Transcripts → 2020


4BC – Breakfast with Neil Breen

Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia


Date: Friday, 24 July 2020

July Economic Update

NEIL BREEN: We were told they would be eye-watering. They were eye-watering. They were sobering. It was a tough day for the Government yesterday when they handed down that mini-Budget. The headline numbers were a deficit of $85.8 billion for the financial year just gone. A deficit of $184.5 billion for the financial year we are in now. Gross debt $851.9 billion. Real GDP is in decline. Unemployment to peak at around 9.25 per cent in December. But we all know and Australians know they were measures that had to be taken, because the economy is falling off a cliff because of COVID-19. I don’t know if he has had any sleep at any stage in the last six months, but the Finance Minister Mathias Cormann joins us on 4BC Breakfast. Good morning to you Minister.

MATHIAS CORMANN: Good morning Neil. Good morning to your listeners.

NEIL BREEN: Well we were warned, we were given plenty of warning about yesterday. But those numbers are dramatic for the nation. And the question is how are we ever going to pay it back.

MATHIAS CORMANN: They are a very challenging set of numbers, no question. But as you have just said we know why we are in this position. It is because of the massive impact on our economy from the coronavirus pandemic, which has had obvious consequences for our Budget. On the other side, Australia is in a better, stronger, more resilient position than most other countries. We have been able to achieve better health outcomes and also better economic and fiscal outcomes despite everything. So that should give people confidence that we will be able to manage an economic and jobs recovery from a comparatively stronger foundation. The way we pay this back is by getting the economy going to its full potential again, maximising the strength of the recovery on the other side. Generating more government revenue on the back of stronger economic growth.

NEIL BREEN: And the question will be, you can pay it back over the long term by gauging the citizens by taking more tax off them, but then that reduces their ability to spend in the economy. Or you give them more money by giving them tax cuts. We know there could be tax cuts in 2022. Which way will we go? Will we be giving the citizens more money? Or will we be taking it off them to pay the debt?

MATHIAS CORMANN: Firstly, we have already legislated more than $300 billion worth of personal income tax cuts, which are locked in, and which will continue to be phased in over the next few years. That trajectory remains. Secondly there is no way that we will be increasing the tax burden on the economy as we come out of this crisis, because that would be precisely the wrong thing to do… interrupted

NEIL BREEN: Yeah, there is no way that that will happen.

MATHIAS CORMANN: No. In the early stages the recovery is likely to be fragile. Increasing the tax burden at that time would harm the economy. We want to maximise the strength of the recovery. We will be looking for ways to provide incentives, including through the tax system, to businesses to invest in their future growth and success. Because only through more successful, more profitable businesses again, will we be able to create more jobs again. People have to remember, we all want to see more jobs. But jobs don’t grow on trees. Jobs are created by successful, profitable businesses. Given that we all want more new jobs, we want to protect the jobs that are there, we want to restore the jobs that were lost, and we want to create new jobs, the way to get that done is by giving businesses the confidence to invest in their future growth and success, so that they can hire more Australians again.

NEIL BREEN: What do you think Minister? I spoke to the Deputy Premier of Queensland, Steven Miles earlier, and I asked him what the end game was. What is the end game for Australians? Is it a vaccine? I don’t know. You’re there in Cabinet meetings. We’re not. We can’t see the finish line.

MATHIAS CORMANN: A vaccine would certainly be the best end game, not just for Australia, but for people all around the world. We need a safe and effective vaccine that can be mass produced and mass distributed as soon as possible. But there is uncertainty as to if and when that will happen. There is some promising research. A vaccine certainly would resolve a lot of this. No question. But in the absence of a vaccine, what we have to do, we have to ensure that we can get the economy back as close as possible to normal in a context were the virus remains with us, this highly infectious virus remains with us. We have to manage things in the economy in a way that is COVID safe, which is why for example people having the COVIDsafe app on their phone is so important. So that we can, in the context of localised outbreaks move very quickly to ramp up testing, ramp up tracing and contain localised outbreaks into specific geographic areas, rather than having them impact on the country as a whole.

NEIL BREEN: Yeah, I think and that is what has happened in Victoria, it got out of control. And in New South Wales it looks under control. I am not sure that that app is working. I have got it, and we know that the numbers aren’t fantastic for it. Hey just with regards to unemployment, just before I let you go, Minister. We are looking at a number of about 9.5 per cent, 9.25 per cent in December, they think that it will peak at. Obviously JobKeeper is keeping a lot of people employed. What would be the real number by December do you think?

MATHIAS CORMANN: When we started to work on all of this earlier in the year, Treasury was expecting the unemployment rate, the official unemployment rate, to get to ten per cent by the end of June. It came in at 7.4 per cent. So somewhat better, because the easing of restrictions happened earlier than was anticipated initially. What really matters is what is happening to the effective unemployment rate rather than the official unemployment rate. The effective unemployment rate was quite a bit higher, because of the number of people that chose to leave the labour market, the number of people that were only able to work a lower number of hours or were underemployed. On all of these indicators, things have started in all parts of Australia, except perhaps Victoria, have started to head in the right direction. In the June month, the number of people who came back into the labour market was 280,000. The workforce participation rate went up to 64 per cent. Underemployment went down. Hours worked went up. And 210,000 jobs were restored. We want to get the effective unemployment rate as low as possible as soon as possible and then the official unemployment rate should coincide again with that number.

NEIL BREEN: Okay Finance Minister, Mathias Cormann, what are you doing on the weekend. Please tell me you are having a couple of hours off?

MATHIAS CORMANN: I am getting back to Perth tonight. Believe it or not, but we are having party meetings tomorrow morning back in Perth, Western Australia. Then I am going to spend some time with my family tomorrow afternoon.

NEIL BREEN: Yeah, well you deserve it. Well done. Thanks so much Mathias Cormann, the Federal Finance Minister for joining us on 4BC Breakfast.

MATHIAS CORMANN: Thank you very much Neil.