Is Australia’s economy growing?

Ross Greenwood speaks to Federal Treasurer, Scott Morrison, about the National Accounts for the March quarter released today which show the Australian economy continues to grow, achieving its best results in three years.

Introduction: Is Australia’s economy growing?

Ross Greenwood:  As I indicated to you, Australia’s economic growth is 3.1% over the past year. It’s running even faster than the government had forecast at this stage. It’s good news. It’s partly as a result of better than expected exports of gas, coal, gold and also iron ore, and the prices have been good. Now, this is good news for the government, good news for Australia clearly, but then on the other side, there are households that have said that are right now perhaps dragging the chain because of subdued wages growth. No doubt we’ll find out that the treasurer is quite happy with these numbers, 27 years of unbroken economic growth in Australia. Treasurer Scott Morrison is on the line. Many thanks for your time, treasurer.

Interview with: Scott Morrison, Treasure

Scott Morrison:  Okay, Ross.

Ross Greenwood:  All right. The numbers, they are terrific, there’s no doubt about that, 3.1%, what does it actually mean for your budget bottom line? Does it mean that the economy and therefore tax receipts are going to be running faster than what even you’ve predicted in the budget?

Scott Morrison:  Well, it completely validates what we’re saying in the budget for a start. In every budget people go, “This is too optimistic,” or “That’s too optimistic,” well the numbers, we could see coming through and we forecast conservatively. We’ll see what happens at the end of June as you know, Ross, this is the end of March quarter numbers, there’s still the June quarter numbers to come in to finish off the year, but they’re obviously looking very positive, and so the budget was clearly been backed in here by what we’ve seen today. What we’ve also seen here is yes, it’s true that you said about the export side of things, what was driving a good part of that growth but we’ve also got to talk about the services exports as well. It’s not just those commodities, the iron ore and so on and coal, et cetera but it is also very strong services exports.

A big part of it is the fact that we’ve been running a very strong public infrastructure investment program now for some years that’s been supporting growth, in fact, right across every area whether it was inventories or whether it was dwelling investment, all of these were positive. Even in business investment where we saw mining investment come down that was overwhelmed by what’s been happening in the non-mining sector. Non-mining investment is up 10%. That’s five times the long-run average. It’s the  I was talking about today. When you see a on the road out there with a tradie driving it, that means the economy’s going well.

Ross Greenwood:  In other words, the other thing I also noticed, there’s plenty of cranes around our capital cities right now. Some of that construction activity may slow down in due course. We can actually see that through the housing numbers in our major capital cities right now. Is that of concern because some are suggesting that at the back end of this year, you might not be getting the same level of growth as you are right now. Does that concern you at all when you start to see those capital city house prices?

Scott Morrison:  Two separate issues. Firstly, the pipeline on residential construction is pretty strong. The approvals in the past were running very hot so there’s a good pipeline of work there on the residential side. What we saw at dwelling investment in this quarter was actually a strong pickup in alterations and additions which is something people do when they think they’re in a position to have confidence and go out there and put on the extra room, the kitchen or do something like that, so I think that’s welcome news.

With house prices more generally in Sydney and Melbourne we’ve seen them flatten off after we’ve had APRA, the banking regulator, restrict access to those interest-only loans which were really driving those prices up, and so that come back to the earth a bit, but we’ll be keeping a close look at that in the weeks ahead. When someone buys a house, they tend to hold on to it for a long period of time so there’s been very strong house price growth in Sydney and in Melbourne over the last seven years or so. If its come off a bit off the top of that, well, people still own the house that they bought for a lot less some years ago.

Ross Greenwood:  Okay, just a couple of things you’ve actually noted today, I noticed you put out a tweet a short time ago observing that Australia’s economic growth really now is at the top end of the top-performing economies in the Western world. In fact, of the G8, Australia is now running faster than any of those. It is also noted that of course Australia’s population growth has been running faster than any of those countries. Is much of the economic growth that we’re seeing in Australia right now due to the faster than average population growth in Australia? If that slows down, is it likely than Australia’s economic growth will also slow?

Scott Morrison:  It supported but it’s not the only thing driving it. With the investment we’re seeing businesses make, as I said, is five times the average that we’ve seen in the past so a lot of positive business conditions out there, and businesses are responding by investing so that’s why it’s really pleasing to see that’s starting to flow and some bit of profit outcomes for those businesses, and that’s starting to include employees. By that I mean, people are getting jobs but also the average payment to employees which comes out of these count that’s up half a percent as well in the March quarter. There are positive outcomes that we’re starting to see is the labor market tighten as the economy continues to do well, then we’ll see the benefits of that stronger economy reaching more and more and more Australians. That’s really what we’re focused on now.

Someone asked me today, “Have we’ve got too much investment? Should we be putting taxes up to slow investment?” I wonder what they are on. That’s just a nonsense. We want to see much more investment because it’s the investment that drives our productivity which lifts wages. We don’t take the economy for granted. In fact, we’ve got a plan for a stronger economy, that’s what the budget was all about.

Ross Greenwood:  Okay. Couple of bits and pieces in regards to tax because clearly if the economy’s running well, there’s more money coming into the government coffers, you have the scope to be able to provide tax relief as you have said in the past. You’ve also indicated today that when Parliament resumes on June 18, you’ll put your personal income tax package as a whole. Labor will then have to either accept it or reject it, you won’t split it. Tim Storer has won, the independent senator, who says he will not support the package unless it’s split and has vowed not to do any deals with government in return for his support. Is it going to be difficult to get this through the Senate?

Scott Morrison:  Well, Labor Party, the cross-benchers, they’re always standing in the way of what the government is trying to do to make our economy stronger, whether it’s trying to make business taxes more competitive or providing tax relief to all working Australians. This is something we’re always trying to do and we often come up into these obstacles but the good news is we put our head down and we just keep going.

Ross Greenwood:  Isn’t the problem is if they don’t get the support in the Senate, then nobody gets a tax cut, so there’s your fundamental problem unless you then decide you’re going to split this bill?

Scott Morrison:  Let’s not get ahead of ourselves. The Senate still has two weeks worth of sitting and they’ll make their decisions then we’ll make ours. What we won’t step back from is accept by someone who got less than a few hundred people vote for them dictate policy to the government. We were elected at the last election to create jobs and to drive economic growth. More than a million jobs have been created since we were first elected. We had a record year of job growth last year, 415,000. 75% of them according to Australian Bureau of Statistics were full-time jobs. Now we’ve got this growth performance in today’s national accounts which as you said puts us on the top of the pack of the world’s leading advanced economies so we promise jobs and growth. That’s what we’re delivering under the Turnbull government’s plan for a stronger economy.

Ross Greenwood:  Do you make much of what the Parliamentary Budget Office has said today what they’ve given the Labor and the Greens, saying that the third stage of your tax package would see the benefits overwhelmingly float towards men over women at a ratio of three to one? Is that an issue for you?

Scott Morrison:  It’s such a ridiculous thing to say. I said today, you don’t get a blue and a pink form to fill out your tax return. There aren’t different tax rates that applied to males and females. You get assists on your income, and your income, it doesn’t discriminate. What’s next? We’re going to have to change tax rates for the left-handed and right-handed people? It is really a nonsensical argument. I think the Labor Party’s been making this argument today. It’s why you can’t trust them on the economy because they come up with this rubbish.

The Tax Act is designed to treat people’s incomes the same so you pay tax according to what you earn. Now what we want to see is all Australians who work hard be able to have tax relief. The big difference between what we’re saying on tax and what the Labor Party is saying is this, we’re not putting any anyone’s taxes up. The Labor Party thinks they have to put taxes up on the top rate of income tax on getting rid of negative gearing and putting up capital gains tax and hitting tens, if not, hundreds of thousands of your listeners who will pay this retiree’s tax on the imputation changes which Labor proposed which will rip away their tax refunds, which will mean tens of thousands of dollars in income which I know your listeners depend on will be stripped away from them. The Labor Party believes that’ll give them $5 billion dollars a year. Now, that’s why they run around and say, “We’re going to do something over here on tax cuts.” I’ll tell you what, they’re giving with one hand and they’re taking with the other many times over.

Ross Greenwood:  A couple of quick things before I let you go. Number one, Clive Palmer says he will consider reopening the Queensland nickel refinery given the fact that the federal government is in court in Queensland trying to get money out of Clive Palmer and his companies in regards to the collapse of that business. Do you think it’s appropriate that they be trying to reopen that nickel mine right now, nickel refinery?

Scott Morrison:  He’s going to settle up in Townsville. He’s left a bitter taste in the mouths of a lot of people up in Townsville. I think it’ll be a while before will people trust him again. There are cases on foot there, I’ll leave it to my colleagues who are directly responsible for their carriage of those cases to comment on those. This guy has got a lot of spine work to do to get himself back in where people trust him again.

Ross Greenwood:  And finally, in regards to the State of Origin this evening, who’s going to win?

Scott Morrison:  Blues by eight.

Ross Greenwood:  My guest, Scott Morrison-

Scott Morrison:  I mean down in Melbourne, the Blues have always done better than Queensland and then the first game is pretty even, so I’m pretty confident. I think our debutant, I think we got 11 debutants tonight, are really going to shine tonight and it’s going to be the start of a new era for the Blues. I’ll be heading out to the pub to watch it very shortly.

Ross Greenwood:  Federal Treasurer Scott Morrison. The Blues by eight he says. Thanks for your time.

Scott Morrison:  Cheers.

Recommended

Is Australia’s economy in good shape?

Interviewed  Mike Kane, CEO, Boral titled ” “We’ve mismanaged energy resources to the point where it’s embarrassing” .”

Interviewed  Scott Morrison, Treasurer, Federal Government titled ” Does Australia still have a AAA credit rating? .”

Interviewed  John Edwards, Non resident Fellow, Lowy Institute titled ” Could the RBA hike rates eight times in the next two years? .”

Interviewed  Scott Morrison, Treasurer, Federal Government titled ” Treasurer Scott Morrison: We do not want a recession .”

Interviewed  Scott Morrison, Treasurer, Federal Government titled ” Why are our wages not increasing? .”

Interviewed  Peter Harris, Chairman, Productivity Commission titled ” Trump protectionism could hurt Australia .”

Interviewed  Paul Bloxham, Chief Economist, HSBC titled ” How do we keep the economic boom going? .”

Money Minute – August 14 2017 Economic Health Check .

Newsletter – July 28 2017 .

Interviewed  Paul Dales, Chief Australian and New Zealand economist, Capital Economics titled ” Interest rates on hold .”

Interviewed  Scott Morrison, Treasurer, Federal Government titled ” Should we have Company tax cuts? .”

Interviewed  Bill Evans, Chief Economist, Westpac titled ” Why rates won’t move for two years .”

Interviewed  Peter Costello, former Treasurer, titled ” Manage budget differently! .”

Interviewed  Scott Morrison, Treasurer, Federal Government titled ” Treasurer Scott Morrison: RBA’s decision today is a sign of optimism .”

Interviewed  Michael Andrew, Chairman, Board of Taxation titled ” Cracking down on the black economy .”

Interviewed  Dale Boccabella, Associate Professor, UNSW Business School titled ” How gig economy workers will be left short of super .”

Image source: 2GB

Previous: Can Australia withstand a recession if Interest Rates stay on hold?
Next: Can Clive Palmer re-open the Queensland Nickel refinery?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

243 More posts in Business category
Recommended for you
Is now the best time to get a job?

Ross Greenwood speaks to Capital Economics Chief Economist Paul Dales about Australia’s unemployment rate hit its lowest...