The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

28 August 2011

Interview with Peter Van Onselen

SKY Australian Agenda

28 August 2011

SUBJECTS: Australian economy; global outlook; Craig Thomson

VAN ONSELEN:

The revelation of job losses in the manufacturing industry is something that in a broader sense you've been talking about for a long time now in terms of the nature of this patchwork economy.  Do you hope that now that this is happening people will let you get on with the business of implementing the policies that can do something about it?

TREASURER:

I think what we're seeing is the enormous structural pressures on the Australian economy.  The consequences of the movement of economic power from the West to the East - with that comes a resources boom, with that comes an elevated terms of trade, with that comes a higher dollar and that does put pressure on trade-exposed industries, such as the steel industry, such as our educational industry, such as our tourism industries.  And the Government clearly laid this out well over a year ago in the budget before last where we talked about the two-speed economy, the patchwork economy and the fact that not everybody in our economy would be in the fast lane of the resources boom.  And in this year's Budget we talked very specifically about spreading the opportunities of the mining boom, preparing our economy for the fact that some parts of it would be under stress, other parts of it would be doing very well and how could we ensure that we maximised the opportunities coming from the resources boom and spread them to every corner of our economy. 

Now what we've seen here with BlueScope is part of that very painful adjustment, and it is a terrible thing for the workers involved but the decision that BlueScope has made to move out of the export industry is strengthening its operations so it can be Australian focused and that secures the jobs of those who remain in the industry and that is a very important outcome for Australia, but it is part of that painful adjustment that we are seeing.

VAN ONSELEN:

Are you hopeful that what's happening in the manufacturing sector right here and now is going to draw people's attention to how serious this is rather than people being focused on the daily political minutia?

TREASURER:

Well, I certainly hope so and part of my job is to deliver a reality check.  I've got to talk to the business community, I've got to talk to the wider community, I've got to talk to the investment community and when we look at the Australian economy, it is very strong.  Our fundamentals are strong.  The glass is more than half full.  It is not half empty.  I have to clearly outline the strengths of our economy in terms of our strong budget position, our strong public finances, our strong financial institutions, our strong investment pipeline.  But clearly for many people out there in our community they're not experiencing the immediate benefit of those fundamentals and it is our job to explain very clearly what is happening here. 

It is hard in what you would call a very difficult and competitive media environment sometimes to have the type of conversation we need to have and to get some balance into that conversation.  And that's my job to get out there and try and deliver a bit of a reality check, talk about these trends in our economy so we can take the community with us because the future for Australia is bright but there are challenges with a patchwork economy and some people will be facing some painful adjustments.

VAN ONSELEN:

If people are feeling the pinch in their daily lives, which they undoubtedly are, how do you get them to understand that that is a nature of the modern economy that we're in, but the actual economy itself in the context of the global economy is going quite well?

TREASURER:

My job is not to apportion blame.  My job is to accept responsibility and to get on with a mature conversation.  The fact is that we've had 750,000 jobs created in Australia in the period of this government, 200,000 jobs in the last year alone.  The fact is that our public finances are strong.  The fact is that there is very big investment pipeline coming through, as high as $430 billion, but overlaid over that now we've seen this new bout of global uncertainty.  So running alongside of that is the impact on our share market, the impact on confidence and that does send a difficult message into the lounge rooms and kitchens of Australia where people are sitting there and saying on the one hand we are talking about a resources boom, strong investment pipeline, on the other, what they see is a lot of uncertainty and turbulence in the international economy. 

Now that's difficult for people to absorb which is why we do need a mature debate and it's why we don't need the type of scaremongering that goes on particularly from our political opponents.  And it's also why we don't need some of the more extreme interpretations of these events that we see in the media from time to time that when a piece of data comes out we get the downside interpretation for that data and we get it multiplied by ten.

I mean I'll just take you back for example to the March quarter National Accounts where there was a very substantial hit to growth which came primarily from the foods in Queensland and cyclones in Queensland.  It was a very big hit to growth.  Some media outlets interpreted that as Australia heading for recession.  It was completely inaccurate in its reporting but I think it had a damaging impact on confidence.  So what we've got to do is to continue to talk about our rock solid fundamentals but we can't stick our head in the sand and not acknowledge that there are stresses and strains and challenges elsewhere in the economy, that people are feeling the pain of those stresses and strains and we have to address those directly as well.

VAN ONSELEN:

You say that you don't want to apportion blame and I understand that, but nonetheless there is a dumbing down of politics whether it is a consequence of the 24 hour news cycle and therefore journalists, a public which is time poor or indeed the Opposition with its relentless negativity or the Government that gets sucked into running messages as well.

TREASURER:

Well, can I say I'm more optimistic about where the people are but I think that the problem we've got is that Tony Abbott is just relentless in his negativity and he is importing US style Tea Party political tactics which basically are to oppose everything you possibly can, try and make the whole political system unworkable and talk the political system and the economy down.  So you get these outrageous distortions of our debt levels, outrageous distortions of what's going on with spending.  They try to paint a picture of the economy which is simply untrue and divorced from reality. 

VAN ONSELEN:

I accept what you say.  There is no doubt our debt is low by world standards, our economy is strong, but how do you respond to the attacks from the Opposition without, in a sense, lowering yourself to their position?

TREASURER:

Well, I think what there needs to be is more scrutiny on those propositions and you say that the Government gets dragged into that – only to the extent that we try to correct the record.  I mean we have out there, analysing our situation, international bodies such as the IMF, the OECD, who have all given us a very big tick for economic management, a very big tick for our rock-solid economic fundamentals.  But even in the face of that objective evidence from third parties at the moment Mr Abbott and his team get away with these outrageous distortions when in fact the facts put forward by those bodies undermine their claims.  But I don't believe that in the media there is the degree of scrutiny of Mr Abbott's tactics that there ought to be.

VAN ONSELEN:

You see I think one of the reasons for that – I say this as a journalist receiving the emails that you get from people that don't like it when you focus on the Opposition rather than the Government – there is this sense from some people in the community that the Opposition deserves that scrutiny closer to an election but not so much further away.  Now the problem with that is that with a minority government they could always be closer to an election than you might think yet they're not, as you say, perhaps getting the scrutiny that would go with being closer to an election.

TREASURER:

No they're not getting the scrutiny that they should be getting at any time in my view, irrespective of where the election is.  You see I was the Opposition Treasury Spokesman for three years before I became Treasurer.  I've now been in this job effectively for nearly seven years and there was a lot more scrutiny of what I did as a Shadow Treasurer than there is of what Joe Hockey is doing as a Shadow Treasurer.  We were actually expected to reply to budgets, to put forward funded propositions, to explain what we were doing, and when we didn't in sections of the media we got absolutely smashed.

VAN ONSELEN:

Is it the bane that Labor governments face, that there is a perception real or otherwise that the Coalition are better economic managers, and that Labor has to always prove itself in this regard rather than just receiving runs on the board?

TREASURER:

Look I think the population understands that we have a very good record of handling the economy.  I believe the reason that I'm sitting in this chair now as Treasurer is because they supported our economic record at the last election.  I believe they recognise just how important it was that we put in place the stimulus, they recognise how effective it was.  And they recognise that the very strong job creation that we have in Australia today is a consequence of that.  They also recognise that when we acted, we acted out of the best of reasons and in good faith to keep small businesses open and to keep people in jobs.  So I think people understand that, even if that is not recognised in the public debate, I think the public understand that.  For this Government, our highest priority has always been securing jobs and also making sure that we had a good budget and that will remain our highest priority as we go forward.

VAN ONSELEN:

Looking at the global economy and the volatility on the share market here and overseas, what do you think is likely to happen, what is the impact likely to be over the coming 12 months?

TREASURER:

Well it's too early to draw any conclusions but I would make this point:  2011 is not 2008.  It's hard to see what the overall impact of what's going on in Europe and the United States will be on growth and therefore on our budget.  So it's most important in these circumstances for policy makers, such as myself, to keep closely in touch with what is going on internationally.  I‘ve been doing that.  I've been in regular contact with G20 Finance Ministers in recent months.  I'm heading off for a short trip to China early next week.  I'm going off to the IMF and World Bank Meetings in late September in the United States.  When matters took a turn for the worse in 2008 I found it was that sort of international engagement that was absolutely critical in helping us formulate our response to the circumstances which had not then yet unfolded.  So international engagement is a critical part of staying on top of where the international economy is going.

VAN ONSELEN:

What is different now compared to 2008?  The global financial crisis then, the turmoil now – why is it like comparing apples and oranges?

TREASURER:

Well, the very big difference is that in the United States, it's primarily a political problem which is stopping the resolution to the economic problem, which is getting in place a very clear and consistent fiscal consolidation over a period of time.  It's politics which is stopping that.  The policy path ahead is very clear whereas back in 2008 it was a systematic meltdown of the whole financial system in the United States and therefore elsewhere in the world.  So they've cleaned up their financial system in the United States now.  So that's a very big difference. 

What is perhaps more concerning is that the European situation doesn't look to have a speedy resolution and could also be held up by gridlock and politics.  I mean the great advantage Australia has is that we are sitting here and, although we are a minority government, we have put our entire budget through the Parliament.  We're passing legislation – some 180 bills through the House of Representatives.  We're putting forward legislation successfully in the Parliament and getting our policies in place.  It is a great strength for Australia compared to what is going on elsewhere in Europe and the United States underpinned by our strong fiscal position and our clear and consistent set of fiscal rules.  That's why Australia is seen as such a strong proposition in current world conditions.

VAN ONSELEN:

That might all be true but there's at least a perception there, isn't there, that whether it's the Opposition talking things down or whether it's the uncertainty that surrounds a minority government, there's a perception that there are risks and uncertainty attached to that?

TREASURER:

Well, I've delivered four budgets and the last budget passed more quickly than the previous three budgets and had at its core a very big fiscal consolidation, the largest in our history.  That's what matters when markets look at Australia.  They look for – where is the consistency?  Where is the strength?  Where is the integrity in fiscal policy?  And that went through in full despite the fact that we are a minority government. 

So the legislation is passing and the Government is governing effectively.  We've got out there now one of the biggest structural reforms in our history – the pricing of carbon.  It will go to the Parliament, it will be debated and it will pass.  This sends a very clear message to the world that Australia is very clear and consistent in its policy objectives and it's got its eye on the main game.  Now we've had a particularly difficult political debate surrounding all of that but the record speaks for itself.

VAN ONSELEN:

It is an interesting dichotomy, I think, because on that one hand - Anthony Albanese talks about this all the time - inside the beltway, I don't say that disparagingly, the Government has achieved a lot of legislative change, is achieving that change. But outside of that, in the minds of the public, it's chaos.  How do you combat that? At some point the Government is going to have to change gears and deal with that, isn't it?

TREASURER:

Well, part and parcel of that is to have some very clear and consistent reporting of those facts.  The fact is that there is a wall of conservatives out there, a cheer squad in the media for the Abbott Opposition, and that sometimes drowns out those messages, and part and parcel of having discussions like we're having now is to point out just how important what Australia is doing to economic confidence in the country and to our economic future. 

The fact is that the tactics of the Opposition have been talking down our economy and that has had an impact on confidence; there is no doubt about that.  For Mr Abbott to go around for two years claiming that our debt position is far worse than it is, that it's not a strength it's a weakness, for him to go around making outrageous claims about spending which aren't true and then to follow that up with a whole scare campaign which is blatantly untrue about carbon pricing does have a impact on the real economy.

VAN ONSELEN:

Even though we've been talking about not getting captured by the daily political contest, it would be remiss of me not to ask you about Craig Thomson. This is a taint on the Government, isn't it? There's a real risk there that Labor federally looks like it's simply going down the path of what's happened or did happen in New South Wales?

TREASURER:

Oh look, fair dinkum.  I mean, in the last Parliament and the Parliament before that under John Howard term, after term, after term, there were these sorts of issues which arose with backbenchers.  There were long debates about backbenchers in the Howard Government and they didn't have any of the impacts that you were just talking about and they didn't lead to any of those conclusions.

VAN ONSELEN:

That's true but, you know, the Wilson Tuckey saga which involved perhaps untoward activity vis a vis the police with a driving charge, the Telecard affair with Peter Reith. They're all ugly, no question.  I remember them at the time but the fact that this includes allegations around brothels just ….

TREASURER:

Well, there are a whole set of allegations about the Member for Bowman.  Now my purpose today is not to go through those.  My point is to say until these investigations are concluded the Member has denied those allegations, the investigations are on, let's let them run their course.  I don't think you can make those sort of conclusions about the outcome at all.

VAN ONSELEN:

Wayne Swan, thanks for joining us on Australian Agenda.

TREASURER:

Thank you.