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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

4 March 2008

Interview with Karl Stefanovic

Today Show

Tuesday, 4 March 2008

SUBJECTS: Interest Rates; Housing Affordability

STEFANOVIC:

Treasurer, good morning to you. It's not good, is it?

TREASURER:

Well, the Reserve Bank is independent, Karl, and they will announce their decision this afternoon. But certainly Australian families that have had something like seven interest rate rises over the last three years, are under tremendous financial pressure, and that's why the Government has said from day one that we will work day and night to tackle this inflation legacy.

STEFANOVIC:

Would you advise people, though I know you don't have direct impact on what the Reserve Bank does, but would you advise people to reel it in and prepare for a number of more interest rates this year?

TREASURER:

Karl, the most important that thing we have to do at the national level from the point of view of the Rudd Government is tackle this inflation challenge that we've got out there, and that's why we put forward a five-point plan way back in January. I can't speculate on the future course of interest rates. That's entirely a matter for the Reserve Bank. But what the Government can do is try to take the weight off the Reserve Bank, take the weight off monetary policy, by reining in fiscal policy by cutting reckless spending at the federal level and we've made a very substantial commitment there, and also to addressing all the capacity constraints in the economy that have also been putting upward pressure on inflation, such as the skills crisis and all of those infrastructure bottlenecks out there. That's what we can do. What we've got to do is put maximum pressure on that inflation rate. That's the cause of the problem.

STEFANOVIC:

Okay, bearing in mind everything that you have done and more for looking to the future and looking at your five-point plan for the future, will that definitively put a lid on inflation?

TREASURER:

Certainly inflation has taken a long time to develop. It hit a 16-year high in the months of October, November and December, so it's going to take some time to time to tackle it, but we're determined to do that in the short-term, the medium term and the long-term.

STEFANOVIC:

Will that put a lid on inflation, your plan for the future?

TREASURER:

I think it's imperative for this country that everyone in the community shows some restraint, that we all work hard out there to ensure that we can dampen inflation and dampen inflationary expectations and that applies to everybody in the community.

STEFANOVIC:

I will just ask one more time. Will your plan put a lid on inflation?

TREASURER:

Well, our aim is to tackle the inflation problem, to put maximum downward pressure on inflation. That's absolutely our aim. We have to do that for all those hard-pressed families out there that have been hit with seven interest rate rises in the last three years. That is our number one objective.

STEFANOVIC:

Okay. Moving on, just in terms of the economic path of the country, when will you assume full responsibility for the economy?

TREASURER:

Well, we accepted full responsibility on day one when the Prime Minister and I met with the Treasury and the Department of Prime Minister and Cabinet in Brisbane on 25 November. We have assumed full responsibility for the economy. We have to clean up some of the mess that was left behind by the previous government. But we are determined to tackle all of those challenges that are in front of us, to modernise the economy to make sure we have an outlook where inflation is lower and growth is sustainable.

STEFANOVIC:

What I'm saying is when will you stop blaming the previous government and move on, move forward and accept responsibility, from what point?

TREASURER:

We have accepted responsibility. The facts I'm talking about, about inflation being at a 16-year high, are not facts from the government, they're from the Bureau of Statistics. That's the legacy we've been left. We said on day one we'd deal with the inflation challenge. We put out our five-point plan out there to deal with that challenge and that's what we're doing, that's what we're focusing on. We're not worried about the previous government. We're worried about the Australian people and what we must do to put downward pressure on inflation and interest downward pressure on interest rates, Karl.

STEFANOVIC:

So, there'll be no more blaming the previous government if, for example, interest rates go up even higher during the next six months?

TREASURER:

Well, Karl, we've accepted responsibility from day one. I just wish the now Opposition would accept some responsibility for creating the 16-year high in inflation. But our task is not to focus on the Opposition. We've got a plan for the future, they haven't. We're determined to implement that. And that's what we're doing, working day and night.

STEFANOVIC:

Housing affordability is obviously a big issue in this country at the moment. We see on the front pages of the paper in Victoria today that there is going to be a great deal of land released by the State Government. That is a move in the right direction. But as a long-term solution, and there are subsequent problems because of that in terms of trying to find people to buy those houses in areas where the price of the property is diminishing at the moment, they're looking at possible losses in the future as well, so it is a tricky game, is it not?

TREASURER:

It certainly is. We do have some very big housing affordability problems out there, very hard for people looking to buy their first home, struggling to actually meet the Australian dream of home ownership. That's why we put forward our First Home Saver Account some months ago. But also on the supply side, land release is important.

That's why the Prime Minister also yesterday announced 50,000 affordable rental properties where people could rent those properties below market rates. We've got to do everything on the supply side to increase the supply of housing, whether it's for home owners or whether it's for rental properties. Young kids out there at the moment are finding it very hard to rent properties.

I saw a lady at the Community Cabinet only on Sunday who was paying 60 per cent of her modest income in mortgage repayments. There is a lot of stress out there and that's the evidence that was presented to the Federal Cabinet in Brisbane yesterday, record mortgage stress and record rental stress, and that's why we are urgently progressing these issues and these policies that we put forward at the last election.

STEFANOVIC:

Treasurer, do you have your own mortgage? Are you feeling the pain as well?

TREASURER:

No, I paid off my mortgage some years ago. I purchased my house in the 1980's, and as a result of that I'm very fortunate. But I have young children and teenagers who I would hope at some stage in their life could enter the housing market, and that's a distant prospect for many of those and many like them.

STEFANOVIC:

It is tough. It was a very revealing weekend for you and for all of us over the weekend in the papers. Anything more you want to get off your chest for us?

TREASURER:

Oh, well, Karl, they were events that occurred 30 years ago. I've not got everything right in my life. I've made the odd mistake and I think there's plenty of your viewers out there that probably have as well. I think what people are really interested in is what are we doing to deal with these future challenges we've been discussing this morning. Because if we don't deal with this inflation challenge, we won't solve some of the problems we've been talking about like the housing affordability crisis.

STEFANOVIC:

Well said, Treasurer. Thanks for your time this morning. It's always appreciated.

TREASURER:

Good to be with you.