The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

3 December 2008

Interview with Marius Benson

ABC News Radio

3 December 2008

SUBJECTS: RBA Rate Cut; Global Financial Crisis; National Accounts; Qantas/BA

BENSON:

Mr Swan, good morning.

TREASURER:

Good morning, Marius.

BENSON:

Three per cent in three months. People are scratching their heads trying to remember when the Australian Reserve Bank took such radical action. Things must really be crook, in prospect?

TREASURER:

I think it's the case that there is a very substantial impact on the Australian economy flowing from the global financial crisis. We've already seen what's going on in other countries around the world. It's delivered a recession in Europe and Japan and the United States and of course the UK is expected to follow. And of course you've got growth now slowing in the developing world, and particularly in our region. So, the Reserve Bank is easing monetary policy and of course that's why the Rudd Government took such decisive action some weeks ago to put in place our Economic Security Strategy. This is fiscal policy and monetary policy working in tandem to strengthen the economy in the face of the global financial crisis.

BENSON:

And when you look at that crisis, it's clear that we are still on the down slope.

TREASURER:

Well, there's no doubt that the risk here is on the downside. We said that very clearly when we put out our mid-year economic review. The Prime Minister made this point very strongly in the Parliament last week when he returned from APEC. We've seen further events in the global financial crisis in the last couple of weeks and there's no doubt that we need to have a range of policy options out there to combat this crisis, and that's why we were so swift with our Economic Security Strategy. And the Reserve Bank made it very clear yesterday that that's the reason they have moved with such a substantial easing of monetary policy.

BENSON:

In fact, for a lot of Australians this recession so far seems to have been all silver lining and not much cloud, it's meant for a lot of people...

TREASURER:

Marius...

BENSON:

For some, I'm saying. Can I just complete the point. Because it's brought interest rates down, it's brought petrol prices down, and it has seen the Government hand out $10 billion. So, it's not been ... the good news has certainly come at the front of the recession.

TREASURER:

Well, there's a global recession, Marius. But here at home the economy is still growing and we do have modest surpluses. The whole point of the Reserve Bank action, the whole point of the Commonwealth Government action, is to strengthen our economy in the face of the fallout from the global financial crisis and the fact that there is recession elsewhere in the world.

BENSON:

Now, you said when the interest rate cut was announced yesterday, you expected the banks to hand on the full cut. Two of the banks have - the Commonwealth and the NAB - Westpac and the ANZ have kept their rates higher and shaved a bit for themselves.

TREASURER:

Yes, well the borrowing costs faced by banks have come down. The Reserve Bank has made that assessment and in response to that, two of the banks have passed it on in full, as they should. This demonstrates that it is possible. And I say to the other banks that have not passed it on in full, get your skates on and pass it through as promptly as possible.

BENSON:

But you said that before, or at the time of the announcement yesterday. Their reply to you has been, nope, we'll pass on about 80 per cent of it.

TREASURER:

Well, their customers can make their judgements about their banks, and if customers are unhappy with their banks then they can take some action. It's one of the reasons we moved so swiftly to put in place our bank-switching package earlier in the year. Customers can pass their judgement to their banks and if they wish, they can utilise that package to move their account.

BENSON:

You won't be speculating on interest rates, but the general expectation is that they're going to continue to go down further - maybe down as far as 3.5 per cent.

TREASURER:

Well, I certainly don't speculate on interest rates, Marius. Those decisions, as you know, are taken by the independent Reserve Bank. But the very good thing that we've got working in our favour here is that both the Government and the Reserve Bank are working in tandem to strengthen our economy.

BENSON:

And the national growth figures are out today. The general expectation there may be for the quarter, a growth rate of, a bear growth rate - may be 0.2 of a per cent, maintaining growth around 2 per cent, maybe a little less than 2 per cent for the year.

TREASURER:

Marius, we'll see those numbers at 11.30. I'm not going to speculate on those. But as I observed before, there is a very substantial impact flowing through from the global financial crisis to our economy domestically. We're not immune from that. But as for the figures today at 11.30, we'll have to wait until then.

BENSON:

Just a quick final point, Mr Swan. Qantas is merging with BA. That appears to be in view of what is seen as a Government green light to that merger. Has the Government given a green light or an amber light?

TREASURER: I wouldn't be speculating about that. I can't speculate about the talks between Qantas and BA. But there are various legal qualifications here that would have to be met if they were going to proceed with such a move. But I'm not going to speculate about the outcome of that move.

BENSON:

The Foreign Investment Review board, would that be looking at that sort of proposed merger?

TREASURER:

Yes, they would and I think that any decision in that area would be one that would come before me as the responsible Minister, and for that reason as well, I wouldn't be speculating about it. But these are matters that are still being discussed between the two airlines, as I understand it, from reading the papers.

BENSON:

But just quickly, no foreign majority ownership of Qantas?

TREASURER:

Well, I think the Minister made that clear yesterday when he was at the Press Club presenting the Green Paper.

BENSON:

Wayne Swan, thank you very much.

TREASURER: Good to talk to you.