Senator the Hon Mathias Cormann

Minister for Finance

18 September 2013 to 30 October 2020

CNBC - Asia Squawk Box

Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia

Economic update, Australia’s relationship with China

MARTIN SOONG: Let’s bring in Mathias Cormann. He is Australia’s Minister of Finance. He joins us live from the capital, Canberra. Minister, good morning to you. Thank you for joining us, appreciate your time and hope you’re keeping safe.

Before anything else, the Treasurer Josh Frydenberg not so many hours ago had a bit of coughing fit and there were worries about his condition. Apparently, he was going to get tested. Can you give us an update on his condition right now?

MATHIAS CORMANN: The Treasurer is absolutely fine. He was tested and the test has come back as negative. Essentially what happened, he was giving a speech, he swallowed the wrong way, got something into the wrong throat. All of us have experienced this before. He was struggling to clear his throat. In the context and in the environment, out of an abundance of caution and on advice he got tested and it has come back negative.

WILL KOULOURIS: Minister, it’s Will here in Sydney. Thanks again for joining us. In terms of the economic statement that was provided yesterday, it’s all but basically guaranteed that we are perhaps going to see huge deficits here in Australia. It’s going to be necessary, perhaps on the side of reform, that we are going to have to see some changes, but the Opposition has already basically said that they’re not going to be supporting anything when it does come to company tax cuts. Where can you provide that kind of reform then if you are going to be experiencing that kind of resistance from the other side?

MATHIAS CORMANN: There is still a lot of water to go under the bridge before we get to vote on all of these sorts of measures that we might bring forward in the context of a Budget in October. The Australian public will expect that that Parliament supports a pro-growth, strong recovery-driven agenda and that is what we will be putting forward. It will focus on lower taxes, less regulation, making it easier for business to be competitive and be successful and of course all of the other areas that we will continue to focus on – increased investment in infrastructure, increasing our access to key markets around the world through our ambitious free trade agenda. There will be a comprehensive economic plan that will be designed to maximise the strength of the recovery on the other side. That will be part of our Budget in October.

WILL KOULOURIS: When you look at it from the perspective that even with the forecast that we do have in terms of that return to GDP growth, it’s basically just a return to normalcy. Is there going to be anything in the way of offsetting some of the hit we are going to take because migration and population has been such a key driver of our economy here in Australia, to perhaps offset the losses that we are going to see if our borders don’t open anytime soon?

MATHIAS CORMANN: The fundamentals of the Australian economy before the coronavirus hit were sound. We were into our 29th year of continuous growth and the outlook was positive. This is a challenging period and there will be some areas that will take more time to adjust. International travel and people coming to Australia from overseas will be one of those areas that will take a bit longer to return to normal. However, we have got significant parts of the economy that have continued to perform relatively well throughout this period, in particular the mining sector, agriculture. If you look at the way Australia has performed through this crisis, both in terms of the fight against the virus from a health point of view, but also in economic terms, we have comparatively fared better and we think that we are in a good position, once we are able to ease all of those restrictions and return to normality at a domestic level, to get the economy growing again. That is certainly the intention.

SRI JEGARAJAH: Minster, can I turn to the external side of the equation because China has banned some Aussie beef imports and is threatening to tariff Aussie barley as well. Is a trade war brewing, possible made worse by the Sino-US tensions now, and is Australia inevitably going to be forced to pick sides here?

MATHIAS CORMANN: Firstly, we do not characterise what is happening the way you have just characterised this. Under the World Trade Organisation framework, all sorts of countries, at any one point in time, would regularly pursue trade measures and anti-dumping investigations where they feel aggrieved and believe that that is happening. That is something that happens on a regular basis in all different directions and China is pursuing that in relation to barley from Australia. We don’t believe that there is dumping. We don’t believe that there are any inappropriate subsidies and we are going to make that case through the proper processes as happens on a regular basis, as I say, everywhere, all around the world among countries that are part of the WTO. In relation to some of these other issues, we will be dealing with them on their merits one by one. Our Trade Minister is working through those. We are focused on having the best possible relationship with all of our trading partners and that is what we will continue to pursue here.

SRI JEGARAJAH: Minister, if you circle back to domestic policy agenda. Do you stand by the wage subsidy scheme? Because Opposition says you keep shifting the goalposts and there is pressure to expand it, there’s pressure to end it early. Can you clarify what the plan is?

MATHIAS CORMANN: The Opposition is wrong. We are not shifting the goalposts. We have been quite consistent. Various people from various sides have made suggestions on what they believe should happen, but we have said this is a six-month program. We have said that halfway through there will be a review to assess how it has been going, to ensure that it is indeed operating as intended. That review will have some findings and perhaps make recommendations, but we can’t pre-empt what those are likely to be. The important point is it is a six-month program, it will remain in place for six months, but if there are any findings or issues in the program that in our judgement or Treasury’s judgement ought to be adjusted, then of course that will be decided and communicated at the appropriate time.

MARTIN SOONG: Minister, Martin here jumping back in. If we can circle back to China banning beef from four Aussie processors as well as potentially barely. You say that these anti-dumping issues crop up regularly and they have always been the case, even pre-coronavirus, but the timing of this happened to happen just after Australia pushed for an independent inquiry into the origins of the coronavirus, taking the side of the US. My question to you is, do you expect any sort of other politically related retaliation from China, one, and two, is this going to sway Australia or Canberra’s decision to continue pushing for this independent inquiry?

MATHIAS CORMANN: On the first point, the timing is actually not as you suggest. The timing of the anti-dumping related investigation process started about 18 months ago, long before anyone had ever heard of COVID-19 or any suggestion that there should be an inquiry. The answer to the second question is of course we will continue to call for an independent inquiry at the right time into what happened. We think it is an entirely unremarkable proposition that given the effect of the coronavirus crisis around the world, given the number of people who have died, the number of people who have lost their jobs, the number of people who have been disrupted in their lives all around the world, of course we should get to the bottom of what happened and assess the response to what happened so that we can either prevent it happening again or if it does happen again, make sure that we respond to it better than last time. That is in our interest, it is in the interest of people all around the world, including the people of China.

WILL KOULOURIS: Minister, just to get back to the wage subsidy for a moment. There is perhaps the possibility that we are going to see a second spike in unemployment following on from the cessation of that wage subsidy program. Would you be open to perhaps allowing some certain industries like, for example, the hospitality industry or the retail industry to jump onto an extended JobSeeker program or perhaps keeping that going rather than necessarily cutting back on the funding for that as well?

MATHIAS CORMANN: The measures that we have put in place, enhanced JobSeeker and the JobKeeper program, are temporary measures. When we designed the programs and put them in place we didn’t know how long the health crisis would require severe restrictions in our economy and hence, we put them in place for an initial six months with a capacity to extend for a period beyond that if that was required. If you look at what is happening in Australia today, we are winning the battle against the virus. The number of active cases is now very, very low. In some jurisdictions, there are no active cases. In a very large part of the continent, there hasn’t been any community transmission at all for some time. Any new cases are return travellers who have returned from overseas and have been appropriately quarantined. From that point of view, the health risk is, we believe, now appropriately managed. We are very focused on avoiding a second wave and that is why we are putting further measures in place to give ourselves a capacity to eliminate that risk as much as possible. We want the economy to return back to normal, as close to normal as it possibly can, in a COVID-safe way. We certainly don’t have to keep these enhanced welfare measures going for any longer than necessary. We want people to go back to work and business to get back into business.

SRI JEGARAJAH: Minister, can you give us an update on Virgin Australia and is there any word on who might be among the suitors, how many suitors are out there and if there are foreign buyers potentially, then do national interest concerns crop up in your mind?

MATHIAS CORMANN: Virgin Australia is in administration and there is an administrator in place who is now working through all of the relevant information and receiving bids and receiving proposals from potential bidders. The administrator, together with creditors, will have to form a view on the best, most appropriate way forward. To the extent that there are issues for government to consider in that context, we expect that they will approach us at that time. At this stage, we have a watching brief. The job really is with the administrator to explore what might be possible to return Virgin back into profitability and to maximise the return for creditors out of the operation that he is pursuing.

SRI JEGARAJAH: Minister, we have got to leave you there. Thank you very much for your time today, we appreciate it.