Josh Frydenberg says the government is looking for opportunities to strengthen the economy, and is open to new initiatives beyond infrastructure spending and tax cuts. But he insists he will deliver the surplus forecast in this year’s budget, even if it turns out the flagging economy requires more stimulus.
In an interview with Guardian Australia after the passage of the Morrison government’s $158bn tax cut package, Frydenberg said he would not tell Australians to go out and spend the looming boost to their household income from tax cuts and recent reductions in interest rates, even though both are part of a conscious effort to spur economic activity.
“It’s not for me to tell the Australian people how they should spend their money, that’s for them to determine their priorities,” the treasurer said. “There’s an expectation that as household incomes are boosted, so is household consumption, but people have their own priorities.”
He played down the need for the government to provide additional fiscal support to the economy beyond the tax cuts and the significant infrastructure spending outlined at budget time, even though the Reserve Bank governor Philip Lowe has publicly advised the government to make “further investments” in infrastructure.
But he said the government was open to proposals that would lift the economy.
Frydenberg said Lowe’s remarks were directed at governments, not just Canberra. “I read it as saying that infrastructure investment that boosts capacity at a time when borrowing rates are at historic lows are good investments, and that’s what we are doing."
“We agree with the governor that monetary policy shouldn’t be doing all the heavy lifting and that’s why we set out in the budget tax cuts to boost workforce participation. We will invest in the right infrastructure projects that lead to increased productive capacity.
“We are always looking for opportunities to strengthen the economy but you have to understand when we put the budget together we were very conscious of the challenges we now see – the global economic headwinds, drought, flood, softening in the housing market.
“We were conscious of these things at the time the budget was put together so this $8bn that will go into pockets from tax cuts will be very helpful.”
Frydenberg said there was no significant division of opinion between the government and treasury, and the central bank, about what needed to be done to stimulate growth and economic activity. “The governor and I speak, and the prime minister. I deeply respect him and have a very good relationship with him.
“We agree that fiscal policy is part of the solution but we put in place quite significant initiatives at the budget – and we are always open to new initiatives where they are appropriate and consistent with values that underpin our government.”
The treasurer insisted that the government would deliver the surplus it promised in the budget delivered before the May election, even if economic conditions deteriorated.
‘You are talking about a false choice’
When asked what he would pick if it came down to a choice between providing economic stimulus and proceeding with the forecast surplus, he contended that was “a false choice”.
“We don’t see it as a choice between growing the economy and having a surplus. You are talking about a false choice.
“We will deliver the surplus as committed to the Australian people. At the same time, we will continue to manage the Australian economy as it grows. We are boosting household incomes with a significant tax package, we are going to get infrastructure spending out the door, consistent with our budget and election promises.
“The advice to me is that the economy will continue to grow and our economic plan is the right one.”
With the new parliament having opened this week, Frydenberg also said the Coalition would embark on a program of reform over the coming term, including looking for more effective cooperation from the states on the rollout of infrastructure projects.
As treasurer, he said he would also pursue a deregulation agenda, reforms on open banking and consumer data rights, as well as implementing the recommendations from the banking royal commission. “I am very focused on the policy agenda,” he said.
The RBA governor suggested this week that the government should – in addition to loosening the purse strings – pursue structural policies to “support firms expanding, investing, innovating and employing people”.
“A strong, dynamic, competitive business sector generates jobs. It can help deliver the productivity growth that is the main source of sustainable increases in our wages and incomes. So, as a country, we need to keep focused on this, the central bank said.
When asked to expand on a recent suggestion from Scott Morrison that the government would pursue industrial relations reform, Frydenberg said it was best to speak to his cabinet colleague Christian Porter, who had responsibility for the portfolio.
