Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 4 June 2020
ALISON CREW: The Federal Government is hoping further lifting of COVID-19 restrictions and its new $688 million HomeBuilder scheme will help hasten the recovery of the economy, as Australia falls into recession for the first time in almost three decades. The scheme will provide grants of up to $25,000 to some new homebuilders or renovators. The Federal Treasurer Josh Frydenberg and Finance Minister Mathias Cormann are expected to provide a detailed economic update next month. The JobKeeper program also on the table. For more now, we’re joined by the Finance Minister Mathias Cormann. Good morning.
MATHIAS CORMANN: Good morning.
ALISON CREW: Now Senator the R word is official upon us, so how are you going to get Australia through this?
MATHIAS CORMANN: Everybody knows why we are where we are. If you compare the economic circumstances in Australia to what is happening in other parts of the world, we actually continue to perform comparatively well. A 0.3 per cent contraction in Australia in the March quarter compared to a 1.8 per cent contraction across OECD countries, or six times as large a contraction. The Australian economy continues to be comparatively resilient. The economic restrictions continue to ease and we are making decisions to help boost the strength of the economic recovery on the other side. We will get back into a strong position as we were before this crisis hit.
ALISON CREW: Let’s look at the HomeBuilder scheme first. It’s a $688 million scheme. How many homes are you expecting will be built by Christmas?
MATHIAS CORMANN: They won’t all be built by Christmas. What has got to happen here is that people enter contracts between today and the 31st of December. Construction has to start within three months of the contract signed. We expect about 27,000 Australians will be taking advantage of this opportunity, and as you say, about $688 million is being invested into this scheme.
ALISON CREW: This program, it is curtailed to individuals earning at least $125,000 and couples earning $200,000. Labor says the scheme is a lost opportunity for those facing financial hardship, so why can’t social housing be included in this scheme?
MATHIAS CORMANN: This is about providing support to ensure that we boost demand in terms of construction activity in the residential building sector. That is a sector that has been particularly hard hit and needs that support. In relation to social housing, we provide substantial support to Australians in need of housing support. About $6 billion a year is spent by the Federal Government to provide support for housing, including rental assistance and support through a joint scheme with state and territory governments. Social housing is predominantly a state and territory government responsibility, but every year the Federal Government puts $6 billion into that sort of support.
ALISON CREW: Let’s take a look at the recession now, technically we actually need two consecutive quarters of negative growth. We won’t actually see the results of the current quarter until September, so just what are you expecting then?
MATHIAS CORMANN: What we do know is that the brunt of the economic impact from the coronavirus crisis is being felt in the June quarter. We are in a better position that we feared we would be by now. When we were looking ahead at the end of March, we were expecting the worst, planning for the worst and certainly were expecting severe economic restrictions would be in place for longer. Because we have been comparatively successful as a country in winning the fight against the virus, because the number of active cases is so low, the number of community infections is so low, we are in a position to ease restrictions sooner. We do expect that things will start to improve, but the June quarter was the quarter where we were hardest hit. The march quarter is when it started and in June is when it really played out to its fullest extent. That is why we are expecting, and as Treasury has publicly indicated, we are expecting that the unemployment rate could go up towards 10 per cent in the June quarter because that is when most businesses really felt the pinch.
ALISON CREW: Shadow Treasurer Jim Chalmers says even before the virus and even before the bushfires we had issues with weak growth and that we can’t afford to withdraw government support, so can you tell us more about what you’re planning to do with the JobKeeper program at this point?
MATHIAS CORMANN: Firstly, Jim Chalmers is wrong, as he so often is. The economy was growing, unemployment was falling and wages continued to grow faster than inflation before the bushfires and coronavirus crisis hit. When it comes to the JobKeeper program, we are about two months in to a six-month program. We said there would be a review about halfway through. Treasury is conducting that review as we speak and we expect to receive their report and recommendations later this month. As soon as we have that in front of us, continuing to monitor all of the economic data and information, we will make the appropriate judgements. It would be completely inappropriate for us to get ahead of ourselves and for us to start speculating in the absence of appropriate information and appropriate data and the recommendations from Treasury in front of us.
ALISON CREW: But Senator, you have thousands of Australians facing financial hardship now in some sectors that haven’t even been covered by JobKeeper up until now. You’ve already revised down the program by some $70 billion, so surely the $60 billion discrepancy, is that not a reason to hasten the Government’s announcement on more support?
MATHIAS CORMANN: Firstly, we have not revised down the program. What has happened is that the situation in June is better than we had feared when the program was initially costed in March and because the economic context is better than what was feared the cost of the program is expected to be less than what was initially anticipated. We are two months into a six-month program. By the time we make relevant announcements, there is still three months to go to the end of September. Clearly the objective for us as a country is to get back to normal as soon as possible, for businesses to be back in a position as soon as possible where they can pay the wages of their employees out of their income rather than having to rely on essentially a wage subsidy from government. We are continuing to monitor how fast the recovery takes place on the other side. We will focus on those areas in the economy that might need specific support to help facilitate the smoothest possible transition. As I am here with you today, I am not going to make blanket statements about what may or may not happen without having had the opportunity to assess properly the economic data as it continues to evolve over the next few weeks and properly assess the advice from Treasury once that has come in.
ALISON CREW: The arts and entertainment sector is one in particular that is hurting badly and looks like it will continue to for some time. Can you indicate anything at all of what support you will be giving to that sector in the months ahead?
MATHIAS CORMANN: What I can indicate is that we are currently considering those sectors that are most severely impacted, including the arts and entertainment sector, to make judgements on what the most appropriate support over the next few weeks and months would look like. We are making an announcement today that is focused on providing supports to the residential building and construction sector. Further announcements will follow over the next few days and weeks.
ALISON CREW: Do you think that Australia needs another significant infrastructure project similar to the original Snowy Hydro scheme, for example, in order to get the country through this recession?
MATHIAS CORMANN: We do have very significant infrastructure projects underway as we speak. The Inland Rail project, for example, is a significant investment of more than $12 billion. As we speak, we are pursuing Snowy 2.0, which is a major infrastructure investment program. We are also building a major new airport in Western Sydney. All around Australia, wherever you look, we are building very significant infrastructure, which is part of our plan for a stronger economy and more jobs into the future.
ALISON CREW: Senator, thanks very much for your time this morning.
MATHIAS CORMANN: Always good to talk to you.