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

4 February 2008

Interview with Lisa Wilkinson

Channel Nine Today Show

Monday, 4 February 2008

SUBJECTS: Interest Rates, Inflation, 2020 Summit

WILKINSON:

Mr Swan, good morning to you.

TREASURER:

Good morning, Lisa.

WILKINSON:

Now, the definition of mortgage stress is when you're using more than 35 per cent of your income to service your mortgage. There are now 750,000 Australians facing that prospect this year and of course the implications of this are devastating, both economically and socially. What can you do to ease that pain?

TREASURER:

Well, we certainly understand the pain of mortgage stress and mortgage stress is when families are paying more than 30 per cent of their income in their mortgage repayments, and of course there is rental stress when families are paying more than 30 per cent of their income in their rent. So there are a lot of people out there, as a result of the six interest rate rises that occurred over the last three years and the 10 interest rate rises on the trot, that are experiencing mortgage street.

What can the government do? Well, the government's got to deal with the inflation problem and the Prime Minister outlined a five-point plan a couple of weeks ago. We began work on the inflation problem from day one because it's inflation that's the real problem here. It does put upward pressure on interest rates but as importantly, it puts pressures on families who are trying to get by. And around the kitchen tables of Australia they do understand that inflation in November and December, or October, November, December hit a 16-year high in that December quarter, and that's putting a lot of Australian families under pressure, particularly those who've got mortgages.

WILKINSON:

Well, welfare groups are saying that this has the potential to define Australia for the next decade. As you say, families are mortgaged, but they're mortgaged to their eyeballs and they're struggling to hold onto their homes. How can you counter this phenomenon?

TREASURER:

Well, what we've got to do is to deal with inflation. We've got to give the Reserve Bank a hand. The Reserve Bank is completely independent and it runs an inflation targeting regime. What we've got to do is to put in place the policies to deal with inflation. Now, inflation has been on the march for a long period of time. It's going to take some time to deal with but we are determined to tackle this inflation problem as quickly as we can.

WILKINSON:

How many more rate rises do you expect this year?

TREASURER:

Well, as I said, that's entirely a matter for the independent Reserve Bank and we strengthened their independence just before Christmas. But we're determined to do everything we possibly can, including by providing leadership at the Federal Government level, by cutting back on federal spending. We've already put forward something like $10 billion worth of savings during the election campaign and during the Budget process over the next few months we will find more. The Federal Government has to do its bit. We have to provide the lead because dealing with this inflation problem is the central economic problem the country faces at the moment.

WILKINSON:

You've called on all Australians to do their bit to tame inflation but how are you going to break Australians' love affair with credit, because it's an ongoing one that seems to only be getting stronger?

TREASURER:

Well, it's not just a problem with consumer credit, the inflation is particularly driven by capacity constraints in the economy. The Reserve Bank warned the previous government time and time again to deal with the skills crisis, to deal with the infrastructure bottlenecks. Well, we've began work from day one to deal with those two factors which have been putting upward pressure on inflation and therefore upward pressure on interest rates. And also the previous government was pretty lax with its spendings. We are going to rein that in and we're going to do that again through the Budget process.

WILKINSON:

Okay. Turning now to the 2020 Summit in April, critics of this plan say it's a talkfest, that there are too many delegates and not enough time for them to speak and it's exclusive because people have to pay their own way, their own accommodation. Having been in Opposition for 11 years, you would've thought you'd have your own ideas.

TREASURER:

Well, we do have plenty of ideas and we put them to the people during the last election campaign and we are in the process of implementing them. We've been working hard right over Christmas to put those in place. But this is not about the next three years, this is about the next 12 years. And we don't operate on the basis that politicians or political parties all have the best ideas. There's plenty of good ideas out there. We don't have a monopoly on wisdom and we do want to involve the whole community in the broader conversation about where this country is heading in the long term, not just the short term. I think this is a breath of fresh air, it's just what the country has been looking for. We've got a leader now who wants to tackle long term challenges and he wants to involve the community in the process. I think it's terrific and I think it will be welcomed out there in the community.

WILKINSON:

Okay, Treasurer. Thanks very much for your time this morning.

TREASURER:

Good to be with you.