PETER STEFANOVIC, HOST: Joining us now is James Cullen, the senior director of government relations at Cornerstone Group. James, good morning to you. How much of a surprise is that for you? Looked like he was going to run the bank!
JAMES CULLEN, SENIOR DIRECTOR, CORNERSTONE GROUP: NAB confirmed, I think last year that Ross McEwan would be the new CEO. As we knew from media speculation at various points Mike had thrown his hat into the ring, obviously that wasn’t going to be the pathway for him. Perhaps there’s other opportunities elsewhere for him.
LAURA JAYES, HOST: Let’s talk economic stimulus, because I’m quite laser-like focused on this at the moment. Josh Frydenberg, you’ve got to read between the lines a bit, he’s not giving too much away, this package it seems like is still being formulated but he’s said a few things this morning. It’s not going to be economy wide, he’s not going to “make the mistakes of the past”, I think referring to Labor and putting those $800, $900 cheques directly in people’s pockets. But it is going to be focused on business, talking about an investment guarantees, forgiveness of tax debts, or at least delaying that, is that the right thing?
CULLEN: I think the key thing with the stimulus will be “what’s your objective here?” We’re looking at a negative quarter, we’ll have Steven Kennedy update the numbers probably for us in the next half hour or so, if we’re looking at a June quarter which is negative, obviously we want to try and avoid that. If the objective is to avoid a technical recession and a negative result in the June quarter, we need money out the door from 1 April, full stop. So there needs to be a combination of measures. I think some of those inevitably are going to be economy wide, particularly if we’re talking about an investment guarantee.
STEFANOVIC: Well I was reading this morning, I think it was in The Australian, about how he’s talking to the states and asking for some of those big infrastructure projects to be brought forward. That has been talked about before, what are the chances of that, shovel ready ones?
CULLEN: They need to start, we can’t be talking about the planning phase, they need to be literally shovel ready. I think they need to be writing to the local mayors and the general managers of the councils around the country. We know they have a constant backlog of local road projects which to be frank are much easier to get out the door. You could see some of that money getting out the door in the June quarter, if the Government was happy to go there.
JAYES: What is Treasury going to say, because last night we heard from the RBA, 0.5 per cent impact on growth according to their figures. Josh Frydenberg spoke to the IMF at about 1am this morning on that phone hook-up.
So Treasury, you’d have to think, would probably be a little more pessimistic because they’re looking further down the track?
CULLEN: This is true, I think Josh might have said this morning that there was a 0.2 per centage pointimpact just from the bushfires as well, also for the March quarter. So put aside the March quarter now from a stimulus perspective, because there isn’t much we can do there.
We really need to be focusing on the June quarter, I suspect that senators will be pursuing Mr Kennedy this morning about what is the likely impact on the economy of the coronavirus in the June quarter, and then of course the next question is how big a stimulus do you need to be able to offset that? Because if we’re talking about an impact of up to 1 per cent of GDP, we then start to talk about a stimulus worth $20 billion, and having to get that out the door between April and June.
JAYES: What was Labor’s package worth?
CULLEN: So there were two main packages. The first was about $10 billion…
JAYES: $10 billion?
CULLEN: Yeah towards the end of 2008, and there was a second, much bigger package which was the schools and the infrastructure as well, over $40 billion in February 2009.
STEFANOVIC: It’s interesting isn’t it though, because I mean Kevin Rudd does come in for a bit of stick about handing out those cheques, but at the end of the day it did avoid a recession, even though the GFC is completely different.
CULLEN: I think the consensus is, amongst macroeconomists, is that Labor played a very proactive role in keeping us out of recession. I suppose that goes back to my first point Pete that if the objective is to keep us out recession, then we’ll be keen to hear from Treasury today about what’s the likely projected impact of the coronavirus in the June quarter, and then we’ll be going to the Government pretty quickly next week to say “What’s the size of the stimulus?” And the other thing to is, guys, I wouldn’t be surprised if the last sitting week in March is dominated by these debates and possible legislation going through, if we’re talking about tax measures and those kinds of things.
JAYES: We need to get money in people’s hands quickly, this is the whole point of stimulus isn’t it? So I look at the business investment guarantee and think that’s not going to have the immediate effect that Government wants now is it?
CULLEN: It’ll need a 1 April start date, again that’s probably why we’re going to have to be talking about legislation in the next few weeks, we’ve seen private investment down in successive quarters now, so I think there’s probably an element of demand ready to go, they just need to push the button.
JAYES: James, what business really want is a tax cut. Why not now, and why wouldn’t Labor now agree to that?
CULLEN: Well, I think an investment guarantee which is actually tied to an actual purchase is going to be more effective right now. The other thing too guys, I know this is…
JAYES: Why is that?
CULLEN: … well I just think that if you set it from a 1 April start date for assets over a certain amount, like Labor’s Investment Guarantee at the last election, you’ll see businesses start to make those purchases now.
JAYES: Tax cuts take a while…
CULLEN: Company taxes are after profits so that’s sort of downstream from the potential investment impacts, but also, Newstart. One-off $25 increase to Newstart…
CULLEN: … I don’t think the Government’s got … we don’t want to bake this into the budget permanently, but a one-off, we know the economics say, not just the social justice, but the economics say that money will get spent and straight away as well.
JAYES: That’s about $4 billion …
CULLEN: Well absolutely, if we’re talking about the longer-term stuff, it can be up to $10 billion, the potential impact over the forwards, but if we do it one-off, it can be much smaller and targeted, and money out the door now.
STEFANOVIC: And perhaps postponing BAS, for a bit?
CULLEN: Sorry, the BAS…?
STEFANOVIC: well, the tax…
CULLEN: …the tax forgiveness, yeah, I’m not sure how effective that is about getting the money out the door now.
STEFANOVIC: Yeah because it then might cause a problem later on down the track.
CULLEN: This is right.
STEFANOVIC: Yeah, ok, great stuff.
JAYES: Thanks very much.
STEFANOVIC: This was quick and nimble there, great stuff James.
CULLEN: Thanks for having us.
JAYES: Someone’s worked for a Shadow Treasurer.