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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

11 August 2011

Interview with Paul Murray

Radio 6PR, Perth

11 August 2011

SUBJECTS: Global Economy; Clean Energy Future; Minerals Resource Rent Tax

MURRAY:

Good morning Wayne.

TREASURER:

Good morning Paul. It's good to be back.

MURRAY:

It's nice to have you here. Wayne, a range of leading business leaders in the newspapers this morning saying that the recent dramatic slump in the global economy should be causing you to rethink a carbon tax and a mining tax in the current financial environment. What's your view on that?

TREASURER:

Well, we're not going to do that. I mean, the carbon price doesn't start until 1 July next year, and in terms of the Resource Rent Tax, the fact is that mining investment continues to be very strong in this country and in particular in this state. So that investment is judging Australia as a very good place to invest despite all of the volatility that is around, because as you know the Asian Century is producing an unprecedented demand particularly for our resources and that is producing an investment pipeline in this country that is simply unprecedented. And that investment is up dramatically since we announced the resource rent tax and the new MRRT.

MURRAY:

So there's a lot of uncertainty about where the world economy is going over the next few years?

TREASURER:

Well, certainly there's a lot of volatility at the moment and a lot of uncertainty in global markets. There's no doubt about that, and it is not as yet clear the extent to which that will impact upon global growth. But as you're aware Paul, the events in Europe have been playing out over the past 18 months and growth there has been slow, and as you know, growth in the United States hasn't been particularly strong over the past 12 months either. But what has occurred in the middle of that is our region has been strong and our local economy has been strong.

It's been strong for two reasons. One, because we've put in place the stimulus to avoid the worst impacts of the global recession. And two, because we are located in the right part of the world at the right time and there is very strong demand for our commodities. Those two things have meant that the region has been growing strongly, Australia has been growing strongly and there is a question about the extent to which these events in global markets will flow through to the real economy and reduce global growth. That's not clear at the moment, but what is pretty clear is that there has been a changing of the guard in the global economy and the importance of our region just continues to grow.

MURRAY:

Yes but there are some concerns that if America goes back into recession and if Europe slows down markedly that will actually drag back China and therefore us?

TREASURER:

Well, there are lots of 'ifs' there aren't there, Paul?

MURRAY:

Yep.

TREASURER:

But the fact is that China will continue, I believe, to grow strongly. But when we talk about Asia Paul, it's not just China that we're talking about, important as it is; we're talking about India, we're talking about South Korea. We're talking about a whole host of dynamic countries that are growing strongly - strong population growth, strong demand for energy, increasingly strong demand for services and so on. And they have continued to grow very strongly during the past 18 months despite the fact that many other developed economies have not been growing strongly. This is a legitimate discussion. It's simply just too early to be making those conclusions. There is a lot of uncertainty. There is a lot of volatility but at the moment the outlook in our region still remains quite strong.

MURRAY:

As you say, these two new imposts aren't likely - well they won't - come in until next year and you've probably got a year now to have a close look at what's happening in the world, but are you open to the idea?

TREASURER:

Well, I'm not open to the idea for these reasons. The fact is that when it comes to carbon pricing these investors have just about all factored into their investment plans a carbon price. There's no shock for a lot of investors right across this country that are making very significant long-term investments because they've already factored that in. They are dealing with it elsewhere in terms of their global operation. And its impact is relatively modest. There's been a huge scare campaign run about it and I know a lot of people have been beating the drum but the fact is that its impact is relatively modest.

So there's all the reasons in the world to proceed with a structural reform like this, because one of the reasons that our economy is strong now is that in the past we've had the guts even during challenging times to put in place fundamental reforms and it's led to the fact that we've had 20 years of continuous growth in this country. So that's my position and that's the government's position.

MURRAY:

The mining industry in Western Australia says our competitors, our resource competitors - and I'm talking iron ore here obviously although to some extent gas - they say our competitors in Africa and South America are watching with great anticipation of what we're going to do here because they believe that they can take advantage of any fall off in our competitiveness?

TREASURER:

Well, the fact is that people are still continuing to invest very, very large sums of money in this state and in my home state of Queensland across gas and coal and iron ore and they're doing that because this is a good place to invest.

MURRAY:

Well talking about your state, so the head of Macarthur Coal, Keith De Lacy, who I think comes out of a Labor Party background -

TREASURER:

He hasn't been (inaudible) a while ago, Paul.

MURRAY:

But that's where he's from. I think he might have actually even been a Treasurer wasn't he at one stage in Queensland?

TREASURER:

Yes it's been a long time since he's had anything nice to say about the Labor Party, but anyway.

MURRAY:

Well, anyway he's running a pretty big coal company there and he says concerns about sovereign risk in Australia have increased dramatically after the mining and carbon taxes were announced.

TREASURER:

Well, the fact is that there's actually a couple of bids for Macarthur Coal. Our state is in such good nick that there's forward amounts of investment going into coal including a bid for Macarthur Coal from a couple of people right now. So what I would say is that the investment story of inward investment increasing and continuing to increase belies those sorts of lines that are run by people like Keith De Lacy.

MURRAY:

Okay well I'll switch to Bob Brown then. You might be a little more comfortable with his views?

TREASURER:

Not especially. Not necessarily on fiscal policy. I mean, the fact is that one of our great advantages, Paul, is that in this country we haven't had the gridlock they've had in Europe and the United States. We've avoided recession. That's our number one strength. We avoided all the capital destruction and high unemployment that came with it. That's why we're strong now. And the fact is that we have been getting a Budget through Parliament which has put in place the biggest fiscal consolidation we've seen. We've done all of that. That's the sort of clear, consistent messages that investors and markets want to see and that's why Australia has been given such a big tick by the IMF.

MURRAY:

Bob Brown, the Greens Leader, is saying that if your revenues are going to fall as a result of the global slowdown you shouldn't be cutting to meet your promise to return the Budget to surplus next year because you're just going to end up hurting small businesses and putting jobs at risk?

TREASURER:

Well, the point I would make to Mr Nasser, the point I would make to Mr Brown, the point I would make to many others that have been out there involved in this debate is that we have a very clear, consistent, methodical, fiscal policy. And as international events unfold we'll sit back and we'll assess them in the normal way.

The fact is that we always bring down a Budget update towards the end of the year which takes into account the impact of what's occurred since the last Budget was brought down. At the moment it is far too early for people to be making the conclusions about the impact on growth and our Budget from these events. There's no doubt there will be some impact. It is too early at this stage to determine how much an impact. But one of the things that I can say to you is that why Australia is in such good nick particularly in this environment is that we have a very clear and consistent fiscal policy and it's the fiscal policy that we're determined to implement over time and we're doing that, and that's to the benefit of Australia.

MURRAY:

I think everyone can see that it's early days and everyone's hopeful that we're not going to see GFC Mark II -

TREASURER:

Exactly.

MURRAY:

I think what they're probably testing at the moment Wayne, is the level of flexibility within the Federal Government.

TREASURER:

Well, could I just say this - we have a proven track record of handling global instability. That's what we have. We handled it last time. We handled it in perhaps the best way of just about any developed economy in the world. That's what the OECD has said and it's what the IMF has said. So we're up for this task, but what we're going to do is we're going to act in a very determined way, we're going to act in a very clear way and we're going to act in a very methodical way and we are not going to make policy on the run.

MURRAY:

Thanks for talking to us today. I appreciate it.

TREASURER:

It's good to be with you.