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

3 September 2008

Interview with
Lyndal Curtis

ABC Radio AM Program

3 September 2008

SUBJECTS: National Accounts; interest rates; luxury car tax; Budget surplus

CURTIS:

Wayne Swan, welcome to AM.

TREASURER:

Good morning.

CURTIS:

The National Accounts figures are out today. They're a snapshot of the three months to June when the global slowdown and credit crunch was beginning to have an impact and when you brought down your first Budget. What are you expecting they'll show?

TREASURER:

We'll have to wait and see, and the figures come out at 11.30 am. But there's no doubt that our economy is slowing, and it is slowing on the back of the global credit crunch. It's slowing on the back of the 10 interest rate rises that occurred under the Liberal Party. But the extent of that slowing will only be clear when we see the National Accounts today. But you've got to remember that just about every other developed country is facing very tough circumstances at the moment. You've got the UK, Japan, Germany, France and Italy all recording zero or negative growth in the June quarter.

CURTIS:

If the Accounts show that the economy is slowing but not slowing sharply, does that leave room for the Reserve Bank to cut interest rates further?

TREASURER:

From day one we have said that we would put in place a disciplined fiscal policy which would create room for the Reserve Bank to move, which is why we built a $22 billion surplus. It's why we put money into the investment funds and…

CURTIS:

And room for them to move again?

TREASURER:

Well, that's entirely up to the Reserve Bank. They take these decisions independently so I don't give them advice publicly. But what I accept responsibility for doing is putting in place a disciplined fiscal policy and investment for the future that will promote growth in a lower inflationary environment. That's what we've got to do. If we want to get interest rates down over time we've got to get inflation down.

CURTIS:

The good news yesterday in the form of an interest rate cut, the banks were quick to heed your calls to pass them onto mortgage holders. Do you also expect banks to pass them onto businesses and credit cards?

TREASURER:

Well, I certainly expect the banks to do what they did when rates were going up, and they passed them on pretty quickly, those RBA rate rises. And I expect them to pass on the rate cuts in the same time that it took them to put them up.

CURTIS:

To credit cards as well?

TREASURER:

The same will apply. There'll be differences between the banks. I'd have to go and have a look at what bank did what and when. But certainly, the initial response from the four major banks yesterday was in line with what they have done in recent times when rates were going up.

CURTIS:

You said the economy's not out of the woods yet yesterday given the global pressures and the sorts of pressures other economies are under, as you've noted. How much further is the Australian economy going to be buffeted? How much more pain is there?

TREASURER:

Well certainly internationally conditions are most uncertain, the most uncertain in 25 years. As I've said before, most developed economies are slowing dramatically. And we are not immune from the impact of that, nor are we immune from the impact of the global credit crunch which, in itself, is pushing up borrowing costs for businesses and for households. But we are better placed to withstand these conditions than perhaps any other country in the world. We've got, as I said, a significant surplus, if it's not significantly eroded by the Senate. We've got the very high terms of trade. We've got very strong business investment. These are things that many other countries in the world would wish to have but don't.

CURTIS:

So, is some of the doom and gloom around at the moment misplaced?

TREASURER:

It's important to get this into perspective. There is a lot of pessimism around on the back of the global credit crunch and the impact it has had particularly on global stock markets, and that's impacted here as well. But here in Australia we have many advantages over the rest of the developed world. As I've said, our Budget is in a very good state. We are delivering tax cuts out there this year, next year and the year after. The terms of trade are high. Our banking system and our regulators are in good shape. There's not many other developed countries in the world who can say that they've got those factors going for them.

CURTIS:

So, while growth may be slowing, the economy might head for a softer landing rather than a hard one?

TREASURER:

I'm not going to predict the outcome of the National Accounts today. But what we will do in the Rudd Government is everything we possibly can to invest in expanding our productive capacity to make sure that we get inflationary pressures down in the economy so we can grow in a sustainable way. That's our objective.

CURTIS:

You mention the Senate. You've done a deal with the Greens over the luxury car tax, and Senator Nick Xenophon is happy with some of the things you've offered. The last remaining Senator you need is the Family First Senator, Steve Fielding, who's called for an exemption from the tax rise for farmers and tourism operators for small businesses. Are you prepared to agree with that?

TREASURER:

We're in discussions with both the Greens and all of the minor party Senators. None of those are concluded yet. Nothing is certain. It's very important that we get through the Senate these important Budget measures which are very important in terms of protecting the surplus and having the capacity in the longer term to fund our investment funds, the Education Fund, the Building Australia Fund, the Health and Hospitals Fund. So, I'm talking to each and every one of these Senators. But I can't say at this stage that any arrangements are finalised or guaranteed.

CURTIS:

But that any deal could erode your surplus?

TREASURER:

We are going to be very responsible, measured and reasonable in discussions with the minor parties. But at the end of the day if the surplus is eroded, that will be on the head of the Liberal Party. It is just the height of economic irresponsibility at a time of global uncertainty such as we experience at the moment for them to put the Government in a position where this surplus will be eroded, and eroded considerably, if they have their way.

CURTIS:

Wayne Swan, thank you very much for your time.

TREASURER:

Thank you.