Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 12 May 2020
LEIGH SALES: Back to our top story, the Treasurer was originally scheduled for an interview this evening. But as we mentioned, he is in isolation after being tested for coronavirus. Instead I spoke to the Finance Minister Mathias Cormann.
Senator you have had to step in at short notice to replace the Treasurer so thank you for that.
MATHIAS CORMANN: Good evening. Good to be here.
LEIGH SALES: Before we turn to economics, was the Treasurer showing any signs of being unwell before his speech today?
MATHIAS CORMANN: No. Not that I am aware of. All of us are perhaps a bit exhausted after weeks and months of very intensive work. I spoke to the Treasurer about an hour or so ago. He sounded perfectly fine. Out of an abundance of caution he got himself tested and is now in self isolation pending those test results coming back.
LEIGH SALES: And was he today in close vicinity to you or the Prime Minister or the Deputy Prime Minister, like in a small meeting room or anything like that?
MATHIAS CORMANN: I cannot speak for anybody else. But we have been meeting by telepresence, we have been meeting from different rooms electronically. So he certainly hasn’t been in close proximity to me. I am not aware whether he has been in close proximity to others.
LEIGH SALES: Okay, let’s turn to the economy. From the self-proclaimed back in black last year to probably the biggest deficit in Australian history, how long do you think it will be until Australia is able to have a balanced Budget again?
MATHIAS CORMANN: That is very hard to predict from where I sit here tonight. The very important point in response to this question is that we did go into this crisis in a comparatively stronger fiscal position. The support measures that we have put in place to support the economy, business, working Australians, and those who lost their job are all temporary measures. They are not imposing structural burdens on the Budget. So while the cost of the support packages have been very, very significant and they will take a while to pay that back, the Budget on a structural basis should be able to return back to surplus once we have worked our way through this.
LEIGH SALES: With interest rates so low, does it really matter if Australia carries a lot of debt for a long time?
MATHIAS CORMANN: It certainly helps that interest rates are so low, but over time, you do not know that this will be the circumstance forever and a day. Of course it is prudent to pay the debt off as soon as we can. Over the first six years of our period in Government we have been repairing the Budget. We have been getting the Budget back into balance. We were on track to get back to surplus this financial year. That is part of the reason why we were in a stronger more resilient position to deal with the crisis when it hit. Nobody expected the extent of this crisis. But we have to ensure in the future, when we can, that we get ourselves back into a stronger position to be able to deal with whatever external shock might come our way down the track.
LEIGH SALES: Some of the assumptions today about economic recovery are around things like schools reopening adding about $2.2 billion to the economy. Gyms, cafes pubs adding about $2.4 billion. But that is relying on Australians not being too scared to go into them. Is that a sound assumption to make?
MATHIAS CORMANN: There are a range of assumptions. There is the assumption that Australians will take appropriate precautions and that we will not be hit by a second wave in terms of the rate of infections across the community. We have put all of the measures in place to ensure, well to give ourselves the best chance, to have a COVID-safe economy. The COVIDSafe app, which we want more Australians to sign on to. The increased testing capacity. The increased capacity to respond quickly to any localised outbreaks. They are all designed to ensure that we can let the economy grow again, in as close as possible to a business as usual situation, as soon as possible. Now, through the national cabinet the framework has been put in place for a phased easing of restrictions to get our economy back as close as possible to normal from the beginning of July.
LEIGH SALES: On rebounding economic growth, in the 1991 recession GDP fell by about 1.4 per cent. It took the economy about a year to recover, back to where it was. Now we are looking at least seven times that for Australia’s GDP, but the Reserve Bank assumptions that it might only take a couple of years to recover. Why such an optimistic outlook against such a pessimistic and uncertain background.
MATHIAS CORMANN: The fundamentals of the Australian economy were sound as we went into this crisis. The global economy was looking up. The outlook for the global economy was positive. On the other side, once we are able to remove all of those restrictions that were required to save people’s lives but slow down and to suppress the spread of the virus, once all of those restrictions can be lifted businesses will get back to doing what they do best. During this period, it is important to note that many businesses in their battle to survive have pursued amazing innovation and adaptation strategies, which will stand them in good stead on the other side.
LEIGH SALES: Some Liberal MPs are saying that when schools open and other businesses re-open that the JobKeeper program should be wound back. If the economy is moving back to sort of roughly normal by July as you said, why not wind back that JobKeeper program earlier than anticipated.
MATHIAS CORMANN: We are six weeks in to a six month program. It is a six month program. We have to be careful not to get ahead of ourselves here. There will be a review half way though, as we have flagged, to ensure that the program is working as intended. It is true that we want to see as many businesses as possible to return to profitability as soon as possible so they do not need to rely on the JobKeeper program. In the end, the JobKeeper program is a demand driven program. People need to fulfill certain conditions in order to qualify. That is the circumstance now. If those conditions are no longer present, then the program just continues to operate as intended. But there will be a review half way through. We will consider whatever the feedback is from Treasury at that point in time. But we are committed to this program for a six month period.
LEIGH SALES: Senator Cormann, thanks very much for your time.
MATHIAS CORMANN: Always good to talk to you.