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

6 November 2008

Interview with Fran Kelly

ABC Radio National Breakfast

6 November 2008

SUBJECTS: US President-Elect Barack Obama; MYEFO; G-20 Finance Ministers' Meeting

KELLY:

Wayne Swan, welcome to Breakfast.

TREASURER:

Good morning Fran. It's good to be with you.

KELLY:

Treasurer, before we turn to the domestic economy, can I just get your thoughts this morning about the election of Barack Obama to the US presidency.

TREASURER:

Well, I think this is a huge generational change in Washington. There's a new President now with a fresh mandate, and of course what the world needs now is for countries to work together. Barack Obama looks like someone who will bring people together, and certainly in meeting the challenge of this international financial crisis that is sorely needed. And I think this fresh leadership with a fresh mandate can really give some force to the global coordination that is required in the months and years ahead to deal with the consequences of the global financial crisis.

KELLY:

And on that, in terms of this whole notion that a new president could be a circuit breaker for the world economy, is the decisiveness of the Obama victory important there, in your view?

TREASURER:

I think when there's an election in any country, it's something that impacts on confidence. When the election is over, people look to the new leadership or the reaffirmed leadership to take swift and decisive action. So certainly President Obama now has an opportunity, working with the outgoing President Bush, to deal with these very formidable challenges that are facing the globe.

KELLY:

Wayne Swan, do you think that an Obama administration is likely to take a more interventionist, a more aggressive approach to dealing with the global financial crisis? The Democrats have been pushing for more spending.

TREASURER:

Fran, I think it's far too early for predicting the course of the new administration. But they do have a fresh mandate. They have an opportunity to bring in new people. They can work with the outgoing administration. With this G-20 Leaders' meeting in Washington, there is a very good opportunity for both developed countries and developing countries to come together for the first time and deal with these systemic issues which go to the very core of the global financial crisis. The meeting that I'm attending in Brazil of G-20 Finance Ministers' meetings, is an opportunity for us to work on the early agenda for that G-20 Leaders' meeting in Washington. It will be very important, and I'm sure both the President-elect and the current President will be working to make sure there are some positive outcomes from that very important meeting in Washington.

KELLY:

Is it important, from your point of view that the President-elect is at the G-20 Leaders' meeting?

TREASURER:

Look, that's a matter for the American administration. That's not something…

KELLY:

You have a view?

TREASURER:

I wouldn't be expressing a view, Fran. That's something for them to sort out. It's only early days in the United States. I'll leave that up to them.

KELLY:

Okay. Let's turn to our economy. You said yesterday the global crisis will smash a $40 billion hole in the Government's finances over the next few years. This year alone, the surplus will fall from $22 billion to $5.4 billion, and it will shrink even further next year. That's a sliver really, isn't it, if growth slows even further than expected? Are we likely to slip into deficit next year, particularly if the Government tries to continue to spend its way out of this crisis?

TREASURER:

Well, first things first, Fran. One of the reasons why the surplus is $5-plus billion in the current year is the Government has put in place a very important Economic Security Strategy, a $10 billion strategy to strengthen growth. The whole purpose of that strategy – acting early, acting swiftly and acting with households – is to strengthen growth in the economy. That was one of the most important recommendations that has come out of much of the international discussion about how we respond to the crisis. We need to respond with a fiscal stimulus. We also need to respond in a country such as ours, where there is room to move, with an easing of monetary policy. And now what we have in Australia is monetary policy and fiscal policy both working in tandem to strengthen our economy. And that's very important given what has been a huge impact from this global financial crisis in the last couple of months, particularly since the collapse of Lehman Brothers on the 15th of September.

KELLY:

Treasurer, with that strategy in mind, won't Australians be looking for a range of spending measures in the next May Budget if the economy is still in a hole? There'd be nothing wrong with the Budget going into deficit at this point in the cycle, if it helps stop us falling into recession, is there?

TREASURER:

Well, first of all, Fran, if global conditions were to further seriously deteriorate, then the Government would have to respond. But what we've done with the Mid-Year Economic and Fiscal Outlook is to put in place our forecasts for the future, bearing in mind what has occurred particularly in the last couple of months. Now, we are forecasting modest growth and modest surpluses. That is something that many other developed countries are not doing. Other developed countries, particularly in the G-7, are experiencing negative growth, and they are all running significant budget deficits, or most of them are running significant budget deficits. We've had the flexibility here to respond, and to respond quickly. But if global conditions were to take a marked turn for the worse into the future, that of course would impact on growth further and would impact on future surpluses. And as the Prime Minister has repeatedly said and I've repeatedly said, we don't rule out taking further action, if necessary, if there were to be a further serious deterioration in global circumstances.

KELLY:

So presumably that means you don't rule out going into deficit to do that, if it's going to drive the economy further. Part of the ambitious program of infrastructure funding that you have been talking about was all about improving the economy long-term in terms of getting productivity up…

TREASURER:

Too right.

KELLY:

…but also driving growth, trying to stimulate the economy now with this funding. What happens now that we've got this hole come into our budget forecasts, because the Future Fund chair, David Murray, said on this program last week the Government would not be able to meet its commitments next year to the infrastructure, health and education funds.

TREASURER:

Well, Fran, infrastructure investment is very important. The Government has already flagged bringing forward some infrastructure investment. We already have $26 billion earmarked in our investment funds. Our capacity to add to those funds will of course be impacted upon by future surpluses, but we do have monies available in the infrastructure funds to make that very important infrastructure investment, which is an important part of strengthening the economy for the medium and longer term, but also lifts our productive capacity. So we do have the capacity to act on infrastructure, but there will be as we go through the preparation of the next Budget tough decisions, tough decisions to be taken.

KELLY:

But that money's not there. We just heard David Murray…

TREASURER:

No, sorry Fran.

KELLY:

…last week that $20 billion out of last year's surplus and $20 billion out of next year's surplus. There's no $20 billion in next year's surplus, is there?

TREASURER:

Next year's surpluses are down, Fran, and that will limit our capacity to add to the already $26 billion which is earmarked across the three funds. But we have resources at hand right now to bring forward additional infrastructure investment, and to do it at a time which will strengthen our economy.

KELLY:

And Treasurer, I know you're on your way to the G-20 Finance Ministers' meeting. Can I ask you just briefly what you're hoping to achieve from this? What kind of reforms Australia wants to see?

TREASURER:

Well, Australia has put in place a comprehensive set of proposals. They were first put forward in the Prime Minister's speech to the United Nations well over a month ago. And we have been talking with international counterparts about all of those proposals. The G-20 Finance Ministers will be working our way through that list, preparing for the important G-20 Leaders' meeting in Washington in mid-November. So we'll be working our way through all of those proposals. They go to the core of the supervision of international financial institutions. They go to the transparency. They go to capital adequacy. They go to remuneration of executives working in important financial institutions. All of those issues are on the table, and the G-20 Finance Ministers will be looking at an early cut of those proposals, preparing for the important G-20 Leaders' meeting in Washington.

KELLY:

Treasurer, thank you very much for joining us on Breakfast.

TREASURER:

Good to be with you.