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

1 February 2008

Press Conference

Waterfront Place

Friday, 1 February 2008

SUBJECTS: Red Book, Inflation, Budget, Malcolm Turnbull and Brendan Nelson, Electoral Spending


I just wanted to make a few comments about the incoming Government brief that was prepared for the incoming Rudd Government back in November, December last year.

It's a high quality document. It has significant material that relates to the challenge that the country faces and how we must meet it well into the future, and this document has been released under Freedom of Information laws.
I make the point that this is the very first time that I know of that an incoming Government brief has been released by the Australian Government.

So it's a significant thing and an important thing because it informs us about the nature of the national debate we need to have well into the future.

It talks about the challenges the country faces into the future. It talks about the challenge of climate change, the challenge of Federal, State relations, the challenge of water, the challenge of indigenous disadvantage, the challenge of international engagement and I guess it shows why the Rudd Government hit the ground running form day one, and you can see all the examples of that over the past eight weeks. For example, the agreement the incoming Government reached with the Reserve Bank on the conduct of monetary policy, the Bali conference and the position that we took there, the COAG conference and the subsequent meeting with the State Treasurers that served to end the blame game in Federal, State relations and to do something about elective surgery waiting lists, and much, much more.

But I guess most importantly, this document really points to the nature of the inflation problem that Australia now faces. It points to the size of the inflation problem that this Government inherited from the previous Government and it is a challenge this Government is determined to meet.

We won't shirk our responsibilities when it comes to this inflation problem like the previous Government did. The previous Government simply put it in the too hard basket. The Rudd Government has started from day one to meet this inflation challenge.

Now, this inflation challenge, I guess, is best demonstrated by this graph here and what it shows is that in the month of October and November and December, Australia had the highest underlying inflation that this country has experienced in 16 years – the highest underlying inflation that this country has experienced in 16 years for the month of October, November and December and an important problem for the country - and this incoming Government brief points to that. And it's important to understand why that is a problem because high inflation certainly does put upward pressure on interest rates.

And today we've heard from the Shadow Treasurer. He singled out, I think on radio in Sydney, and said that Mr Howard and Mr Costello kept inflation within the target band. He said that Mr Howard and Mr Costello kept inflation within the target band.

Well this graph from the Bureau of Statistics shows inflation well out of the target band under the previous Government. It shows inflation had been on the march for over two years under the previous Government.

So, I think Mr Turnbull and Mr Nelson are just completely out of touch because you don't actually need the Bureau of Statistics to tell you that inflation has been rising. Around the kitchen tables of this country Australians absolutely understand that inflation has been rising, and rising for some time.

So, there is a substantial inflation problem inherited by the Government and one we are determined to act on and that is why the Prime Minister outlined the Rudd Government's five-point plan only a couple of weeks ago to deal with inflation.

Unfortunately, the Opposition doesn't recognise the scale of the problem and of course they don't recognise the scale of the problem because they are partly responsible. That's the truth of the matter.

What the Rudd Government will do is everything within its power to put downward pressure on inflation because you see, we've had six interest rate rises – six interest rate rises in the last three years and 10 in the cycle.

It is vital that we deal with this inflationary problem. It took some time to build and it will take some time to deal with but we are determined to deal with it. The Rudd Government will tackle this challenge. The previous Government didn't tackle the challenge and the consequence has been rising inflation. Over to you.




Well, what I say is that Malcolm Turnbull is completely out of touch. These are the official figures and that's why the incoming Government brief identified the scale and the size of the inflation challenge.

But everybody out there around the kitchen table understands that inflation's been rising – everybody apart from Malcolm Turnbull.


(inaudible) the economy. They will in a year or so. How can you judge what it's going to be like in a year or so?


Well, these decisions are taken by the independent Reserve Bank. The job of the Government is to do everything within its power to put downward pressure on inflation and we have to lead by example. That is why, during the election campaign, we put forward $10 billion worth of savings and that is why, since the election, we've indicated we need to make further savings.

That's part and parcel of the Federal Government leading by example and showing some restraint. That's very important and the other things that we are doing are also very important.

This inflation has been driven by the skills crisis, driven by infrastructure bottlenecks and driven by a high spending former Government. We are acting in each of those areas. We are acting across all of those areas and doing everything that we possibly can to put downward pressure on inflation and interest rates.


Will those tax cuts be paid? Will (inaudible) mistake?


There's no doubt that the tax cuts should be delivered. There's been no mistake when it comes to tax cuts. The tax cuts play a vital role in encouraging workforce participation. They provide incentive for the workforce that has worked hard in recent years to make our economy strong and they deserve those tax cuts.

What we're talking about here is the total Commonwealth Government spend and there will be room in the Budget for further cutbacks, Commonwealth spending and deliver the tax cuts.




Well, because we can make the savings elsewhere in the Budget. The Australian workforce has worked hard. They deserve the incentive that comes with these tax cuts and they will be delivered.


What's your message to families who are awaiting your first Budget?


My message to families is that we will do everything within our power to assist them in their daily struggle to make ends meet and part of that is the delivery of the tax cuts and part of that is getting the economic settings right for the long term.

This inflation challenge took a long time to build and it will take some time to deal with but we are meeting it with urgency and putting in place all the settings we can to deal with it in the longer term.


Kevin Rudd said that (inaudible) can expect to pay (inaudible)…


Well, there's no doubt we have to find further savings before the Budget. Part of the Prime Minister's five-point plan was to reset a target for a surplus of 1.5 per cent, at least 1.5 per cent of GDP.

That does mean additional savings over and above the savings that we indicated in the election campaign.

It's going to be a time for tough decisions. It's going to be a time for foresight and it will be a time for bold policy.

We do face a number of challenges, conflicting ones, and not only the inflation challenge but there is also the fallout from US sub-prime crisis. So, there are cross currents affecting this country but for myself, I'm optimistic about the future but we are not immune to the fallout from international circumstances. We operate now in a globalised economy and what occurs in one country can't necessarily be confined to that country.


(inaudible) unions…donations during the election…?


Unions, businesses, community organisations all get stuck in during an election campaign. The ACTU got stuck in during the campaign and plenty of other people did as well. There were business groups that were spending large amounts of shareholder money out there as well on industrial relations campaigns. There were environmental groups who were out there spending money on their campaigns. It's part and parcel of democracy. We don't owe anybody anything. We govern in the national interest. We won't be governing in the sectional interest of any particular group in our society.


Do you think Australians will be shocked to learn just how much money the unions put in?


Well, I think Australians would in total be shocked by the total amount spent by everybody in the campaign and I think if you actually have a look at the figures there will be other groups in the community who spent more than the ACTU. Thank you.