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 August 2008

Doorstop Interview

Coolum, Queensland

1 August 2008

SUBJECT: Economy, Peter Costello, Brendan Nelson

TREASURER:

Australia is better placed to withstand the fallout from the slowing global economy than most nations in the world.  Given the global turmoil and given the fact there have been eight interest rate rises in three years, that is producing a slowing in our economy.  And that, of course, is reflected in retail sales figures, it’s also reflected in employment growth. 

But we should keep things in perspective.  We should keep things in perspective because there are underlying strengths in the Australian economy.  We have a very strong budget.  We have a very big package out there to assist working families.  The working families package delivered in the Budget contains tax cuts which are being delivered from 1st July.  And also we have a nation building program of investment to deal with the long term challenges. 

So, Australia does face challenges, uncertain global conditions, perhaps the most uncertain global conditions in 25 to 30 years, but there are underlying strengths in the Australian economy and we do need to keep these figures in perspective.

JOURNALIST:

Are we on the brink of a recession, Mr Swan?

TREASURER:

I think that sort of talk is unhelpful and I don’t think that sort of talk takes into account the underlying strength of the Australian economy.  There is no doubt that the economy is slowing.  Eight interest rate rises in three years, on the back of the highest inflation in 16 years, is certainly producing a slowing in the economy.  The Government has put in place policy settings, strong policy settings, to fight inflation to take the pressure off interest rates.  That’s terribly important.  We’ve been saying that from day one we are absolutely committed to disciplined economic management but we must also recognise the underlying strengths of the Australian economy and the fact that our surplus gives us the buffer against international uncertainty.

JOURNALIST:

You’ve said slowing.  Is there a chance that we could come to a crashing halt?

TREASURER:

Well, the economy is slowing but as I said before, there are underlying strengths.  We are not immune from the fallout of international circumstances.  As I said before, the international economy is slowing and that certainly impacts on this economy.  But this economy has many things going for it.  It has a strong surplus, it has high commodity prices, we are putting in place a long term reform program to build the productive capacity of our economy.  All of those things are working in our favour.

JOURNALIST:

Would you like to see the Reserve Bank consider its monetary policy, perhaps ease interest rates?

TREASURER:

That’s entirely a matter for the Reserve Bank.  But what the Government has said and what the Government has done from day one is to deal with the inflation challenge to put downward pressure on rates in the long term.  You see, the Government did inherit inflation at a 16-year high and there were eight interest rate rises over three years.  They’ve certainly hurt family budgets, there’s no doubt that families are under pressure.  That’s why we fought so hard to put into the Budget those tax cuts, the additional childcare relief and the additional relief for educational expenses, because we do understand what financial pressures families are under.

JOURNALIST:

If the Reserve does cut those rates, do you think that the banks will pass on those cuts to consumers?

TREASURER:

I think customers will be absolutely filthy if the banks do not pass on, within a reasonable time, any official cash rate reductions.

JOURNALIST:

Have we reached the bottom or is there a longer way to go?  Should we be bracing for more stormy weather?

TREASURER:

Well, as I said before, we do face stormy international conditions, the most uncertain global conditions in 25 to 30 years.  But the underlying strengths of the Australian economy mean that we are in a vastly different position from many of the countries in Europe and from the United States.  We have not been infected by the sub-prime crisis like those countries have.  Our banks do remain strong.  Our regulators are first class.  We have a strong Budget surplus.  We have high commodity prices.  All of these things strengthen the underlying orientation of the economy.

JOURNALIST:

The figures showing that the economy’s slowing, the retail sector’s struggling a little, was that startling for you, personally, to see?

TREASURER:

No, it’s not startling because when you have eight interest rate rises in three years they carry a lot of punch, and that’s really impacted on a lot of households, and that’s why the Government said from day one we would deal with the inflation challenge so we could put maximum downward pressure on interest rates, and that’s what we’ve been doing from day one.  But you see, these pressures developed over a long period of time.  A long time of neglect by the previous government of inflation; the consequence of that was very high rates.  They are impacting on consumers, no doubt about that. That’s why the Government has put in place all of the policy settings we have in the past eight months.

JOURNALIST:

Treasurer, there’s talk of a Peter Costello comeback.  Do you think that he’s Australia’s greatest Treasurer?

TREASURER:

Well, Peter Costello is part of the problem.  He can’t be part of the solution.  His legacy is inflation at 16-year highs and WorkChoices, that’s Peter Costello’s legacy.  As I said, he’s part of the problem.  He can’t be part of the solution.

JOURNALIST:

Do you think it shows how desperate Brendan Nelson’s leadership has become if the Libs are looking towards him?

TREASURER:

Well, I think the problem with the Liberal Party is that they haven’t got any policy.  You see, they can’t face up to the long term challenges and they can’t face up to the consequences of their neglect over the past four or five years – reckless spending over the past four or five years, record high inflation over the past four or five years, record neglect of infrastructure over the last four or five years.  That’s the record of the Liberal Party and I think that record shreds their economic credibility.