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 August 2011

Press Conference

Melbourne

3 August 2011

SUBJECTS: Australian export data; retail trade data; US debt agreement; international economy; Malcolm Turnbull on climate change; Christine Nixon book launch

TREASURER:

Good afternoon. I just wanted to make a few comments about the economic data today and a few comments about events in the United States in recent times. I think the data today is a telling example of the patchwork economy that I've been highlighting for some time now. And of course our response to the patchwork economy lay at the core of our Budget back in May. We've got some really solid trade data today – Australia posting its 14th trade surplus in the past 15 months and coal exports are recovering very strongly. Coal exports rose 18 per cent in June – that is the largest increase in a year. So this is good news for the resources sector. It's good news for the Australian economy but we also received retail sales data today. Trade values were down 0.1 per cent in June but volumes were up 0.3 per cent in the quarter and 0.6 per cent over the year.

Now the fundamentals in the Australian economy are strong. We have strong job creation but we are seeing consumers behave much more cautiously and we see them behave more cautiously particularly when events occur internationally. The events in Europe and the events in the United States do have their impact, and we have seen the efforts of Tony Abbott in recent times to talk our economy down. That does all impact upon consumers.

Australia is not immune from global economic events but I think Australian consumers can take great confidence from the fact that our fundamentals are strong. We do have some soft spots in the economy but we shouldn't lose sight of the fact that unemployment is low, that public debt is low, and that we have a huge investment pipeline and we are bringing our budget back to surplus in 2012-13, which is the fastest fiscal consolidation - that is return to surplus - that we have seen in Australian history.

I just wanted to say a couple of things about events in the United States. I think we all welcome the passage of the debt deal through the Congress and of course its signing off by the President of the United States. I think everybody around the world breathed a very big sigh of relief, not just in Washington but here in Australia.

I think the United States is in for a long and painful process of fiscal adjustment. That's important that that takes place to return certainty to the global economy. So what we've just seen is a first step along a very long path. A lot more work to do in the United States and in Europe, but I think here in Australia we can draw an enormous amount of confidence from our own strong economic fundamentals and our proven track record in handling global uncertainty. As I said before, our fundamentals are strong: low unemployment, a very big investment pipeline, strong public finances, strong financial institutions. All of these things really count for Australia. Over to you.

JOURNALIST:

Do you think the high dollar and the success of online retailing will lead to job losses in the short term in traditional retailing?

TREASURER:

Look I think there are a variety of factors involved when we're looking at retail in Australia. There's no doubt that consumers are cautious and this caution has been with us now for some time. You've seen the savings rate tick up in Australia in recent years. Australians are saving more and spending less. And the savings ratio began to tick up at the end of last year yet again and it's been high right through this year. On top of that you've seen the international uncertainty and I think that's affected confidence among consumers, and of course Mr Abbott's attempts to talk down the economy haven't helped either. Having said all of those things, it's important to recognise that unemployment still remains low in our economy. That's an important driver of the economy. We have got a very, very big investment pipeline. So I think for all of those reasons Australians can be confident.

JOURNALIST:

Why the day after the RBA decides to keep rates on hold are we still continuing to see the (inaudible)?

TREASURER:

I beg your pardon?

JOURNALIST:

The day after the RBA decided to keep rates on hold we're still continuing to see shares plummet.

TREASURER:

Well I don't become a commentator on the share market but I would draw your attention to what's occurring on global markets at the moment and what we are seeing play out in the global economy and in global markets is the uncertainty that flows from events in the United States and in Europe. And we're not immune from all of those things.

I made the point before that one of the reasons that we have a cautious consumer in Australia is that we are still living with the aftershocks, if you like, of the global financial crisis and the global recession and one of those is the fact that the stock market in Australia has not returned to the levels that it was at prior to the global financial crisis.

JOURNALIST:

But are you concerned about (inaudible)?

TREASURER:

As I said I don't comment or speculate about the stock market but our stock market is not immune from events in global markets.

JOURNALIST:

(Inaudible)?

TREASURER:

Well, we have some sectors that are really strong. You can see that today. You can see that in the trade data today – a really strong pipeline of investment in resources, a very strong investment there, that is driving economic growth. Other sectors are weaker. Other sectors for example are affected by a higher dollar. If you're a tourist operator, for example, if you're manufacturing and exporting goods to the rest of the world, you're impacted by a higher dollar. But the underlying fundamentals across our economy are strong, but not everybody is in the fast lane of the resources sector.

JOURNALIST:

So what is it going to take for confidence to return (inaudible)?

TREASURER:

I think the most important thing is to see some stability in international markets, for the United States to take the step that it has just taken, but to take the next step as well. That is going to be very important for global confidence for investors and markets to see that there is a very clear plan in the United States to return to fiscal sustainability in terms of budget policy. The United States is running budget deficits of 9 to 10 per cent. That's simply not sustainable. And of course you can see the sovereign debt crisis evolve in Europe and the implications of that. We need to see progress on both fronts, but the big difference for Australia is that our economic fundamentals are strong.

We have a government that has a proven track record of handling this international uncertainty and we are located for the first time in our history in the right part of the world at the right time. And growth in the Asia Pacific is strong despite all of the headwinds that are coming from Europe, despite all of the headwinds that are coming from the United States. We see strong growth in our region. So that's why Australians can have confidence that our economy will continue to grow and our economy stands in stark contrast to events that are going on within the United States and of course within Europe.

JOURNALIST:

Can you see some confusion out there about the messages in the sense should people be saving or should they be spending? It appears that people are generally – because of the patchwork nature of things and what's happening overseas – they don't really know which direction to take their own micro economies as it were.

TREASURER:

I think Australians are sensible people and they take responsible decisions about their own finances. Australians have collectively decided in recent months or in recent periods, more than six months or so, to spend a bit less and to save a bit more. But our economy is strong and they can be confident in the knowledge that we are in the fastest growing region of the world with some of the strongest fundamentals of any advanced economy. So when they take those decisions they can have confidence that the fundamentals here are strong and they can take wise decisions about their spending and about their saving.

I just wanted to also just make one comment about Mr Turnbull who I understand was addressing the Press Club at lunchtime. I, like many I think, was surprised to hear that Mr Turnbull had abandoned all of his principles on climate change and decided to support Mr Abbott's policy. This I think indicates that Mr Turnbull can't stick to his own principles when it comes to climate change despite all of the grandstanding and despite the fact that while Mr Abbott is in Europe he has chosen to give him a science lesson about climate change. Apparently he's going to abandon his principles and leave them all behind when that legislation comes to the parliament.

JOURNALIST:

Do you think it's – just one more question – do you think it's appropriate that Julia Gillard launched Christine Nixon's book given the book is heavily about leadership and Ms Nixon failed to show that leadership on the day of Black Saturday. Do you think it's an appropriate move by the Prime Minister?

TREASURER:

Of course I think it was appropriate. The fact is that the Prime Minister made it very clear that she didn't agree with Christine Nixon on a number of points in the book but she launched the book and that was entirely appropriate. Thank you.