Below is the transcript of a CNBC Exclusive interview with Josh Frydenberg, Treasurer of Australia. The interview was first broadcast on CNBC’s Squawk Box Asia on 9 November 2018.
All references must be sourced to a “CNBC Interview’.
Interviewed by CNBC’s Matthew Taylor and Sri Jegarajah
MATTHEW TAYLOR (MATT): Morning treasurer, a pleasure to see you there and thanks very much for joining us. What is the biggest challenge for the Australian economy right now? We’ve seen some strong growth numbers over the last little while, particularly in the second quarter, strong job creation. But what worries you the most when you’re determining forecasts and looking at how the Australian economy is performing right now?
FRYDENBERG: Well as you say the Australian economy is performing very well. We’ve seen GDP growth through the year at three point four percent. We’ve seen our unemployment rate fall to 5 percent, the lowest level since 2012, with strong, increased employment across various brackets including seniors, women as well as younger people and we’ve also seen a budget that is on track to come back to balance in 2019, 2020, a year earlier than expected, and we have had triple A credit rating reaffirmed by Fitch and Standard and Poors most recently. But when we look abroad and having just been to the IMF World Bank G20 meeting in Bali, there are some global headwinds. We’re seeing some trade tensions between China and the US, and Australia would be affected if that were to accelerate or to expand. We’ve also seen global debt levels increase since the time of the GFC and we’ve also seen the impact of the normalization of US monetary policy, particularly in the strengthening US dollar vis-a-vis some of the emerging economies. So we’re watching the global growth story very closely. There’s still a good story to tell but obviously what happens internationally impacts us here in Australia as well.
MATT: Yeah we’ll talk more about what’s happening internationally in a moment but you mentioned the budgetary position, of course we saw the final outcomes of the budget released just a few weeks ago. You’re of course gearing up to the mid-year economic and fiscal outlook that I understand will be released next month, the budget deficit at its lowest level in a decade. Will we see that surplus when you front everyone in a few weeks’ time and reveal the mid-year budget update because we saw a big improvement from what was handed down in May to what was just revealed at the end of September.
FRYDENBERG: You are right we’ve seen improvements on the receipt side as companies are doing well, jobs and employment is increasing and that is leading to more government revenue at the same time lower government payments since the number of working age Australians on welfare has fallen to its lowest level in 25 years, but we’re still on track to bring the budget back to balance in 2019, 2020. Everything will be revealed in terms of the 18, 19 year, when we go forward with the next statement in through MYEFO but we are pleased with where the economy’s at. We’re not complacent. The economy doesn’t run on autopilot and therefore will continue to put in place good economic reforms like lower taxes, infrastructure spending and targeted programs to get people into work.
MATT: You just mentioned some of what’s going to drive the economy. Infrastructure spending, lower taxes. But in terms of what you’re going to be selling as we head into the election cycle, the election is going to be held some time potentially in the middle half of next year. What’s going to be your economic story to tell the electorate and seek re-election because we know that under the former Prime Minister Malcolm Turnbull and his former Treasurer Scott Morrison, the big keystone economic policy of the government was this cut to corporate tax particularly for the big end of town, that was seen to give the economy a shot in the arm. But that’s been scrapped now, so what’s your major economic cornerstone that you’re going to be selling to the electorate as you try and get re-elected sometime in 2019?
FRYDENBERG: Well just to point out we actually have recently legislated through the Parliament, tax relief for 3.3 million Australian businesses incorporated and unincorporated businesses employing some 7 million workers– that’s very significant. Our message to the Australian people is that the economy is strong following significant reforms that the Coalition has put in place. We’re a center right government and therefore we reduce spending and we reduce taxes and we increase employment. We have done all of the above with more than a million jobs being created over the last five years. So whether it’s a budgetary record of bringing the budget back to balance a year earlier than expected, whether it’s a record with the triple A credit rating agencies, having seen triple A credit rating reaffirmed, whether it’s the job numbers or whether it’s the other economic programs and tax relief that we’ve provided, we believe that is a good record to go into an election campaign. And of course there will be other announcements and policies that we’ll make in due course and while we point out the strengths of a Coalition government’s economic plan, we’ll also point out the weaknesses in our political opponents, particularly the 200 billion dollar plan for higher taxes – higher taxes on your income, higher taxes on your business, higher taxes on your property, higher taxes on your savings and higher taxes on your electricity.
SRI: Can I get back to the external environment, and can I ask you Mr. Frydenberg, what’s your message to the G20 audience in Buenos Aires later on this month. What’s your message to Mr. Trump, to Mr. Xi, and how confident are you of any kind of breakthrough concession or detente in this trade conflict.
FRYDENBERG: Well, as you know, the tit-for-tat tariffs that we’ve seen extended by both the US and China has only been affecting about 2 percent of world trade. So we would ask that cool heads prevail here, and that that is not expanded. And while we understand some of the legitimate concerns that the United States has, we think it’s in the global economies’ interests, certainly in Australia’s economic interests for a multilateral rules based international trading system to be maintained. We believe that the WTO is the place where disputes should be resolved, bearing in mind that some countries do have concerns with some of the current WTO processes but we would just say to all countries, big and small, through the G20 and beyond, that an international rules based trading system has supported growth, has supported jobs and is the way to go into the future.
MATT: How is Australia’s relationship with China? I know the Foreign Minister’s been there this week but earlier on in the week you of course announced that you’d be blocking that CKI bid for APA group saying that it was contrary to the national interest but not discriminatory. Are you expecting any kind of backlash from China, who likes to invest in Australia, and of course this is not the first time a significant deal like this has been blocked by the Australian government?
FRYDENBERG: Well as you know, Australia is a capital importing country. We are a major trading country and China is our number one trade partner. So we continue to welcome Chinese investment and we continue to welcome foreign investment and the preliminary view that I have made is not about a particular company or a particular country, it’s making a judgment based on advice that I’ve taken into account from the Foreign Investment Review Board, from our critical infrastructure committee about what the implications would be for Australia. We just see a concentration of foreign ownership by a sole company in such a key set of assets as in the gas transmission sector in Australia. APA is a unique company with more than 50 percent of the gas transmission business in Australia. More than 15,000 pipelines supplying gas and electricity into key markets. And I’ve made my preliminary view known and will make a final decision in the next couple of weeks.
MATT: We await that decision. Treasurer Josh Frydenberg, thank you very much for joining us this morning with your insights on everything from Australia to the world.
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