Guardian Australia: You are planning on bringing forward the business tax cuts, the small and medium enterprise tax cuts …
Josh Frydenberg: Well the prime minister has indicated that we are looking at it.
OK, well let’s assume that’s going to happen, is there a case to bring forward the personal income tax cuts you promised at the last budget, because wouldn’t that give you an antidote to low wages growth?
Our focus has been on small and medium sized enterprises.
Is that a no?
Our focus has been on small and medium-sized enterprises.
I haven’t heard a no.
Our focus has been on small and medium sized enterprises because a decision had been taken not to proceed with large scale company tax cuts.
So you are leaving it open then?
No. I’m not leaving it open. I’m not giving you a definitive answer. The only thing I’m commenting on is small and medium enterprises, which is something we are looking at. I’m not opening a door for you on income tax. I’ve been asked that question before, and my answer is the focus is on small and medium-sized enterprises.
There’s still no “no” on income tax cuts though.
We’ve legislated it. It’s a three-stage plan and 10 million taxpayers are getting up to a $530 benefit this year, and as you know we are simplifying the tax system by taking out one bracket, and the Labor party would see a forklift driver in Parramatta who would otherwise been on 32 and a half cents in the dollar, if they had their way he’s on 37 and he’s paying up to $4,500 more for his tax.
Still haven’t heard a no. If not that, then what are you going to do about wages growth? Would you agree that the lack of wages growth is your biggest political problem in terms of your portfolio?
Wages growth is low. At the same time the wages price index was up 2.1% and the compensation of employees is up 4.8% and we are seeing strong jobs growth across the economy. The Reserve Bank of Australia in their statement last Tuesday made it very clear that the outlook for the labour market is positive, and that as we see continued economic growth eat away at the spare capacity in the labour market you will see a gradual increase in real wages. We are already seeing a tightening in some sectors like health.
Sure, but you are, in essence, telling voters that the economy is improving, just wait a bit and everything will be fine. Do you think that’s an election-winning message? Just wait until the economy brings you more money?
I think the message to the Australian people when it comes to the economy is it is growing strongly. The momentum has continued. The growth is faster than any G7 country, and faster than the OECD average, and it’s the fastest growth since the height of the mining boom in 2012. That being said there are Australians doing it tough. The long-term unemployed, the drought-stricken farmers, the families who are struggling with high energy bills. We are taking action on all those fronts, making them priorities. We want to get more people into a job and reduce the cost of living.
But you are saying to people be patient, aren’t you. That’s the message.
The message is the Australian economy is growing and we are taking action, for example, around energy, to lower people’s power bills.
The improving economy is going to boost the budget position at Myefo, that’s pretty obvious.
There’s two things to point out. One is you’ve got the final budget outcome, which is later this month, so those improved numbers will be reflected in the budget outcome. Then you’ve got Myefo, which is traditionally around December, and follows the national accounts.
On current information, the budget position is going to improve, but you’ve got to fix up the Catholic schools issue, I imagine you will have to say something on health and aged care, there will be an election in a few months. There’s a lot of outgoings.
I’m very conscious of where the overall budget position is, and I’m not speculating on any specific outcomes other than to say we are still on track to come back to balance in 2019-20.
You say you are on track to come back to balance, but do you guarantee you will come back to balance? That you won’t spend the uplift?
You’ll see the updated numbers in Myefo.
So there’s no guarantee?
No, there’s nothing to say that we are not on track. We are still on track.
Even factoring in spending that will be in the hundreds of millions?
I’m not going to give you Myefo today.
Just a couple of broader issues. One of the reasons the Liberal party has had its moment with leadership is because of the political situation in Queensland and the problem with disaffection. You are bleeding votes on the right. You are a new treasurer, what’s your economic pitch to voters flirting with voting One Nation or other rightwing political disruptors, because they are not convinced your offering is what they need. What is your economic message to those people?
My economic message is to all 25 million Australians. We are the party of lower taxes. We’ve legislated tax relief for business and households. We are the party of jobs, having created more than 1m new jobs, the bulk of which are full time, with female participation rates near record highs, and 95,000 young people coming into the workforce in the last year, the highest number in nearly 30 years, and more seniors coming into the workforce with a series of programs we have underway. We will grow the economy not as an end in itself but as a means of providing essential services, with increased investment in hospitals, education, disability support services.
Will there be more investments in those services between now and the election?
You’ve already speculated on Catholic education, and the NDIS is a major scheme to be funded. But what I’m trying to do, or what my goal is as treasurer, is to steer the responsible fiscal course and ensure the country’s balance sheet is in good shape. I’m focusing on delivering the essential services we need by having the right economic policies in place to continue the growth trajectory, consistent with Liberal and National party values. I want people to keep more of their hard-earned income, and that means a lower taxing and lower spending agenda. We’ve brought the rate of real spending growth to its lowest level in 50 years. We’ve legislated more than $40bn savings in the last few years. We have net debt that’s peaking and we are bringing the budget back to balance. I’ve inherited a pretty good set of numbers, and I’m continuing that momentum. Issues I’m interested in? Particularly getting young people back into the workforce.
I’ll ask you about that in a minute. I want you to outline what you are interested in doing, you’ve got an opportunity to reform things … but sticking with your One Nation voters for a minute, they are leaving the Coalition because you haven’t got an economic offering for them. That was amply on display during the Longman byelection.
Minor parties can promise you the world but actually not deliver you very much. It’s the Coalition that balances budgets and ensures responsible productivity-linked spending. As for the Labor party, as Menzies said, politics is a battle of ideas not a clash of warring personalities – there is a very clear line now between us and them. They have more than $200bn worth of new taxes and they are proposing new taxes on property, retirement savings, your business and your income. That is a clear line of difference between us and them.
What do you want to do in the portfolio. What are your objectives?
The macro objectives are the ones I’m focused on: jobs, tax and growing the economy to guarantee the essential services. But ultimately I think we need to focus on productivity in this country, and that means a deregulation agenda, an infrastructure agenda, and then it’s also about getting younger people into work because if you can get young people into work and even open up housing ownership, then you are going to build economic responsibility and discipline that will stand them in very good stead.
Do you have specific programs in mind?
We have programs like PATH, and I’m taking a good look at all of those areas, conscious that youth unemployment is lower now than when we came to office. I’m conscious that in some parts of the country it is too high. If you look at the numbers state by state, Queensland and Western Australia have seen their unemployment numbers a bit higher than the rest of the economy.
So you are looking at things that will be regionally targeted?
Definitely focusing on the regions, that’s important. Obviously drought-stricken communities are an urgent priority for us.
The best treasurers are disliked by their colleagues. You are a very affable person, who likes to be liked, so are you ready to be disliked by your colleagues?
Ultimately what you want from your colleagues is not to be liked, but respected. I think Peter Costello, as Australia’s most successful treasurer, with 10 budget surpluses, earned the respect of his colleagues by making some tough decisions, including paying back Labor’s $96bn in debt. We have some tough decisions to make and I will work constructively and cooperatively with my colleagues to do that. I also have the benefit of having a prime minister who has been in this role recently. He understands some of the pressures on the budget, some of the external risks to the Australian economy. If you look at trade tensions, Chinese growth, US inflation, and so on.
There are external risks?
And you say you have tough decisions to make, like what?
I’m not going to tell you that.
Well, I’m asking you. Like what? Name a tough decision.
It’s just about ensuring we get back to balance at the time we’ve forecast. As you’ve said, there are some spending pressures in some areas, and I’m managing the overall economic parameters. Managing the spending envelope is important.
Are you prepared to say no, and make it a hard no?
Yes. On a number of fronts. The other thing we haven’t discussed yet is the banking royal commission. I’m appalled by the behaviour that has been exposed through the banking royal commission. Fees for no service. Fees for dead people. Allegations of lying to regulators. Most recently allegations of 300,000 breaches by providing unsolicited insurance advice. There’s a case here to answer for the regulators. Asic has a new head, so this predates him. But if Asic knew about this misconduct, why weren’t they punishing it and stopping it? That’s an area where I want some answers. We have taken steps to better resource Asic and put in place a deputy chair who is a special prosecutor. We’ve taken steps in a number of areas, but I think Commissioner Hayne has been very professional, very deliberate and the government will be getting the interim report at the end of this month and the final report in February, and if he asks for an extension of time, I am positively disposed to that.
Do you think the government did the wrong thing by resisting the royal commission for so long?
The government was focused on the other issues I’ve been talking about, but as the prime minister said in the house – he regretted that it took so long.
Should the government apologise?
I think we’ve got the process running effectively. We’ve put in place a commissioner who is doing an outstanding job and now we await the report and we will properly consider it. The Australian people want results, and we’ve got a process that can produce results.
Just one on your old portfolio, do you think the Coalition can go to the next election without a policy to reduce emissions?
We do have a policy to reduce emissions.
No, you don’t.
We do have a policy on emissions.
No, you don’t. Will there be more money for the emissions reduction fund?
The ERF has more than $200m in it.
You didn’t top it up at the last budget. Are you going to top it up?
We’ll continue to prosecute a case for reducing emissions in a range of areas. It’s in the built environment, it’s in the land sector …
You won’t even tell me if you are going to top up the ERF?
I don’t talk about expenditure review committee decisions that may, or may not, happen. You can direct those questions to the responsible minister.
Will Australia meet its Paris targets in a canter?
We will meet our Paris targets.
Through the policies we have in place, through technology, and as you know we’ve turned the task around by reducing it by about 60% since Labor was last in office with the good work we’ve done in a range of areas.
Australia will meet its Paris targets in a canter, yes, or no?
Australia will meet our Paris targets. I’m confident we will do so easily.