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Budget 2020: Getting on with the jobs

Oct 7, 2020 • 14m 55s

Josh Frydenberg’s second budget is a world away from the surplus he was predicting last year. Now, in the middle of a pandemic, debt is on track to hit $1 trillion and the Treasurer is talking up a jobs-led recovery.

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Budget 2020: Getting on with the jobs

326 • Oct 7, 2020

Budget 2020: Getting on with the jobs

KAREN:

Hello.

RUBY:

Hi, Karen, it's Ruby.

KAREN:

Hi, Ruby. How are you?

RUBY:

I am good. How are you?

KAREN:

I am okay, I think.

RUBY:

Yeah. Big day. Big night.

KAREN:

Budget day, it’s always a big day. I just had to find a quiet place in parliament house which wasn’t very easy.

RUBY:

Yeah, not on budget day.

KAREN:

No, that’s right. Anyway, all good.

RUBY:

And you're ready to just launch into it?

KAREN:

Yep. Hopefully, yep.

[Theme music starts]

RUBY:

From Schwartz Media, I’m Ruby Jones, this is 7am.

Josh Frydenberg’s second budget is a world away from the surplus that he was predicting last year.

Now, in the middle of a pandemic, with debt on track to hit $1 trillion, the treasurer is talking up a jobs-led recovery.

Today, The Saturday Paper’s chief political correspondent, Karen Middleton, on a budget of big numbers and heroic assumptions.

[Theme music ends]

Archival Tape -- Unidentified Man #1:

“The covid crisis has smashed our economy leaving eye-watering numbers never seen before in an Australian budget.”

Archival Tape -- Unidentified Woman #1:

One of the most important federal budgets in history.

Archival Tape -- Unidentified Woman #2:

“It's been described as the most important since the Second World War.”

Archival Tape -- Unidentified Man #2:

“Right now almost 1 million Australians are out of work, the government has already spent billions and tonight will promise to spend billions more…”

Archival Tape -- Josh Frydenberg:

“The Great Depression and two world wars did not bring Australia to its knees, and neither will Covid-19.”

RUBY:

Karen, we are talking to you just as you come out of budget lock up, and I’m hoping that you can start by just telling me what the top line big picture story is for this budget.

KAREN:

Well, the government is saying that it has an economic recovery plan. And the line from the Treasurer was that the economy is fighting back and that this is the way out of the dire situation we find ourselves in, courtesy of the Coronavirus.

RUBY:

And tell me a bit about Josh Frydenberg’s budget speech. How did he appear and how is he selling his budget?

KAREN:

Well, it's a bit long, actually. That was surprising.

Archival Tape -- Josh Frydenberg:

“Mr Speaker I move that this bill be now read a second time…”

KAREN:

Normally it goes for just on half an hour, but we were still watching it 45 minutes in. Whether he was reading very slowly or being very deliberative, I'm not sure. But, yeah, he's conscious of the import of this budget.

Archival Tape -- Josh Frydenberg:

“There remains a monumental task ahead. But there is hope. And Australia is up to the task.”

KAREN:

The economy's in dire straits and they've had to spend enormous amounts, which is not really this government's natural inclination. But the treasurer is big on the word hope and big on the word plan.

Archival Tape -- Josh Frydenberg:

“Tonight, we embark as a nation on the next phase of the journey, a journey to rebuild our economy and secure Australia's future.”

KAREN:

A focus, particularly, on helping out business, boosting business, giving them concessions, encouraging to spend, will assist the economy in its trajectory out.

Archival Tape -- Josh Frydenberg:

“Our plan is guided by our values. Our circumstances may have changed, but our values endure.”

RUBY:

Okay, so let's talk about the plan then, the recovery plan. What are the key spending projects that have been announced, a lot of it seems to be around jobs and creating jobs?

KAREN:

All about jobs. And we've heard that for weeks and weeks.

Archival Tape -- Josh Frydenberg:

“Our plan will create jobs.”

KAREN:

Jobs, jobs, jobs, jobs and skills…

Archival Tape -- Josh Frydenberg:

“There is no economic recovery without a jobs recovery.”

KAREN:

...encouraging people into the workforce, encouraging people to hire and to retain staff...

Archival Tape -- Josh Frydenberg:

“There is no budget recovery without a jobs recovery.”

KAREN:

...Everything about getting people employed and staying employed.

Archival Tape -- Josh Frydenberg:

“This budget is all about jobs.”

KAREN:

The government is bringing forward the tax cuts that it was planning for a couple of years hence, they will be brought forward and backdated, in fact, to July. We have heard the speculation around about that and the government's arguing that that's going to put a lot of extra money in people's pockets and encourage them to spend. So that's one of the big ticket items.

There's also extra money for a new wage subsidy. They're calling it hiring credit, not a wage subsidy. But really, it is a wage subsidy focused on young people, employers getting a cash bonus for hiring a young person aged between 16 and 35.

Archival Tape -- Josh Frydenberg:

“Treasury estimates that this will support around 450 thousand jobs for young people.”

KAREN:

They're offering huge concessions to business to really encourage spending. So you can now, as a business from tomorrow, you can go out and spend on anything you like and can claim a complete tax write off, not a partial one.

So there are big concessions for business in this budget package that are all designed for business to lead the recovery.

RUBY:

And Karen, jobs are such a big focus of this budget because of the huge hit that the economy has taken this year. So what are the figures?

KAREN:

Well, the figures are pretty scary, I have to say. So we've seen a massive leap in the deficit from $85 billion at the end of the last financial year to a forecast deficit of $213.7 billion at the end of the financial year that we're in.

Now, of course, this was supposed to be a surplus year. We were supposed to be $5 billion in surplus. And you might remember the treasurer boasting last year in the budget that we were already back in the black. Bit premature.

And we're just seeing absolutely eye watering figures. The net debt figure out to 2023/24 is almost a trillion dollars. If you go to the gross figure, it's over a trillion dollars. So, I mean, we just can't even envisage numbers like this, we're not used to seeing them.

Lots of zeros in this budget that are pretty unfamiliar.

RUBY:

We’ll be back in a moment.

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RUBY:

Karen, what assumptions is the budget making about what will happen next with Covid-19?

KAREN:

It's assuming that we will get a vaccine by the end of next year. It's assuming that we won't see a repeat of what happened in Victoria, either in Victoria again or anywhere else in the country. And that basically things won't get any worse.

And in terms of unemployment, things are going to get worse before they get better. We're currently on an unemployment rate of about 6.8 per cent. The budget says by the end of this financial year, we'll be at about seven and a quarter per cent, but it's going to dip further than that before it comes back. So we will, by the end of this calendar year, in the December quarter, get to 8 per cent unemployment.

And the budget forecasts that will be back within about 18 months to about six and a half per cent. So that's a pretty big leap. And all of these figures are based on some pretty heroic assumptions.

RUBY:

And so when you take a step back and look at it, is the overall feeling that this is a budget that is focused on the calamity of right now?

KAREN:

Yes, absolutely. It's very much the top line focus of this whole budget.

Those figures are terrible. But the treasurer and the finance minister have both said, look, we acknowledge that borrowing costs are low. Now is the time to borrow money and to spend it in targeted ways to really try and get the economy going again.

And they are confident and this is a confidence game because people need to be reassured that the government knows what it's doing if they're going to go out and spend their money.

We've seen people saving quite a bit through this pandemic, which is a sign that they're nervous about the state of things, about their job security, about the state of the economy generally. And the government needs people to relax at least enough that they feel that they can go and spend money, build houses, buy goods, and generally get the economy chugging along again.

RUBY:

And speaking of confidence, do you think that the government landed this budget, as in, for all of the challenges with the numbers, do you think that this can be chalked up as a win for Josh Frydenberg and for Scott Morrison?

KAREN:

I think it's way too early to see how it goes over yet. People will be combing through this to see exactly how it will hit them.

There are a lot of upsides for a lot of people in terms of tax relief. I mean, $12.5 billion dollars tax cuts that people will start seeing straight away.

So I think people will feel positive about that for sure, whether they are prepared to accept that the government has a plan out of this terrible recession and that we are going to bounce back as quickly as they say is another thing, I guess. But it is going to be all about reassurance and confidence.

Archival Tape -- Josh Frydenberg:

“Across this country, people are digging deep, banding together and getting on with it. The road to recovery will be hard, but there is hope.”

KAREN:

A lot of the figures they quote about the state of our economy, they also quote other economies and say, look at the UK, look at the US. We're much better off than them.

Archival Tape -- Josh Frydenberg:

“Australia's economy contracted by seven per cent in the June quarter. By comparison, there were falls of around 12 per cent in New Zealand, 14 per cent in France and around 20 per cent in the United Kingdom.”

KAREN:

Our health status is better in terms of Covid-19. Our economy hasn't suffered as much. Our growth hasn't suffered as much.

Archival Tape -- Josh Frydenberg:

“Mr Speaker, the Australian economy is now fighting back.”

KAREN:

So, you know, they're really saying, we're doing okay, Australia, and we just need to hang in there and pull ourselves together and get out of this recession together. And that's gonna be, I think, a political theme of theirs heading into next year, too, whether it is an election year. They want people to very much feel assured that things are gonna be alright.

Archival Tape -- Josh Frydenberg:

“The Morrison government's message to all Australians is that we have your back and we have a plan.”

RUBY:

So what does the next year look like in Australia, Karen, based on this budget?

KAREN:

I think it's tough and I think it's going to get tougher before it gets better. And that's the problem. There's a long tail to an economic recession, even if the health figures turnaround reasonably quickly. And we're being optimistic about that here in Australia with the low levels of infection and transmission in most of the country and improving levels in Victoria.

But the economy takes longer to fix.

We don't know how many of those so-called zombie businesses there are that are currently being propped up by things like the JobKeeper wage subsidy, which is due to run out next year, and the JobSeeker boosted payment. The government hasn't made a decision yet on whether it will return that to the old Newstart level, the unemployment benefit, or keep it boosted. There's a lot of pressure to keep it boosted. But all these things are helping keep people afloat. And in terms of JobKeeper, they're helping keep businesses afloat.

And once that disappears, we don't know how many businesses might struggle to stay in business and that will have a knock on effect for unemployment.

So 8 per cent might not be the bottom at the end of this year.

On the other hand, if we happened to get a vaccine earlier than they're hoping, if things go better than they're hoping, well, we could see the economy turn around much more quickly.

There are great many unknowns. And that's why they're basically saying you have to trust us to pull the levers at the right time and then we all have to work on this together.

RUBY:

Karen, thank you so much for taking the time to talk to me. I'm sure you've got a busy night ahead of you and a busy couple of days continuing to go through all of this.

KAREN:

It's certainly busy in budget week and on Thursday we will have opposition leader Anthony Albanese’s response, his first one as opposition leader, so there will be a lot riding on that for him as well.

RUBY:

I'm looking forward to seeing what you write about all in The Saturday Paper.

KAREN:

Thanks, Ruby.

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[Theme music starts]

RUBY:

Also in the news…

Billionaire businessman James Packer has told an inquiry that emails he sent threatening potential business partners were “disgraceful” and “shameful”.

The NSW liquor and gaming authority inquiry is examining allegations of money laundering at Crown casino, which is part owned by Packer.

At the beginning of his testimony, Packer told the inquiry he had been taking medication that left him unable to recall information.

And Donald Trump has returned to the White House after spending three days in hospital battling Covid-19.

Trump stood on a White House balcony, ripped off his mask and saluted. In a video posted online, Trump suggested he may be immune to the virus, and said Americans shouldn’t be afraid of it.

I’m Ruby Jones, this is 7am. See ya tomorrow.

[Theme music ends]

Josh Frydenberg’s second budget is a world away from the surplus he was predicting last year. Now, in the middle of a pandemic, debt is on track to hit $1 trillion and the Treasurer is talking up a jobs-led recovery. Today, Karen Middleton on a budget of big numbers and heroic assumptions.

Guest: Chief political correspondent for The Saturday Paper Karen Middleton.

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7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Ruby Schwartz, Atticus Bastow, and Michelle Macklem.

Elle Marsh is our features and field producer, in a position supported by the Judith Neilson Institute for Journalism and Ideas.

Brian Campeau mixes the show. Our editor is Osman Faruqi. Erik Jensen is our editor-in-chief. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

New episodes of 7am are released every weekday morning. Subscribe in your favourite podcast app, to make sure you don’t miss out.

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326: Budget 2020: Getting on with the jobs