The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

21 January 2008

Interview with Tony Eastley

ABC AM Program

Monday, 21 January 2008

SUBJECTS: Inflation, Budget, Community Cabinet

TONY EASTLEY:

Well, the man with carriage of the Budget is the Federal Treasurer, Wayne Swan, who joins us on AM this morning from Perth.

Very good early … good morning to you Wayne Swan.

TREASURER:

Good morning Tony.

TONY EASTLEY:

In December of last year, you scrapped the whole idea of keeping the government surpluses to one per cent of GDP (gross domestic product). What's the new figure?

TREASURER:

Well, we've said that we will aim for a surplus of at least 1.5 per cent in 08/09. And never forget that only in November last year, Mr Costello and Mr Turnbull set a target of only 1.2 per cent.

TONY EASTLEY:

But that's all very well, but things have changed since then. So 1.5 per cent, that will give you what sort of return in the May Budget?

TREASURER:

Well Tony, what hasn't changed since then is the elevated level of inflation. The previous government knew at that time that inflation was elevated and likely to remain at or above the Reserve Bank's target band.

So, there was a need for restraint then, and there most substantially is a need for restraint now. So, we are determined to set a substantial target, for the Federal Government to play its part in exercising budgetary restraint.

TONY EASTLEY:

All right, well let's talk about the future now. How much money will you be saving? What sort of surplus will you deliver in the May Budget?

TREASURER:

Well, we've said that we will aim for a surplus of at least 1.5 per cent of GDP in 08/09. And some of the figures that have been bandied around, $18-billion, $17-billion, are around that target.

TONY EASTLEY:

Are they fair figures?

TREASURER:

They're around that target, yeah.

TONY EASTLEY:

Is it designed to try and convince the Reserve Bank not to raise interest rates, this latest decision of yours?

TREASURER:

Well, it's part of our five point plan to fight inflation, you see. Inflation in this economy has been building for a long period of time. It's going to take some time to deal with and it will need every aspect of policy directed to dealing with it.

So, the first part is budgetary restraint from the Federal Government. Secondly, we have to deal with the twin investment deficit. We've got to deal with the skills crisis and we've got to deal with infrastructure bottlenecks, and they are very squarely part of our five point plan.

TONY EASTLEY:

All right, well your own treasury department is telling you that inflation is significant. So why not scrap or modify at least these promises that you made, what $30-billion in tax cuts, which of course can only add to demand and inflationary pressure in the economy?

TREASURER:

Well Tony, the tax cuts are very important. They encourage workforce participation.

TONY EASTLEY:

But they are inflationary, aren't they?

TREASURER:

No, they're not necessarily inflationary. What's inflationary is the Federal Government's total spend, and that's why we are determined to make savings over and above the $10-billion we promised during the election campaign. And that's why we've set this target.

But when it comes to the tax cuts, they have been earned by the Australian people. They work hard to make our economy strong, they deserve incentives in the tax system, and these tax changes which we put forward for a long period of time, will provide the incentive for people to work harder and for people to re-enter the workforce.

They're very important parts. They are a very important part of fighting inflationary pressures in the economy by dealing with problems on the supply side of the economy left to us by the previous government.

TONY EASTLEY:

So, the tax cuts guarantee that they'll be untouched?

TREASURER:

We promise the tax cuts, we will deliver the tax cuts. There's a strong economic case for the tax cuts. But there's also a strong economic case for fiscal restraint from the Federal Government, fiscal restraint that the previous government wouldn't show.

TONY EASTLEY:

Ok, well king of the fiscals is Lindsay Tanner and the head of the razor gang. Does it mean now to accommodate this new figure, you'll have to strip back some spending in some other areas?

TREASURER:

Yes, it certainly does. We've made that very clear. We understood this during the campaign, we understood the nature of the inflation challenge that the previous government didn't understand and wouldn't meet. We put forward $10-billion worth of savings during that campaign and we are out there at the moment searching for more.

TONY EASTLEY:

This is more on top of what you've already sort of stated?

TREASURER:

That's right, absolutely. In excess of the $10-billion put forward during the last election campaign.

TONY EASTLEY:

What sort of areas do you think will be targeted?

TREASURER:

Well, we're not going to nominate those. That's for the Budget process. Lindsay Tanner and I are working very hard in the Budget process, and that will be revealed on Budget night.

TONY EASTLEY:

What's worse for Australia do you think? The looming US recession or domestic inflationary pressure?

TREASURER:

Well, we have to meet both those challenges. We're not immune from the fall-out of the US sub-prime mortgage crisis, but we are well placed to meet it. But most importantly we have to deal with this inflationary challenge that was Peter Costello's and Malcolm Turnbull's parting gift to the Australian people, and we intend to do that with a lot of energy and policy creativity.

TONY EASTLEY:

Just finally Treasurer, the talkfest yesterday, was it worthwhile?

TREASURER:

It certainly was. I mean, Community Cabinets are very important for staying in touch. They remind all politicians that we live in a community and we need to stay in touch with that community.

TONY EASTLEY:

That sounds like a PR statement.

TREASURER:

It's not a PR statement, it's a matter of political practice from the Rudd Government, which is absolutely determined to move the Cabinet around the country to places in this nation that have never been previously visited by a Federal Cabinet.

TONY EASTLEY:

Federal Treasurer, Wayne Swan, thanks for joining us this morning on AM.

TREASURER:

Good to talk to you.