Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 21 July 2020
PETER STEFANOVIC: Joining me now is the Finance Minister Mathias Cormann. Minister good morning to you.
MATHIAS CORMANN: Good morning.
PETER STEFANOVIC: What will the new JobKeeper rate be after September?
MATHIAS CORMANN: I will let the Prime Minister and the Treasurer announce that in a few hours from now. What I can confirm is that JobKeeper and JobSeeker will continue to be paid at the current rates until the end of September. We will then extend JobKeeper for six months from the end of September at a lower rate and JobSeeker to the end of the year, also at a lower rate. This will be part of phasing the Australian community out of the elevated levels of support that have been provided over this current first six month period.
PETER STEFANOVIC: What will that cost?
MATHIAS CORMANN: Again, that goes to all of the specifics. In the 2019-20 financial year we have had to make $56 billion in additional payments as a result of the decisions that we have made to support business, to support the economy, to support jobs and to support those Australians who lost their job and to provide additional support to our health system. We will be reconciling later in the week in the economic statement the fiscal impact of all of these measures.
PETER STEFANOVIC: We are going through a trillion dollars though in total debt though. Aren’t we?
MATHIAS CORMANN: Again, we will be releasing our economic and fiscal update on Thursday. That will reconcile the fiscal impact of all of the decisions that we have made so far and indeed the impact of the economic downturn on our revenue and on our expenditure.
PETER STEFANOVIC: Okay, just on the JobKeeper, you mentioned in your report that some 900,000 Australians effectively received a pay rise. Is it fair that that should continue right up until the end of September?
MATHIAS CORMANN: When we made decisions at the end of March to provide this support into the economy, speed was of the essence, the need for speed was of the essence. It was to provide macroeconomic support. There were a range of objectives. Yes, to support business and to save jobs and to keep employees connected to their employers, but also to provide income support and to provide macroeconomic support. From that point of view we always said that that would be for an initial six month period. We will be addressing this for the next six month period, but until the end of September, things will continue as they are. Things will change from the beginning of October.
PETER STEFANOVIC: Okay, well just onto some specifics. It has been reported today that the new JobKeeper rate will be $1,200 a fortnight. So it has also come down $300 a fortnight. Is that accurate?
MATHIAS CORMANN: As I have said in my first answer, I will let the Prime Minister and the Treasurer make the specific announcements. But there will be a lower payment, this is part of weaning business off this transitional support payment as we continue through this transition over a further six month period.
PETER STEFANOVIC: Okay, should I even ask you about JobSeeker and whether it will be above $700, which is being reported today?
MATHIAS CORMANN: We will be continuing to provide elevated JobSeeker payments until the end of this year. The ongoing arrangements beyond the end of December will be a matter for the Budget.
PETER STEFANOVIC: Okay, it is going to be two tiered and it is based on fresh eligibility tests. What are the markers going to be for tier one and tier two?
MATHIAS CORMANN: This will be determined based on hours worked. The specifics will be part of the announcement later today. Essentially, a quarter of recipients in the first six month period were receiving more than they would have in the context of the hours they ordinarily worked. Moving forward there will be two tiers based on hours worked, which will lead to a higher payment and a lower payment.
PETER STEFANOVIC: How often will people or businesses be tested?
MATHIAS CORMANN: For those who became eligible in the first six month period, once they were in, they were in for the full six months. What we will be doing from here on in is to reapply the turnover test at the beginning of October and again at the beginning of January to ensure that businesses still need that support and that they maintain eligibility for that support through this next period.
PETER STEFANOVIC: Okay so there is going to be two tests there. Two tests, one in October, on in January did you say as part of the next round of financial measures?
MATHIAS CORMANN: Yes.
PETER STEFANOVIC: So that is when people will be tested, whether they are in tier one or tier two?
MATHIAS CORMANN: No. The test I talked about for the beginning of October and the beginning of January is the turnover test. That is to ensure that businesses still are experiencing the relevant reduction in the level of turnover.
PETER STEFANOVIC: And is there a level of reduction that they have to achieve? And what is that?
MATHIAS CORMANN: The level of reduction is what it was, that is for businesses with a turnover of up to $1 billion it is a 30 per cent reduction. For businesses with a turnover of above $1 billion it is a 50 per cent reduction.
PETER STEFANOVIC: Okay, so that remains unchanged?
MATHIAS CORMANN: The turnover test remains unchanged, but it will be reapplied, whereas in the initial six month period, once businesses qualified they remained in the program for the full six month period. Moving forward from the end of September, there will be two tests. Beginning of October and the beginning of January.
PETER STEFANOVIC: Why did you decide on a six month extension?
MATHIAS CORMANN: This was based on advice. The judgement that we have made is that this is the appropriate period, given the experiences from some of the businesses on the front line of the economic impact of this crisis, that the most appropriate transition out of this back into the new normal would be a further six months.
PETER STEFANOVIC: And how flexible will the Government have to be, considering there may well be further shut downs?
MATHIAS CORMANN: This is a demand driven program. Further shut downs will mean that businesses in affected areas are more likely to qualify because they are more likely to meet the 30 and 50 per cent reductions in turnover.
PETER STEFANOVIC: But by extending by six months, that is an indication that you are not really expecting the economic conditions to get much better in that time?
MATHIAS CORMANN: The economic conditions have already got much better than what we thought they would be at the end of March. Across Australia with the exception of two jurisdictions, across most of Australia, the level of active cases is very, very low. The level of community transmission is quasi non-existent. Yes, we have got a particular challenge in Victoria and in parts of New South Wales and it is going to be very important to get on top of that as swiftly as possible.
PETER STEFANOVIC: Yeah and if there are further shutdowns, which there may well be is that going to be flexible? Will the Government allow further changes to be made?
MATHIAS CORMANN: It is a demand driven program and to the extent that further shutdowns impact on specific businesses that will no doubt be reflected in increased eligibility in those affected areas. That is the way demand driven programs operate.
PETER STEFANOVIC: Just finally, looking back on what you have been able to hand out so far, the JobKeeper and the JobSeeker program. Would you call it a success?
MATHIAS CORMANN: We have been dealing with a very difficult circumstance, but we do believe that the JobKeeper and the enhanced JobSeeker arrangements worked as intended, that they were successful in putting a floor under the economy and providing necessary much needed support to businesses, to working Australians and those Australians who lost their job. But it is still a tough circumstance. There is no question.
PETER STEFANOVIC: And what did not work, what failed in your opinion?
MATHIAS CORMANN: Look, we had to make decisions very quickly, we did the best we could. We believe that overall, by and large, things have worked as intended and we will continue to make adjustments and the Prime Minister and the Treasurer will be announcing some adjustments today.
PETER STEFANOVIC: Do you concede though that some of the handouts perhaps were a disincentive for people to work?
MATHIAS CORMANN: Well we knew that when we went into it. There are trade-offs here. We had to make judgements about providing macroeconomic support into the economy and income support into the economy very swiftly. We knew that that would create distortions, but over a temporary period, we accepted that that would be the case. But certainly the longer these sorts of elevated support payments remain in place, the distortions and the disincentives become more accentuated, which is why it is important that we start the phasing out, the sensible and responsible phasing out of this temporary level support.
PETER STEFANOVIC: Finance Minister, Mathias Cormann appreciate your time this morning, thanks for joining us.
MATHIAS CORMANN: Always good to talk to you.