Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 9 April 2020
WILL KOULOURIS: All of this comes following the most significant stimulus package ever passed through Australia’s Parliament, just last night. That $130 billion wage subsidy with over 700,000 businesses already having already signed up hoping to be eligible for that subsidy. It is going to provide for $1500 a fortnight payments to workers, every fortnight starting from May. Joining us now to discuss some of the details of this most significant package, I am very pleased to welcome the Australian Minister for Finance and Leader of the Senate Mathias Cormann. He is joining us live via the phone from Canberra. Minister thank you so much for joining us and congratulations on the passage of the bill. Now, this is an incredibly significant package, A$130 billion. Do you think now though that we are at the point now where this is the upper limit? I know that there is a lot of uncertainty about the coronavirus impact here. But is this it for now in terms the stimulus provided by the fiscal side?
MATHIAS CORMANN: We have now put in place measures that represent about 16.4 per cent of our GDP. While there might still be some adjustments along the way, in terms of major measures this is it.
WILL KOULOURIS: There was a lot of boisterous consternation from the other side of the aisle yesterday about those who were left out in terms of say migrant workers and casuals for example. But realistically was it fiscally possible or even fiscally prudent to have included everyone in a catch all wage subsidy?
MATHIAS CORMANN: We are providing support for six million workers through this JobKeeper program. That is about half of the Australian workforce. Long term casuals, those who have been with the same employer for twelve months or more are covered. But those who have worked for businesses for less than twelve months will be able to access other supports through the welfare system if they are out of work and qualify for JobSeeker. You do have to draw the line somewhere. When it comes to temporary visa holders, the expectation always is that they are able to support themselves in Australia, while in Australia, either through work, through their savings or by accessing their superannuation. For those who cannot do that, our very strong advice to them is that they should return home.
WILL KOULOURIS: With all of these stimulus measures that you have introduced, it’s going to require a lot of issuance. You had S&P global downgrading the outlook but maintaining that AAA rating. Are you concerned about any risk to Australia’s sovereign credit rating, because even though you are borrowing at extremely low levels there, there is the possibility that we are going to see a significant downturn in the economy, even beyond what people have forecasted already?
MATHIAS CORMANN: In Australia, we are part of the same world. Compared to others we are in a comparatively better position. Certainly on the back of the work that we have done over the last six and a half years to strengthen our Budget position, to strengthen our economy, we have gone into this crisis in a comparatively better position. As you say we are maintaining our AAA credit rating. That is a good thing. But yes, Australia is facing the same challenges as other countries around the world are facing, dealing both with a health crisis and an economic crisis at the same time.
DAN MURPHY: Mathias, it’s Dan Murphy here in Singapore. How concerned are you now about a recession in Australia. And is this going to be something that S&P is also focusing on in the future. Clearly they have raised concerns about it now. But would that AAA credit rating now at risk, and recession perhaps coming now for the first time in thirty years in Australia. Clearly the Government may have to do more in order to push that fiscal lever and maybe even the RBA doing more to protect the economy from slumping into its first recession in thirty years. What do you think?
MATHIAS CORMANN: The RBA and the Government are both doing everything we can. Monetary policy and fiscal policy are very much heading in the same direction. Supporting the economy, supporting business, supporting jobs. Our focus is on supporting Australians through this temporary challenge that we are facing, to ensure that we have the strongest possible opportunity for a big bounce back, a major recovery on the other side. The fundamentals in the Australian economy going into this were sound and remain sound. Our growth outlook was optimistic. That was the same for the RBA and for the Government. We are quite confident that on the other side, once we are on the other side of this coronavirus induced crisis that we will be able to bounce back strongly.
MARTIN SOONG: Minister, this is Martin, let me quickly jump in with a question. In the U.S, a lot of people are worried about their 401k’s. In Australia, I guess your equivalent would be the superannuation program. Can you give us some sort of indication how badly that has been hurt and what the Government needs to or is trying to do about it?
MATHIAS CORMANN: Our superannuation system is very stable. It is one of the largest savings pools in the world. About A$3 trillion in savings are managed by our superannuation funds. All of the advice that we have from our prudential regulator is that in all of the circumstances this is all in a relatively good position. You have to remember their exposure to the market also means that on the other side of all of this, when the economy recovers strongly, they will be part of that recovery as well.
DAN MURPHY: Minister, should Australian banks stop paying dividends to ensure their liquidity?
MATHIAS CORMANN: I am not going to provide public advice to the banks. We are having conversations on a whole range of issues with the banks on how to best support the economy, business and jobs through this period. You have to remember a lot of people do rely on their dividends from the banks for their income. We do not have any advice in front of us about liquidity issues among the banks at this point. That is something that we do monitor. But these are things that will continue to be assessed and considered in an orderly fashion.
WILL KOULOURIS: Minister, you did touch on it just a little bit earlier in terms of the recovery, in terms of the temporary nature of this health risk. Do you have any kind of guidance as to whether or not we are going to see perhaps a risk to the tax cuts that have been proposed if we don’t see that V-shape recovery that perhaps the Government is expecting?
MATHIAS CORMANN: No, there is no risk to the tax cuts. When you want to have a strong recovery, the worst thing you could do is increase taxes at the time that you are working towards a recovery. The tax cuts are a very important part of making sure that we are in the best possible position on the other side. We did not know when we legislated the tax cuts that this is the challenge that we would be facing, but in the context of what we are going through now, imposing higher taxes would actually harm our future economic growth prospects. So that is not something that we are entertaining.
WILL KOULOURIS: There have been a lot of criticisms in terms of the high levels of government debt that are going to be issued because of these stimulus measures. Do you have any kind of concerns about perhaps ameliorating some of that debt moving forward because it is going to saddle a lot of the debt onto the books for a considerable amount of time moving forward?
MATHIAS CORMANN: Again, on an international basis, if you compare the Australian position globally, our debt position is very comfortable. We have got relatively low government net debt and relatively low government gross debt by international standards. We are spending a lot of money to support the economy, business and jobs right now. Importantly though, these are temporary measures. We are not baking liabilities into the Budget bottom line. We are not making changes that will impose burdens on the Budget over the medium to long term on a structural basis. Once we are on the other side of this yes, we will have to pay back what we have invested in here. But the Budget will be able to recover relatively quickly on the other side because we have not imposed structural increases and expenditure on the Budget.
DAN MURPHY: Minister, before we let you go, I must say these are incredibly challenging times. Your Government is dealing with a global health emergency, stemming from Australia’s most critical trading partner. What do you need to see from an economic perspective and from a flattening of the curve perspective before Australia gets back to business and makes its way through this crisis?
MATHIAS CORMANN: What we need to see is the medical advice that tells us that it is safe to do so. We are expecting that this is probably going to last for about six months all up. It would be great if it was less. But we will be entirely guided by the medical advice. We would never gratuitously want to close sections of our economy if it was not required for health reasons to save lives. As soon as we are advised that it is safe to loosen some of those restrictions, then these are the sort of judgements we would make at that time.
DAN MURPHY: Absolutely. Minister Mathias Cormann, we’ll leave it there. Thank you so much for joining us today. That’s Mathias Cormann, the Australian Finance Minister there.