Topics: Budget 2021-22; Iron ore; Borders
Gareth Parker: What would you do with four thousand dollars? Finance Minister Simon Birmingham, good morning.
Simon Birmingham: Good morning, Gareth. It’s great to be with you.
Gareth Parker: Would it go to budget repair or perhaps capital expenditure?
Simon Birmingham: I think right now it’s still all about investing in growing the economy. That’s what last week’s budget was about. And so we’d make sure we deploy that four thousand dollars to a business who can grow and create more jobs.
Gareth Parker: There you go. It goes into the private sector to make the whole engine go round. Obviously, the budget was handed down a week ago. Time flies when you’re having fun. You’re here to continue to sell that budget message. You must be buoyed by the fact that that Newspoll, for example, says that most Australians think this is a good blueprint.
Simon Birmingham: Well, it’s a blueprint that really is about continuing to get us through the Covid-19 pandemic. It brought about this pandemic, the first recession Australia had faced in 30 years. But crucially, our economy has managed to bounce back far more strongly than almost any other in the world where the first developed country to be back at employment levels above what they were pre pandemic. And our ambition is to make sure that we keep growing those job numbers over the next couple of years. And the budget outlines a forecast for a further 250,000 jobs to be created and for unemployment to be pushed below five per cent. And it’s a long time since we’ve managed to get unemployment below five per cent and hold it there for a period of time. And that’s certainly what we’re driving towards.
Gareth Parker: It does come at a cost, though, doesn’t it? And it’s a long term cost. And by taking on all of this record debt and deficit, you’re asking future generations of Australians to pay for today’s jobs.
Simon Birmingham: Look, there is obviously a profound shift in terms of the debt profile with what we had expected prior to the pandemic. But this has been the biggest shock to the global economy since World War Two. So you would expect there to be some dramatic outcomes as a consequence of it. What we’ve done with this year’s budget is carefully frame it so that the debt levels over each of the next 10 years that are forecast come in at a lower level than we expected in last year’s budget. So we’ve been able to take that economic strength that Australia has shown, that faster recovery than had been forecast previously and manage that to bring those future debt profiles in at a lower level than had been forecast.
Gareth Parker: They are still in the way though aren’t they –
Simon Birmingham: They are still very significant, but the way we best
Gareth Parker: and they do have to be paid back one day?
Simon Birmingham: And the way we best sustain and manage that debt is of course, to be able to make sure that the economy is as strong as possible, that we’ve got as many people in jobs as taxpayers. To give a little example, we did some analysis over what the faster rate of employment growth and jobs growth meant for the budget earlier this year. And by having 200,000 more Australians in jobs and not on JobSeeker than had been forecast meant a five billion dollar turnaround to the budget bottom line, we had three billion dollars less that we were paying in welfare payments, through JobSeeker payments and two billion dollars more that we were receiving in income tax and contributions that people were making to the economy. And so that really is how we in large part got the budget to the point of balance pre pandemic. And it’s going to be through getting Australians into work in record numbers that we can manage to get us out of it with the strength and opportunity for individual households funding the essential services people want, but also being able to manage those debt repayments.
Gareth Parker: You’ve been on the ground here in WA since Sunday. What are local businesses, local people telling you about the state of the West Australian economy?
Simon Birmingham: There’s clearly a strong degree of strength and buoyancy across the West Australian economy. Many businesses thanking the Morrison government for JobKeeper and the different measures that helped them through the enormous uncertainty over the last year. Exciting some businesses that I’ve met with who are taking on more apprentices and using the subsidies and support we’ve put in place to encourage more trades, more apprenticeships. In fact, 270,000 wage subsidies to support apprenticeships that that are driving extra numbers. Also, some businesses that are using the full expensing depreciation tax reforms that we’ve put in place to spur and get that growth in place and to see businesses buying extra plant, extra capital equipment, investing in being in faster growth for them, that sort of investment spurs immediate economic activity, but it also makes those businesses more productive in terms of the growth that they will see in the years to come, the competitiveness, the productivity in those businesses. And so it gives a short term benefit, but also long term dividends through those reforms.
Gareth Parker: It’s very much a China linked story, though, isn’t it, as well? I mean, iron ore prices are still up above two hundred dollars a tonne, which is just mind blowing. And there’s no sign that Chinese demand for our West Australian iron ore is abating. And that, of course, is the, you know, the most powerful element in the economic dynamic in this state. For some years, you couldn’t get a call back from anyone from the Chinese government in your role as Trade Minister. And yet this trade war doesn’t appear to be actually materially hurting us, if anything, we are benefiting more than ever both state government coffers, federal government coffers and the shareholders of the major resources companies, their employees, suppliers and everyone else is sort of a grand irony here, isn’t there?
Simon Birmingham: Well, there’s certainly strong buoyancy that that is driven in part by the resources sector. And we are seeing huge iron ore prices right now. Now, from a budgeting perspective, we’ve maintained a conservative outlook. Once again, we’ve forecast those prices will come from the 200 dollars a tonne type level. They’re at back down to 55 dollars a tonne.
Gareth Parker: They tried to punish us with a trade war. And in fact, we’re richer than ever as a result of their custom.
Simon Birmingham: And we’ve seen equally the ability of Australian industry to diversify, to move and to shift. I caught up with CBH, the big grain handlers, yesterday whilst here talking to them about the impact of the unfair and unjustified tariffs that China has placed on Australian barley. And what those companies have been able to do is return sales back to the Middle East, send the first ever shipment of Australian barley into Mexico. Doing that under the terms of the Trans-Pacific Partnership trade agreement that our government negotiated and delivered. And it’s a demonstration that that even when those disruptions come along, business and industry are able to adapt and we’re creating the tools and the choices for businesses to be able to pursue other markets. Now, you know, iron ore is clearly a very particular case where China is a dominant market for for seeking that product. And so we do appreciate the importance of it. But it’s also why we take a very conservative approach in terms of our budget forecasts as to where we see that going.
Gareth Parker: And Australian business finding other markets is a good thing. I mean, I think that you’re right. It does show the flexibility and the resilience of those sectors. I just want to just finish on borders, particularly international borders, because it’s the pressure is sort of coming on from various angles, both from families who have been separated from their loved ones without really any end in sight. As we sit here right now and talk this morning, there’s obviously a business imperative and there’s been talk about international students. What did you make of the Virgin CEO, Jayne Hrdlicka’s comments that at some point we have to basically let this virus back in and that people will die as a result?
Simon Birmingham: Well Gareth, I’m not sure that Jane has quite got the pitch right there in terms of convincing Australians that that reopening is a good thing. What we need to do is take it very cautiously still, at present. We are going to continue with the vaccine rollout. That has seen a big step up in recent weeks as we got through the first million Australians being vaccinated in 40 odd days, the second million doses in 19 days, the third million doses in 17 days. You can see that each million doses delivered and administered is being achieved in a shorter and shorter time frame as this rollout continues. And we want to make sure that continues with as much strength and support as it possibly can. We’ve got 195 million doses that we have contracted for Australians. That includes now some that are going into the booster shot category. And so we’ve got a range of different vaccines from different suppliers with the contracts there to make sure that people can have confidence the product will make it to our shores and will get distributed. But it’s still going to take a bit of time and no doubt there will still be other uncertainties or unexpected events that occur along the way, which is why we are doing all the contingency work to be ready to reopen borders when it’s safe to do so. But we can’t put a firm date on it yet because we just don’t know for sure when it will be safe.
Gareth Parker: Do you think Jayne Hrdlicka’s comments helped the debate or harmed it?
Simon Birmingham: I think for many Australians, they’ll probably react negatively to that sort of idea, put in that type of language. I don’t think it helps. I think Australians want to know that government is doing all the contingency planning. Of course, we want to reopen borders as soon as we can, but no sooner than it is safe to do so. And that’s the approach the Morrison government will take. The rollout of the vaccines are important to that, but there’s also a lot of other health information that will have to take into account, including, of course, the resilience of those vaccines to new strains, new variants. And we can only assess that when it comes to the time we’re actually making those decisions based on the health advice that’s before us. And that’s what we’ll be listening to first and foremost ahead of airline CEOs or anybody else.
Gareth Parker: Simon Birmingham, the Federal Finance Minister. Appreciate your time.