The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Chris Bowen

Chris Bowen

Assistant Treasurer and Minister for Competition Policy and Consumer Affairs

3 December 2007 - 8 June 2009

Transcript of 04/02/2008

Interview with Keith Conlon and Tony Pilkington

5AA Breakfast

Wednesday, 4 February 2009

SUBJECTS: Nation Building and Jobs Plan

KEITH:

Chris Bowen, Assistant Treasurer good morning.

CHRIS BOWEN:

Good morning Keith and Tony.

KEITH:

That must have been a crunch before cabinet. Was there discussion about other methods, other techniques, other ways of spending the doe?

BOWEN:

Oh, look of course when you are doing a package such as this you consider all range of alternatives. Certainly ministers considered any number of alternatives but this is a carefully crafted package – it's of course a very significant - but what we wanted to do is stimulate the economy when we need to, and get us through this very difficult situation economically, but also to invest in the future. You've got an opportunity to spend a lot of money. You want to help people doing it tough and put money into investment for the future so for every dollar that we are spending on direct payments to people which is important we are spending two dollars on things like the biggest rebuilding program of our schools in the nation's history.

TONY:

Well let's go back to the individual payments and they are massive, and your hoping that an average family with two kids at school, they will get something like $3800 straight up by the time you add up the different benefits. What do you really know on whether they will spend it or not?

BOWEN:

Well, look we have done a lot of modelling and a lot of thinking about that and we expect that most people will spend it and look I've got to say…

KEITH AND TONY:

Have you got evidence for that?

BOWEN:

Well, there are economic models, etc, but look the thing is this, if people decide, for some people the sensible and smart thing to do would be to say pay off their credit card debt. Say you've got $4000 dollar debt on your credit card, you get a significant payment, and you pay it off or pay a big chunk of it off. Now that does two things. Most importantly it makes you feel a lot more confident about the future if you don't have that big credit card debt hanging over you. Next month if the washing machine goes bung or you know your car needs repairing you are going to feel more confident about the work done instead of putting it off. So you'll see that spending come through over time in a more measured manner, but still when we need it over the next twelve months. The other thing is it means that the banks have more money. The banks and other financial institutions have more money to lend to other people. If somebody pays off their debt in this time of very difficult environment for banks to get credit overseas then there is more money available.

So the bottom line is there is more money in the economy, and with more money then there was yesterday in the economy today.

We expect most people will spend it and that will stimulate the economy and support jobs, but by the same token other people will save it or repay debt and if that's the best decision for them then that's fine too.

KEITH:

Chris how much consideration was given to the tax cuts? This is of course what Malcolm Turnbull or the opposition are arguing. They are saying that would have been better and in the long-term the more effective way to go and they quote a prominent US economist to say that is the way to get the money out to the economy.

BOWEN:

Well there are lots of economists. I'm an economist, you get two economists in a room and you get three opinions. Over time you get all sorts of economists arguing all sorts of things, but look the other thing is point A – the payments that we are making are bigger than the tax cuts that come through in July, there are tax cuts coming through in July anyway. Malcolm Turnbull at one point was arguing to bring those forward. The amount of money that we are putting into the economy is bigger, than if we put those tax cuts forward. The other thing is if you give tax cut it's a little bit of money every fortnight or every month. It's not going to encourage you to go out and do the things you have been thinking of doing and putting off. You know, taking the kids away for a week, its not going to entice you to do that because you're getting a bit of extra money in your pocket every fortnight. What you need is the money in your wallet now; money in the bank account now.

TONY:

The fact that you are doing that upfront. So much of it upfront, is that acknowledging that the biggest danger of us sliding very rapidly into recession right now, first half of the year.

BOWEN:

Oh look this is a very, this will be very difficult across the - out of our ten biggest trading partners five are in recession, there are others heading towards recession. You look at our three biggest trading partners US, Japan and China, US and Japan are both in recession China has halved their growth rate. Their growth rate is the lowest it has been in seven years so that is going to impact us through the year. So we have taken the view, yes, we need to stimulus the economy now. But we also of course will move to have people spending throughout the year. So by giving the people money now upfront it's giving them the flexibility and opportunity to use as they see fit.

TONY:

How soon will you know that it's working?

BOWEN:

You get a range of figures that are unofficial, from the ABS, and from individual companies. For example, we have a good look at Westfield's figures, Westfields are throughout the country and throughout the world so they are a good comparison factor. Now in December their sales were up in stores in Westfield shopping centres by two and a half per cent, compare that to massive drops in the United States, I think it was 14% and in New Zealand are down 7% massive drops, year on year from December 07 to December 08, compared to Australia up 2 .5% so that shows us that our stimulus package hit the right buttons last time. It's just one set of figures amongst many, but those sorts of figures all add up.

KEITH:

And because Peter Costello - a mate of mine - last night said well if you are about making profits for Westfields that's all well and good…

BOWEN:

Yeah I saw that, but it's about jobs. If the small stores in Westfields are - have strong sales - and they are making money, then they are not going to lay off the sales assistants and they are not going to reduce their orders and the warehouses aren't going to lay people off.

We are going through what is a very substantial contraction around the world; the rest of the world is effectively in recession. And we need to do whatever it takes to keep Australia out of recession.

We are going to move heaven and earth -now we can't guarantee what the result will be - but we will be using all the policy levers at our disposal. Fiscal policy which is at our disposal, the Reserve Bank using monetary policy, at their disposal, to make sure that our growth is as robust as it can be and if our growth is as robust as it can be, then our unemployment will be as low as it can be.

TONY:

Questions for Chris Bowen Assistant Treasurer. Somebody says the pensioners, have they missed out in this package?

BOWEN:

Well look the pensioners are of course the centrepiece of our last package, the substantial payments in the December stimulus and we have said that they will be in some way the centrepiece in the May Budget. We want to fix up payments for pensioners in the long term, make it more sustainable. So this particular stimulus package is directed at lower and middle income families and individuals at schools, at climate change. Pensioners were the centrepiece of the last package and will be very important in the May Budget.

TONY:

And a question about the thresholds, why did you choose them and indeed when did they cut in or cut out?

BOWEN:

Well, there are a range of payments, there are five different bonuses and payments to Australians in this package and there is a different set of arrangements for all of them. But look, very quickly, if you are a taxpayer, so if you have a net tax liability in the last financial year 2007/08 and you earned less than $100,000 then you get the $950 dollars. So of course we have to draw the line somewhere but we are targeting the money for those, what we call lower and middle income earners on less than $100,000. Then there is the Single Income Family Bonus that goes to those people who get the Family Tax Benefit B and most people would know whether they get that or not. That's if you've got one income earner in the family and that's $950 they get paid in the fortnight from the 11 March. Then there is the Farmers Hardship Bonus; if you are a farmer and you are on the special benefits or the exceptional circumstance relief that's $950. Back to School Bonus - that goes to people who get Family Tax Benefit A and children between the age of 4 and 18 as of yesterday and it's $950 per child and then there is the Training and Learning Bonus which goes to students who are on Youth Allowance or Austudy or Abstudy and that is $950.

KEITH:

Which raise the question - a good question - from a Mum who said her young lad is working part time in a fast food joint, he is a student, he is also a part time worker, as a part time worker does he qualify for the bonus?

BOWEN:

Yeah, it doesn't matter if you work part, full time, casual the new if you pay tax, you get a tax liability fill in a tax return then you qualify for the bonus.

KEITH:

Even if you might only earn 80 bucks a week, you get the lot?

BOWEN:

If you earn up to $80,000 then it's the $950, if you earn $80,000 and $90,000 then its $650 and if you earn between $90,000 and $100,000 then its $300.

TONY:

Chris Bowen we thank you very much for joining us this morning.