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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

8 August 2011

Interview with Chris Uhlmann

7.30, ABC1

8 August 2011

SUBJECTS: Global economy; returning the Budget to surplus; Productivity Commission report on retail sector; people smuggling

UHLMANN:

Treasurer, welcome.

TREASURER:

Good to be here.

UHLMANN:

In your view, will the troubles in the United States and Europe translate to Australia?

TREASURER:

Well, I wake up every day, Chris, and thank my lucky stars that I'm a finance minister in Australia, in the Asia Pacific, because what we've seen in recent years is a shifting of the guard from West to East in the global economy and we are located in that part of the global economy that is growing strongly. We're not immune from events in Europe or in the United States, but here, we are fortunate to have a number of countries that are growing strongly - China, which is growing around nine per cent. It's not just a China story, it's a story of Indonesia, it's a story of India. It's a story of many other countries. So we are very fortunate to be in a very dynamic region in the global economy and that is a fundamental strength for Australia.

UHLMANN:

But China needs markets. Obviously Europe and the United States are its biggest markets, so could we see slower growth in China?

TREASURER:

Well, it's a possibility. You can't rule anything out. We are in uncharted waters here. But what I do know is that, particularly in China, but elsewhere in the region, there are domestic factors which mean that those countries will continue to grow. They may not grow as strongly because of events elsewhere in Europe and in the United States, but there are dynamics in their economy which relate to their population growth, which relate to productivity improvement, which mean that they can continue to grow in adverse circumstances. How much that will be, we don't know.

UHLMANN:

And if China slows, so will Australia.

TREASURER:

Well there's no doubt if China slows, it will have an impact in the region. But as I've just said, what we have in the region is a dynamism which is very important to the global economy. And China has the policy flexibility, as it's demonstrated before, to continue to stimulate its domestic growth and of course the region.

UHLMANN:

You're aiming for a small surplus next year of $3.5 billion. Do you have any advice on how that might be affected by what we're seeing at the moment?

TREASURER:

Well, it's far too early to make any conclusions, but we will be affected - markets are affected, budgets are affected. But we're committed to bringing our budget back to surplus in 2012-13.

UHLMANN:

Does it make it harder?

TREASURER:

Well it certainly makes it harder, but there are very good reasons why we should bring it back to surplus in 2012-13 and I've outlined them. And of course the events which are unfolding elsewhere in the world demonstrate the importance of that. But of course, it does make it harder.

UHLMANN:

And if it makes it harder, does that mean that you have to cut harder?

TREASURER:

Well, we'll cross that bridge if we come to it. What we are now is in uncharted waters. These events are playing out. We've seen the impact upon markets, particularly the stock market, here and around the world. But really, what we've got to ensure is that countries, particularly G20 countries, work closely together in the days, weeks and months ahead to ensure we can respond to these conditions.

UHLMANN:

Are you certain that you still need to hit this surplus target, and what's the difference between a $3.5 billion surplus and a $3.5 billion deficit? It's negligible in terms of economics.

TREASURER:

Well I think it's very important in this environment to demonstrate to people that you are very serious about fiscal policy. When we move to stimulate our economy, when we saved this country from recession a few years ago, we outlined our fiscal rules and we said that we would apply those fiscal rules when growth returned to trend. And we have been applying those fiscal rules, and in some cases growth has not necessarily come back to trend, because we think it sends a very important signal to investors and to markets that we are very serious about fiscal policy in Australia, and we are.

UHLMANN:

What if you needed to stimulate the economy again? Would you be prepared to borrow to do that if we went into recession?

TREASURER:

Well, I'm not going to speculate about that. We certainly have a degree of policy flexibility, we have low unemployment, we have strong financial institutions, we have a strong investment pipeline. All of these things are great strengths for Australia.

UHLMANN:

You've changed the labour market conditions; you've made them more rigid than they once were.

TREASURER:

Well that's what some people say. I don't ...

UHLMANN:

The Productivity Commission said that last week.

TREASURER:

Well, no, I don't accept that characterisation.

UHLMANN:

Well that's what the Productivity Commission said last week, and particularly about penalty rates.

TREASURER:

Well, they've raised the issue of penalty rates, but we've put in place an industrial relations system that is based on enterprise bargaining. I certainly don't accept that you get productivity by going out and slashing the wages of the lowest paid workers. What you get productivity from is investing in the skills of your people, investing in infrastructure. This Government's got a very big productivity agenda. Now I note that some people have raised reservations in that report. But I believe that we have put in place a system which generates the productivity gains that this country needs, but it comes from the investment in our people most particularly, and that takes time to come through.

UHLMANN:

And the commission said that the - it was not about cutting wages; the real problem was the ability to trade profitable at times that consumers wanted to shop, so it was about flexibility in the system?

TREASURER:

Well, you've raised some different questions that are not necessarily to do with industrial relations and are to do with the regulation in the sector. They made a number of points about changes in the sector, that the sector has fallen behind. It hasn't necessarily kept up.

UHLMANN:

This was about industrial relations, this was about penalty rates.

TREASURER:

Well, I don't necessarily accept that at all. What I do know is that the sector has not kept pace with change, that it does need to change its orientation, because, you see, consumers have changed. They can do price discovery standing in a shop on their iPhone. All of these things have changed, and what means is that the industry will have to change. But they've not even, they've not shown the willingness so far to even recognise the changes that are going on amongst their customers.

UHLMANN:

If conditions in Australia worsen materially, would you consider delaying the carbon tax?

TREASURER:

Oh, look, important reforms like pricing carbon, like bringing down the tariff wall, like floating the dollar, like bringing in enterprise bargaining, are reforms which strengthen the economy. And in the past, when those reforms have been put in place, people have come out and said, 'Don't proceed now.' This is an essential reform for the long-term strength of our economy and we're determined to put it in place.

UHLMANN:

The High Court has extended an injunction on the Malaysian people swap deal. Doesn't that just cement in people's mind that this Government has a lot of trouble trying to implement its policies?

TREASURER:

Oh, fair crack of the whip. The fact is that people will take legal action. I think most people anticipated that there would be some form of legal action. This is the legal process in Australia. This is what we live with. We're a free society. I don't think anybody should be surprised by the fact that some people out there have taken this legal action. But we regard our reform as being absolutely essential to break that people smuggling model.

UHLMANN:

Wayne Swan, thank you.

TREASURER:

Thank you.