Topics: Budget update; Australian exporters; Iron Ore.
Norman Swan: So the good news here is that Australians are back spending and back working; the optimistic words of the Federal Treasurer Josh Frydenberg, yesterday, as he handed down his Mid-Year Economic and Fiscal Outlook. The budget update shows unemployment is expected to peak at 7.5 per cent early next year, an improvement on the 8 per cent forecast just two months ago. The record deficit of $214 billion has also been revised down to just under $188 billion. But as Shadow Treasurer Jim Chalmers reminded earlier, many Australians are still hurting.
Jim Chalmers: When we welcome a bit of an improvement in the budget and the economy is to say, don’t forget those more than two million Australians who are still struggling, still at risk of being left behind. So it’s too early for the Government to be clearing- declaring mission accomplished when so many people are struggling.
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Norman Swan: Shadow Treasurer Jim Chalmers on Breakfast earlier this morning.
Simon Birmingham is the federal Finance Minister, and I spoke to him a short time ago.
Simon Birmingham: Great to be with you, Norman. Thanks for the opportunity.
Norman Swan: Jim Chalmers talks about the forgotten Australians; are there forgotten Australians in this budget update?
Simon Birmingham: Definitely not. Our approach has been very much to focus on all Australians. And by supporting all Australians through this incredibly challenging year of 2020, we’ve kept them safe and we’ve also managed to keep many, many livelihoods safe and secure as well. And so, what we are seeing is a significant recovery in the Australian economy. Still a way to go, still risks. We acknowledge all of that. But 85 per cent of the 1.3 million Australians who either lost their jobs or saw their working hours reduced to zero are now back at work.
And that is incredibly strong recovery and world leading in many, many ways and what we’re forecasting is an ongoing improvement in relation to getting people back to work, as well as getting the budget somewhat back under further control.
Norman Swan: Both you and the Treasurer yesterday said that- you acknowledged the fact that it was the stimulus that’s got you here and obviously also the response to the pandemic. But you must be nervous about lifting stimulus. I mean, the JobKeeper wage subsidy has been significant here. You have saved money on it; companies are going to be going through pain in the first quarter of next year and we’re going to see problems arising there. So it may not be so rosy next time around. Isn’t there a case to extend the program beyond the end of March?
Simon Birmingham: What we’ve done is respond very carefully to the circumstances at every step of the way and also have acted to taper the types of responses we’ve applied. So, yes, JobKeeper has been incredibly important. That’s why we put it in place and it’s why we extended it. But we also took the steps to taper it, to taper down the rates of JobKeeper, to taper eligibility criteria to make sure it was better targeted.
And we’ve done that to minimise the risks of shock to the economy and to support the graduated stages of recovery, which continues to see the health recovery work hand in glove with the economic recovery. So notwithstanding the fact that, yes, there are threats always on the horizon, but when we look at the improved GDP figures, that we’ll now see the Australian economy having grown in 2020 rather than shrunk during the year, as had previously been forecast, we see the stronger growth projections in terms of employment, then we think we’ve got the settings about right in terms of support for job security, economic growth, but also realising that these types of huge intervention and stimulatory measures, can’t go on forever.
Norman Swan: One of the most efficient stimulatory measures is, in fact, people who are disadvantaged putting more money in their pocket and JobSeeker has done that. What will happen to JobSeeker once the coronavirus supplement finishes in March? Because that’s money that’s almost dollar for dollar goes straight into the economy, as well as helping people at the rough end, do better in life.
Simon Birmingham: They’re conditions and circumstances that we will monitor closely over the next couple of months. As we’ve done with everything, we don’t pretend that any of these policy settings are set and forget, but we do recognise that there is now a huge ongoing budgetary challenge to be dealt with as well, which means that every decision we make going forward has to be a careful one, focused on ensuring that taxpayer dollars and the debt that is accrued are invested as carefully, wisely and in targeted a way as possible. And we’ll do that against the economic conditions, the continued recovery in employment, which to date is now seeing more than 740,000 jobs created across the Australian economy in the last six months and our priority is to keep getting people off of JobSeeker and back into employment.
Yes, there is a long period ahead. It’s expected to take about four years before unemployment gets back to the pre-pandemic level. So we know that there is a long and steady path, and that’s why our focus will remain on job creation policies. That’s why the budget – and this was just a budget update – but the budget itself had the policies of the JobMaker hiring credit to really focus in on young Australians where we are seeing, and historical precedents of other recession show, much harder to get young Australians off of the unemployment queues, out of a recession. So we’ve acted with the JobMaker hiring credit, we’ve acted to stimulate business investment, private sector investment and activity to create real and sustainable jobs. And that’s the big measures in the budget to bring forward a lot of business spending, investment and activity that is necessary to really boost job creation, not through make-work programs, but through actual ongoing, sustainable jobs.
Norman Swan: Do you think you’re hiding your head in the sand over iron ore, given what you’ve had as a Trade Minister? It’s probably your last interview as the Trade Minister, actually. But anyway, over iron ore, given how precarious our trading relationship is with China at the moment and so much depends on the iron ore trade.
Simon Birmingham: No, Norman, if anything, we are being very prudent and cautious. Iron ore prices are currently running over the last month at an average of about $132 a tonne. We are forecasting that to go down to $55 dollars a tonne. So our budget forecasts are premised on the fact that the value of iron ore sales on a per tonne basis will slide to more than half its current rate. And we’ve always taken that sort of prudent, cautious approach.
The resources and agricultural forecasts in this budget update reflect some of the decisions that China has taken to date and are based on the cautious assumptions of the agricultural and resources departments and their modelling agency. So we continuously update those and one of the things that served us well over the last few years in bringing the budget back to the point of balance has been the fact that we apply very careful and prudent approaches to those assumptions.
Norman Swan: What’s your advice for the incoming trade minister?
Simon Birmingham: So, my advice for whomever holds the Trade portfolio, which it’s been a great honour to hold and which I will miss dearly, is to continue to back and support Australia’s exporters. We’ve grown opportunities for them over the last six, seven years of government, not just with China, but through trade deals with Japan and Korea in the early days; the Trans-Pacific Partnership, which I had the pleasure of bringing into force with Canada, Mexico, Vietnam, the Indonesian agreement that came into force this year, the new regional trade compact that involves 15 regional economies and will provide new avenues for engagement with China.
Norman Swan: So you say that, though, and we had on the program a couple of days ago, Sean Parsons from Ellume, who have produced the first rapid test, major rapid test for COVID to be approved, $42 million dollars [indistinct] the US Government; the US wants them to go to Texas to manufacture. And you complained on air he’s not getting any support from the Federal Government. He’s got support from the Queensland Government. I mean, surely you should be tipping money into Australian manufacturers of high-tech industry. That’s the future. Why aren’t you?
Simon Birmingham: Well look, our budget handed down this year includes a very significant lift in terms of support for manufacturing activity. I’m not aware of his particular business and I’d urge him in terms of accessing the international markets to be engaging with our Austrade team. But there is a big lift in funding for manufacturing and our manufacturing strategy, which we do see is part of the pivot that’s necessary to support Australian businesses to value add more to their products. So …
Norman Swan: I suspect you may need- I suspect you might need to talk to your Austrade team, I think he’s been talking to them a lot. But look, Simon Birmingham, thank you very much and we look forward to talking to the future as the Minister for Finance and unfortunately, not just trade, but we’ll find out who that is later on today. Thank you very much.
Simon Birmingham: Indeed. Thank you, Norman. My pleasure.
Norman Swan: Minister for Finance, Simon Birmingham and Minister for Trade will be announced later on today.