Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 23 July 2020
HASLINDA ARMIN: Joining us from Parliament House now is Finance Minister Mathias Cormann. Minister Cormann good to have you with us. Now the damage to the economy will stay, will remain long after the pandemic has gone, but todays update did not include any new significant stimulus measures. What does the Government hope to do to mitigate the impact of the virus recession given that the stimulus measures so far seem to be temporary?
MATHIAS CORMANN: Firstly, today was an update which summarised a very long list of measures that we have taken since earlier this year to boost our health system, to support the economy and to support and protect jobs. The situation in Australia, while challenging, while we have presented a challenging set of numbers today, we all know why we are here. We are here because of the impact on the economy and consequently the Budget of the global coronavirus pandemic. So there is a clear reason for it. Australia is in a comparatively better position than most other countries. We are in a better, stronger, more resilient position than most other countries, both in economic terms and in terms of our Budget and indeed in terms of our health outcomes so far.
HASLINDA ARMIN: Jobs remain the big issue though, you are forecasting a jobless rate of 8.75 per cent at a time where your support is seen to be winding down. Is that reasonable?
MATHIAS CORMANN: Before the coronavirus crisis hit we had an employment growth rate at twice the rate compared to the OECD average. We are dealing with a challenging situation right now, but things are heading in the right direction. The economic contraction in Australia has been much less than in other parts of the world. The employment impact has been much less than in other parts of the world and in the month of June we had 280,000 Australians go back into the labour market. The participation rate went up, the number of hours worked went up, underemployment went down and 210,000 jobs were restored in the economy. So yes there are challenging times ahead, but we continue to make the decisions to provide support in the economy and to business and to protect jobs as appropriate. We do have to get back in to a situation as close as possible to normal. We do have to get back into a situation where viable businesses pay for their wages of their employees out of their own income, rather than having to rely on taxpayer funded support.
HASLINDA ARMIN: Minister, if needed, is there any wiggle room for further stimulus to help jobs given that somehow the Government found an additional 20 billion Aussie dollars to support the jobs program?
MATHIAS CORMANN: We will continue to make judgements to put the Australian economy on the strongest possible foundation and trajectory for the future. We are taking measures across the board, including providing tax incentives to businesses encouraging them to invest in their future growth and success, so that they hire more Australians again. That is what we will do. We will continue to pursue our deregulation agenda, our ambitious free trade agenda, to give exporting businesses out of Australia the best possible access to markets around the world, our infrastructure investment program and our energy reforms. We will continue to make all of the necessary decisions to give businesses around Australia the best possible opportunity to be successful in this current environment, so that they will hire as many Australians as possible in the months and years ahead.
RISH SALAMAT: Minister, we had your boss, I suppose Scott Morrison talking about, a few months ago, about him expecting the economy to be more or less humming along nicely in the middle of July. Well clearly with the outbreak of Coronavirus again in particularly Victoria that is not going to be the case. How concerned are you about this recession deepening?
MATHIAS CORMANN: I think you are misrepresenting what the Prime Minister has said there. The Prime Minister earlier this year said that our objective was to get the economy back to as close as possible to normal by July and we are in that position. Yes, we are dealing with a localised outbreak in one state. In one jurisdiction out of eight. There are some trends in New South Wales that we are keeping a watching eye on. But across Australia, overwhelmingly there is no community transmission, there is a very low number of active cases and businesses are coming back, jobs are coming back and the recovery in large parts of Australia, at least in many parts of the economy has started. So, look we will continue to do what we can. We have to continue to manage the risk of outbreaks into the future, but we also have to put in context where Australia sits compared to the rest of the world. Our economy is in a stronger more resilient position than most, our health outcomes are better than most and we just have to continue to do everything we can to stay on top of it.
RISH SALAMAT: Absolutely, the fiscal side of course, you are doing some of the heavy lifting there and the central bank, the RBA is also doing the heavy lifting. Do you think they could do more in your view, Phil Lowe and Co, do you think they should be perhaps be going towards negative interest rates to help support what is going on in your efforts?
MATHIAS CORMANN: Well our central bank makes decisions on monetary policy independently. I am not a commentator on monetary policy. I would just point to a statement that the Reserve Bank Governor himself has made in the past that he does not envision a circumstance or a scenario where we would enter into negative interest rate territory. The Government will continue to do what we need to do to provide the appropriate levels of fiscal support. Let me just make this point. On an international comparison basis, even after the crisis level expenditure that we had to incur now, our debt levels are still lower than the debt levels of many other countries before they went into this crisis. If you look at our gross and net debt levels as a share of GDP, they continue to be comparatively low, which gives us the necessary fiscal flexibility should further fiscal support, should further support measures be required into the future.
RISH SALAMAT: Mr Cormann, no economy is having a good time of it. What are you most worried about looking ahead?
MATHIAS CORMANN: Look until such time as there is a safe and effective vaccine that can be mass distributed around the world, we will have to continue to manage the risk of the coronavirus in our lives. It is a highly infectious terrible virus. It is going to be with us for some time and we have to ensure that we keep the economy going into the best possible position while the coronavirus remains. So, we have to find the right way to run things in the economy in a way that is COVID safe, while the virus remains around and that challenge, that is going to be the key challenge for some time.
HASLINDA ARMIN: Minister, are you concerned about household debt? Currently debt to income ratio of 200 per cent. Could household debt derail the economic recovery In Australia?
MATHIAS CORMANN: Well that is not what we are seeing right now. In periods of higher unemployment that is one of the risks that you have to monitor. We are providing historically unprecedented income support into the economy, both through the Jobkeeper and Jobseeker programs. But this is one of the things that we will have to continue to monitor into the future. I have to say our banks here in Australia have been very good in working with their customers, where that was required, to help them transition safely through this period and this will be a watching brief, but at this stage it is still looking ok.
RISH SALAMAT: Minister, you are leaving politics, what are you going to do and what do you think your legacy is going to be? What have you left behind as you can say I did this?
MATHIAS CORMANN: I have been the Finance Minister for the entire period of our Government. We went into this crisis in a comparatively stronger fiscal position as a result of the Budget repair effort over our first six and a half years in Government. I certainly take a level of satisfaction out of the fact that Australia and Australians are in a stronger, better, more resilient position as a result of the work that we did as a Government, with me as Finance Minister, during our first six and a half years in Government. In terms of what I do next, well look I am still here till the end of the year. We still have a Budget to deliver in October and half yearly Budget update before Christmas. I am 100 per cent focused at the job at hand. At the appropriate time I turn my mind to what is next.
HASLINDA ARMIN: Minister before we let you go very quickly, under what circumstances would you fast-track personal tax cuts?
MATHIAS CORMANN: Well look the Budget is on 6 October. In the lead up to the Budget we do what we always do, we review all of the economic data, all of the information, all of the opportunities to adjust policy settings to provide the appropriate incentives and the appropriate supports into the economy if and as required. We will not be doing that today. We will be doing that over the weeks and months ahead.
RISH SALAMAT: Minister, when I asked you earlier about what you were most worried about in the future. I am surprised you did not mention anything about China, your biggest trading partner and the decoupling perhaps taking place there. How concerned are you about the damage it could do to the Australian economy?
MATHIAS CORMANN: Well our relationship with China is an important relationship, but it is a mutually beneficial relationship. We sell a lot of our resources into China. China needs a lot of our resources to grow their economy. It is a mutually beneficial relationship. It has to be a mutually respectful relationship. From time to time there are issues that arise. Our view is that you have to work through any issues that arise in a way that is constructive. That is what we will continue to do. We are focused on having the best possible relationships with all countries around the world. We are a trading nation we want to sell as many products and services out of Australia all around the world, including into China, and we will continue to work on having the best possible relationships with all countries around the world, including China.
RISH SALAMAT: Mathias Cormann, thank you very much indeed that is the Australian Finance Minister joining us there from the Australian capital, Canberra.