Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 23 July 2020
QUESTION: What can we expect today?
MATHIAS CORMANN: The Treasurer and I will be releasing the July economic and fiscal update later this morning. It will show a very challenging set of numbers. I think that all Australians know why we are where we are. We have been dealing with the economic and fiscal impact of a one in one hundred year global pandemic. While things are challenging here in Australia, both when it comes to health outcomes as well as economic and fiscal outcomes we are in a comparatively better position than most other countries. We are in a comparatively better position because of the hard yards that were done during our first six years in Government to repair the Budget and to put our economy on the strongest possible foundation and trajectory for the future.
QUESTION: Is it fair to say it will take Australians at least thirty years to pay off this debt? And what message should people take away from that?
MATHIAS CORMANN: We are in a challenging position, there is no sugar coating this. We did what we had to do given the economic fallout of this one in a hundred year pandemic. But we are in a comparatively stronger position than most other countries. We are in a comparatively stronger position than we would have been if we had not done the hard yards to repair the Budget over our first six years in Government. Moving forward, we will be providing the medium term projections in terms of our fiscal outlook in the context of our Budget in October. Today, what the Treasurer and I will be presenting is a reconciliation of the fiscal impact both of the measures that we have taken to support the health system, support the economy and jobs, and the fiscal impact, the impact on revenue and expenditure and the Budget bottom line from the economic hit as a result of the coronavirus crisis.
QUESTION: Minister, with the numbers that you are presenting today, do they give the Government any pause for thought about your consideration of bringing forward income tax cuts?
MATHIAS CORMANN: What we are doing today is presenting a reconciliation of the cost of the measures that we have taken to support the health system, to support the economy, to support jobs and the impact on the Budget bottom line of the hit on our economy from the coronavirus pandemic. Our five year plan for the strongest possible economic and jobs recovery will be a matter for the Budget. We will leave those considerations for that.
QUESTION: Minister with predictions of deficits of $90 billion and $190 billion, how does the Budget get back from that?
MATHIAS CORMANN: What we have done is provide significant temporary crisis level support to the health system, to the economy, to jobs. Nearly one hundred per cent of that support is allocated in the two financial years, 2019-20 and 2020-21. We have not baked in ongoing structural commitments. We have maintained and preserved the structural integrity of the Budget. But there is no two ways about it. It will take us a while to get back on top of the debt that we were forced to incur in the context of this crisis. We will do so on the back of a strong economic recovery on the other side. Stronger revenue flows and lower payments, in particular into the welfare system, on the back of stronger economic growth and a strong jobs recovery on the other side is what is going to get Australia back on track.
QUESTION: Minister there are some suggestions around that it could cost around half a billion dollars for the Government to get its hands on enough vaccine when one becomes available to vaccinate the population. Has that been built into the Government’s thinking, are there any objections available from your point of view on that as well?
MATHIAS CORMANN: Greg Hunt is already taking steps to ensure that if and when a vaccine becomes available that we have access to appropriate quantities of any such vaccine. We stand ready to do what needs to be done in order to ensure that Australia has access to that vaccine if it becomes available.
QUESTION: And are there any estimates as to how much that would cost?
MATHIAS CORMANN: These are things that we will deal with at the appropriate time.
QUESTION: Minister why are you only including two years in the update, rather than four?
MATHIAS CORMANN: As you know, earlier this year we made a decision to delay the Budget to October. That is because of the significant uncertainty around the global and domestic economic outlook. There remains significant uncertainty around the global and domestic economic outlook. What we are doing in this July economic and fiscal update is provide a reconciliation of the cost of the measures that we have taken in order to support the health system, the economy and jobs and the Budget impact of the economic hit that was caused by the coronavirus pandemic. By the time that we get to the Budget in October, as was always the intention, we will be in a position to provide four year forward estimates and medium term projections in the usual way. But right now there is just too much uncertainty in terms of the economic outlook.
QUESTION: What concerns do you have about a second wave and how quickly these numbers being presented today could actually be out of date?
MATHIAS CORMANN: Estimates are point in time estimates. They do depend on what happens in the actual circumstance moving forward. A second wave is a significant risk. It would be a risk from a health point of view, it would be a risk from an economic point of view and it would be a risk from a Budget point of view. All around, we need to continue to do what we can to stay on top of that risk, to minimise that risk and to make sure that we do everything we can to avoid it.
QUESTION: Minister you are from Western Australia, how important will the resources sector be in Australia’s recovery. And is that possible the only good news that is going to come out of today?
MATHIAS CORMANN: The resources sector has been incredibly important over the last six months when it comes to the resilience of the Australian economy. We have continued to perform strongly when it comes to our export volumes and the price in particular for iron ore is quite high. In the half-yearly Budget update we assumed that the price for a tonne of iron ore would go down to $55 a tonne. When I last looked it was running at above $100 a tonne. The continued strong performance of the resources sector, the fact that the resources sector was able to continue to operate was a very important factor in minimising the hit on the Australian economy. Things are hard. Things are difficult, but they are not as bad as they could have been. They are not as bad as they are in many other parts of the world. We just have to keep things in perspective, despite all of the challenges we are dealing with.
QUESTION: Doesn’t that the performance of the resources sector highlight how important it is, to balance of the relationship with China and to keep the trade open despite all of the other security and defence challenges.
MATHIAS CORMANN: We are committed to having the best possible relationship with China, based on the fact that this is a relationship which delivers mutual benefits, including and in particular in the context of the resources trade. It is a relationship that has to be based on mutual respect. It is a relationship where if and when issues come up, you work through them positively and constructively. We are keen and committed to having the best possible relationship.
QUESTION: So how important would you say China is to Australia’s chances of recovery?
MATHIAS CORMANN: We will continue to make all of the necessary judgements to put ourselves in the strongest possible economic position. That includes having the best possible trade relationships with countries all around the world, including China.