Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 31 March 2020
FRAN KELLY: Australian employers have embraced the Government’s staggering $130 billion economic lifeline. The monumental bailout will see around six million workers paid a flat $1500 a fortnight for the next six months in a desperate bid to keep businesses open and stop a looming recession turning into a deep depression. Firms have jumped at it. More than 65,000 businesses had signed up to the scheme by nine o'clock last night. That’s in five hours. The stock market has surged to its biggest one day gain on record. And even the unions and Labor are supportive.
ANTHONY ALBANESE: We certainly will not stand in the way of any positive initiative. And this is one. This is one we have been calling for some time. It is the right policy. We will look at the detail to see if there are any improvements need to be made. But it is certainly a step in the right direction.
FRAN KELLY: Opposition Leader Anthony Albanese speaking on AM a short time ago. Well Mathias Cormann is the Finance Minister. He joins us very early from Perth this morning. Minister thank you very much for being there.
MATHIAS CORMANN: Good morning Fran.
FRAN KELLY: This JobKeeper scheme is already being described as a depression buster. Would the Australian economy have collapsed without such an extraordinary injection of cash?
MATHIAS CORMANN: We have always been focused through this on saving lives and saving livelihoods. This coronavirus pandemic has had a massive negative impact on our economy as it has on economies around the world. The good news from an Australian point of view is that we went into this in a relatively stronger position compared to others. So we are in a position to do what needs to be done in order to protect our economy and jobs.
FRAN KELLY: But I am looking at the calculations behind this, because this wage replacement will be available to six million employees which includes workers retrenched since 1 May, and those still in work but at risk of being laid off …
MATHIAS CORMANN: 1 March.
FRAN KELLY: 1 March. I beg your pardon, thanks. And those still in work but at risk of being laid off still. Is that how many jobs could have been lost, half the workforce, without this intervention? Is that the Government’s calculation?
MATHIAS CORMANN: Our calculation is, as we have said all the way through, that we want as many businesses as possible to stay in business. We want to save as many jobs as we can on the way through. We want to ensure that Australians who lose their job have the appropriate levels of income support, so that on the other side …interrupted
FRAN KELLY: I understand that Minister. But what I am asking you is the dimension of this, is this formed by a calculation that without it, that is how many workers jobs were at risk?
MATHIAS CORMANN: Our judgement is that this is what is required to support Australian businesses and Australian jobs through this very challenging period so that on the other side everyone has the opportunity to be there for the strong recovery.
FRAN KELLY: Firms with turnovers down by at least thirty per cent due to the pandemic are eligible to apply for this subsidy. How many of the at least one million workers we think already laid off do you expect to be re-hired. Have you done that sum?
MATHIAS CORMANN: Not into that forensic detail. But as we have said before, anyone who has been laid off since 1 March where the business is still operating is going to be eligible to receive, that $1500 a fortnight JobKeeper payment.
FRAN KELLY: And the subsidy’s also available to firms which are still afloat but struggling. Employers will have a legal obligation to pass on the payment. Is there anything, just to get this clear, is there anything to stop a boss cutting wages to the amount of the subsidy, that’s $1500 a fortnight. Are you worried some will be tempted to take advantage of the workers’ desperation in these times to hold onto their jobs?
MATHIAS CORMANN: They have to pass on one hundred per cent of the $1500 payment. But individual businesses will be in individual circumstances. Some businesses will be able to afford to continue to pay the existing wage, and this subsidy will help them do that, but others might not. A business that has lost all activity or has lost more than half of their turnover will have to be able to make judgements. In order to keep the employee connected to the business, the minimum that they will be able to draw on is $1500 a fortnight. I have to say, this represents about seventy per cent of the national median wage. But in those sectors most impacted by this, workers in the accommodation, hospitality and retail sectors, it actually equates to a full median replacement wage. Employers are able to supplement this. But we have to be realistic. A lot of businesses will find it very difficult to continue to pay, perhaps at the same level, as they did before this crisis if we want them to stay alive.
FRAN KELLY: So that’s legal basically, that employers could say I need you working. You get this $1500 flat rate, take it or leave it.
MATHIAS CORMANN: We are working through all of these issues. Christian Porter as the Minister for Industrial Relations has been working very closely with union movement to work through all of the Fair Work related implications of all of this. But in the end, it is about making sure that this payment helps to keep as many businesses in business as possible, and as many Australians connected to their job as possible. Yes, this is going to be a challenging period, but we are trying to help as many Australians through this as possible.
FRAN KELLY: The scheme captures full and part time workers, sole traders, even New Zealanders on temporary visas. But casuals who haven’t been working for the same boss for twelve months won’t be eligible. We were speaking to Sally McManus earlier in the program she is urging the Government to rethink that, maybe tweak this. Why have they been forsaken, there must be quite a few, particularly students who have arrived in the country to start again, and start at their causal jobs. Why have they been forsaken?
MATHIAS CORMANN: They have not been forsaken. A casual who becomes a jobseeker is able to access the JobSeeker payment. But in terms of a connection to the business, these are established systems where a casual worker secures certain entitlements and certain rights once they have been with the same employer for more than twelve months. That is why that particular threshold has been chosen. That is an existing time period after which certain rights and entitlements get triggered. You have to draw the line somewhere. It is not that a casual who has worked less than twelve months for the same employer is forsaken, it is just that they would have to access their support through the JobSeeker rather than the JobKeeper payment.
FRAN KELLY: This payment, the JobKeeper payment that has been announced will be back dated to 1 March, but won’t be delivered until 1 May. Most laid off workers probably can’t afford to wait until May for the money. Would you hope and expect bosses to pay their staff now and claim back the subsidy when they can in May. Perhaps using the grants of up to $100,000 I think that some small businesses are already eligible for. Is that your intention? Is that what you hope they might use it for?
MATHIAS CORMANN: The short answer is yes. That is what we are hoping absolutely. Our feedback, certainly as we were putting this package together, the feedback we were getting from business is that just the Government making this announcement will be a sufficient shot in the arm, and a sufficient boost in confidence for them to be able to make decisions to hold on to their employees. They understand, as I am sure most Australians would understand, the logistical exercise involved in setting this up in order to ensure they get access to …interrupted
FRAN KELLY: Of course yes. It is just what happens in the meantime.
MATHIAS CORMANN: In the meantime, businesses now know that the Government will be paying to the tune of $1500 a fortnight for eligible employees in those eligible businesses. So they are now able to plan and make decisions based on that knowledge. So … interrupted
FRAN KELLY: I am asking you as the Finance Minister, are you prepared to say now on national radio to the businesses of this country please do pay these workers now, you will get this money back in May. The Government is already helping to support small businesses. Is that the pitch you will make to businesses?
MATHIAS CORMANN: Of course. That is what we have been saying. That is what we believe overwhelmingly business will do. The feedback clearly, that we have been getting, businesses are desperate to hold onto their workers. They actually want to hold onto their workers. They want their workforce to be there on the other side for the strong recovery. I was talking to a business yesterday employing more than a thousand people, a couple of hundred apprentices. They are desperately keen to hold on to all of their people. They are looking at this as a way of being able to do so. We believe that businesses around Australia overwhelmingly will use this as an opportunity to hold onto their staff.
FRAN KELLY: And Minister, just before we leave this particular issue around the subsidy. This is $1500 a fortnight before tax, isn’t it? Why bother imposing tax on this, and how much would it be net in the hand after that?
MATHIAS CORMANN: This is a normal arrangement. Again, for people in the hospitality sector for whom this is effectively the equivalent of a full time median wage, they pay tax on that income now. I have not got the specific dollar amount in terms of tax deducted in front of me now, but the usual arrangements apply. This is taxable income in the hands of the business, but they can claim a full deduction when that is paid as they must pay this money out to employees. For the employee, the tax arrangements are precisely the same as what they normally would be.
FRAN KELLY: It is a quarter to eight on Breakfast. Our guest is Finance Minister, Mathias Cormann. As the Finance Minister, all up so far the Government is spending $240 billion, around eleven per cent of GDP to try and sure up the economy, save the economy really. There is more to come this week, we understand, with rent relief measures to be announced. How long is this going to take to pay off? Should we be measuring it in decades not years?
MATHIAS CORMANN: The important point here is that we went into this in a comparatively stronger economic and fiscal position. We were on track to deliver a surplus this year, having brought the Budget back into balance last year. This is a necessary investment into our future economic prosperity … interrupted
FRAN KELLY: But as the Finance Minister have you looked at how long this is likely to saddle us with debt?
MATHIAS CORMANN: We are assessing all of these things. There will be an update in the Budget in terms of our revised forecasts and projections.
FRAN KELLY: The airline industry is one of the hardest hit by this downturn, by this pandemic. Virgin airlines has sought, we understand a $1.4 billion rescue package from the Government. Given it was the decision to effectively close the borders that has crippled the airline industry, does the Government have an obligation to help? What is your view?
MATHIAS CORMANN: We have provided significant support to aviation industry. We have already provided about …interrupted
FRAN KELLY: But they want a $1.4 billion rescue package.
MATHIAS CORMANN: We are not going to start providing commentary in relation to individual companies and what may or may not be appropriate. Let me just say again. We have provided $1 billion worth of support to the aviation industry. That was one of the very early decisions that we made in terms of sectoral support. Beyond that we will continue to make judgements in relation to specific matters if and as appropriate.
FRAN KELLY: So the Government, you’re not saying, would be prepared to take a stake in an airline if it means maintaining a competitive aviation sector?
MATHIAS CORMANN: It is not our plan to take a stake in an airline. But let me also say that on the other side of all of this, we are committed to ensuring that through our policy settings and the like that on the other side, that we have two competitive airlines. That we have an aviation sector with two major airlines competing with each other. Of course that would be our intention.
FRAN KELLY: Just finally Minister, is this your one shot in the locker? This $130 billion subsidy package. What if it doesn’t work? What if not enough employers sign up the workforce?
MATHIAS CORMANN: Let me just say to you, we do not think about it in terms of shots in the locker. We are dealing with a very significant challenge. It is a very significant health challenge with very significant economic implications. Our response has evolved as the impact has continued to evolve. I do not believe that there will be another package of this sort of magnitude. But I do believe that we will continue to adjust and make decisions if and as required to support the economy and to support jobs.
FRAN KELLY: Mathias Cormann, thank you very much for joining us.
MATHIAS CORMANN: Always good to talk to you.