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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

12 April 2011

Interview with David Speers

Sky News

12 April 2011

SUBJECTS: IMF World Economic Outlook; Budget 2011; Carbon price

SPEERS:

Treasurer, thanks for your time. I want to actually talk about your trip to the United States, you're leaving this afternoon for New York and Washington for talks of the IMF and the World Bank. The IMF has downgraded its forecast for Australia's economic growth this year from 3.5 to 3 per cent, presumably because of the natural disasters that have taken a hit on the economy here, but the Reserve Bank is still saying we'll get 4.25 per cent growth. There's quite a difference. Why is that?

TREASURER:

Well, I think what the IMF report does is demonstrate our short-term and long-term challenges both global and domestic. It is true we've got short-term softness but we've certainly got medium-term strength, and you can see that in the IMF forecasts as well.

SPEERS:

But they're both talking about the same year, this year, and one's saying 3 per cent and one's saying 4.25 [per cent].

TREASURER:

No, I don't think that's strictly correct either, they're forecasting 3 per cent for this calendar year, it is a calendar year they're dealing with, now, of course we had originally forecast for our financial year, 3.25 [per cent] it's going to be substantially less for that financial year. So, we are both looking at lower growth now than we were six months ago for our domestic economy, but in the years that come through, whether it is the calendar year or the financial year, we are looking at stronger growth.

So the short-term weakness comes from the domestic factors we know – the floods, the cyclones – but of course internationally you've got what's occurred in Japan, and of course instability in the Middle East, and of course, on top of that you've got the continuing discussion of sovereign debt problems in Europe.

So they are, if you like, downgrading our growth forecast in the short-term but in the longer term they are still as optimistic as both the Reserve Bank and Treasury is about the medium-term strength of our economy built largely on the strength of Asia. If you look at what's going on in Asia, the strength here is driving an investment pipeline into this country that means we have strong fundamentals into the future.

SPEERS:

But the IMF in its update has also warned of the potential of overheating in China and India and talks about particularly the commodity price rise that we're enjoying the benefits of at the moment. But what if a bubble bursts - is this something you'll be talking about during your meetings in the United States?

TREASURER:

Well, I think if you look at the IMF report in total, it says the risk is more on the downside, they make that point for the reasons that I outlined before. In particular, they talk about what's gone on in the Middle East. Those sorts of issues are all around and they talk a little bit about China. Look, I've been in this job for three and a half years and for three and half years there have been predictions by many that something fundamentally was going to happen in the Chinese economy which would threaten its future –

SPEERS:

Do you think it's going to happen?

TREASURER:

Well, I think that there are some domestic challenges in China. The authorities are dealing with those challenges. I remain an optimist. The Treasury and our advisers are optimistic about the future growth path of the Chinese economy. The forecast in this document that the IMF have put out is for Chinese growth of around 9 per cent. The fact is that China is going to continue to grow strongly, but it isn't just a China question when you're talking about Asia. It's not just a China and India question when you're talking about Asia. It's growth across the region -

SPEERS:

Indonesia and other countries as well. Back here, you're in the process, of course, of putting together the Budget. Now, you're talking about tough spending cuts and getting us ready for tough spending cuts. Will you be trying again – because you've tried a couple of times but haven't been able to get this through Parliament – means testing the private health insurance rebate and the child care rebate?

TREASURER:

Well, we've certainly put forward proposals to means test the Private Health Insurance rebate and of course we will continue with that proposal. But look, I'm not going to speculate about what may or may not be in the Budget -

SPEERS:

What about the Child Care Rebate though?

TREASURER:

As I said, I'm not going to speculate about what may be in or not in the Budget. I never do that as we go through these interviews in the lead up to the Budget. There will inevitably be people who will care to speculate. What I can say is that we are absolutely determined to return our Budget to surplus. That task has been made more difficult by the short-term weakness we were talking about before, but we are in no way deterred from bringing the Budget back to surplus in 2012-13 for all of the reasons I also spoke about before. The long-term strength of our economy, the fact that we are an economy which is coming to capacity, the fact that we've got an unemployment rate with a '4' in front of it right now, the fact that we've got an investment pipeline that is huge - all of those reasons mean that we have to be absolutely firm in implementing our medium-term fiscal strategy and that's what we're doing.

SPEERS:

But if the economy is in such good shape in the medium term, why would you even have to look at some of these cuts to middle income families? Whether it's the health rebate –

TREASURER:

Sorry, I'm not speculating.

SPEERS:

No, I know.

TREASURER:

I'm not speculating about all of those factors in the context that you have just chosen to raise them. Yes, we put forward a proposal for good reasons in a past Budget, a structural reform of the –

SPEERS:

And that remains policy?

TREASURER:

That remains policy. It's an important structural reform.

SPEERS:

So it will presumably be in this year's budget?

TREASURER:

It's in the figures right now. What remains is its passage through the Parliament. But of course –

SPEERS:

Will you put it back to Parliament?

TREASURER:

Of course we will continue to progress this measure. You see, the Liberal Party says that they believe in fiscal discipline and they don't like deficits, but at every turn they take actions in the Parliament which make them bigger.

SPEERS:

Well their argument is a cost of living one. They point to the flood levy, the carbon tax, trying to take the private health insurance rebate away from middle income families as well. Doesn't this all add up to –

TREASURER:

Sorry that is not an accurate way to characterise what we're doing with the private health insurance rebate anyway, but the fact is you need fiscal discipline and we are absolutely determined to put in place the fiscal discipline upon which we build continued employment growth and prosperity for our country.

SPEERS:

Yeah, but it is taking away the rebate from some families.

TREASURER:

Yes it will at higher incomes, but the fact is that the Opposition can't claim to have a responsible economic policy when they are blocking measures like that which make deficits even larger. Every step they take basically has them running around the place saying 'deficits are bad, how much bigger can I make them'.

SPEERS:

How high is a high income, Wayne Swan? Do you regard $150,000 as a combined family income to be a high income?

TREASURER:

Well as you know, we've already put means tests in place in the family payments system that has a limit of about $150,000, that's right, combined income. But look I'm not going to go through and speculate about measures that others are speculating about in the newspapers on a daily basis, I'm just not going to do that.

SPEERS:

Let me try to get you to speculate on –

TREASURER:

Can I just make one point about the family payments system. All of my life, and all of my time in politics, I have been a very strong supporter of the family payments system and I remain one.

SPEERS:

Okay. On the carbon price. A lot of industries are in your ear trying to get various assistance measures as you go through the process of working out the detail. The LNG industry – Don Voelte, the head of Woodside – in particular this week has been arguing LNG should be exempt. Do you have sympathy for his argument that if China and India used a lot more LNG than coal then global emissions would drop?

TREASURER:

Well, what I have some sympathy for is the fact that we do need to provide some assistance to our energy intensive, trade exposed industries and LNG is one of those. We understand that argument. We are having an informed discussion with the industry about all of the issues involved there. We remain committed to work our way through those issues with the industry because putting a price on carbon is absolutely essential to our future economic prosperity, to business certainly and particularly to investment in renewable energy which this country desperately needs.

SPEERS:

Are they going to get a better offer than was offered under the CPRS?

TREASURER:

Well, we are currently discussing these matters; we haven't reached any conclusions about that or the household assistance which is also absolutely essential in this environment and given this objective.

SPEERS:

I know you've ruled this out before, but unions are saying a good idea would be tariffs for imports from countries that don't have a carbon price?

TREASURER:

Well, I don't think that's a good idea and we have ruled that out before and we're not going down that road.

SPEERS:

Alright. And just finally I wanted to ask you about Kevin Rudd, he caused a stir last week with his comments on the emissions trading scheme when he again talked about those in Cabinet that wanted to dump the thing all together and he has in the past in caucus referred to you and Julia Gillard as wanting to abandon this scheme. So for the record, did you?

TREASURER:

Well, I don t talk about what happens in Cabinet, but the one thing I can say is that I've been a long term supporter of an emissions trading system for Australia, have been of that view for many years, and will continue to argue for an emissions trading scheme for Australia.

SPEERS:

Did Kevin Rudd's comments help your efforts last week?

TREASURER:

I don't go into discussions about all of those things, the most important thing is to progress the policy and that's what I'm doing.

SPEERS:

Is he being a team player?

TREASURER:

Of course he's being a team player, and he's doing a great job as Foreign Minister.

SPEERS:

Wayne Swan, thank you.

TREASURER:

Thank you.