Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 3 June 2020
ELYSSE MORGAN: A shrinking economy is front and centre for the Government as it begins a review of the JobKeeper support program, whether to target, taper or turn it off all together come September. Finance Minister Mathias Cormann joined me.
Minister thank you for your time. The Treasurer today conceded that Australia hit recession in the March quarter. But of course this one that we are in currently is going to be far worse. Consensus is for around an eight per cent contraction. What do you believe it will be?
MATHIAS CORMANN: Today we received the results for the March quarter at 0.3 per cent negative growth. Negative growth is always disappointing, but in the context that we are in, everybody knows what has caused it. Australia is performing significantly better than most other developed economies around the world.
ELYSSE MORGAN: It is cold comfort though to those who are in the economy, losing their jobs or seeing their hours worked slashed. How much worse do you think it will get from here?
MATHIAS CORMANN: We do expect the June quarter to be worse than the March quarter. The March quarter is when the coronavirus crisis started to hit. We were one of the first countries in the world to close our borders. Initially to foreigners travelling from mainland China and subsequently from other countries around the world. Moving forward, we want to get as many Australians back in to jobs as possible as soon as possible.
ELYSSE MORGAN: Are you seeing any recovery in tax receipts or revenue figures yet?
MATHIAS CORMANN: We are monitoring all of the economic data on a regular basis. If you look at what has been happening to confidence, confidence has certainly picked up strongly from the bottom of this crisis … interrupted
ELYSSE MORGAN: And is that flowing through to actual activity yet?
MATHIAS CORMANN: A range of indicators are starting to pick up. Retail activity has picked up. We want to see business investment, in particular non-mining investment pick up moving forward. These are all matters that we are focused on to ensure that we maximise the strength of the recovery on the other side.
ELYSSE MORGAN: And so if we are starting to see those green shoots, how does that play into the JobKeeper review that you and the Treasurer are undertaking at the moment.
MATHIAS CORMANN: The JobKeeper review is being undertaken by Treasury as we speak. We are barely two months into a six month program. We always said that there would be a review in June. That is taking place now. We expect the results of that review to come before the Government later in June. We will make judgements at that point in time as to what adjustments can sensibly be made.
ELYSSE MORGAN: If there are green shoots do you see it likely though that some of those businesses who saw initially a hit to their business but have now bounced back and some are even trading better than they have been previously, that you would you curtail the amount of JobKeeper benefits that they would be able to access?
MATHIAS CORMANN: I am not going to pre-empt the decisions in relation to the findings of a review which has not even been finalised or presented to Government. What…interrupted
ELYSSE MORGAN: I know that, but it is common sense that if businesses are getting more in subsidy or workers are getting more and a subsidy that there were pre-crisis, that that would be curtailed. It is not so much pre-empting what you are going to say, but it is only 12 weeks away, the end of this program, it’s only a couple of weeks away that you will have to make these decisions, shouldn’t you be giving businesses a heads up as to what is possible?
MATHIAS CORMANN: We will be giving businesses a heads up at the appropriate time, when the appropriate decisions have been made.
ELYSSE MORGAN: It is just that the Treasurer said today that the Government wants to understand whether the quantum, the $1500 payment, the JobKeeper payment continues to be the right amount. So in saying that he is bringing up the spectre of that amount being changed.
MATHIAS CORMANN: We had to make decisions very quickly in order to get the supports into the economy swiftly. One of the trade-offs that we had to accept at the time of making those decisions, for example, was that people were able to get higher payments through JobKeeper than they were getting in the ordinary course of events through their normal working hours. These are things where it is well understood that they are being looked at through the Treasury review. We have not made any decisions, but these are all things up a consideration.
ELYSSE MORGAN: If there is no extension to JobKeeper and JobSeeker which is what the Government has again and again said, what happens to the economy in October when they stop?
MATHIAS CORMANN: Restrictions are being eased all around Australia with opportunities for businesses to return into a more normal pattern of business. We know there is going to be a transitional period where this is going to be phased in. But nevertheless here we are in early June. So there is still a fair period until the end of September.
ELYSSE MORGAN: What’s Treasury modelling telling you now about what will happen at the end of September if the JobKeeper and JobSeeker programs finish on a hard stop, which is what the Prime Minister, and the Government, and other Government Ministers have said again and again will happen.
MATHIAS CORMANN: We will continue to make judgements as appropriate to ensure that the economy is supported through the transition. But by the same token the objective is and ought to be that business returns back to normal as soon as possible. That businesses return back to paying their employees out of their earnings as soon as possible. That is … interrupted
ELYSSE MORGAN: The business is like tourism, tourism businesses, all through Port Douglas, Cairns in Queensland, just to pick one area. There is no way that within two or four months, that business will be back to normal for them. What is the Government's plan for those pockets of the economy?
MATHIAS CORMANN: Again, there is going to be less international tourism. But there is the opportunity for increased domestic tourism… interrupted
ELYSSE MORGAN: Is the Government sticking to the view that Prime Minister said in mid-May that he didn't want the Australian economy propped up by subsidies. That he didn't want businesses addicted to JobKeeper. It sounds like that is what you are sticking to. That there will be a view from the Australian Government that internal demand should pick up enough by the end of September that you would be needing these programs?
MATHIAS CORMANN: It has always been very, very clear that the supports that we have put into the economy in the context of a one in a one hundred year crisis event, that those supports are temporary. They are very significant, but they are necessarily temporary. One because we cannot possibly afford them out of the economy on an ongoing basis. Secondly, we do need to get the economy to get back to normal as soon as possible. If we were to provide these sorts of taxpayer funded supports for any longer than necessary, we would actually be weakening our economic prospects into the future. We would …interrupted
ELYSSE MORGAN: So what do you make of the Reserve Bank Governor’s views, Phil Lowe last week, that JobKeeper will need to be extended or tapered for certain industries? You don’t agree or you agree?
MATHIAS CORMANN: I think you are overextending what he said. He was invited to comment on a hypothetical scenario. He did not go quite as far as you have just articulated that, even in the context of a hypothetical scenario. Our point is very simple. We are working to ensure that the economy can recover as fast and as strongly as possible. We are already in a much stronger position than we had feared, as I am talking to you here today in early June compared to what we were expecting might happen at the end of March. We will continue to work on putting Australia into the best possible position moving forward. Including by making sure that all of the health safeguards in the context of the coronavirus threat remain in place, are enhanced and continue to be available to manage risks in the economy appropriately. That is really the mission here. We will assess the economic data, we continue to monitor the economic data, we will continue to assess it, we will continue to make judgements on what is appropriate. But the objective ought to be for the economy to return back to normal as soon as possible in a way that is COVID-safe. For businesses to return back into a situation where they are able to pay the wages of their employees out of their revenues.
ELYSSE MORGAN: And so the message to business tonight is JobKeeper, JobSeeker will finish in September?
MATHIAS CORMANN: The message is as it has been all the way through. We are conducting a review halfway through. Treasury will be reporting to Government in June in relation to its review of the operation of the JobKeeper program. We will make judgements accordingly after having received the review by Treasury. We will be making announcements in good time for business to be able to adjust and to respond. In fact, we made an announcement today that we will be releasing the economic update on 23 July. Precisely to ensure that we can integrate and include any judgements and any adjustments to the JobKeeper and JobSeeker programs, that we can reflect them in the economic update to be delivered on 23 July.
ELYSSE MORGAN: More broadly on the economy, we have had the mining boom, then we had the housing boom which was supported partly by migration. What’s next for the Australian economy?
MATHIAS CORMANN: The best days for the Australian economy are in front of us. We will continue to be an outward looking, open trading economy, selling products and services all around the world. We will continue to be an economy with a strong resources sector, a strong agriculture sector, a strong manufacturing sector which is focused on those areas where we can be internationally competitive and a very sophisticated and strongly developed services sector. We have much to offer to the world. We are engaged with the world. We will continue to ensure we get the best possible access to markets all around the world. The fact that we have performed so well from a health point of view through this crisis makes us a very attractive destination and it makes us a very attractive supplier of goods and services into the future. There is lots of opportunity for Australia moving forward.
ELYSSE MORGAN: So exactly what’s going to drive us in that? Exports are a little bit hampered if you look at what’s been happening recently with China. The US economy isn’t doing that great, that’s a key trading partner for us. And the past decade in Australia has really been driven partly by migration. What are you going to replace that key economic driver with?
MATHIAS CORMANN: When you say replace, we have continued to perform strongly on the export front. We have continued to export iron ore at a very good price at strong volumes. We have continued to export our wheat at very good prices at very good volumes … interrupted
ELYSSE MORGAN: Sorry, I’m speaking specifically about migration. That’s been a key driver over the past decade. Will you be using that going forward as a key driver or will we need to look for something else?
MATHIAS CORMANN: There will be some things that will be different. There will be some things that will return back to normal after a period of time. When it comes to our export performance, whatever it is, the resources sector, the agriculture sector, or international education, international students through the education sector. International students were our third biggest export earner for an extended period. I see no reason why that cannot return relatively swiftly into the future. Lots of opportunities for Australian business and the Australian economy into the future.
ELYSSE MORGAN: Pre-coronavirus, our net debt sat at around $560 billion. Where do you see that debt figure peaking at?
MATHIAS CORMANN: These sorts of numbers will be presented as part of our economic update which we will be delivering on the 23rd of July. I do provide a monthly update in terms of where we are at on a month by month basis, in terms of the actuals. But the update in terms of our forecasts and our projections will be in our economic update and in our Budget in October.
ELYSSE MORGAN: Ballpark, where do you think it will be?
MATHIAS CORMANN: I am not going to start speculating about ballpark figures.
ELYSSE MORGAN: Okay, when do you think the economy will be in a position to start paying it back?
MATHIAS CORMANN: Again, you are now asking me to provide fiscal forecasts and projections. We will leave that to the economic update and to the Budget as appropriate.
ELYSSE MORGAN: Beyond industrial relations what do you believe are the Government’s key opportunities for reform?
MATHIAS CORMANN: The Prime Minister spelled that out in some great detail in his speech to the Press Club the other week. At a very high level we have to ensure that we do everything we can to make it easier for business to be successful, to reduce the cost of doing business, to help ensure that business has the confidence to invest in their future success so that they will hire more Australians and over time be in a position to start paying them higher wages again. We have to ensure that across the board, whether it is through lower taxes, through more sensible industrial relations arrangements, through better access to markets around the world through our ambitious free trade agenda, through increased investment in our productivity enhancing infrastructure, by making sure we can have sustainable, reliable access to competitively priced energy supplies. Right across the board we have to ensure we make every post a winner. That we put ourselves in the strongest, most competitive and most resilient position possible, to seize the opportunities and be able to deal with the headwinds as they come our way.
ELYSSE MORGAN: Minister, thank you very much for your time.
MATHIAS CORMANN: Always good to talk to you.