes, the Government is considering the plight of these most vulnerable people because there are very many of them?
MATHIAS CORMANN: We are considering the plight of the most vulnerable people, but I am not going to go through a shopping list of specific measures until such time as we have made all of the relevant decisions and are ready to announce them.
FRAN KELLY: You’re listening to RN Breakfast, our guest is the Finance Minister Mathias Cormann. It’s quarter to eight. Mathias Cormann, on schools people are already worried. Some schools are reporting 25 per cent absenteeism already. People are voting with their feet and taking their kids out and yet the Government keeps telling us there is compelling reasons to keep the schools open. There might be compelling reasons for the economy and certainly for the healthcare sector because we can’t have all the doctors and other nurses and health workers at home looking after the kids, but what about the safety of the kids and the wellbeing of the kids?
MATHIAS CORMANN: The safety of the kids is also, based on the advice that we have in front of us right now, better off by being at school rather than being exposed in the broader community… interrupted
FRAN KELLY: Better off than being at home?
MATHIAS CORMANN: In the end, parents make their own judgements in relation to their kids and we completely respect that. But right now, any premature decision to close schools, we are advised, would actually be counterproductive in terms of what it is that we are trying to achieve which is slowing down the spread of the virus. That has been the unanimous decision also of the National Cabinet and we continue to consider the medical advice when it comes forward and at the appropriate time decisive decisions will be made if and as required. Right now, for a whole series of good reasons, we continue to say that schools should remain open and we are working to ensure that happens.
FRAN KELLY: And obviously the economy is barely going to cope with 1.85 million parents forced to stay home to look after their kids. Are there lessons from other countries about how they might have ameliorated this, suggestions of keeping schools and childcares open for the offspring of healthcare workers for instance? Are there any of those measures being tried elsewhere that are working?
MATHIAS CORMANN: Again, Australia is not as far down the road in terms of the spread of the virus as some of these other countries and some of these other countries have been forced to already go for significantly more drastic measures. We are of course considering very carefully the experiences in other countries around the world and what the learnings can be for us and we will continue to make judgements based on medical advice as appropriate.
FRAN KELLY: You confirmed here for us on Breakfast last week there wouldn’t be a budget surplus this year. How deep into the red are you prepared to push the budget to get the country through? Is it likely to end up costing us more than the $52 billion that Labor spent during the GFC?
MATHIAS CORMANN: Firstly, we are in a position to respond as strongly as we are and we have the flexibility to respond as strongly as we are because of having done the hard yards over the last six and a half years to repair the Budget. We are in a position where we can do what needs to be done. I am not going to be able to provide a fiscal update now. That is done twice a year and the next reconciliation of all of the numbers will be in the Budget on the second Tuesday in May.
FRAN KELLY: Sure, but will it cost us more than $52 billion do you think?
MATHIAS CORMANN: I am not going to put a number on it right now. $17.6 billion is the package that we announced last week. We are having further discussions around scaling that up. We will be making announcements before the Parliament returns next week in relation to these things.
FRAN KELLY: Mathias Cormann, thank you very much for joining us.
MATHIAS CORMANN: Always good to talk to you.