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 July 2008

Interview with Greg Cary

Radio 4BC,
Brisbane

1 July 2008

SUBJECT: State of Origin, Newspoll, Inflation, Cost of living, Pensioners, Petrol, International economy, Emissions Trading Scheme, Alexander Downer

CARY:

I understand you were in camp with the State of Origin team last night.  How do they really feel, game three tomorrow night?

TREASURER:

Well they’re certainly pumped.  Both the Prime Minister and I were with the team last night with a number of other mentors from around the country and the “King” (Wally Lewis) was there as well. So it was a good night and Kevin and I had an opportunity to say a few words to the team and to answer a few questions as well.  It was a bit like Question Time.

CARY:

What were the kind of questions they were asking?

TREASURER:

They were just asking about our experiences, you know how we dealt with some of the setbacks that come from time to time.  We had a good yarn with them, it was really satisfying. 

CARY:

There’s a few things to get into here this morning.  Starting with setbacks, these polls and I know you’re going to tell me they’re just polls and the only ones that matter are elections and that’s true to a point, but nonetheless they must be worrying in the early stages of the government.  What’s your analysis of what’s going on, not just Gippsland, but the PM’s popularity down, the Government’s popularity down, the Opposition’s popularity up, what’s going on?

TREASURER:

Well things are a bit tough out there.  I mean the global price of oil is through the roof.  A litre of petrol this year has gone up about 30 cents from the beginning of the year.  That’s certainly has an impact out there and on top of that, we’ve got an inflation problem that’s developed for some time.  It’s hit a 16 year high and that’s produced over three years eight interest rates rises.  All of that adds up to a lot of financial pressure on people on low and fixed incomes and families and so on.

CARY:

Is it just that though, is it just that or is it also that during the election campaign, even if you didn’t say it in as many words you certainly, to be frank, gave the impression that you could deal with these things in a positive way.  Maybe people are saying: “hold on a second, you talk the talk, but you’re not really walking the walk”?

TREASURER:

Well we did talk the talk about it.  That’s one of the reasons why we’re committed to delivering not only the tax cuts which are starting today, but the Education Tax Refund and also the additional assistance for out-of-pocket childcare expenses.  That is a direct recognition of the fact that we understood then and we certainly understand now that families and people on low and fixed incomes are under tremendous financial pressure.  That’s why we had to bring down such a tough budget to deal with the inflation problem, but also to rein in spending so we can make room for those additional initiatives which recognise that people are under a lot of pressure out there from cost of living increases. 

And that’s why we’ve had to be so determined and so tough, because if we don’t deal with this inflation problem, interest rates will be higher for longer. So we have to deal with them, we have to take the tough decisions.  So, whether it’s an opinion poll or whether there’s a by-election in a particular seat, the one thing that the Prime Minister and the Government are absolutely determined to do is to not put these problems in the too hard basket, but to deal with them for the long-term.

CARY:

Just one of the things you didn’t obviously address to the liking of many in the Budget is pensioners.  Are you having a rethink about all of that?

TREASURER:

Well we certainly did put some initiatives in the Budget for pensioners.  We put the $500 bonus in because the previous government had not budgeted for that.  And also we increased the Utilities Allowance and we made it permanent and we increased it to $500 a year and the next instalment of that is due in a week or so’s time.

CARY:

I think you recognise that it’s not enough.

TREASURER:

No, we said it’s not enough, we know it’s not enough.  We did what’s affordable and what was responsible.  But we also said at the same time, we said it before the Budget and said it during the Budget, is that we would have a look at the real and live issue of the adequacy of the pension, most particularly the adequacy of the single rate of pension.  That’s what we’re doing through the Henry Review.  We said we would address that and we would come back with our response.  But we have to do what’s affordable.  You’re talking really big dollars here. 

We are in a very uncertain international environment at the moment when it comes to the impact of the sub-prime crisis and its fallout on financial markets.  That’s putting additional pressure on borrowing rates and of course now, this third global oil shock which is putting petrol prices through the roof.  We have to balance all of those things and in the middle of that be as responsible as we possibly can and as disciplined as we possibly can.

CARY:

I don’t think anyone would underestimate the significant task you have ahead of you and I don’t know that you’d have felt any more optimistic waking up this morning to this report from the Swiss based Bank for International Settlements.  Now this is the central bank of the central banks and they’ve warned international agencies that the economy maybe at the tipping point, warns of an economic catastrophe with parallels to the 1920’s meltdown.  They catch you with the biggest financial crisis in 120 years.  They’re making claims that central banks have underestimated the problems facing the economy.  They say even if the IMF is wrong and it says there will be only mild economic growth globally, the Bank of International Settlements suggests a deeper and more protracted downturn.  They say central banks are to blame.  That’s pretty scary stuff.

TREASURER:

Well there’s no doubt that there has been substantial problems in international financial markets following directly from what’s occurred in the United States and spreading out to the rest of the world.  That’s what’s caused the problems on share markets around the world, the impact on confidence and so on.  Some of the reasons why the Prime Minister and I have been so engaged internationally is that sorting out the international financial market does require an international response.  The really good news for this country is that we have not been affected directly with problems of the type they’ve had with the sub-prime in the US.

CARY:

Do you think we will be?   By the way on that, do you think we will be?  I’m hearing reports that in England land prices and house prices are way down and America, a million houses in foreclosure.  Today we’ve got an Australian finance company - the same is about to happen here.  What do you think?

TREASURER:

Well we are not directly impacted with sub-prime type problems but the flow-on affects do impact upon us and that’s why we need some international solutions and why the Prime Minister and I have been engaged.  I was with the G8 Finance Ministers in Osaka only a couple of weeks ago.  I’m talking with the head of the Financial Stability Forum which is trying to put in place a lot of the solutions for the long-term internationally.  These are very, very challenging times.  There’s no doubt about that, but the one thing that we’ve got going for us is that growth is still relatively strong in the developing world and while that happens we also get the benefit of being a commodity exporter.  So as you’ve also noticed, on the other side of the ledger we are getting solid increases in our terms of trade.  The price that others are paying for our commodities and that is assisting us in what is a very, very difficult period.

CARY:

It is that, and now you’ve got the carbon emissions scheme which you committed to having in place by 2010.  Treasurer, as you prepare Australia’s scheme, what guarantees do you have that the world’s leading emitters of carbon will follow suit?  And if they don’t follow suit, what’s the use of us even fiddling with the edges?

TREASURER:

Well because we need national and international solutions and because we are such a big commodity exporter we have to actually provide some example and some leadership on this issue because we are a very big exporter of coal and coal, of course, needs new technology to clean it up because, one way or the other, if we don’t deal with this problem both nationally and internationally, the cost to the world, the cost to world economy, the cost to our national economy will be far greater than the cost of action domestically. 

The sad thing is, Greg, that we haven’t taken steps earlier.  The previous Government had the option, four or five years ago, of bringing in an emissions trading scheme.  They didn’t do it.  So we’ve lost valuable time.  We’ve got to make that up because dealing with emissions here is part and parcel of protecting future economic prosperity.

CARY:

Interesting polls in the paper today.  People were asked would a carbon emissions trading scheme slow global warming and 61 per cent say yes, so you would think there was support for what you plan to do and then when people were asked would you pay more, people in favour 56, people against 39.  Then when it says should petrol be exempt, in favour 42, against 46.  So it’s a balance there of people thinking petrol should be in or petrol out.  What’s your thinking?

TREASURER:

Well, we can’t be guided by opinion polls on this Greg.  We’ve got to get the settings right for the future.  Now the previous government squibbed it.  We dragged them to the table, they decided to start talking about an emissions trading scheme.  They acknowledged, and we certainly acknowledge, that an emissions trading scheme will have some price impacts.  That’s why we’re going through the process of putting a Green Paper before the Australian people so we can have a conversation, not just with households but also with business about the design of the scheme.  So we’ve committed to a process over the next six months of putting out a Green Paper and talking to the community about how we will design this scheme.  Because you see if we don’t do it, it will be an act of gross irresponsibility and it will be an act of gross irresponsibility for which this country will pay for a long, long time.  We’re determined to develop this scheme and to do it in consultation with the community.

CARY:

Yes, it’s a difficult one to do in total consultation though isn’t it? 

TREASURER:

Yes.

CARY:

Because this is a very complex thing and it’s hard to try and get our heads around it.  A lot of us aren’t going to be able to do that.  So this is where this balance of political leadership is going to come in.  It’s going to be a huge challenge obviously for you and the Prime Minister.  But when you say, you know, you don’t want to take too much account of opinion polls, and that’s fine, but what they are reflecting is the sensitivity, as the Gippsland by-election obviously did too, about increasing fuel prices, grocery prices etc.

TREASURER:

Sure.

CARY:

So it then becomes an essential point as to whether fuel is going to be subject to any addition, or not and that’s where I suppose the question arises, will you use the current excise as the way of paying for carbon with petrol?

TREASURER:

Well, all of these issues will be canvassed at length in the Green Paper when it comes down later in July and when it’s out there we’ll have something much more concrete to talk about.  That’s what we’re working on at the moment.  I mean I just think the Opposition and Malcolm Turnbull are being grossly irresponsible here.  They even acknowledged last year that an emissions trading scheme would not only have an impact on prices, they said it should be as broad as possible and Malcolm Turnbull himself said that it should include petrol.  Now, we’re going to go through all these issues in the Green Paper.  There’s plenty of time to have a detailed discussion with the community, with households and with business about this.  We’ll take our time to do that.  We understand that getting this right for the future is essential to our future economic prosperity and we will take our time and work with the community and provide the leadership that you were just talking about in that process.

CARY:

Just going back to something I touched on before and related to all of this.  What kind of pressure is being placed on China and the other major emitters?

TREASURER:

Well, a great deal.  I mean there are international meetings going on all of the time.  The Prime Minister is going to the G8 in a few weeks’ time to talk about this and other issues.  I mean the world has to come to some conclusions about this and that’s hard.  There is a split if you like between developed and developing nations about the objectives of the scheme.  We’ve got to try and bridge that gap in the years ahead and we’re going to be working hard on this both internationally as well as nationally, but at the end of the day we’ll do the right thing in the Australian national interest, the right thing to protect our economy and the right thing by our kids so we can pass something on to them that’s worthwhile having.

CARY:

You talked of the Opposition.  Alexander Downer, just finally, has decided to call it quits.  One writer today calls him the giant of conservative politics.  What would you say?

TREASURER:

Well, Alexander Downer has been in politics.  I don’t intend to say anything other than I hope that in the future he finds satisfaction in a life outside of politics.  It’s pretty easy to score a political point about Alex, but he’s been in politics a long time.  I’ll leave it up to him and let him go in peace.

CARY:

Would you, as the one commentator said today, he said he really was a giant of the conservative cause though, that at a time when many are suggesting the Coalition doesn’t have a strong narrative, he at least was strong in what he felt a conservative Government should be all about.

TREASURER:

Well, as you know from that article today, dumping effectively on his own Party as he goes out the back door.  I don’t think that’s the best way for people like Alex to go.  Whether his description of the disarray on the conservative side of politics is completely accurate or not, I think people like Alex who have served for a long period of time in the Parliament should just go and they should go quietly.

CARY:

Our Treasurer, Wayne Swan, enjoy the day.

TREASURER:

Good to talk to you.