Transcripts → 2020


ABC TV - News Breakfast

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

MICHAEL ROWLAND: Let's bring in the Finance Minister Mathias Cormann, he joins us from Parliament House. Minister good morning.

MATHIAS CORMANN: Good morning.

MICHAEL ROWLAND: We had a tsunami of red ink yesterday. Of all of the figures and of all the indicators, what is the one that worries you the most?

MATHIAS CORMANN: The thing that worries me the most is to ensure that we get fully on top of the coronavirus pandemic here in Australia. Clearly with the outbreaks in Victoria and in parts of New South Wales, that is something that presents an ongoing risk. The risk of localised outbreaks in other parts of Australia presents an ongoing risk. We want to ensure that we can get back to as close a normal position as possible, to the new normal as soon as possible. That is going to be important for people's health, but it is also going to be important for the strength of the economic recovery and the jobs recovery on the other side as soon as possible.

MICHAEL ROWLAND: Now you are forecasting unemployment as we mentioned will peak at just over 9 per cent by December. Are you really confident that that is the highest it will get? Do you fear it might go even higher as millions of people come off JobKeeper?

MATHIAS CORMANN: We are being very candid about the fact that there is a high level of uncertainty in terms of the global and domestic economic outlook and in relation to the health outlook. We have provided an update based on the best available information at a point in time, but this is a fluid situation. It continues to evolve and there is likely to be movement in both directions for some time.

MICHAEL ROWLAND: So it could possibly could go higher, the jobless rate?

MATHIAS CORMANN: We provided an update based on the best available information. Just to point you to the JobKeeper program, in March when we were planning for the worst, because we feared the worst, we thought that it would cost $130 billion. Only two and a half months later, the situation had developed better. We had been able to ease restrictions earlier and the cost was reassessed down to $70 billion. So things can move in a positive direction too. We should not assume that everything is necessarily just going to be one way into a worse direction.

MICHAEL ROWLAND: That is the really challenging thing Mathias Cormann, isn't it? Treasury officials essentially are on par with astrologists at the moment. They are simply guessing.

MATHIAS CORMANN: Forecasts and estimates are that. They are not actuals. You make your assessments based on the best available information. But in the current climate, I think that all Australians can understand that this is a situation that continues to evolve, that continues to be fluid, that there are high levels of uncertainty. So yes, estimates and forecasts are even more challenging to make at this point in time than normal, which is why we only presented two years of numbers, which is why we delayed the Budget from May to October, because of that uncertainty making it so much more difficult to present a credible forecast.

MICHAEL ROWLAND: The Government, in setting these figures assumed the Victorian lockdown would finish as scheduled in mid-August. Doubts raised about that. But also assumes international borders with quarantine restrictions will reopen from the start of next year. Is that realistic?

MATHIAS CORMANN: They are the assumptions underpinning the update. But that is because these are the decisions that currently stand. As decisions are changed, you feed the change in parameters into future updates. You can only provide an update at a point in time based on the decisions as they stand and the decision as it stands in Victoria, for example, in relation to the timing of the lockdown, is what is reflected in the update.

MICHAEL ROWLAND: Now, the forecast also has wages growth of a pretty minimal 1.25 per cent for this financial year. Can those Australians lucky enough to still have jobs now expect minimal, if no wage rises for possibly several years ahead?

MATHIAS CORMANN: When the unemployment rate goes up, wages growth will be less. But on the other side, the inflation rate is also negative and significantly less moving forward beyond that time. So yes, there is likely to be lower wages growth at a time of comparatively higher unemployment. But there is also going to be a lower rise in cost pressures.

MICHAEL ROWLAND: Finally, you have gone into much greater debt to help fund these very important programs. JobKeeper at this stage only goes until March. If the situation does not improve by then, is the Government happy to go into further debt to help fund the economy going forward and more importantly, keep Australians in jobs?

MATHIAS CORMANN: The important point is that Australia, despite everything and despite this challenging set of numbers, is in a better, stronger, more resilient position, including a more resilient fiscal position than most other countries around the world. We do have further fiscal capacity to provide support into the economy, business and to support jobs if and as required. But these are judgements that we will make closer to the time as we have more data and more information about how the situation is evolving.

MICHAEL ROWLAND: Finance Minister Mathias Cormann in Canberra. Thank you.

MATHIAS CORMANN: Always good to talk to you.