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

27 November 2008

Interview with Lyndal Curtis

ABC Radio AM Program

27 November 2008

SUBJECTS: Mumbai Terrorist Attack, Deficit, European Union Stimulus Package, Global Financial Crisis, Credit Card Interest Rates, Economic Security Strategy

CURTIS:

Wayne Swan, good morning.

TREASURER:

Good morning.

CURTIS:

If we could go first to India with reports that two Australians have been injured, how concerned is the Government about what’s happening there?

TREASURER:

Well, very concerned.  We condemn these attacks, and Australian authorities are making every effort to contact Australians who may be affected.

CURTIS:

If we can turn now to the deficit, you spent a long time avoiding the word.  How hard is it to admit the possibility there may be a deficit?

TREASURER:

A deficit isn’t necessary right now.  We are projecting modest growth and modest surpluses.  But it would be irresponsible to rule it out.  Because you see overnight the European Union has put in place a fiscal stimulus of 1.5 per cent of GDP and they’ve said exceptional circumstances demand exceptional measures.  What we’ve said is that if growth were to slow much further then we would take additional action – whatever steps are necessary to protect Australian growth and Australian jobs.

CURTIS:

You’ve said it would be temporary.  What does that mean?  Does that mean a deficit in one year only and not in the out years?

TREASURER:

Well, certainly what it means is that we may have to invest in the economy to strengthen jobs and to strengthen industry.  We will judge that as we go through.  Growth is now slowing.  All the risk is on the down side.  What the Prime Minister reported upon yesterday was, from his discussions with APEC leaders, that growth around the world is slowing dramatically, particularly in our region.  That will have an impact on Australian Government revenue and of course it will have an impact on employment.  What the Prime Minister is saying is that we will take every responsible step to protect Australian jobs and to strengthen the Australian economy.  If that means going to a deficit for a short period of time, that is the responsible thing to do.  The irresponsible thing would be not to do that.  The irresponsible thing would be to simply to sit on our hands, like Mr Turnbull proposes, and do nothing, but the price would be paid Australian workers.

CURTIS:

But would you prefer just a one year only deficit rather than it carrying on to the out years?

TREASURER:

Well naturally, but we will do what is responsible, what needs to be done to strengthen the economy.  Our policy is for a surplus over the economic cycle.

CURTIS:

The Finance Minister is already looking for savings yet you’ve said you want to protect jobs.  Can you rule out making any savings that would cause unemployment?

TREASURER:

We will certainly be looking for savings as we go through the Budget process through to May next year.  But what we will be looking to do is to take every opportunity to invest to strengthen our economy, and particularly to strengthen the job outlook.

CURTIS:

You’ve said you’ve already spent $10 billion on an Economic Security Strategy, $6 billion on the car industry, another $11 billion for the States for infrastructure.  You said you don’t rule out further action.  What shape is that further action likely to take?

TREASURER:

To begin with we’re still projecting modest surpluses on the back of modest growth.  But I’m not going to predict what further action we may take except to say that the Government believes passionately in investing in infrastructure to lift the productive capacity of this economy in the long term. 

CURTIS:

So, any further action you would want to have a positive benefit, not just as you’ve done with the Security Strategy putting money into people’s pockets?

TREASURER:

Well, most certainly measures which can strengthen the productive capacity of the economy to lift our productivity are important for the long term and they can also have a short term and medium term impact.  We will be looking at all measures.  All options are on the table because we will take every responsible action to strengthen the economy and to protect Australian jobs.

CURTIS:

You said last night that growth will probably be slower than your two per cent forecast.  Are you still expecting it to be positive, with a one in front of it or maybe lower?

TREASURER:

I’m not going to speculate about the growth figure that we will receive next week.  What we do know is that in the last three weeks or so the IMF, the World Bank and the OECD have all downgraded world growth forecasts and they are particularly pessimistic now about what is happening in emerging economies.  So, there certainly will be a slowing of growth but the exact nature of that won’t be revealed until we see the National Accounts next week.

CURTIS:

But still expecting it to be positive?

TREASURER:

I’m not going to speculate about the outcome for the National Accounts next week.  I never have in the past and I don’t intend to do that today.

CURTIS:

With growth still positive, a budget still in surplus and probably further interest rates coming, why shouldn’t a deficit be regarded as economic failure on your part?

TREASURER:

Because there is a very, very significant slowdown in the global economy and we’re not immune from that.  Of course it is the case that we are better placed than many other countries in the world.  But the fact is a dramatic slowdown in the global economy does impact here and we are not going to sit idly by, as Mr Turnbull proposes, and see that affect revenues and therefore also affect employment in the Australian economy.  We will take every possible step we can to protect Australian jobs and Australian industry.

CURTIS:

Finally, with people looking forward to Christmas, how much of a brake on the economy is the fact that credit card rates are continuing to be high and the banks aren’t bringing them down?

TREASURER:

Well certainly, it’s disappointing to see that credit cards have not come down as much as mortgage rates have come down, given what has occurred with the official cash rate.  The credit card market is a pretty competitive market.  There are lots of options out there for people.  So, I’d certainly be urging them, if they’re unhappy with the behaviour of their credit card provider, to switch.

CURTIS:

You’ve said that the prospects internationally are positive because of the action that’s been taken by other countries.  You’d obviously be supportive of the package from the European Union pumping hundreds of billions of dollars into their economy?

TREASURER:

The stimulus of about 1.5 per cent of GDP.  Our economic security package six weeks ago with a stimulus of around one per cent of GDP.  That’s very important to strengthen our growth outlook in the immediate term.  What I’m saying is that if the slowdown in the international economy is even more pronounced, there may be a case for future action.  But let’s see the impact of the economic security package as it flows through our economy, particularly when those payments to pensioners, carers and to families flow from the 8th December.

CURTIS:

Wayne Swan, thank you for your time.

TREASURER:

Good to be with you.