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

5 August 2011

Doorstop Interview

Brisbane

5 August 2011

SUBJECTS: Global financial markets; Australian economic outlook; international economy; carbon price; National Broadband Network; Nick Minchin's criticism of Malcolm Turnbull

TREASURER:

Okay well we've seen a fair bit of volatility in global markets overnight. This reflects sovereign debt concerns in Europe and of course economic weakness in the United States. Australians should never forget that our economic credentials are among the strongest in the developed world and that Australia has a proven track record of dealing with global economic uncertainty. And there is just a world of difference between the situation in Australia and the situation in Europe and the United States. For example, in the United States unemployment is almost twice the level of Australia.

Australia has low unemployment, a very strong investment pipeline, very strong financial institutions and we are located in the right part of the world at the right time. Growth in the Asia Pacific remains strong. There is a shift in economic power from West to East. All of these factors mean that our economic credentials and fundamentals are strong and that's very important to bear in mind as we see these global events buffet markets globally and also at home.

JOURNALIST:

Are you saying Australian shareholders shouldn't worry and they shouldn't (inaudible)?

TREASURER:

No, what I'm saying is that we are being impacted upon by events elsewhere in the world and of course that's obvious in local share markets. It's been obvious in local share markets for some time. The fact is that the share market in Australia is not back to the levels it was prior to the global financial crisis and now of course it has been hit by another bout of global uncertainty. The point that I'm making is that the Australian economy has strong economic fundamentals, low unemployment, strong financial institutions, low public debt. These things all count, plus the fact that we are located in the Asia Pacific where growth is still strong.

JOURNALIST:

Are you worried about a second global financial crisis?

TREASURER:

Well, there's no doubt that there is a long and painful adjustment yet to take place in terms of the United States particularly when it comes to dealing with their public debt and their budget deficits. I believe that they will do that. I believe that they will put that in place. This week we saw the first step along that road but we need to see more and I believe that that will be progressed through the US Congress and in Europe also a period of adjustment. But growth is strong in the Asia Pacific and that is why our prospects are fundamentally different from what is going on in Europe and in the United States.

JOURNALIST:

(Inaudible)?

TREASURER:

Well, growth remains strong in Australia. The economy is softer in the short term. We outlined that in the Budget. We have put in place a set of policies to return to surplus in 2012-13. Commodity prices remain high. That's why our fundamentals are strong and I remain confident that we will return to surplus in 2012-13. But I just make the point we are not immune from these global events but we are located in the right part of the world at the right time and that is to our advantage.

JOURNALIST:

Would you consider deferring the carbon tax (inaudible)?

TREASURER:

Well I've been asked this by a number of people. The fact is that carbon pricing doesn't even commence until the first of July next year. I think there's been a lot of scare mongering and irresponsible talk about the impact of carbon pricing by many people who should know better. They should stop talking down our economy. The fact is that fundamental reforms like pricing carbon are absolutely essential to strong economic growth into the future – essential to business investment, certainty for business investment and essential to strong growth. In the past, we as a nation have put in place fundamental economic reforms which mean we are strong for the long term and we've got to continue that journey with a carbon price.

JOURNALIST:

(Inaudible)?

TREASURER:

I'm sorry I can't hear you.

JOURNALIST:

(Inaudible)?

TREASURER:

You should actually reverse that question. We can't afford not to put the NBN in place because the NBN is part of a very ambitious reform program to lift the productivity of our economy. The centrepiece of our recent budget was a whole set of reforms to lift productivity – reforms in terms of lifting workforce participation, reforms in terms of lifting the skill levels of the Australian workforce and also in budget was the NBN – perhaps the most important microeconomic reform in recent history in our nation. It lifts productivity. It empowers businesses. It's a fundamental reform to ensure our economy remains strong for the long term.

JOURNALIST:

The slip in the Australian dollar is good news for manufacturers and farmers. They'd be jumping for joy today. When does it stop being good news?

TREASURER:

Well, I don't speculate about the course of the dollar. The Australian dollar has been strong because it reflects the strength of the Australian economy vis-a-vis other developed economies in the world. It also reflects the strength of commodity prices as well but there's no doubt a high dollar impacts upon many trade-exposed industries such as tourism, education and so on. There's swings and roundabouts with the dollar.

JOURNALIST:

(Inaudible)?

TREASURER:

The most important thing is that Australia has strong economic fundamentals and one of the reasons that we are so strong is because we avoided recession during the global financial crisis. Because we did that we have the policy flexibility to deal with uncertainty in the international economy should measures be required. I just don't speculate about those matters but the underlying fundamentals give us the strength in this environment to make sure we can protect our economy.

JOURNALIST:

Did Treasury see this coming? Are you prepared for this situation?

TREASURER:

Absolutely. The reasons why the Government has been so intent on bringing our budget back to surplus in 2012-13 is that we realise it's important that you have strong public finances. When we moved to protect our economy at the height of the global financial crisis and the global recession we put in place a set of fiscal rules which we have applied and those fiscal rules have us coming back to surplus in 2012-13. That is one of the reasons why our economy is seen as being so strong and stands in stark contrast to what is going on in the United States and in Europe.

JOURNALIST:

It's a bit of a catch 22 for you, isn't it? Because the way you're talking, the way you're talking here now must be worrying a lot of Australians.

TREASURER:

No, I'm delivering a message to Australians about the strength of the Australian economy. Australians will be sitting back today watching events on global markets and they will be saying to themselves `what does this mean for us?' What it means is that they are located in an economy which is one of the strongest in the developed world and which has a prudent capacity to deal with international uncertainty and that's my message to Australians today. Thanks very much.

JOURNALIST:

So not really much to worry about for Australians?

TREASURER:

We are not immune from global developments and you can see that in terms of what's occurring in markets globally and in markets here. What Australians need to keep in mind is the underlying strength of the Australian economy.

JOURNALIST:

What did you make of the Nick Minchin letter today in the Australian?

SWAN:

Well, quite bizarre. It would be really great if the Liberal Party actually just concentrated on policy rather than talking about itself and the ambitions of individuals within it. Thanks very much.