PETER STEFANOVIC, HOST: On that note, let’s bring in James Cullen, the senior director of government relations at Cornerstone Group, James I’m not going to get you to comment on that, first of all, I’ll get you to comment on the $18 billion package that the Government has announced today, and there’ll be more detail that will be provided by the Prime Minister when he steps up to the podium in a short while from now, but what do you think of it so far?
JAMES CULLEN, SENIOR DIRECTOR, CORNERSTONE GROUP: There’s a lot of the hallmark here of the first Rudd Government stimulus, in terms of payments which will be directed to low income earners, on the pension and potentially Newstart, I think that’s a big tick. I think from an economic perspective that money will get into the economy really quickly, which is what we need here guys, we need to try and stave off a recession and stop that negative quarter of growth in the June quarter. Those business measures all look reasonably good and well-targeted too. I suppose allowing business to invest is part of it, though we need to make sure there’s confidence in the economy that they actually go and make the investment. Yes it will help with their cash-flow, we don’t want them saving the money, they need to be spending it, that’s the key. It’ll be ‘watch this space’ for the next few months.
LAURA JAYES, HOST: Instant asset write-offs have certainly been used by businesses in the past, they’ve been so successful in recent years and they’ve been upped in successive budgets. But James, the point now is keeping this cash in the economy. Do you expect there’s going to be some leakage with these assets, potentially bought from overseas?
CULLEN: Laura I think the global supply chain is the interesting aspect there isn’t it, in terms of what we’re facing now versus the GFC. So we need businesses to be able to invest and to have these assets available to invest and buy. Because as you say, we do need the money in the economy. So, the measures do free up cash-flow, that tax holiday measure that they’ve got there, that’s a good thing, I think that’s a really important tick. And the other measure when it comes to wage subsidies, a retention payment for apprentices, this is really important because in these tough times, businesses will generally try and get rid of the lower productive workers like an apprentice first, so keeping them employed I think is really important, and that will keep people gainfully employed at this time. There’s a few ticks there, but we’ll also have to wait and see how business responds.
STEFANOVIC: What about the exit strategy, the Government’s exit strategy, how difficult will that be, once eventually all of this subsides?
CULLEN: I understand the rhetoric from the Government and not wanting to talk about prolonged deficits but we just know from experience here that a combination of this stimulus package, and remember we’re not really talking about the impact on the budget from an automatic stabiliser perspective, if unemployment does tick up we’re going to have an automatic increase in Newstart and businesses paying less tax as some businesses go out of business. There will be a big impact in this financial year and potentially next one, and that just flows on as well.
I understand the rhetoric and the Government’s keen to try and make sure these measures are targeted and are ending 30 June this year and perhaps next year as well. The proof will be in the pudding a little bit here, and today we’ll see more detail about what exactly will the fiscal impact be of these measures, not just in the current financial year, but in the coming years. And that will really tell the story about what the lasting impact on the budget will be.
JAYES: If the Government’s going to cop any kind of criticism here it will be for overshooting, not undershooting, which is different to what was being speculated upon last week James. What does this tell you about the advice the Government must have from Treasury? They’re looking at least a 1 per cent drop in growth in the June quarter alone, aren’t they? And I find their language really interesting where no-one in Government, from the Treasurer down, is willing to even contemplate this idea of recession, which we all know this is what this package is about, avoiding it.
CULLEN: That’s where the political and economic action is guys, can we stave off a recession and to be frank it’ll be the political test that Labor puts to the Government as well, particularly given Labor’s track record in the GFC and getting us through. It’s going to be really interesting to see what that number is, I know they’re not really keen to put a Treasury number out there but we know already that there’s at least a 0.5 per cent impact in the March quarter, the current quarter we’re in now. If we think there’s at least a 0.5 per cent impact for the June quarter, then obviously this stimulus package is overshooting it. You’d want to have at least $10 billion in the economy to offset a 0.5 per cent impact on GDP in terms of stimulus. So it’s clear the advice is evolving, I think the language has been evolving too. Three weeks ago guys the Government was reluctant to talk about stimulus. So this thing is moving quickly and as things stand right now, they are overshooting. But in a couple of weeks time, we might be talking about a second stimulus package in the Budget.
STEFANOVIC: Labor’s hemmed in here right, it’s got to pass it?
CULLEN: Absolutely. It mirrors the first package of the Rudd Government, so I think it’ll be a pretty quick tick from Labor. I’m sure they’ll make them squirm a little bit given the Government’s language and what Government said about Labor over the years when it comes to stimulus, but I think Labor will reserve the right to go and look at other measures, and you can see this morning a real focus from Bill Shorten and the rest of them on casual workers. What happens with casual workers, will there be an announcement today? Because if we do see a prolonged downturn, casual workers self-isolating will be a problem for the economy, they won’t have money, I think the taxpayer will have to fork out there. Labor will continue to put the pressure on the edges of this package.
JAYES: James, great to hear from you, especially on a day like today, appreciate it.
CULLEN: Thanks guys.