Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 2 September 2020
DAVID KOCH: Now Australia is expected to officially enter a technical recession today. Two consecutive quarters of negative economic growth. That will be the first time we have been there in nearly three decades. Some economists predict the National Accounts figures for the June quarter will show a five to 7.2 per cent contraction in the economy. That is off the back of falling sales figures in almost every industry. Sales for accommodation and food services down 39.1 per cent, arts and recreation 37, there has been a 31 per cent drop for the retail sector, even the mining sector down 1.8 per cent.
Finance Minister Mathias Cormann joins us live from Canberra. Mathias good morning to you.
MATHIAS CORMANN: Good Morning.
DAVID KOCH: Around that six, seven per cent contraction, is that about right?
MATHIAS CORMANN: I am not going to pre-empt the release of the figures later this morning, but clearly we do expect a severe contraction. We know what has caused it. Economies around the world have been hit very hard by the impact of the coronavirus pandemic. If you look at what has happened in the UK in the June quarter, a contraction of more than 20 per cent. An about 10 per cent contraction on average across all OECD countries in just that one June quarter. It is the June quarter when here in Australia so far, we were most heavily hit, so we do expect that there will be a severe contraction.
DAVID KOCH: To put it in perspective, the previous record for negative growth was just two per cent back in 1974. We are almost towards the end of the September quarter at the moment. Do you expect the economy to bounce back into positive for this current quarter?
MATHIAS CORMANN: If you look at what was happening towards the end of June and early July, we were certainly heading in the right direction. Jobs were being restored across the economy. Across many sectors of the economy, activity was picking up. Then the outbreak in Victoria happened, so what we desperately need is to continue to get on top of the outbreak in Victoria, to maintain the situation everywhere else and to open up the economy as much as we can as soon as we can.
DAVID KOCH: So you are expecting another contraction this quarter as well?
MATHIAS CORMANN: I am not pre-empting things, but based on current indications and given the effect of the outbreaks in Victoria, there will certainly be another negative impact on the economy. To what extent, that is going to be reflected in the September quarter. That will be for later in the year.
DAVID KOCH: Overall, it is going to be a really deep recession. Wages are down a record 3.3 per cent for the quarter. JobKeeper is set to be reduced from the end of the month. Do you expect wages to fall even further and what do you see as the ceiling for unemployment?
MATHIAS CORMANN: The expectation from Treasury earlier this year was that we would be at a 10 per cent official unemployment rate by the end of June. We came in at 7.4 per cent. In July that edged up by 0.1 per cent to 7.5 per cent. We have to work as hard as we can to strengthen the recovery, to strengthen the jobs recovery and to make sure that businesses have the best opportunity to recover and to start hiring again. We want to see businesses invest in their future growth and success and to hire more Australians again so that we can bring the effective unemployment rate down again.
DAVID KOCH: All of this at a time where our major trading partner is flexing its muscle. China delivered another blow to Australian farmers, suspending barley imports from our biggest grain handler. China claims there were weeds in the barley and that was harmful. The WA company says that was not right, they met all the requirements. How fearful are you that China is just going to put the screws on us?
MATHIAS CORMANN: We do respect the fact that China, like we do, have quarantine arrangements in terms of imports into their country. We are working with the company, we will be investigating those claims and make representations as appropriate once we have to the bottom of all the facts.
DAVID KOCH: Alright, Mathias Appreciate your time.
MATHIAS CORMANN: Always good to talk to you.