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

24 September 2008

Joint Press Conference

with the Hon Julia Gillard MP, Acting Prime Minister

24 September 2008

SUBJECTS: International Monetary Fund, Global financial crisis, luxury car tax, COAG reform agenda, short selling, Schools Assistance Bill

JULIA GILLARD:

I’m here with the Treasurer to welcome the International Monetary Fund (IMF) article four report on Australia, and this report concludes, and I quote, that: ‘The sound macroeconomic framework that we have in this country should permit Australia to weather the global downturn and contain inflationary pressures.’ This report comes to three important conclusions: it welcomes the Government’s budget surplus; it notes the resilience of the Australian banking system; and it welcomes the Government’s ambitious reform agenda through the Council of Australian Governments (COAG). And I want to say in respect of that agenda of reform through COAG, that it is a vital agenda of reform for this country’s future; that the work that is happening to end the blame game is work that is all about preparing this nation to meet the challenges of the future.

Now obviously intergovernmental discussions can be complex. But for Australians this ambitious program of reform is about better schools; it’s about better hospitals; it’s about a seamless national economy; it’s about a national approach to climate change; a national approach to homelessness and housing; it’s about a new era of nation building and investment in infrastructure; and importantly, it’s about closing the gap for Indigenous Australians.

The endorsement of this program of reform is significant. The Government has worked intensively throughout the year with our state and territory colleagues on this ambitious program of reform. And many of the intergovernmental agreements that will deliver these vital new reforms will be concluded before the end of this year.

With those words, I’ll hand over to the Treasurer.

WAYNE SWAN:

Thanks very much, Julia. It’s very encouraging to get such a strong endorsement, such a strong endorsement for the Government’s budget settings—the economic settings of the Budget. And also, I think, for our long-term reform agenda, and also, such a strong endorsement of the quality of the banking and regulatory systems that we have in this country.

I think this report underscores the importance of the budget surplus and the role that fiscal policy does play in supporting monetary policy. And you might recall there was a fair bit of debate back last May about the appropriateness, or otherwise, of the budget settings. I think this report does demonstrate very clearly that we got the balance right. I think the report also strongly supports the decision of the Government to do something long term about the capacity constraints in the Australian economy, through the establishment of our investment funds. And it recognises the important role those investment funds will play in lifting the productive capacity of the Australian economy and putting in place the long-term investments for the future.

I think the IMF is also adding weight to the Government’s view that we’re not immune from global difficulties, but we are in good shape to handle those difficulties. And I think, like the Government, the IMF is saying that we do expect the slowing of global growth, but we still have a lot to be optimistic about. All of that is pretty encouraging but we understand that there are difficult times ahead. We’re not out of the woods yet but it’s good to see that the IMF shares our view about the budget settings and the long-term reform agenda for this country.

JOURNALIST:

Mr Swan, the report also says that the the risks are on the upside in the [inaudible] economy, says that if inflation persists at an elevated level, further fiscal restraint may be needed and the authorities and staff agree that monetary policy should be tightened quickly if needed. Leading indicators suggest [inaudible] is expected. This was based on conversations in July.

WAYNE SWAN:

That’s right.

JOURNALIST:

Do you think that assessment has changed very much and if there is a need for further fiscal restraint, what would be the timeframe for that?

WAYNE SWAN:

Well, I’m not going to speculate about the future. As we know, the impact of these events in the United States and on global markets is one that has been quite profound. The flow-on impacts of that in terms of world growth are yet to be seen. I think the IMF has just made the rather sensible conclusion that for the period that this report covers that we got our settings right.

The Government will have to be flexible in responding to changes to the international environment. We are acutely aware of the need to tackle inflationary pressures in the economy. But at budget time, we were also acutely aware of the countervailing forces impacting upon this country.

Both the Prime Minister and I, in April, were overseas—we became acutely aware of the potential for the US sub-prime crisis to continue to impact on world growth. That’s one of the reasons we chose to place the budget settings as we did in May and we will continue to make appropriate adjustments as time goes on. So there are always risks out there—sometimes they are on the upside and sometimes they are on the downside.

At the moment, if you are looking at  the international environment, you’d have to say that the risks are more on the downside. This report would reflect the assessment of some weeks ago.

I mean last week, for example, was one of the most momentous weeks that we have seen in terms of, in terms of, economies around the world and in terms of the United States. So, the job for policymakers is to be flexible in that environment.

JOURNALIST:

What advice are you getting now from Treasury about the impact that the global financial crisis may have on government revenues, pitching forward to the MYEFD in late November.

WAYNE SWAN:

Let’s not speculate about where we’ll end up in MYEFD, but there is no doubt if you just were to look at the impact, say, on stock markets, that there would be a substantial impact there in terms of future government revenues from capital gains tax, for example—that would be one. But it is too early, far too early, to be making that assessment or speculating about what the outcome may be. Because, as you know, on the other side, we’ve had some pretty healthy increases in commodity prices and so on. But if you’re looking at the second-round effects of what has gone on in world financial markets—and most particularly in the United States—they will have implications for future revenue. And to underscore that point, that’s why the integrity of our budget surplus is so important, and how irresponsible it is for the Liberal Party to attack that surplus at a time of global economic uncertainty.

It is completely economically irresponsible for the Liberals and the Nationals to be doing in the Senate what they have done in the last 24 hours. I mean, there is more economic responsibility in the hands of the Greens—Mr Xenophon and Mr Fielding—and in their little finger than there is the Liberal and National Parties in the Senate.

Now, fortunately, we’ve put forward a balanced measure in the Senate, a balanced proposal on the luxury car tax and that has passed. We have put a balanced proposal in terms of the Medicare levy surcharge threshold and we are talking to the minor parties about that, but we can’t get any economic responsibility out of the Liberal and National Parties in the Senate.

Surely, this report underscores the absolute importance of a decent surplus and why the Liberal Party should be supporting the Government in the Upper House. But unfortunately, I think they’ve completed shredded any pretence at having any economic credibility at all.

JOURNALIST:

Mr Swan, you’ve passed the luxury car tax, but it’s kind of a bit unrecognisable from the original form. 

WAYNE SWAN:

That’s not true.

JOURNALIST: 

Post renovations in the Senate.

WAYNE SWAN:

That’s not true. We’ve made some concessions, but it’s still there. The measure is substantially still there, the revenue flow is substantially still there.

JOURNALIST:

[inaudible] is not there, isn’t it?

WAYNE SWAN:

Beg your pardon?

JOURNALIST:

Rebates and [inaudible] and people have got to go back so they can claim back their rebates.

WAYNE SWAN:

Well, that what happens when the Liberal Party behave like economic vandals in the Senate. I mean, we’ve got a responsibility to the country, we’ve got a responsibility to the revenue base, we’ve got a responsibility to the Australian people to preserve the integrity of our Budget—and that’s what we’re doing. We are taking responsible measures in the Senate; we are negotiating with the minor parties—the Greens, Mr Xenophon, Mr Fielding—we’re doing that in a sensible and measured way. We’ve got a good outcome. I don’t accept your characterisation of that outcome at all. This is the consequence of a Senate where the Government doesn’t have a majority.

But what has made all of that necessary? The vandalism of the Liberal Party in the Senate. Now Mr Turnbull said on day one of his leadership that he was going to be different and he was going to provide economic leadership. Well it’s not economic leadership to vandalise the Budget in the Senate. It certainly isn’t economic leadership to do what he did in his first the press conference, which was spend $20 billion in 20 minutes.

JOURNALIST:

Ms Gillard, on the COAG reform agenda that you mentioned—have you got agreement off the states from the national industrial relations system? Will your forthcoming legislation include measures on how the (inaudible)?

JULIA GILLARD:

The discussions with the states on workplace relations are actually occurring through the relevant Ministerial Council rather than straight through COAG. I’ve met with the Workplace Relations Ministerial Council on a number of occasions and we are discussing the Government’s legislation, and obviously our aspiration to make sure that there is one workplace relations system for all of the private sector.

In that process, of course, the states have very rationally said they want to see the Government’s legislation; they want to see all of the details of the shape of the system. When we have the committee on Industrial Legislation Meeting to go through the Government’s legislation, which will occur from the 7th of October to the 17th, we will also take the opportunity to have officials from states and territories work through the legislation. And we will then go to a further Workplace Relations Ministerial Council at the appropriate time. 

JOURNALIST:

[inaudible]

JULIA GILLARD:

Well, we’re working towards agreement. We’re continuing to discuss with the states getting agreement. Obviously, the states want to see our legislation and then if I can echo some of Wayne’s words,—the legislation will come into the House of Representatives. The great unknown about the future of that legislation is how it will be treated by the Liberal Party in the Senate. And the last stated position of the Liberal Party on this question, still heavily in the embrace of Work Choices, is that they won’t pass the Government’s legislation unless we graft the most hated bit of Work Choices—Australian Workplace Agreements—back into the heart of it.

Well, we won’t be doing that and we are saying to the Liberal Party that the Government’s legislation should be new in light of the fact that the Australian people voted for the policy Forward with Fairness last November. 

JOURNALIST:

The IMF said in this report that it identified the risks to Australian banks from global financial turmoil have been rollover risk because they’re relying so heavily on wholesale funding. I was just wondering if you could give us update on what your assessment is on how banks have been able to access global markets in the last week, whether they’re still being able to access them comfortably.

And also, can you tell us whether it’s true that Macquarie Bank, amongst others, lobbied the Government very heavily over the weekend and if this influenced your short selling decisions, or were the short selling decisions taken and announced on Sunday purely based on advice from regulators?

WAYNE SWAN:

Well, in terms of the term funding for our major deposit taking institutions—my advice for the Reserve Bank is that they have been accessing that term funding on international markets and that they have done that substantially, I think, for the period ahead. But what goes beyond that will be dependent upon on how these matters play out in international markets. So the Government is acutely aware of that, as indeed are the regulators.

Secondly, in terms of so-called lobbying over the weekend, I, as I’ve said in the Parliament, had a meeting with our Council of Financial Regulators Friday afternoon. The major regulators the Reserve Bank—APRA, ASIC, the Treasury—and went through a whole range of issues. This is, consultations that have been happening regularly all year. It so happens that we had a meeting on Friday afternoon and discussed some of the issues, including the issue of short selling. But this is an issue taken independently by ASIC—taken independently by the decisions they made on Friday afternoon and independently in the case of the decision they announced on Sunday afternoon.

The Government does support both those decisions. And I think I explained in the Parliament why there was a change over the weekend and that change was entirely appropriate because of the change in the conditions themselves changed between the close of the markets in Australia on Friday night than elsewhere.

In terms of lobbying, over the weekend I spoke to—as I’ve said, all the regulators—I spoke to a large number of people involved in the financial services sector. Not one of those was in any way dominant in influencing the views that I had about this matter. But, in any case, the final decision was taken by ASIC. I support the final decision they took. Many people in the market  then and now have been lobbying the Government and regulators about these issues. There is absolutely nothing unusual about that. In fact, it’s the way you would want it to be. You would want decisions that are taken like this to be decisions which have been discussed at length with industry.

JOURNALIST:

So you said, just to be clear, Macquarie was one of those organisations?

WAYNE SWAN:

I spoke to a large number of organisations …

JOURNALIST:

Including Macquarie?

WAYNE SWAN:

I’m not buying who I spoke to over the weekend. I spoke to a large number of organisations over the weekend. In any one week since this event commenced on the first of January, I would’ve had regular conversations with CEOs of most of the major financial services corporations in this country and I’ll continue to do it. ..

JOURNALIST:

You see the point of the question that they’re only beneficiary; they’re the only big beneficiary of the short selling …

WAYNE SWAN:

I’m sorry, that is a completely absurd …

JOURNALIST:

Are they the big beneficiary of short selling?

WAYNE SWAN:

… a completely absurd characterisation which doesn’t reflect well on your good self. The fact is that this was a very substantial decision about the integrity of our market. In an environment where serious regulators around the world were moving to take very substantial decisions, and they were markets in which Macquarie Bank or any of our banks were not big players. So these were decisions being implemented around the world late last week and over the weekend. And the beneficiary of the decision by our regulator was the Australian people. They were beneficiary—the Australian people.

JOURNALIST:

Treasurer, do you think that the regulator might’ve made a mistake in the implementation of the decision given the market’s opened late [inaudible]?

WAYNE SWAN:

I think it was always going to be the case that when a decision of this size was taken, there would have to be adjustments made as it was implemented. That was recognised by the regulator. It was also recognised by the ASIC.

JOURNALIST:

Ms Gillard, just back on COAG, and education in particular, a while back Kevin Rudd made a speech to the Press Club outlining a forward program. How have negotiations gone since that time with the states on these matters and will you be taking this matter to the next COAG meeting next week? Do you expect an outcome?

JULIA GILLARD:

The Government’s taken some further steps on the reform agenda. In fact, an important step was taken today when I introduced the new Schools Bill into the Parliament. The Bill delivers $28 billion to non-government schools, but it also makes it absolutely clear that we will be requiring of non-government schools the same transparency and reporting framework we will be requiring of Government schools.

We are moving towards a National Education Agreement, which is about lifting the quality of all schools in this country and about transparency for all schools. Those discussions are continuing. They’re continuing through the Productivity Agenda Working Group that works for COAG. They’ve also continue through the relevant Ministerial Council. We’ve always said that the final arrangements for schools would be made at the final COAG this year—that’s the Government’s timetable and we’ll meet that timetable.

JOURNALIST:

Ms Gillard, how much harder will it be to get agreement given (inaudible) in WA and the prospect of another one in the ACT? How much hard will it be for you to get the national reforms?

JULIA GILLARD:

We’ll make this the last question and then in some famous words, ‘we’ll have to zip’. On the question of arrangements with states and territories, we’ve made it perfectly clear to each state and territory that the Government is determined to ensure that there is a new era of transparency for Australian schooling. We’re determined to make sure parents have information. We’re determined to make sure that you can compare like-schools with like-schools. We also believe this information is important for Government to show where disadvantage is, to show where we need to make the most difference to lift quality in schooling.

So the Government is determined on its transparency agenda—the Prime Minister outlined it at the National Press Club. We’re working towards finalising those agreements with all governments, including newly elected governments.