Topics: National accounts; GDP; QLD quarantine facility; Greg Hunt: Christian Porter
Steve Austin: Simon Birmingham is Australia’s finance minister. Simon Birmingham, thanks for coming on this afternoon.
Simon Birmingham: Hello, Steve. It’s great to be with you again.
Steve Austin: So what was the cause of the third biggest quarterly fall on record?
Simon Birmingham: A fairly obvious and simple one, Steve, which was the lockdowns that we saw occurring across parts of New South Wales and Victoria, that for the entirety of this September quarter, the Sydney metropolitan area was in lockdown for around two thirds of it. The Melbourne metro area was in lockdown and so that precipitated a significant drop in household spending, as you acknowledged in the intro, which saw those states have their economic activity contract a bit whilst the rest of the country not in lockdown continued to grow quite strongly. If you look across the past 12 months, Australia continues to have shown enormous resilience through COVID-19 and is actually in the top three developed economies in terms of our overall annual growth rate, running at 3.9 per cent.
Steve Austin: Apparently, our international trade grew, but it didn’t make up for the loss of local consumer demand though.
Simon Birmingham: That’s right. We saw that there was a very significant growth in relation to trade and exports that in fact our trade surplus was running at some 38.9 billion dollars. And we’ve been now running for a considerable period of time, significant trade surpluses. I think that’s probably a surprise to many Australians that we as a country have turned around what people thought was being a nation of importing more than we exported, which was the case for a longish period of time. But the different trade deals we’ve managed to do with a range of different countries have helped to open up many different opportunities for our exporters.
Steve Austin: On the issue of the sort of the lockdowns suppressing consumer demand significantly, is this why the prime minister has ruled out further lockdowns?
Simon Birmingham: Well, look, we obviously want to avoid lockdowns because lockdowns are incredibly costly. They’re costly, as we’re discussing right now to the economy overall. But what does that mean underpinning that? Well, it means that businesses struggle enormously, to ensure that those businesses don’t fail and that people don’t lose their jobs. We have invested huge sums in terms of economic responses to lockdowns. Government support to businesses, to individuals – programs like JobKeeper. And they’ve all worked and they’ve worked exceptionally well. But they’ve come at massive cost in terms of increased debt and deficit that the nation faces, and we can’t afford to continue to do that forever. And particularly now was a very, very heavily vaccinated population, one of the most vaccinated in the world and one of the first in the world to be rolling out a population wide booster program. We should have confidence that we can avoid lockdowns and manage COVID in a more effective and less costly way in the future.
Steve Austin: My guest is Australia’s Finance Minister Simon Birmingham. Simon Birmingham. Where does Australia earn most of our export income? What is it? Where does it come from? It’s my understanding its resources, but exactly what?
Simon Birmingham: So resources do continue to constitute in terms of sheer dollar value. Close to two thirds of our export value. Iron ore being the largest of those. But gas, coal, a range of other smaller commodities, play quite significant roles too. You know, China remains the single largest of those different export nations. But we’ve seen great success in terms of diversifying and we have some strong strategies to continue to try to support our exporters to diversify whether that is through the resources sector, particularly our critical minerals strategy, which is seeking to develop the new types of minerals and resources opportunities that we need for battery technology and renewable technologies and the types of rare earths that are used in those things Australia has in abundance, and a key part of that strategy is also looking how we may do more of the processing of those earths rather than simply exporting the raw ore body.
Steve Austin: So what proportion of gross domestic product or GDP does exports resources comprise?
Simon Birmingham: Look, our trade comprises around about a quarter as I understand roughly, and resources constitutes probably, as I say, about two thirds of that.
Steve Austin: Okay, well, this is what’s in my mind, I’ve not heard anyone actually answered this, but the iron ore price you mentioned or iron ore as one of our really big ones, the price of iron ore has dropped 60 per cent this year, in fact over that. So you’re the finance minister, you’re going to need to make up the difference. So what’s the government’s plan to make up for the loss of revenue from iron ore royalties?
Simon Birmingham: Well, iron ore is actually still trading above the budget forecast that we locked in, which was that it would track down to around $55 per tonne. So we have always taken a very conservative approach in relation to the price of iron ore. When we’ve set the federal budgets, it has consistently outperformed that it was outperforming that several multiples of that price for much of the last year and at other times in the past. It has come back in much closer to the budget forecasts now. But at the same time, we’ve seen the prices for LNG, our gas exports and our coal exports actually running much higher than budget forecasts, too. So there’s a range of variables there. But a key tenet of the approach we’ve taken is to apply very conservative estimates to these commodity prices.
Steve Austin: So it’s not causing you any concern as finance minister at this point in time?
Simon Birmingham: We’d always wish for it to be selling at the highest possible price. That’s quite logical. But we take a conservative bias in terms of the budget approach so that we minimise the risk of rude shocks and maximise the chance of a positive upside coming through in terms of the budget. What we’ve seen in last year’s budget and in some of the early signs for this year’s budget is that our revenues into government are holding up very strongly. But it’s not just the resources industry that’s doing that. In fact, the strength in terms of the employment market and wages has been driving higher levels of income tax. Notwithstanding the fact that we’ve implemented tax cuts that are returning around $1.5 billion a month, you know, back to Australian families and households. We’re still seeing stronger than anticipated revenue in income tax streams and the like, even with those lower tax rates.
Steve Austin: This is ABC radio. My guest is Simon Birmingham, Australia’s finance minister, on a completely different topic. Where is the Pinkenba quarantine facility at currently?
Simon Birmingham: It’s running to schedule and that schedule is for the first beds to be available to the Queensland government towards the end of the first quarter of next year. So it’s around March next year.
Steve Austin: No delays? It’s on track?
Simon Birmingham: It’s on track, no delays. And we’re running a build program there as we are largely in tandem in Perth and one in Melbourne, where we struck agreement with the state government there a little bit sooner. And it’s on track for us to hand over the first bed places by the end of this year, s by December. Across those three different projects, what we’ve been able to do is because they are largely a modular construction. If you think sort of mining huts, if you like as that sort of structure, we’ve been contracting to deliver on the build across the three sites, there’s obviously earthworks necessary too, but much of the build happens off site. So to create those modular buildings, they are very highly developed and regulated, if you like, in the sense that we’ve worked through with health officials around ensuring they have the highest standards of infection control. They have additional air ventilation than you would ordinarily get in those sorts of facilities, too.
Steve Austin: I read that the wet weather has delayed the Wellcamp facility outside Toowoomba. This is really more a Queensland government facility though with the private sector involvement. Is this an issue for the Commonwealth?
Simon Birmingham: It not, Steve. Look, that facility is one the Queensland government has chosen to pursue with their developers. So I wish them well in that regard. We’ve, I think in place has been able to share some information from the plans and other things that we had developed initially for Melbourne. It’s, as I said, we’ve certainly pursued the higher standards in relation to infection control and prevention around risk of disease being spread in the Commonwealth facilities because we want them to be able to serve whatever purpose we need in the future. Whether that’s for COVID, for a future variant of COVID, for some other type of disease, we might need to manage or, of course, other emergency or disaster response.
Steve Austin: What’s in my mind is I’m wondering sort of where the arrival of international students and skilled workers is at from overseas because they’re going to have to quarantine either at the Pinkenba facility or at the Wellcamp facility. But I’m trying to work out what the timing is for that, Simon Birmingham?
Simon Birmingham: Well, that will depend a little on Queensland government decisions about opening up to international arrivals. We, in response to the Omicron variant of COVID-19, made the decision this week to defer by two weeks the date where from a federal government perspective, we were happy to see international students and essential workers and humanitarian visa holders able to come into the country once more. We’ve already opened up to returning Australian citizens and permanent residents and their family members, who have been able up until these last few days to move relatively freely into Victoria and New South Wales. There’s now a 72 hour period that they have to abide by whilst COVID testing is undertaken and the like. But our intention is still barring any unexpected news in relation to this new variant that will be opening up for those international students in a few weeks’ time, whether Queensland or when Queensland follow suit is, of course, a matter for the Queensland government. But from an entry to Australia perspective, we won’t be maintaining those restrictions.
Steve Austin: My guest is Simon Birmingham, Australia’s minister for finance. I’m going to keep you just for a minute longer if I can. But Christian Porter has announced he won’t be recontesting the next election. Neither will federal Health Minister Greg Hunt. What did they tell you? Did they tell you this in the party room at all today? Simon Birmingham?
Simon Birmingham: Well, not aware that that Greg has made any such announcement, so-
Steve Austin: ABC has confirmed that he will on Thursday formally announce his plan to retire.
Simon Birmingham: Well, I haven’t heard Greg make that announcement, and if he’s going to, I’ll respect his right to be able to do so himself. I think Greg has been an exceptional health minister and not just in relation to COVID-19, but even this afternoon. Whilst I’ve seen some of this speculation, he has been working with others in shepherding through the House of Representatives legislation around research and support for people with mitochondrial disease, which is going to be of enormous benefit to families into the future and will be a great legacy for Greg whenever he chooses to leave the parliament.
Christian has made an announcement this afternoon. As I understand it, obviously there’s been some very difficult issues during the course of this year that have been aired. They’ve been traumatising for many people in that regard. And look, I would wish everyone who has been subject to that trauma in those difficult issues the best for the future. It, you know, they in particular around Christian, have been quite difficult ones for a large number of people.
Steve Austin: I’ll leave it there. Simon Birmingham, thanks for your time.
Simon Birmingham: Thank you, Steve.