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

11 August 2011

Interview with Geoff Hutchison

ABC Radio 720, Perth

11 August 2011

SUBJECTS: Global outlook; Australian economy; returning the Budget to surplus; Government's productivity and reform agenda; people smuggling

HUTCHISON:

Mr Swan, good morning to you.

TREASURER:

Good morning it's good to be here too.

HUTCHISON:

I know you'll tell us how resilient our economy is, how strong the fundamentals are that underpin it, but if this global share market slide continues what will be the flow-on effects for the Australian economy?

TREASURER:

Well, let's just go through it a bit. I mean, we're seeing extraordinary volatility and uncertainty in international markets over the last week or so, and really the big question is to what extent that impacts upon growth in the global economy overall. In fact, you could say that one of the big things that happened in the United States wasn't just what occurred when they lifted their debt ceiling, but it was also the growth figures that came out around the same time, which showed that growth in the US was weak, certainly nowhere near as strong as people had previously expected.

So I think what markets are responding to is two things. In Europe, they're responding to the challenges of sovereign debt and also associated matters in the banking system, and I think in the case of the United States, they're worried about the trend of growth there. Really the question is to what extent will that impact on global growth given the fact that growth in our region, Geoff, is so strong and has been so strong for some time. We are seeing a bit of a changing of the guard in the global economy from West to East. That is a major advantage to Australia but also what is the major advantage to Australia is that we avoided recession because we moved to stimulate our economy and of course all of our financial institutions here are very strong. Our banks are in a very, very strong position, and that also stands us in very good stead along with low unemployment and that very big pipeline of investment that we're seeing in resources.

HUTCHISON:

Can Australian home owners and mortgage holders at least feel some confidence that we're likely to see a series of interest rate cuts in that the last month of this year and into the next?

TREASURER:

Well, that's entirely a matter, as you know, for the independent Reserve Bank. The Reserve Bank issued their Statement on Monetary Policy last Friday where they commented on growth and the likely course of the economy in the years ahead. But we've had some pretty serious volatility and uncertainty in the global economy since then.

I think what Australians can be very confident about is that things are stronger here than in just about any other developed economy but we're not immune from the impacts and fallouts in terms of global growth. But we certainly stand out, particularly amongst developed economies for our strength and our low public debt, the investment pipeline I was talking about before, and the strength of our financial institutions.

HUTCHISON:

Treasurer, having spent billions and billions of dollars to insulate the economy from the global financial crisis three years ago, why are you so steadfastly saying that you will return a surplus in 2012-13?

TREASURER:

Look that's a very good question, and of course when we're looking at what's going on in markets, there are people who really feel those impacts in the markets, particularly say self-funded retirees. But one of the reasons that we are so strong about our fiscal policy is, and one of the reasons that international institutions - for example the IMF gave our economy a big tick - is that we've got a very clear, consistent and methodical fiscal policy, and we put that in place when we moved to stimulate the economy back in 2008-09. What we said then was that we would move and put in place a very strict fiscal policy as growth returned, and we've been doing that and we have put in place the objective of coming back to surplus in 2012-13 because that's important to send a message to the world that there's a very strong, consistent and clear fiscal policy in Australia and of course that's what they're not seeing in some of the other developed economies.

HUTCHISON:

It's not just a political tactic to fend off Tony Abbott which has been the suggestion made by the Greens.

TREASURER:

Not at all, no.

HUTCHISON:

And similarly, you know, economists are saying you don't have to do it. The Former Reserve Bank board member Warwick McKibbin has said it. The Greens say you don't have to do it. I mean, there is some concern that this pursuit is being seen as a bit of a shut the Opposition up policy ahead of an election.

TREASURER:

Geoff, can I just say when we put this in place Tony Abbott wasn't the Leader of the Opposition. We put it in place because it was the responsible thing to do when we moved to stimulate the economy. You can't be Keynesians on the way down and not be Keynesians on the way up. But look this is a legitimate debate; I absolutely acknowledge that – as Mr Nasser from BHP overnight has made that point. But the fact is we don't make our fiscal policy on the run. International events are unfolding. They do have implications for growth but their implications for the Budget are not clear. Their implications for growth are not clear. So it's a legitimate debate, but what we will do in a methodical way is we will prepare our estimates for growth and release them at the end of the year as we usually do, and we still expect to be back in surplus in 2012-13, but there is no doubt there will be some impact. But until we see the full extent of these events and how they impact on global growth, what we will do is the logical thing, is work to our fiscal strategy and update it in the normal way. That's what we're doing and it's not something that's sort of just come along.

HUTCHISON:

You also just quoted Jac Nasser and overnight he's also expressed concern as we're talking about volatile economic times and the belief that they may last another couple of years. He has expressed concern about the introduction of both an NBN – a costly NBN – and the introduction of the carbon tax in these times.

TREASURER:

Look, we should talk about both of those things. Just in relation to the NBN - you know, there is a very, very close link between the NBN and productivity. But I'm concerned about where productivity has been in Australia in the past decade. There has been a structural decline in productivity in Australia in the past decade, and one of the reasons we're putting in place the NBN is part and parcel of a pretty broad and wide productivity agenda that the Government has got across skills and education, NBN, tax and so on because productivity and lifting productivity growth takes a long time. These productivity cycles take a while and it takes a while to see the benefits of the sort of investments that we are making across the economy.

When it comes to the carbon price, we are not talking about the introduction of a carbon price until 1 July next year. It's an important structural reform in our economy like past structural reforms such as the floating of the dollar, the putting in place of national superannuation. You've got to get these things in place to have a strong economy and one of the reasons we've got a strong economy is that we had the guts in the past to put them in place and we are now reaping the benefits of those right now.

HUTCHISON:

Treasurer, last question. Are we likely to hear today - while the High Court determines in the next few weeks whether or not asylum seekers will ever be sent to Malaysia - will we hear today that Manus Island will be reopened as an offshore processing centre?

TREASURER:

Look I can't speculate about that. You'll have to talk to the Immigration Minister about those matters.

HUTCHISON:

You have no comment on it?

TREASURER:

Well, no I'm not dealing with these issues. But can I just say about Malaysia and the High Court action, we've put in place a very important policy to break the people smugglers' model. That is absolutely critical. That's the Government's objective and we're going to continue to pursue that to break the people smugglers' model.

HUTCHISON:

Thanks for talking to us.

TREASURER:

Good to talk to you.