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

3 May 2011

Press Conference

Canberra

3 May 2011

SUBJECTS: Budget; Future Fund; Reserve Bank; Australian Dollar

JOURNALIST:

Mr Swan, are you conscious of the fact that the Future Fund is investing in companies that make cluster bombs? And secondly, do you think the fund (inaudible)?

TREASURER:

Well, the mandate of the Future Fund is that it invests independently of decisions of Government. So we don’t direct the investment decisions of the Future Fund and nor should we. So they are decisions that they take independently of the Government and it is incumbent upon them to explain their reasons for their investment decisions which they make under their mandate which is independent of the Government.

JOURNALIST:

But you have oversight of the fund so you could –

TREASURER:

Yes, but I don't direct them in terms of their investment decisions and that is very clear.

JOURNALIST:

Mr Swan, you follow the footsteps of two of the great Parliamentary communicators, Paul Keating and Peter Costello. Do you back your salesmanship of this year’s Budget?

TREASURER:

Look I’ve always backed myself in personal and political life, and we’ve got a very big task on our hands this year. This is my fourth Budget and in some ways it is a more complex Budget than the previous three. That means that a greater degree of challenge in terms of explaining the competing forces that are occurring in the Australian economy and the differing trends that are occurring in the Australian economy just over, say, the past six months. So yep, big challenge on our hands, I’m up for it and I’m going to get stuck into it, and I’ve been doing that in the last few days.

JOURNALIST:

Do you think the Australian people have understood your message? Has your message cut through with the public? Do they understand your story?

TREASURER:

I think the Australian people absolutely understand that what this Government has done over the previous few years is save this country from recession and in saving this country from recession, put in place the foundations as a strong economy which is going to produce prosperity for the future. I fundamentally believe the Australian people understand that, and I fundamentally believe the Australian people understand the contrast with our Liberal opponents and if they had been in charge during that period Australia would have gone into recession. We’d have seen the loss of well over 200,000 jobs and Australia now would be struggling.

So the Australian people understand the strong economic management that we [put] in place and the courage that we brought to bare for the decisions that we put in place to support our economy is paying a dividend for Australia but we have new challenges now in Mining Boom Mark II. My challenge is to explain those to the Australian people and locate the Budget I’m about to deliver within that framework. That’s what I’ve been doing. I gave a speech at the Queensland media club a couple of weeks ago and I’ve been out on the trail every day banging the drum about those things and the challenges of this Budget.

JOURNALIST:

The Reserve Bank Governors are meeting, the board meeting this morning. Do you hope that that (inaudible) see through the inflation spike of the March quarter?

TREASURER:

Well, I can only quote what the Reserve Bank Governor himself has said is that they do tend to look through inflation spikes.

JOURNALIST:

Mr Swan, Lindsay Tanner – as I’m sure you’ve seen – canvassed the dark arts in Budget making and using the best figures to get the maximum positive impression and so on. And he did note pushing things towards the end of the Budget period to give a good impression and perhaps we saw some of this with (inaudible).

TREASURER:

With what sorry?

JOURNALIST:

With the performance pay issue which is into the Never Never.

TREASURER:

No I don't accept that at all.

JOURNALIST:

Do you guarantee that there are not any examples of the dark arts in this Budget?

TREASURER:

What I can tell you about the measure that was announced yesterday is that there are very good reasons for the allocation of the funding and the rollout of that program in the timeframe that was described. That is that if you’re going to set up that bonus system it takes time. It has to be done based on research. It has to be done in a way which is quite methodical. That’s why it’s got the timeframe associated with it. It’s got nothing to do with anything else other than rolling out a program in a timeframe which is realistic to ensure that it is implemented properly. And in terms of the more general point, what we’re doing in our Budget is what is right for the country and that is what is dominating our thinking, not the politics of it.

JOURNALIST:

Mr Swan, what do you think of cluster bombs as a weapon first of all, and second of all can you provide us with any update on what the Council of Financial Regulators are (inaudible)?

TREASURER:

Well that’s an interesting combination of questions. What was the second one?

JOURNALIST:

The council of financial regulators and the bond market, their appeal to bond marketers. Can you give us any update on that?

TREASURER:

No I can’t give you any update on their review of the bond market but I’d be happy to do so at an appropriate time. In terms of cluster bombs, my personal view of those is that they are very destructive weapons which can cause an enormous amount of human misery. That should be obvious to anyone and it’s evident in the name, but I don't direct the Future Fund in terms of their investment profile.

JOURNALIST:

How difficult is it now pulling together the final parts of the Budget when you’ve got the dollar moving as quickly as it has over the last fortnight?

TREASURER:

Well, the fact is that the strength of the Australian dollar over recent times does impact in terms of economic forecast. Of that, there is no doubt. We will take that into account in our forecasts on the night, but I’m not going to go into the ins and outs of what changes that has meant in terms of the forecasts because that will all be there for you to see on Budget night.

JOURNALIST:

How confident are you of the dollar staying above parity with the US?

TREASURER:

Well, the first thing is for very good reasons the Treasurer of this country doesn't speculate about movements in the dollar. I’m happy to talk about the reasons why it’s so strong at the moment and the principal reason why the dollar is so strong is the strength of our economy relative to all of our peers, and the fact that we have one of the best fiscal balance sheets of any developed economy in the world, and the fact that we have an unemployment rate with a four in front of it, and the fact that commodity prices are high. Those are all the factors that reflect the strength of the Australian dollar and of course there is also the relativity of the Australian dollar to other currencies against which it is frequently benchmarked. But ultimately these are matters which are decided in the market.

JOURNALIST:

Mr Swan, given the dollar and (inaudible) in the Budget, given that obviously a higher dollar makes the manufacturers less competitive. There’s a lot of complaints around the manufacturing sector and the –

TREASURER:

Well, there are swings and round abouts. We can’t escape the fact that the strength of the dollar reflects a strong economy, but when the dollar is strong it has impacts in a different way on different sectors. So of course it hurts sectors like tourism. It hurts manufacturing and exports. So it has an impact in those areas. The most fundament thing that the Australian Government has to do in this Budget and in all of our policy is to get the fiscal settings right for the future. I’ve spent a lot of time over the last couple of weeks explaining why we need to return to surplus in 2012-13. Why that is absolutely critical given the strength of the investment pipeline that we’re going to see in the years ahead and those fundamentals are the ones that we have to get right in a situation where a number of those other economic parameters are moving around.

JOURNALIST:

Mr Swan, Tony Abbott’s personal standing seems to have risen in today’s Newspoll. What do you attribute that to and do you think that the Budget will be a plus or a negative?

TREASURER:

Well, you might be fixated on numbers in polls today, but the numbers I’m fixated on are numbers like an unemployment rate of 4.5 per cent and 500,000 new jobs. They’re the sort of numbers that I’m fixated on and I’m fixated on getting the economic settings right. I’m not worried about opinion polls day to day, week to week, or frankly, month to month.

JOURNALIST:

Mr Swan do you think there will be an impact from the death of Osama Bin Laden, an economic impact in terms of confidence?

TREASURER:

I wouldn't even buy into that. I don't know that you can draw any direct linkages there.

JOURNALIST:

Mr Swan, why won’t you link the strength of the Australian dollar to the compensation package for trade exposed industries?

TREASURER:

Because it doesn't make any economic sense at all. There’s no doubt that a strong Australian dollar has an impact upon the profitability of our exporters. No doubt about that. And when it has significant movements those impacts are bigger on different groups of people at different times, but that’s entirely a separate issue from an informed and mature discussion about the impact of a carbon price on the profits of companies and the carbon price will have an impact across a range of industries and it will differ industry to industry. There’s no doubt that the impact of a carbon price on energy-intensive trade-exposed industries is one that we are taking into consideration as we discuss the design of the scheme with those industries and that’s what we’re doing.

JOURNALIST:

How much weight can we give the forecast, say, on the surplus, or the deficit, on inflation , unemployment in next week’s Budget when you have the carbon price plan coming down the line which will have a major economic impact. What –

TREASURER:

Well, so you assert.

JOURNALIST:

You don't think it’s going to have an impact?

TREASURER:

Well, no we will account for that when we design the scheme in full and we will produce all of our modelling associated with that, but as you’re aware the impact of the CPRS and the modelling that accompanied that demonstrated its impact on growth overall which was minimal. Now that doesn't mean to say it’s the same in every sector and of course I’ve already indicated that there are particular challenges when it comes to energy-intensive, trade-exposed industries. No doubt about that as well and all of that will be covered in the modelling. But when we produce our Emissions Trading Scheme, we will account for it in the normal way and in the normal way incorporate that in our economic forecasts as we go through the year.

JOURNALIST:

But are you talking about the deficit for 2011-12 and the surplus for 2012-13 are unaffected?

TREASURER:

We’ve already made it very clear that we see the Emissions Trading Scheme as being broadly revenue neutral.

JOURNALIST:

You’ve been talking about your explaining of the Budget during (inaudible) but there have been quite a few mixed messages in that explanation. You seem more upbeat about jobs as the (inaudible) in the last few days. Whereas the previous period was the pain and the unpopularity of the Budget that you were telling us about. What is your dominant message?

TREASURER:

Well, I’ve been explaining the same message for the past few weeks. I’m sorry you don't think that they are the same. Let me take you through it. What I’ve been explaining is the short-term weakness in terms of economic growth and that impact on revenue. I’ve talked about that extensively in the last couple of weeks. I’ve pointed out that the natural disasters had an impact of global uncertainty, particularly flowing from the events in Japan, will have an impact on growth, particularly in our current financial year and that of course impacts on revenue. I’ve gone to great lengths to explain that impact and at the same time I have gone to great lengths to explain the fact that the investment pipeline that we are experiencing is going to strengthen in the years ahead and as a consequence of that we do expect growth to strengthen over the forward estimates. So two things are happening – short-term softness in the economy, long-term strength and we have to prepare for both.

JOURNALIST:

But in terms of the measures that ordinary people will be looking at is emphasising, I think, or the Government has as a whole, that in the last few days the whole skills thing, the incentives for people to get into jobs and yet you’re also saying that there’ll be a lot of pain for people in the Budget.

TREASURER:

No what I’m saying is that we have a low level of unemployment and that we expect unemployment to fall even further at the same time we have short-term weakness brought about by the impact of natural disasters on our current growth figures for the year, this year flowing into next year. So what I’ve said is that that will mean higher deficits. I’ve said that very clearly in the short-term. What I’ve said simultaneously with that, we’ll see a strengthening of growth, firstly as the economy rebounds from the natural disasters and growth picks up as the reconstruction takes place in Queensland and elsewhere. Simultaneously with that we will see the full impact of the investment pipeline that we’re experiencing in resources and with that will grow capacity pressures in our economy. That will drive jobs and it will drive growth, and as we go forward we will experience an even lower rate of unemployment and that will stretch the capacity of our economy and put upward pressure on prices as well. That’s why it’s important in the Budget that we bring it back to surplus in 2012-13 and also do everything we possibly can to ensure that Australians benefit from the employment opportunities that are flowing from the investment boom. That's why in the Budget we’re going to focus extensively upon participation and workforce measures. So bringing the Budget back to surplus will involve belt tightening and the reason we have to do that is to avoid the capacity pressures and price pressures in the economy in the years ahead. Thanks.