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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

18 September 2008

Interview with Marius Benson

ABC News Radio

18 September 2008

SUBJECTS: US Financial Market; Global Economy; Malcolm Turnbull

BENSON:

Wayne Swan, the US market was down four per cent overnight. It seems to be getting worse. If you throw $100 billion into a financial system and it doesn't cheer it up it must be pretty crook.

TREASURER:

I don't speculate about the future course of markets, Marius, but as we've been observing for some time, and indeed as we pointed out during the Budget, we face a very complex set of international circumstances when it comes to international financial markets, and they are taking some time to play their way right through the system. And of course, it's happening in very unpredictable ways. That's why the Government way back in May was at great pains to point out the complexity of the international situation facing Australia, and the importance therefore of having a very strong surplus in this country as a buffer against this global international uncertainty which unfortunately has continued to affect the economy in all sorts of ways, affecting confidence on global markets, slowing world growth. We're not immune from all of that but certainly these are great challenges, not only for the globe but also for the Australian economy.

BENSON:

Just looking at the way the world is going, George Soros, who's a bit of a legend in the financial world, says we're still heading into the storm, we're not even beginning to come out.

TREASURER:

There's been all sorts of predictions by various figures in international financial markets. But the one thing I know, Marius, is this: that if you were in one country in the world in these circumstances, the country you'd want to be in is Australia. One of the things we've got going for us is a strong Budget surplus, we've got a high terms of trade and we've also got a well-regulated and well-capitalised banking sector. Those are strengths for Australia in these circumstances.

BENSON:

Glenn Stevens, the Governor of the Reserve Bank, was making the point that the banks are very secure, very well capitalised, as you just said, but he's probably there talking about the Four Pillar banks. What about those other players in the market like Macquarie Bank? Are those sort of institutions coming in for particular scrutiny from you in these circumstances?

TREASURER:

All of the deposit taking institutions are regulated by APRA. It's a first-class and world-class regulator, and so is the Reserve Bank. They have been in constant contact with all of our deposit-taking institutions since this began: first, last August, and of course it came back with a vengeance in January this year. They've done a first-class job in working with these financial institutions, and as the Governor has said and has APRA has said, they are all well-capitalised.

BENSON:

And some advice came from the Governor, Glenn Stevens, yesterday. He was saying to people that it's time to balance the budget, get out of debt, don't put anything more on the card. Do you think that is sound advice?

TREASURER:

I think it's always sound advice to make sure that your living costs match your income. But I'm not in the business of being a personal financial adviser to individual Australian families who are under tremendous financial pressure - 10 interest rates rises in a row under the Liberals, 16-year high inflation, and then superimposed on top of that, the oil price spike and international inflationary pressures. This has put Australian families under tremendous financial pressure and is slowing the economy. There's no doubt about that either.

BENSON:

Is Glenn Stevens right when he says credit has been too easy to come by in the past?

TREASURER:

I think one of the lessons of what has occurred internationally is that that may have certainly been the case. But in this country our banking sector is well-regulated and we have not suffered from the sort of lending standards you've seen in the United States in the sub-prime market, which is really the cause, the underlying cause, of so much of the financial turmoil that we're seeing at the moment. We don't have those sorts of lending practices in this country in the way in which they have reared their head in the United States.

BENSON:

It's pretty clear we're heading for slower economic times ahead, if people, especially if they heed the advice of the Governor of the Reserve Bank and they put off buying that flat screen or that new car.

TREASURER:

Our economy is slowing but as I said before, there are underlying strengths in the Australian economy. We've got a strong Budget surplus. We've also, Marius, got those investment funds out there - the investment funds through the Building Australia Fund, the Health Fund, the Education Fund. And of course, that's why we need to maintain our strong surplus and it's why the attempt by the Liberals to vandalise this surplus in the Senate is so utterly irresponsible. To do this at a time of global uncertainty is the height of economic irresponsibility.

BENSON:

Speaking of the Liberals, it looks like you're going to have a new counterpart looking at you across the Parliamentary chamber. A new Shadow Treasurer might be Julie Bishop or Andrew Robb. Any preference?

TREASURER:

I doesn't matter which one it is. They'll have a big job ahead of them trying to resurrect the Liberal's economic credentials. I mean, the Liberals left Australian families with record inflation and 10 interest rate rises on the trot. They denied that inflation was a problem. Mr Turnbull himself called it a fairy tale and a charade and then he turned around after saying that and said in the Budget we didn't do enough to fight inflation. And of course now he's out there trying to blow a $20 billion hole in the surplus, $6 billion in our Budget measures and another $14 billion in extra spending. I mean, he's taken on board every single piece of Brendan Nelson's economic irresponsibility, and he did it in one press conference.

BENSON:

You've been criticising Malcolm Turnbull, you've been labelling him an out of touch silvertail, and some people are saying that's a bit dangerous for Labor given the degree of prosperity enjoyed by, say, the Prime Minister's family.

TREASURER:

But he is out of touch. There is absolutely no doubt that Malcolm Turnbull is out of touch. Why else would he have said that inflation was a fairy tale? I mean, why else would he have said that interest rate rises were overdramatised? Why else would he be up in the Senate trying to deny families a tax cut of $1200 by opposing the Medicare Levy Surcharge changes to the threshold? Why else would he sit in a Cabinet and vote against an increase in the single rate of the pension? I mean, he is absolutely out of touch. It's not his personal circumstances that are the problem here, it's his values and it's his policies.

BENSON:

Has he got you more worried than Brendan Nelson had? Is he more intimidating?

TREASURER:

I don't believe so. Same horse, different jockey.

BENSON:

Wayne Swan, thank you very much.

TREASURER:

Thank you.