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

5 March 2008

Interview with Hayden Cooper

ABC Radio AM Program

Wednesday, 5 March 2008

SUBJECTS: Interest Rate Rise, Inflation, Bank Lending

CAVE:

With interest rates now at their highest levels for 12 years, the Reserve Bank Governor has hinted that the effort to rein in spending might just be succeeding.  New figures on retail spending also confirm that view.  In the next few days the commercial banks are expected to respond and there are fears they may lift their rates by more than the official increase.  Federal Treasurer, Wayne Swan, says while there are painful times for homeowners ahead, household credit appears to be moderating.  He spoke to Hayden Cooper in Canberra.

TREASURER:

Well, I’m certainly concerned about the impact of the rate rise and I’ve dedicated the Government, and the Prime Minister has dedicated the Government, to do everything we possibly can to put downward pressure on inflation and therefore downward pressure on interest rates.

COOPER:

By definition though, and more broadly on the economy, is it a given that you’ll have to sacrifice economic growth in order to beat inflation?

TREASURER:

This is more voodoo economics from Mr Turnbull.  We don’t have to choose between jobs and low inflation.  What we have to do is acknowledge the problem.  And of course, Mr Turnbull has said that the highest inflation in 16 years is a fairy story.  Well, people sitting around the kitchen tables of Australia or people operating businesses know that inflation is not a fairy story.

COOPER:

Well, what will be the impact on employment of your policy on inflation?

TREASURER:

Well, the most important thing we’ve got to do is attend to the supply side constraints in the economy.  At the moment we’ve got demand exceeding supply.  That’s why we have committed ourselves to modernising expenditure, putting resources behind education and skills and providing political leadership when it comes to infrastructure.  Expanding the productive capacity of the economy is a key plank in dealing with this inflation challenge and it’s one that the previous government didn’t understand.

COOPER:

So, you still believe it is possible to have both strong economic growth and at the same time low inflation?

TREASURER:

Absolutely.  That’s what we have to aim for at economic policy: strong wealth creation and wealth creation that is sustainable without inflation getting out of control.  That’s the whole point.  The previous government bequeathed the Australian people the highest elevated inflation in 16 years.  We’ve accepted responsibility for tackling it and we are now putting in place our five-point plan to deal with it.  And we’ve said because of the circumstances we’re in, we will work day and night to implement this plan to tackle it in the short-term, medium-term and long-term.

COOPER:

On lending, is it still too easy for people to get their hands on credit, and is it time for the Government to boost regulation?

TREASURER:

I’m not convinced that there is a need for dramatic changes in regulation.  I think good competition is what we should aim for in all of these markets and good consumer protection.  So, we’re always in the market for suggestions about protecting the rights of consumers, just as we are in the market to make our product markets more competitive.  And that’s the reason, Hayden, that we put in place our account switching package only a month ago.

COOPER:

So, you don’t think banks and non-bank lenders are handing out loans too willingly?

TREASURER:

I think at the moment all the advice I’ve received from our regulators is that they are not doing that, that lending, by and large, is very responsible.  We don’t have the same problem that emerged in the United States with the development of sub-prime.  And thankfully, that’s the case.