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

7 August 2008

Interview with David Reyne and Kim Watkins

9am with David and Kim

7 August 2008

SUBJECT: Family, economic challenges, interest rates, banks, Australia’s Future Tax System discussion paper, Carbon Pollution Reduction Scheme, Liberal leadership

WATKINS:

Wayne Swan joins us today to talk financial and familial responsibility. Good morning.

REYNE:

Good morning.

TREASURER:

Well thanks for the welcome.

REYNE:

Just on being the father, we heard that your daughter-

WATKINS:

Are you apportioning blame already, are you, or-

REYNE:

No. Well-

WATKINS:

Father of-

REYNE:

No. I’m just moving off that ‘r’ word, recession. Your daughter plays in a band.

TREASURER:

She does, yes.

REYNE:

Do you go and see her?

TREASURER:

Yes I do. The time I saw her was at an MTV evening in Sydney at the Metro.

WATKINS:

This is her. (referring to footage on screen)

TREASURER:

And it was a terrific evening. But I was a bit puzzled because at one stage all these people started lining up for autographs. But then I looked around and I saw it was because they were there for Jess from the Veronicas, who was standing beside me.

REYNE:

What do punters-

WATKINS:

There you are. Look. (referring to footage on screen)

REYNE:

Oh there you are, front and centre.

TREASURER:

That’s right.

WATKINS:

You’ve got to lose the jacket.

TREASURER:

That’s up in Brisbane.

WATKINS:

Oh that was Brissie was it? You’ve got to lose the jacket.

TREASURER:

Yeah.

WATKINS:

You need to show off your tatts.

TREASURER:

But you think I’d look any different without it?

REYNE:

Probably not.

WATKINS:

That’s true.

REYNE:

Do punters approach you? Do they ask you to buy them a drink?

TREASURER:

Oh occasionally, yeah. I mean, they say ‘You’ve got a big surplus. What about a few drinks?’

REYNE:

What do you know of her music? I mean, what style of music does she play?

TREASURER:

She describes it as melodic rock. So it’s hard, but it’s got a pop element. I really do like it. I think it’s pretty good.

WATKINS:

It’s not thrash though.

TREASURER:

No, no, it’s not.

WATKINS:

Cause it’s hard to tell on YouTube.

TREASURER:

It’s not heavy metal, but there’s a lot of strong guitar backing up the vocals.

REYNE:

Where does she get her musical ability from? Is it from you?

TREASURER:

No, it’s from her mother and her grandmother. There’s none of that musical talent on my side of the family.

WATKINS:

What about the other two kids? Are they into music as well?

TREASURER:

Yeah they are. The second daughter sings in a band as well. And Matthew, who’s 13, is doing quite well on the guitar.

WATKINS:

I’m wondering, the children’s interest in music, has that been encouraged I guess because they look at your job and see that it’s so terribly serious?

TREASURER:

No, not particularly. I think driven mainly by their mother, the elder girls were in ballet from a very early age, and Kim was very active in the youth ballet in Queensland and chaired that for many years. So it was through dance, into music, public performance. It really didn’t have anything to do with my responsibilities. It probably happened in spite of them.

WATKINS:

Well perhaps they get the ability to be a good public performer from their father. There’s a link.

TREASURER:

I think they’re pretty good in their own right.

WATKINS:

But let’s get into it. Nine months into Government, and we know that the discussion paper has been released on tax changes. Let’s talk about that. I know that you don’t want to go into specifics because obviously it’s only a discussion paper at this point, but the results of that paper, or the report, will be released in 18 months time. What will be done with the information contained in that report?

TREASURER:

Well the Government will have to act on the recommendations that it thinks it should act on, at the end of that period. But there will be reports on the way through. The final report will be completed by the end of next year. For example, there is going to be a report on pensions which will come through and be complete by next February. And as you know, there is an issue to do with the adequacy of the pension. I mean a lot of pensioners are doing it really tough, and what we said is we have to have a comprehensive look at the pension because fixing that adequacy problem costs a lot of money. So we’re doing that through this process, and we’ll have a final report on that around February next year. So there will be staged reports coming out of the Henry Review.

WATKINS:

That will allow you the opportunity to then implement some changes where you-

TREASURER:

Yes it will. Most certainly. You know pensioners are doing it really tough.

WATKINS:

They are.

TREASURER:

I mean for aged pensioners we put the bonus out there, and for all pensioners we increased the utilities allowance in the Budget. But we do recognise we have to do more.

REYNE:

So does that mean more revenue needs to be raised from tax?

TREASURER:

Well certainly it all has very big implications for our Budget, and we have to do these things in an affordable way. So that’s why we’re going through this process, and we will approach the conclusions through the Budget. Because, you know, we have to run a disciplined Budget. We’ve got a very big inflation problem at the moment. Sixteen year highs at the end of last year. That’s what we inherited, and that has produced something like ten interest rate rises under the Liberals. That is what is impacting on economic growth at the moment. And in addition to that we’ve got these very big international challenges that are happening. The most uncertain times in 25 years in the international economy. So we’ve got to take all of those things into account as we develop our Budget and respond to reports such as the report on pensions.

WATKINS:

I want to talk about the international pressures in a moment, but you said there that you’ve inherited these issues. At what point does the Government then assume control and responsibility for what’s happening with the economy?

TREASURER:

Well from day one. I mean we accepted responsibility from day one. But the Liberals would pretend that somehow inflation only began to rise on the 26th of November last year, after the election. I mean inflation has been building for a long period of time. It’s going to take time to deal with, but the consequence of higher inflation has been eight interest rate rises in the last three years alone, and that is having a fundamental impact on economic growth. And on top of that, this year what we’ve had is this oil shock. The price of petrol has gone through the roof. I think it’s increased, or had increased at its peak, about 20 cents a litre since the Budget. So that impacts a lot on the confidence of consumers. So those are things we have to deal with.

WATKINS:

So it’s really hurting, isn’t it?

TREASURER:

It certainly is hurting. That’s one of the reasons why in the Budget we delivered the tax cuts which commenced on the 1st of July. I mean we recognise that families out there are under tremendous financial pressure, and we have provided relief in the Budget because people who work hard do deserve some incentive and relief in the tax system.

REYNE:

What can the Government do when the RBA sets their interest rates and the banks ignore them?

TREASURER:

Well there’s two questions in there. One is what can the Government do about interest rates? Well we’ve got to fight inflation. But secondly, what can the Government do when the banks move outside the official cycle of the Reserve Bank? We don’t regulate interest rates, but I tell you what we can do. We can make the banking market as competitive as possible, which is one of the reasons why I’ve been so insistent on putting in place a bank-switching package, so that people who are unhappy with their bank can shift their account.

If the Reserve Bank were to take a decision at some stage in the future to reduce the official cash rate, then it would be my expectation that within a reasonable amount of time the banks follow it down. Because you might recall that when the Reserve Bank was going up, the banks were pretty quick to follow. So I would have an expectation that if it were coming down, and we don’t know that it is – that’s entirely a decision for the Reserve Bank – but if it is coming down, I will certainly have an expectation that in a reasonable amount of time the banks do follow it down.

REYNE:

And if they don’t?

TREASURER:

Well if they don’t, we’ll have to look at how competitive the market is and what further measures we can take to enhance competition in the market.

WATKINS:

Why is talk of a recession so damaging?

TREASURER:

Well because I think it fails to really appreciate the underlying strengths of the economy. Yes, we do have a slowing economy. First of all because of interest rate rises over a long period of time. Secondly, because of all those international circumstances. But the underlying strengths of the Australian economy are still there: a strong Budget surplus, the tax cuts that have been put out there, the investment funds that we have created, the strength of our regulators, and the fact that growth in the developing world is still strong. If you were any country in the world in these uncertain international conditions, the country you’d want to be is Australia.

WATKINS:

Given the fact that America seems, well it’s sliding into a recession already.

REYNE:

This is affecting the interest rates the banks are setting as well.

TREASURER:

It’s certainly doing that. But the one thing we don’t have here - we don’t have the sub-prime problem in our banks. Our banks still remain profitable, and you can’t say that of many other banks around the world. There is something like only 16 banks in the world that are double-A rated. Four of them are Australian. So one of our strengths is that our banks are still in good nick, because by and large they didn’t get involved in a lot of those practises that have occurred in the United States and elsewhere in the world.

REYNE:

Well before we run out of time, let’s talk about an emissions trading scheme.

TREASURER:

Sure.

REYNE:

The economic challenge that is definitely going to be. What’s a tonne of greenhouse gas worth?

TREASURER:

Well the Green Paper talks about a carbon price of about $20, but it depends on the design of the scheme. So that’s why we’ve got the Green Paper out there. We’re consulting with industry about its impact. We’re consulting with households. We’ve put the basic principles of the design out there for people to look at, and that’s the process we’re going through at the moment. But can I just make the point about the economic impact. If we don’t deal with dangerous climate change, the cost of inaction will be far greater than the cost of acting now. So if we act now, it will be less disruptive on our economy than if we delay.

WATKINS:

We hope so, but we don’t really know until we-

TREASURER:

It’s a very big challenge. Many countries in the world are acting. 20-odd countries in Europe. 20-odd states in the United States. What we’ve got to do is get a head start, because the jobs of the future will come from going carbon clean and we need to be in that game.

REYNE:

Why would we compensate petrol prices?

TREASURER:

Well because-

REYNE:

Shouldn’t we be deterring people? Shouldn’t we be discouraging? Doesn’t it fly in the face of the whole reason?

TREASURER:

That’s already happened. I mean petrol prices are up roughly 30 cents a litre this year. It’s had a huge impact on the consumption of petrol. You don’t want to be making that even worse. You don’t want to be doing that. But what we have said is we will include transport, and that includes petrol, in the scheme for the long-term. But given what has occurred in the oil market in recent times, there is no need to send a further price signal when it comes to petrol.

WATKINS:

And clearly we need to be investing, and we are investing, in renewable energies.

TREASURER:

Yes we are, and we need to invest a lot more in cleaner technologies. That’s the whole point.

WATKINS:

And faster.

TREASURER:

Exactly. That’s the whole point of an emissions trading scheme. It puts a price signal into the market to encourage business to invest in cleaner technology. That’s what it’s really all about. Despite all of the detail, all of the complicated terms, all of that, that’s the bottom line for an emissions trading system.

REYNE:

Is this the great economic challenge for this Government do you think?

TREASURER:

Oh it’s a huge economic challenge. There are economic challenges in terms of the international environment, there’s a big economic challenge in terms of inflation, and of course there’s a big economic challenge when it comes to climate change.

WATKINS:

And there’s a big challenge within the Liberal Party at the moment, isn’t there?

TREASURER:

Yes there certainly is. Well there’s many challenges within the Liberal Party at the moment, they’re everywhere.

WATKINS:

So who would you prefer as leader?

TREASURER:

Look it doesn’t matter. You know, same teapot, different cosy, really. If Mr Costello wants to include a chapter in his book on how he got inflation at a 16 year high, perhaps he can take it on.

WATKINS:

Ohh.

REYNE:

Just before you go, look you were born on the 30th of June, which is the end of the financial year. Were you welcomed as a tax or a return, do you think?

TREASURER:

Well I’ll say this. It’s always a reminder to put in my tax return.

WATKINS:

You’d be hoping for a present. Alright. Look lovely to talk to you. Thanks again Wayne.

REYNE:

Thanks for your time Wayne.

TREASURER:

Good to be with you.

WATKINS:

Cheers.