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

2 March 2010

Doorstop Interview

Canberra

2 March 2010

SUBJECTS: Reserve Bank interest rate rise; Government's performance; future challenges; banks' response to interest rate rise

TREASURER:

I just wanted to say a few words about the Reserve Bank decision today. Today's decision will be tough on family budgets, but I think it's important to understand that rates are still at 1970s lows. I think families, and I think businesses understand that rates can't stay at emergency levels forever, although for someone with a [$300,000] mortgage it's tough stumping up an extra $50 a month. The fact is that the Reserve Bank has flagged for some time now that rates will be adjusted as the economy recovers, and the economy is recovering and rate rises are an inevitable consequence of a recovering economy that is outperforming the rest of the world.

Now we'll see the usual scare campaign from the Liberals today - their ridiculous claim that somehow rates can stay at emergency levels forever irrespective of what's going on in the economy. That scare campaign should be seen for what it is. The fact is that rates are still 2.75 percentage points lower than their peak under the Liberal Party.

I'd also draw your attention to some of the remarks from the Reserve Bank Governor yesterday. He said that the finances of the country were in "terrific shape", and that stimulus had "worked a treat." The fact is that Australia would be in recession if it weren't for the stimulus that was put in place by this Government. The economy is in a far better position because of timely and temporary stimulus, and it puts Australia in the position to maximise the opportunities that flow from economic recovery. And the Government is doing everything within its power to maximise those opportunities as the global economy recovers and as our domestic economy recovers, and that's why the Government has a comprehensive agenda across education, skills particularly, but also across health and infrastructure – to maximise economic growth, to support employment and to support business, to improve the prosperity of this country for the long term. Over to you.

JOURNALIST:

(Inaudible)

TREASURER:

I've always had a view in politics that we can always do better. You know, I get up every day and think about what I do because it's a great privilege to be a Minister, and from time to time you don't get every decision right. You don't make the call correctly all the time, but what we do as a Government is our very best, and last year when this economy was challenged by the global recession, we put our shoulder to the wheel, put in place an economic stimulus that, together with the hard work of employers and employees, has produced an economic outcome which is the envy of the world - the best performing advanced economy. That's something that all Australians should be proud of, but in that process you'll get things right, there will be some things you wish you had done better. That's just part of life and it's part of policy making.

What I found when I became Treasurer, and particularly when the global financial crisis hit, is that there wasn't a set of policies that you could just pull out of the cupboard - take it out, it's got global recession written on it - put it in place and off you go. These were very challenging circumstances for the country and the Government put in place, with the cooperation of the Australian people, a set of policies which have produced a good outcome for the country.

JOURNALIST:

The Prime Minister said that there were times when he didn't ask enough questions. Were there times when you should have asked more questions?

TREASURER:

Look I don't have big tickets on myself and I freely admit that there are times where, if you could have your druthers, you may have done things differently. But in the sort of environment that we've been in over the past couple of years, it's been a challenging environment, which has tested not just the politicians, it's tested the policy-makers, it's tested all of our people. I think the thing that we can be really proud of as we come out of this global recession is the resilience of this country, and one of the things that served us so well as we went through this past 18 months in particular was, I think, the good sense and optimism of the Australian people because that underpins confidence and confidence was something that this country had and many other countries didn't and it does account for how well we've done compared to the rest of the world.

JOURNALIST:

(Inaudible)

TREASURER:

I try to get up a bit earlier - if that's possible - occasionally get a little bit more sleep so I'm not as tired. You know, we do all these things.

JOURNALIST:

What are some of those things you do differently – if you had your druthers?

TREASURER:

If I had my druthers I could go through a range of policy areas and I could go through a long list of them but I don't think it's going to help the public debate. What I want to do and what the Government is doing is getting on with the future agenda. We're in the future business here, and we know to maximise the opportunities that will flow from global recovery - and particularly from growth in our region - we've got to invest in skills and education, we've got to make our health system sustainable.

We've had the Intergenerational Report which we delivered some months ago. It points out, for example, that health expenditure in this country will become unsustainable given the ageing of our population unless we have fundamental reform. So when I get up every day and I think about what I can do better, it's what can we do better to meet those challenges of the future, particularly the intergenerational challenges that were outlined in the report - health is front and centre of that, as is education, as is infrastructure.

JOURNALIST:

The Reserve Bank says that the economy has returned to trend growth. Was that your impression?

TREASURER:

It depends who you're talking to out there David. I've been communicating with a lot of people across industry over the past month. If you're in resources the outlook is quite bright. There's no doubt the economy has strengthened, but if you see some of the data that came out last week, parts of the economy are still soft. So it depends where you are in the production chain and what industries you are in. But the one thing I do know is that the economy is beginning to grow again, and that's good. We are seeing some good signs on the horizon. The problem we have here is what many have described as a two-speed global economy and there are uncertainties that flow from that. What I do know is that prospects are better here than just about any other advanced economy, but I'm still cautious if you like. I'm confident but I'm certainly not complacent.

JOURNALIST:

Mr Swan what's your message for the banks today in light of this interest rate rise?

TREASURER:

Well, my message to the banks is that there's absolutely no justification whatsoever for any increase over and above the official cash rate increase. If we look at the net interest margins for the major banks they have improved to pre-crisis levels, and there is no justification whatsoever for them to move over and above the cash rate as set by the Reserve Bank.

JOURNALIST:

Do you think banks such as Westpac should actually increase rates by less than 0.25 to make up for last time?

TREASURER:

I've made my views very clear about what Westpac did last time; it was not justified and they thoroughly deserved the backlash that they subsequently suffered.

JOURNALIST:

(Inaudible)

TREASURER:

Well, the Prime Minister has made it very clear that we accept responsibility for the good, and we accept responsibility for the bad. If you don't get something right, put your hand up and indicate that you haven't got it right and get on with the job that you're here to do, and that is what the Government is doing.

JOURNALIST:

But is it undermining confidence in the Government by saying that you deserve that?

TREASURER:

Not at all.

JOURNALIST:

Should homebuyers be making sure that they have some room in their household budgets for more interest rate rises, given that you say the economy is rebounding now?

TREASURER:

Look that's entirely a matter for the independent Reserve Bank, but the Governor has made it clear that rates will be adjusted to more normal levels as economic recovery moves ahead. But they're matters for the Reserve Bank Board's judgement on a monthly basis.

Thanks a lot.