Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 12 June 2020
WILL KOULOURIS: But I do want to get you across, in terms of the latest OECD commentary we did see yesterday with GDP coming off by around five per cent. All of this, or their expectation of GDP, all of this is coming as the national cabinet here in Australia is meeting to discuss the recovery plan moving forward for COVID-19. In that vein, I am very pleased to be able to welcome the Australian Finance Minister Mathias Cormann, who is joining us live via the phone from Canberra. Minister thank you so much for joining us today. Just firstly, in terms of the OECD numbers that we did get through yesterday. It is relatively better than the IMF forecasts that we got, that five per cent drop in GDP that is expected, and even going back to your Senate Committee hearing with the Treasury Secretary, you guys were looking for a smoother recovery and a more gradual recovery here in Australia. But do you think that if we have a smoother recovery it is going to drag out the recovery rather than having a sharper contraction in Q2?
MATHIAS CORMANN: In Australia, we are in a comparatively better position both on the health front and on the economic front as we speak. So we believe that the effect on the downside is going to be less and the recovery is going to be sooner and somewhat better. That is what the OECD also expects. The key risk that we are managing is seeking to absolutely minimise the risk of a second wave of infections. If that were to happen, that would hit our economy hard.
WILL KOULOURIS: Touching on that, because obviously the OECD predicted the 7.6 per cent hit to consumption in 2020 and a lot of talk now is about these protests that are happening. Many members of your Government have flagged that $25 billion discrepancy when it comes to the GDP in terms of the 6.3 per cent hit we will take if we do see a second wave. But understanding in terms of the health risk, of course there is the risk if we do allow these protests to go ahead that there is that transmission risk. But even on a comparative basis perhaps if you compare the US with its 0.4 per cent when it comes to total population versus active cases, Australia 0.002 per cent. Could a case be made perhaps for the Government to perhaps allow these protests to go ahead and perhaps manage them? Hand out face masks, hand out hand sanitisers and still allow them to go ahead despite the minimal health risks that are there?
MATHIAS CORMANN: The reason we are in the position that we are in, with a very low number of active cases, a very low number of deaths comparatively speaking when you look at it in an international context, it is because Australians have made significant sacrifices. Businesses have been closed. People have lost their jobs. People have been prevented from attending funerals. Some people have been forced to die in isolation from their loved ones. All in order to supress the spread of the virus. In that context people are not prepared to accept this unnecessary and entirely avoidable risk of having tens of thousands of people protest and exposing their fellow Australians to unnecessary and avoidable health risks and to unnecessary and avoidable risk that they might lose their job because we get a second wave. This risk is entirely avoidable.
WILL KOULOURIS: But in that respect, if it was managed then it would be a lot easier for that control. You could even perhaps have people attending sign up for COVID tracking app in terms of providing that outreach rather than necessarily the adversarial nature of having them all arrested for example.
MATHIAS CORMANN: They are dealing with important issues. We are entirely in favour of freedom of speech and the right to protest, but we are in the middle of a pandemic. We are in a health emergency. People going to these sorts of protests put lives at risk, put jobs at risk and it is an entirely avoidable and unnecessary risk. There are other ways to express the passion and the strength of feeling in relation to what is an important and legitimate issue. It is a matter of courtesy and respect to their fellow Australians, more than anything else.
TANVIR GILL: Minister Cormann good morning. Tanvir joining in the discussion. The top story for us this morning is the market sell off, the global market sell off. We had comments coming from Treasury Secretary Steven Mnuchin that even if there is a risk of a second wave the economy cannot afford another shut down. Now he was speaking for the US, but do you think that is the case for the world economy, for Australia as well? In the wake of that big risk becoming a reality, the risk of a second wave?
MATHIAS CORMANN: Another shutdown of the economy would be absolutely devastating. Secretary Mnuchin is absolutely right. That is why it is so important that we do everything we can to avoid a second wave, that we do not take any unnecessary and avoidable risks. In an Australian context what the OECD has told us is that they would expect about $80 billion worth of growth to come off if we had a second wave over two years. $25 billion this year and another $55 billion following year. This is something where all around the world we have got to make the best possible effort to supress the spread and to avoid at any cost a second wave.
TANVIR GILL: And what about best possible efforts in the direction of more economic stimulus being injected into the economy, because we are talking about benchmarks in excess of 15 per cent of GDP. There is talk of another strong package in the US. Is that the way forward, is the Australian Government prepared to do more? And how much more if that becomes a reality, not just a risk of a second wave, but the economic implications that come with it?
MATHIAS CORMANN: In Australia we have already provided about 13.3 per cent of GDP worth of economic stimulus into the economy. We provided one of the most substantial support packages for business, working families and those who lost their jobs, anywhere in the world. We are working our way now through our plans to maximise the strength of the recovery on the other side. The key now is to transition carefully, in an appropriately calibrated fashion out of the transitional, temporary support that is in the economy right now back into a more business as usual circumstance. That is certainly what we will be doing over the next few weeks. Our Budget in October will have a whole range of measures in it across lower taxes, increased investment in infrastructure, increased opportunities for trade and so on and so on, deregulation. We will be having pro-growth agenda rolling out over the next few months to maximise the strength of the recovery.
NANCY HUNGERFORD: Minister, I just wonder what this threat of a second wave outside of Australia and places like the US means for the resumption of international travel. Whether that now looks as though it’s longer down the time horizon and how damaging that could be given the importance to your economy for business travel and for tourism as well.
MATHIAS CORMANN: We have always assumed that international travel will be some way off. In relation to business travel, I suspect that businesses around the world have adapted to the circumstances that we are in. A lot of the business engagement now happens at a digital level. In relation to tourism, yes, it will take some time for international tourists to be able to come back to Australia in the way they did in the past. But we are also in a situation where travellers out of Australia will be restricted in their capacity to travel internationally. There will be a level of substitution domestically in Australia in terms of some of that tourism market. Some areas, like international students, we do believe that there will be capacity to put appropriate risk management processes in place when somebody intends to come to Australia over an extended period. That is a very important export earner for us, the international student market.
NANCY HUNGERFORD: It is indeed. And this comes at a time when many are worried about China’s warnings to students regarding their own presence in Australia. I wonder how much this concerns you and just overall for those who are worried about the tensions between your two countries right now. What can you say to reassure them?
MATHIAS CORMANN: Australia is an incredibly open, welcoming, friendly, successful multicultural country. Any student around the world who is considering a period of study in a foreign country we would urge to consider Australia as a destination. This is a great place to come and study. Like all countries, of course we are managing issues in pockets from time to time. But overwhelmingly, Australia is a very welcoming, open and friendly country.
WILL KOULOURIS: Minister, on that as well. I remember back in 2014 the level of Chinese tourism or education spending here in Australia is basically at the level where India is right now. Much in the same vein as we look for our barley exports, is there going to be more of a concerted push towards perhaps education exports from India and from other countries if this does continue?
MATHIAS CORMANN: It is not a matter if this does continue. We have always been focused on diversifying as much as possible our trade opportunities. We have been pursuing a very ambitious trade agenda, entering into free trade agreements with countries all around the world including Japan, South Korea, Indonesia. We are in the process now with the European Union and the United Kingdom. We would like to think that we can land an agreement with India. Australia is a globally focused, outward looking trading nation. We are an exporting nation. We want to sell as many Australian products and services into as many markets around the world as possible. That is something that we have been focused on in the past and will continue to focus on in the future.
NANCY HUNGERFORD: And Minister, China is arguably one of, if not, the most important of these markets and your Prime Minister has said that the Government will not be intimidated by threats coming from China. But can you afford right now not to have good economic ties with China?
MATHIAS CORMANN: We want to have the best possible relationship with China. But we also will stand up for our national interest. From time to time, in a mutually beneficial relationship, there will be disagreements on specific issues. Our view is that those issues should be worked through constructively and positively. It is a very important trade relationship and we do have a strategic partnership as well, a comprehensive strategic partnership. We want that relationship to be in the best possible shape. But when there are issues where Australia’s national interest is at stake, we will stand up for our national interest.
TANVIR GILL: Right. Minister Cormann, very quickly sir. I know you’re say that you welcome students broadly from every part of the world, but how concerned are you specifically about China issuing that warning to students from not attending Australian universities because as I understand, international education is Australia’s fourth largest forex earner and you’re getting about $26 billion annually? This particular issue impacts your economy far more than what we’ve seen on other issues such as the import ban on beef as well as the tariff impact on barley.
MATHIAS CORMANN: International students are a very important export market for us as I have indicated earlier. That is why we will continue to make the point that Australia is an incredibly friendly, welcoming destination for international students. We are one of, if not the most successful multicultural society anywhere in the world and we would encourage any student anywhere in the world who is considering a period of study in a foreign country to consider Australia. I am certain that they will have a good experience.
TANVIR GILL: Alright. Minister Cormann, thank you very much for joining us with your thoughts and your reactions this morning, and also your insights on the state of the economy in Australia. Really appreciate your time, sir.