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

15 October 2008

Interview with David Kosh

Sunrise, Channel 7

15 October 2008

SUBJECTS: Economic Security Strategy

KOCH:

Is the massive economic rescue package right for Australia? The Federal Government is spending more $10 billion to help you cope with the financial crisis and this is what you'll get – lump sum payments for pensioners and carers and self-funded retirees, $1,000 each, per child, in low and middle income families and up to $21,000 for first home buyers. So has the Government spent too much and what will this mean for interest rates? Treasurer Wayne Swan joins us now. Treasurer, good morning to you. No other Government around the world has responded to the crisis in this way. You'll really pulled out of the blocks here. Why?

TREASURER:

Well because I think the global financial crisis has entered a dangerous new phase. It's changed its face dramatically in the last couple of weeks and that's the lesson that I learnt in Washington, talking to world leaders over the weekend and other countries around the world are responding. But the fundamental lesson that I think the Government has been aware of for some time is you have to stay ahead of the game and that means using every lever of policy. Monetary policy has already been eased but because of the dramatic slowdown in growth which will result from events, particularly of recent weeks, we believe that the economy needs an immediate boost through this package.

KOCH:

Okay, we're in much better shape than most other countries around the world. Our financial system is in good shape. Our economy is in good shape. What do you know that we don't know? What's Treasury telling you? Are you seeing really early signs of a major stumble here?

TREASURER:

Well, most certainly the Treasury believes that the global events of recent weeks will have a significant impact on growth over time. Other world economies and other world leaders believe that. The economic briefing from the IMF on the weekend was zero growth in advanced economies and a more pronounced slowing of growth in emerging economies and, as you know Kochie, slowing growth in emerging economies impacts more immediately on our economy. So we think it's terribly important that we give this fiscal boost to strengthen our economy, particularly in the next period ahead, the next six months. You see, as you're aware, monetary policy also is kicking in with that 100 basis point cut from the Reserve Bank, but we wouldn't expect the impact of that to be felt until probably more the second half of next year. So we are really looking at this immediate boost.

KOCH:

Without this package, were you scared we'd go into recession?

TREASURER:

Well, certainly we wanted to avoid a sharp contraction in growth. Sharp contractions in growth are expected to happen elsewhere in the world. So we thought it was very important to move early to strengthen our economy, indeed as we have been doing all year. I mean back in the Budget we knew that the possibility of these events turning really nasty was certainly on the agenda and that's why we moved early to build a strong surplus to give us that buffer so we could actually be in the position that we are now in to be able to respond. Many other countries don't necessarily have that luxury Kochie.

KOCH:

Britain and the US have bought into their local banks and in some cases actually bought them outright. Do you intend to become a shareholder in any of our major banks? To actually buy a stake in them?

TREASURER:

Well, fortunately our banks are well capitalised, Kochie, but we moved with our guarantee the other day because of what was occurring internationally and the fact that the knock on effect of that was to have a dramatic impact on the cost of raising funds by our banking system. But our banks were safe before that move and they're safe after that move but what we have done is strengthen them, given what other changes are taking place elsewhere in the world. We've got some of the best banks in the world in terms of international ratings.

KOCH:

So, they don't need you to buy in at the moment. A lot of people emailing in, all of these bonuses to pensioners, self-funded retirees, families on Family Tax Benefit A, when can they expect to get the money?

TREASURER:

Well, from the 8th of December. That's about as quickly as it can be delivered and that's why we are focussing on delivering those benefits which will be of immediate benefit to people.

KOCH:

Not a risk to inflation or any future interest rate cuts you don't think?

TREASURER:

No, I don't believe so. I think what we've got now is monetary policy working in tandem with fiscal policy. I heard the story earlier. I've been talking regularly to the Reserve Bank, in fact I met with them on the morning I left for the United States and, of course, my Treasury Secretary, Secretary Henry, is liaising very regularly with the Reserve Bank and indeed because of circumstances from the beginning of this year, Kochie, we've been in contact with all of our regulators regularly.

KOCH:

Okay, Treasurer. Thanks for joining us this morning.

TREASURER:

Great to be with you.