Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 31 March 2020
ALAN JONES: I thought we’d discuss it with the Finance Minister. He’s on the line from Perth, where I have to confess it’s very early. Minister, good morning. Thank you for your time.
MATHIAS CORMANN: Good morning Alan. Good morning to your listeners.
ALAN JONES: Tighten that dressing gown will you? I am aware and so are most Australians that the $130 billion JobKeeper payment is a lot of money. In fact, the total economic support to date is $320 billion, or 16.4 per cent of the GDP and I just say to my listeners, as I write in today’s Daily Telegraph Sydney newspaper, it is important on these things that we support the Prime Minister. That said, Mathias Cormann, $1,500 a fortnight, 70 per cent of the national medium wage, which is $55,000, this is only $200 more than the JobStart allowance, the unemployment allowance. How does someone who’s on just $80,000 for example, which is the average earnings of Australians, how do they manage on $37,000?
MATHIAS CORMANN: There are a couple of points to be made here, Alan. Firstly, for those workers in the accommodation, hospitality and retail sectors who were most severely hit, this is actually a full median replacement wage. And the second point is that this is supporting business, with businesses who still can, to continue to pay their employees their current wage. They can obviously top that up and continue to pay their employees the same as what they are paying them now and this will help the business to be able to afford that. A business that has more than 30 per cent drop in turnover or for businesses above a billion dollars a drop off of about 50 per cent, it is not that they can’t pay anything at all…interrupted
ALAN JONES: These are businesses, Mathias, that have been closed down.
MATHIAS CORMANN: Not all of them. The businesses that have been closed down predominantly are across the tourism, hospitality and retail sectors. We understand that this is tough. This is a tough situation. We are trying to get the best possible balance. As you say, $130 billion, it is an eye watering amount. Having invested now 16.4 per cent of our GDP into supporting the economy over the next six months, it is a very, very significant investment and in the end, you have to make judgements on how far you can take this… interrupted
ALAN JONES: Just on one point as I said, Mathias. It just seems to me, and I’m trying to avoid being critical here because we have got to get behind the Government on all of this, but every worker will get the same payment, no matter his current wage. He might be a full-time worker, a part-time worker, a casual worker. They’re all going to get the $1,500 a fortnight and if I can just ask you to comment on that and the second point is in terms of helping business, this is effective as of yesterday, so the employer has got to pay this up. Against that, the employer won’t be reimbursed until the first week of May.
MATHIAS CORMANN: A couple of things. It was very important for businesses who are considering whether to hold onto their staff or stand their workforce down to have the confidence that the Government was going to come in and support them. It is true, these sorts of exercises are huge logistical exercises. Our system is not geared immediately to be able to process payments of this magnitude and this volume on the spot. So there is some system work that will have to be done to set all of this up. We are doing that as swiftly as we can and early May is the earliest opportunity that the payments can be paid out. From the feedback that we have received from businesses after our announcement yesterday, this was a huge boost of confidence for them. We have already had more than 60,000 businesses register their interest to participate in this… interrupted
MATHIAS CORMANN: Businesses with a turnover of less than a billion dollars… interrupted
ALAN JONES: Less than a billion.
MATHIAS CORMANN: …have to self-assess that they have had a drop off in revenue of more than 30 per cent and businesses with a turnover of more than a billion dollars have to show that they have had a drop off in revenue of more than 50 per cent. But just to go back to your previous question, why are we doing it the way we are, making the same payment to all. Essentially, because we need to keep this simple in order to administer it efficiently and effectively. Again, if we want to get this sort of magnitude of payments out in a very short timeframe, then sadly there is no alternative to doing it this way. If we had to make differentiated assessments on an individual basis, it would become a very, very complicated process.
ALAN JONES: Yes, I agree with that. But Mathias, what people are saying is you immediately, and I think this was a mistake quite frankly, you immediately doubled the Newstart allowance to $550 a week immediately. The person who has never had a job in his life, doesn’t look for a job and doesn’t care about getting a job is on $550 a week and the poor coot who’s worked flat out for the last 28 years is on $750.
MATHIAS CORMANN: It is not true that we immediately were able to make that change either. We are doing it as fast as we can when it comes to the JobSeeker payment, but that will only start to come into effect from 27 April because we have to work on our system arrangements there, too. I say again, in terms of the JobKeeper payment, for many people working in businesses around Australia, their business will continue to be able to pay them more and this $1,500 fortnight payment to the business helps the business afford their wage… interrupted
ALAN JONES: Just on that $1,500, Mathias, do they have to pay tax on that?
MATHIAS CORMANN: The $1,500, firstly, is taxable income in the hands of the business, but the business has a full deduction of course when they have paid it out to their employee. And yes, for the employee it is taxable income in the usual way.
ALAN JONES: So he’s got to pay tax on the $1,500 that he’s going to be given?
MATHIAS CORMANN: That is right. That is the way it would work now. Again, this is equivalent to 100 per cent of the median wage for workers in those sectors most affected. They would be paying tax on that as we speak now.
ALAN JONES: Righto. What about self-funded retirees? They were earning only a matter of months ago 2.55 per cent, that’s down to 1.31 percent, it’s 90 per cent fall in income. You couldn’t survive on a 90 per cent fall in income. Where do they fit into this?
MATHIAS CORMANN: In relation to self-funded retirees, firstly we have halved the mandatory drawdown rate, as I think you would be aware and we have also significantly reduced the deeming rate by three quarter of a per cent since this all got underway. An initial half a per cent and now down to a quarter of a per cent. The deeming rate is the lowest it has ever been and that does help to… interrupted
ALAN JONES: I don’t know why you didn’t shove it at naught per cent in this environment.
MATHIAS CORMANN: A quarter of a per cent is equivalent to where the official cash rate is at. It is the lowest it has ever been.
ALAN JONES: Right. Some lenders are suspending loan payments for up to six months, but I’m hearing that while payments have been suspended, they are capitalising the interest. Is that what you believe the arrangements were? I know you have done a lot of work with the banks.
MATHIAS CORMANN: The banks, I have to say, have been very good in relation to all of this, in terms of the way that they have approached business and also their residential customers. Capitalising and not requiring people to pay over the next six-month period is extremely helpful. The challenge we have at the moment is a cash flow challenge. I think doing it the way the banks are doing it is an appropriate way to do it… interrupted
ALAN JONES: The reason I asked you that question was Josh Frydenberg said to me yesterday that the banks were announcing yesterday that anyone with a loan of up to $10 million, if they are landlords or small or medium businesses or whatever, wouldn’t have to pay any interest or principal for six months. Is that your understanding and therefore, no one should be capitalising interest?
MATHIAS CORMANN: They won’t be paying the interest over a six-month period. In terms of what happens beyond, obviously the payments are due, it is just that they are not going to be charged over this next six-month period which is a huge help for landlords along the way.
ALAN JONES: I don’t mean to be personal here, but a lot of my correspondence says the Government has put the economy in a coma and the Government should pay for the life support and we have all got to do our bit, we’re all in this together. People are saying to me public service employees are still on full salary, politicians are on full salary, the ABC’s not being pruned. If it’s Team Australia, shouldn’t public servants, politicians and the ABC be sacrificing their bit?
MATHIAS CORMANN: As we have been going through this, we made arrangements for there to be a freeze in relation to pay arrangements at the public service and the political level and the like. I am not sure to what degree taking this further helps in the broader context.
ALAN JONES: But it’s a cost on the Government. They are all employed by the Government, so I’m simply saying you’re actually shelling out all this money, it’s one way to cut the costs for the Government. The ABC, politicians, 252,000 public servants in Canberra. Just on super because I know we’ll never have enough time. People have told me, I know you have said they can have access to their superannuation up to $10,000 this year and next year, people are telling me that the superannuation funds are not actually answering any kind of calls. They’re having great difficulty accessing the funds. They’re not returning email communications. There are pre-recorded messages when you call, saying they have got no confirmation from Government that they can release any money. Is that true?
MATHIAS CORMANN: We have legislated that as part of our package that went through the Parliament last week and the super funds will have to comply with the law. Again, this will be applicable from the end of April. If people can be patient for another couple of weeks because these super funds do also have to make relevant arrangements in order to be able to process these…interrupted
ALAN JONES: Yes, I was going to ask you that. The superannuation balance has been drastically reduced in this climate. Superannuation funds are saying they are being inundated and may have to sell off assets.
MATHIAS CORMANN: I don’t think that is right. The advice that we had from APRA was that there were very significant cash reserves, that is liquid cash reserves, available across superannuation funds to more than cover what the likely demand is going to be without selling assets through this period. Super funds who suggest that, we don’t believe that what they are telling people is true.
ALAN JONES: Okay. I just wanted to cover these things with you now. I know there is talk today about the costs of all of this and we have made that point – $130 billion is the cost – and indeed, we are making about a total package of $320 billion, 16.4 per cent of GDP. Isn’t this an ideal time to act on the advice that you received in January by your own expert naval shipbuilding advisory board and cancel the $80 billion submarine contract?
MATHIAS CORMANN: No, I don’t think that we can cancel our submarine program. It is a very important capability for Australia and we are a very fair way down the track of getting all of that lined up. If we were to delay this through this sort of decision, we would be seriously undermining our defence capabilities…interrupted
ALAN JONES: Germany said they could do it, Mathias, Germany said they could do it for $20 billion. Germany said they could do it. You could buy it off the shelf for a lot cheaper than the deal Turnbull did. Just before we run out of time, credit cards. The Reserve Bank interest rate is at 0.25 per cent. Payday lenders, a payday loan is a sort of small unsecured loan, it may not be linked to the borrowers payday, but a payday lender charging as much as 47 per cent. Credit card rates are north of 15 per cent. This is a 1,500 per cent loading on the cash rate when in fact the unemployed are using the credit card to buy their groceries. What are you saying to the banks about credit card rates?
MATHIAS CORMANN: What I would say to the banks in general terms is that they have done very well for business and their retail customers to some degree, but credit cards is most definitely an area where perhaps they should consider going further and providing appropriate relief in the current circumstances. You are right, people do rely on their credit cards through this period in order to help manage their cash flow and pay for their groceries as you say. If the banks could stretch themselves just that little bit further in relation to lowering interest rates on credit cards, that would be a fantastic thing for them to do.
ALAN JONES: Okay, you go back to bed. Thank you for your time. It’s good to talk. Communication is the key, but I’m grateful for your time, Mathias.
MATHIAS CORMANN: Thank you, Alan.