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

1 June 2011

Interview with Chris Uhlmann

7.30, ABC 1

1 June 2011

SUBJECTS: National Accounts

UHLMANN:

Wayne Swan, welcome.

TREASURER:

It's good to be with you.

UHLMANN:

Now you expected to see a decline in these National Accounts, didn't you?

TREASURER:

Yes, we certainly did. I mean, the impact of the floods in Queensland, Cyclone Yasi, the rainfall in north-west of Western Australia, the floods in northern New South Wales, even events in Victoria, it meant that our economy took a very big hit in the March quarter and we were upfront about that at the time and of course you can see it here today. It is very significant. A detraction of 1.7 per cent in the quarter is very, very significant by any standard.

UHLMANN:

But you're expecting growth over the course of this year?

TREASURER:

Well, we're expecting the economy to bounce back because the fundamentals are strong. It's not just the rebuild, and there'll certainly be a benefit from that, particularly in Queensland, but also the fact that there is such a strong investment pipeline. The fact is we've had very strong employment growth in Australia in our term in government, over 700,000 jobs, we've got unemployment down at 4.9 [per cent] and we're expecting 500,000 additional jobs, and what we have kicking in is an unprecedented investment pipeline.

UHLMANN:

Alright. Let's look at some of the figures and see what they might tell us about the way the rest of the economy is tracking. Now you identified in 2007 productivity as a big fail for the Howard Government, and that's really what we get out for what we put in, and it is a really good indicator of a community's wellbeing and its sustainable growth over time. Isn't it a fail on your watch as well?

TREASURER:

Well, certainly when you have a very big investment boom and when you look at productivity on a quarterly basis, you won't necessarily get reliable figures. You've got to look at productivity over the long term, and of course what we need to do is to deal with the foundations of lifting productivity. And what's that all about? Well most particularly, it's about the training and the education of our workforce and our people. It's about investing in human capital. And we've been doing that from day one, but most particularly in this recent budget, we have made a bigger and better-trained workforce the central focus. So we lift the productivity of our workforce by investing in it.

UHLMANN:

But looking at these figures over time, from December quarter 2007 until March, the economy's productivity is 0.8 per cent – completely anaemic. It continues the structural decline that you identified back in 2007. Nothing's changed.

TREASURER:

Well, I don't accept that at all, because you can't measure productivity over a short period of time.

UHLMANN:

Four years isn't enough?

TREASURER:

No, it is certainly not enough when we are dealing with the long-term structural changes that need to be made to lift productivity. You can't train your workforce in a year or two. You can't turn around your education system. Some of the initiatives that we've put in place for example in education, in terms of improving quality, they all take time to kick in. So you've got to identify: what can you do to lift productivity? Well, the workforce is a centrepiece of that, but also in addition, what we do in terms of infrastructure. They're the two big areas, and there's no short-term bang out of those long-term investments which simply have to be made.

UHLMANN:

There isn't, but you didn't want to accept the Howard Government's arguments on some of these things and you were prepared to make measurements over five years, which is a reasonable amount of time and mark them a fail, but over four you don't mark yourself in the same way.

TREASURER:

Well, in fact they were there for 12 years.

UHLMANN:

Sure, but up until 2000 in fact, they saw very good productivity.

TREASURER:

Well, I'm quite happy to accept the verdict at some time in the future when we've been in a position to have fully put in place substantial reforms in education and training, substantial reforms particularly when it comes to infrastructure. But let's just take one fundamental reform, let's just take one long-term reform that will have a dramatic impact on productivity – it's the NBN. The NBN is absolutely essential to lift the efficiency and the productivity of small businesses throughout this country, but it can't be laid out and it can't be put in place in one year or two years or three years. So it's a substantial microeconomic reform. People have been talking about a microeconomic reform like that for 25 years. Well, we're putting it in place but it'll take a while to get there.

UHLMANN:

Let's just have a look at another thing that hangs off productivity, which is unit labour costs. And wages are going up, productivity is going down, which means that a large gap is emerging there and of course that'll have an effect on inflation.

TREASURER:

Well, first of all, I don't accept the premise of your question. I think our wages growth at the moment is relatively modest. There are sectors where it is very strong, but what we put in place many years ago was a system of enterprise bargaining. That remains absolutely important to ensure that you get productivity outcomes at a workplace level, but secondly, it is that combined in terms of what you do with the education and training of your workforce and what you do with ...

UHLMANN:

Sure, Treasurer, but I know you understand that we're talking about unit labour costs. So we're looking at labour divided by productivity and that's 7.4 per cent up over the year to March. That's the biggest quarterly jump since 1990. Now the Reserve Bank would look at that and be concerned, wouldn't it?

TREASURER:

Well, I think you can pick and choose your measures if you like. You can take that measure. There are a number of other measures, particularly the ones that we had in the Budget which don't back up your assertion.

UHLMANN:

If you look at productivity and you look at these wages costs, they're a problem for you, aren't they?

TREASURER:

Well, what we have to do is contain inflation, there's no question about that, which is why we are absolutely determined to bring the Budget back to surplus in 2012-13.

UHLMANN:

Is there a sense once you get in government you apply a different measure for yourself than you used to apply for the previous government?

TREASURER:

No, I think we are being entirely consistent when it comes to labour force. We have strongly backed enterprise bargaining. We've introduced some fairness back into industrial relations in Australia; we make no apology for that. But when it comes to dealing with what we must do to put in place a lift in productivity, the investments in education, the investments in infrastructure, the reforms when it comes to the development of the NBN, this is all part of a very broad productivity agenda.

UHLMANN:

We need more workers, there's no doubt about that, and we will head towards a population of around about 36 million by the middle of this century. That's undeniable, isn't it?

TREASURER:

Well, you'll have to take the forecasts that come from the Intergenerational Report. It will depend upon what happens with overall birth rates. At the moment they're a bit below, I think two per woman, but of course it will depend upon levels of migration. They depend upon what's going on in the economy.

UHLMANN:

And they depend upon government decisions.

TREASURER:

Well of course they do, and they are adjusted from time to time. But the one thing we can't have is some sort of absolutely rigid target. What we do is make adjustments depending upon what is happening in the households of this country and what is required by the economy, and from time to time it may go up and from time to time it may well come down.

UHLMANN:

Was it wise to re-regulate the labour market as you head into mining boom mark II. It's less flexible now than it was for the last mining boom.

TREASURER:

Well, I don't accept that categorisation.

UHLMANN:

It'll only be tested this time around though, won't it?

TREASURER:

Well, I think we've put in place a very fair framework and one that is emphasising productivity. We are still absolutely committed to enterprise bargaining in industrial relations. That's the system that's there. And if you go around and talk to business, from time to time they will have some criticisms of the system, but they're not talking about getting rid of the current system. They support the current system.

UHLMANN:

And if wages rise unsustainably on your watch, won't that be a sign that the system that you put in place has not worked?

TREASURER:

Absolutely not. The fact is that we put in place a system which was negotiated between employers on the one hand and employees and the Government on the other. The fact is that we believe it will reflect productivity improvements in terms of wage outcomes. What we've got to do is make sure we get all of our settings right, and in particular the training and the skills of our workforce. They're the centrepiece.

UHLMANN:

Treasurer, thank you.

TREASURER:

Thank you.