Topics: Jobs growth; Wage growth; migration; Budget expenditure;
Steve Austin: The man who’s responsible for making the books balance and keeping a tight rein on government spending is Simon Birmingham. Simon Birmingham, thanks for coming back on ABC Radio Brisbane.
Simon Birmingham: Hello, Steve. Great to be with you again.
Steve Austin: So what areas or sectors has the bulk of the job growth in Australia come from? It’s a pretty healthy, positive outlook, really.
Simon Birmingham: It is a very, very strong jobs growth. Some 366,000 additional jobs added just this month, and that now puts Australia 180,000 jobs ahead of where we were as a nation prior to COVID-19. And that’s pretty phenomenal. When we think about the fact that we’ve had a recession, we’ve had second quarter of economic downturn following that recession. We’ve had, of course, the disruptions of lockdowns and when we look overseas, Australia is now a top three performing country in terms of economic growth over the last 12 months and one of the few to have more jobs today than we had pre COVID-19. And that recovery has been across many sectors of the economy. You know, we’ve now got more than one million Australians employed again in manufacturing-.
Steve Austin: Queensland. Let me jump in there. Queensland’s Treasurer Cameron Dick says that Queensland leads the nation in jobs growth. You agree, of all the states?
Simon Birmingham: Well, look this month. I think probably some of the strongest figures this month come out of Victoria, but that is driven, of course, by Victoria coming out of their lockdown and their restrictions. So that’s been a very impressive recovery by Victoria. Just as last month, we saw a really impressive recovery by New South Wales. But 14,000 new jobs in Queensland over the last month is something fantastic, too. And so this is what we want to keep going right across the country. And we saw every state record growth and quite good levels of growth during this month.
Steve Austin: The other thing that stood out to me, Simon Birmingham, was that this looks to me like there’s good evidence that shutting out immigration, i.e. labour from overseas actually lifts jobs and employment prospects for Australians seeking work, which is, I think Phillip Lowe has made in the past.
Simon Birmingham: Well Steve, I think we have to be careful there, and it’s why we run a cautious migration program as a country that to simply take that to its extreme of shutting out migrants and migration longer term means you lose innovation and capacity across your economy means that you don’t have the ability to meet shorter term skill shortages that you can and that you don’t get the type of talent or investment that you can attract to a country like Australia.
Steve Austin: Is that why MYEFO forecast a doubling of migrants coming to Australia?
Simon Birmingham: Well, what MYEFO works on the premise of is that as we reopen our international borders, we will resume the same types of migration settings and policies that we had in place prior to the closure of the borders that that government ordered starting back on the 1st of Feb last year when we closed the borders to China-
Steve Austin: Simon, you might just want to clarify this. That does mean it’s a doubling of migrants coming, doesn’t it?
Simon Birmingham: Well, I’m not sure what baseline you’re using in terms of a doubling there. We’re not creating new streams in relation to migration, but of course, we’ve seen essentially a cessation of migration during COVID-19. We’re now expecting to see a recovery of those numbers, and that is permanent migrants who come in under very strict criteria, according to skills or in terms of the humanitarian entrance that we have or of course, temporary migrants, particularly getting international students or very select skilled visa holders back into the country.
Steve Austin: But that will mean that there is less impetus for jobs and sorry, wages growth in Australia, which everyone is hoping for, but this would appear to be working against that.
Simon Birmingham: Well Steve, this is about ensuring that we can continue to achieve the types of growth that we had pre-COVID, we went in to cope it with a very strong economy with a budget that had been brought back into balance and with very high levels of employment. Since our government took office, we’ve managed to achieve positive wages growth modest, I acknowledge modest but still positive, whereas there wasn’t real wages growth for much of the time of the previous government-
Steve Austin: So Philip Lowe, the Reserve Bank governor is looking for wages growth. He sees that as a solution to Australia’s problem doesn’t he?
Simon Birmingham: Well, wages growth is important, and we do see positive wages growth forecast through the next few years looking ahead. And that’s going to be very important that we do try to make sure that is realised and the really strong employment figures that we’ve got and the forecasts for unemployment to fall even further to 4.25 per cent across the country will help to do that. And those forecasts have 4.25 per cent unemployment and not only historic lows in terms of recent times, but they also take into account all of those different migration policy settings that you were asking me about before.
Steve Austin: My guest is Simon Birmingham, Federal Finance Minister. So you’re the man responsible for making sure that the Australian government can fund what it spends. Why is the government continuing to spend 27 to 28 per cent of gross domestic product over the next four years? If it’s so good because on your figures, the deficit is still going to be $57 billion by 2045. Why?
Simon Birmingham: Steve, yes, we do continue to see significant deficits now. They shrink from around $99 billion down to that $57 billion. So we do see a reduction there. And if we look at where debt was forecast to go when the 2020 budget was handed down, looking at the implications of COVID-19, we thought that Australia’s debt would peak at some 43.8 per cent of GDP, nearly 44 per cent of GDP. It’s now going to be closer to 37 per cent of GDP, so we’ve really managed to rein in what that likely peak in terms of Australia’s debt is forecast to be. That’s very important step forward that we’ve achieved there thanks to having stronger economic growth.
Steve Austin: But what I’m trying to find out is why with that stronger economic growth, though, Simon Birmingham, are we continuing to spend nearly 28 per cent of GDP over the next four years? That’s incredibly high. And yet you acknowledge we’ve got strong economic growth. So why spend so much?
Simon Birmingham: Because we did still have a recession, Steve. And the recession we had means that that although the economy is rebounding stronger than had been forecast at the time of that recession that COVID-19 and lockdowns induced and caused, we still lost that period of economic growth. We had backward trajectory for a period of time in our economy, and that means you’re coming off of a baseline that isn’t as strong as, of course, we were forecasting and projecting prior to the COVID-19 recession. Before COVID-19 hit we had a budget that was balanced where the spending profile for the future was based on the premise of there being a larger economy. But a recession hit means we’ve now got to work our way back to that position, but work our way back we are doing. Those figures I gave before that show the forecast peak in debt as being less than had been anticipated. The fact that the budget deficit has improved as a result of that stronger economic growth is a demonstration that things are working. For COVID-19 we have had to undertake the biggest deficits in Australia’s peacetime history to get the economy and jobs and everyone through it. We’ve done so, though, while still maintaining Australia’s AAA credit rating, and we’re only one of nine countries in the world to do that. And indeed, two of the three international credit ratings agencies this year have taken us off of the negative watch list. So we have to maintain a relative perspective there about where we sit compared with the rest of the world. And our debt levels are far, far better than the rest of the world and that is recognised by those ratings agencies.
Steve Austin: I have to let you go, apparently, but I’ve got one more question doesn’t this mean you’re a big government model, not a small government model? The opposite of what you or the prime minister and the party claims? You know you’re a big taxing government and a big spending government, you know, good Nordic socialist model spending government.
Simon Birmingham: [Laughs] No, it doesn’t, Steve. It does mean that that, you know, we are not ideological purists. That when crisis hit, we’re willing to put aside ideology and respond with pragmatism. And that’s precisely what we’ve done during COVID-19.
Steve Austin: Do you acknowledge that you’re a big taxing, big spending government?
Simon Birmingham: Well, we’re definitely not big taxing because-
Steve Austin: Yes, you are. The data is very clear.
Simon Birmingham: No, it’s not Steve. If the data in terms of revenue reductions because of tax cuts is very, very clear. That we’ve delivered what is now $1.5 billion a month of extra income going into the pockets of Australians thanks to income tax cuts. The whole economic recovery plan is built around providing investment incentives that are fuelling record levels of non-mining private sector investment to get business going again, which is a form of tax breaks, their small business tax breaks that we have delivered. But ultimately the next election will be a choice, and we’re very determined that we have to show restraint in terms of future spending commitments, particularly future long term structural spending commitments. The Labor Party is talking about things like free childcare, even for very wealthy families or free TAFE, and picking up those costs from the states and territories. And that would embed huge additional structural spending that certainly would jeopardise the type of recovery that we’ve got underway at present.
Steve Austin: I’d love to have an argument with you, Simon Birmingham, but unfortunately, I have to let you go to your next appointment. Thank you very much for your time.
Simon Birmingham: Thank you, Steve. My pleasure.