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

26 September 2011

Interview with Ashleigh Gillon

SKY News Channel

26 September 2011

SUBJECTS: Global economic outlook; Australian economy; problem gambling; Prime Minister Gillard

GILLON:

I asked the Treasurer, Wayne Swan, what came out of the meeting from the weekend, what they achieved and what the takeout message was for him from those talks.

TREASURER:

Well, I think we're facing a pretty serious situation in the global economy; there's been a very big hit to confidence.  So growth figures for developed economies have been revised down.  We've got challenges of sovereign debt in Europe, that of course is putting pressure on the European banking system and we've got a fair bit of volatility in markets.  So all those things combined are seen very seriously by the finance ministers around the table at both the G20 and the IMF.  I think there is a collective resolve for everybody to work together. 

In the first instance what we need from the Europeans is for them to implement all of the commitments they have given to deal with the challenges there.  But we've indicated over the weekend that in terms of multilateral bodies like the IMF, we are prepared to work as constructively as we possibly can with the Europeans to assist them to resolve these issues.

GILLON:

Reports in weekend press suggest that Europe is ready to take concrete action to try to short-circuit the intensifying new debt crisis.  There's talk of a nearly $3 trillion rescue package being floated.  How confident are you that that sort of package will do the job, that it can actually work?

TREASURER:

Well, all of these issues have got a way to play out but the Europeans have taken a number of decisions and they are in the process of implementing those, and they do have a stability facility in place to provide backup for the banking system.  I think what we've got to see is for that to be implemented as quickly as possible.  But I think what the IMF have said publicly is that they stand ready to work with Europeans should that be necessary.

GILLON:

Has it been a failure of leadership in Europe, do you think, so far, that's brought us to this point?

TREASURER:

There's no doubt that what we're suffering from in the global economy is  political gridlock both in Europe and United States, and what that means is that those two very big economic engines have been misfiring, and that's been happening for some time.  So we are witnessing the consequences of political gridlock, a lack of political will.  We are not getting the sort of decision-making processes that confidence demands and the consequence of that has been the hit to confidence, we've seen the effects in markets.  So essentially these matters have been delivered, if you like, by a lack of political will.

GILLON:

Have you found that the approach there in Washington to Greece is more that it's not if the country will default, but when?

TREASURER:

The Europeans are very determined to deal with the situation in Greece within the framework of the Union.  That's what everybody here was saying, that's what they're committed to doing, and that's what I believe they will do.

GILLON:

We've seen some pretty dire warnings over the weekend about Asia's growth as well saying that it could be slashed by a third if Europe and the US both go back into recession.  That sort of outcome would have a pretty devastating impact here in Australia, wouldn't it, especially when it comes to the resources boom.

TREASURER:

Well, I think it's too early to be drawing those sort of conclusions but the fact is we are all very interconnected that's why it's very important there is a global response to the events in Europe.  The fact is that developed economies are slowing and that does have a knock-on effect in terms of developing economies.  We haven't seen growth in those two areas completely decouple. The fact is there are flow-on effects to developing economies.  But in the IMF forecasts that were published just in the past week based on seeing developing Asia growing at about 8 per cent where as they see [developed] economies, major [developed] economies, growing at less than 2 per cent.  There's no doubt there's far greater strength in our region and that's very important not just for the region but for Australia, and indeed for the global economy, but the region isn't immune from these events.

GILLON:

How worried are you though that the Australian dollar and commodity prices are already sliding?

TREASURER:

Well, I think there will be an impact across the board and we've seen some impact of these events in terms of the dollar but I think we've got to go back and look at our fundamental strengths, and our fundamental strengths mean that as a developed economy we're growing faster than most other developed economies.  We've got a very good, strong public balance sheet.  We've got low public debt.  What we have is those very big investment pipelines coming through which will be largely unaffected by these events because they're long-term investments.  We've created over the past year something like – past four years – something like 750,000 jobs and we've got strong financial institutions.  So there are underlying strengths in the Australian economy which means that we are in a better position to handle the fallout from these events than just about any other developed economy, but we are not immune from them.

GILLON:

It's a fine line, isn't it?  Because on one hand you're saying we are entering this dangerous new phase and on the other hand you're talking up the strength of the economy.  It's difficult to really know in terms of investors here.  Confidence is already so low.  It's a fine line not to talk down the economy, isn't it?

TREASURER:

Well, the phrase dangerous new zone, if you like, was used by the IMF to describe the threat we're seeing in the global economy and what I've been talking about is the flow-through effects from that into the region and into our economy.  I think we need to have confidence in our strengths.  We shouldn't talk down the Australian economy as Mr Robb and other Liberals have been doing.  The fact is we're not immune from these events but we ought to highlight our underlying strengths and that's what I've been doing and they are understood but our share markets for example are not immune from the fact that there is a lack of confidence globally, that flows through to markets in Australia.

GILLON:

Well, if a boom does [stop] to flow that's of course another blow to your Budget forecast which could in turn impact your promise to return to surplus.  Is it time to start being more flexible with that goal to return to surplus?  Or are you just too worried about the political fallout in case you get faulted by the Coalition for not delivering on that promise if that turns out to be the case?

TREASURER:

What's most important here is to have a very clear, consistent and credible fiscal policy and that's what we've got.  We're determined to return to surplus in 2012-13 but there's no doubt that the recent events that we've just been discussing impact on global growth, that flows through to domestic growth, that flows through to Budget revenues and that does have an impact.  So it means that that objective that we've set, that determination to come back to surplus in 2012-13 just gets harder because of these events, but there's a very good reason for maintaining that determination.

GILLON:

A very well-respected economist, I know you're familiar with, AMP's Shane Oliver, he's urging the Reserve Bank today to cut rates by at least a quarter of a per cent.  He says otherwise the RBA risk joining European governments in falling behind the curve by failing to act on the world's worsening economic conditions.  Some of your own Labor MPs have been adding their weight to these sorts of calls.  How confident are you that the central bank has the settings right at the moment?

TREASURER:

Well, the Reserve Bank takes its decisions independently when it comes to interest rates and it makes that judgement month by month.  I mean, I will just make this observation in terms of the international economy:  the IMF, when they have a look at the Australian economy in detail in an article for a report which was published a few weeks ago, just made the point that when it comes to both fiscal policy and monetary policy there was enough or a lot of flexibility in Australia to respond to circumstances should they be required.  But look it is far too early yet to tell how all these events will play out and what they will ultimately mean for global growth let alone its impact on Australia.  What we've got to do is to closely monitor these events and be flexible enough to respond if action is required.

GILLON:

Treasurer, obviously you had to miss all the footy games over the weekend but if you were here you would have heard that the AFL is describing your proposed gambling reforms as a tax on footy.  The AFL is a pretty powerful enemy you've got there now and you add it together with the NRL and Clubs Australia.  The campaigns that are getting underway are going to reach a lot of Australians and be pretty powerful, aren't they?

TREASURER:

Well, first of all I am disappointed that I haven't been able to watch the footy this weekend, but secondly they're two great codes – the AFL, the [NRL] but the most important thing here is to recognise that what the Government is dealing with is a challenge that we've got in our community.  Both those codes have always been concerned with the vulnerable, what the Government is concerned about is problem gambling and that's what we're seeking to address.

GILLON:

Some of your own backbenchers are pretty nervous about this policy though, aren't they?  They're facing a lot of pressure.

TREASURER:

These issues are being debated pretty hotly in the community but the fact is that we have to deal with these challenges.  The Government doesn't shy away from dealing with challenges out there that must be confronted.

GILLON:

Just finally, even the Opposition now is admitting its task of winning the next election would be made a whole lot harder if Kevin Rudd is returned as leader.  What do you make of the leadership rumblings that have been dominating the press here in recent days?

TREASURER:

Well, Julia Gillard is an outstanding Prime Minister, an outstanding leader.  She will lead us to the next election and beyond.  We will win the next election and we'll win it because we've got the policies for the future.   We're about securing the economic foundations for the future.  What we've seen from the Opposition is a whole lot of politics and a whole lot of talking our economy down.  They've just demonstrated, particularly in the past week or so, that they're not capable of running a modern economy, or understanding what is going on in the global economy.

GILLON:

That's the sort of rhetoric we heard from you though before Kevin Rudd was toppled, wasn't it?  There are moves to destabilise Julia Gillard on, aren't there?  It seems pretty clear.

TREASURER:

No, I don't accept any of that at all.  What's been in the press has largely come, as I can see it, from the Liberal Party.

GILLON:

You personally probably wouldn't fare too well if Kevin Rudd was returned as Leader, would you, if there was a reshuffle?

TREASURER:

Can I just say that the things that I'm focusing on are the things that matter to the Australian public.  What I'm focusing on is the economy.  What Julia Gillard is focusing on is the economy.  And what we're on about here is making sure that we maximise all of the opportunities for Australians in what is going to be a testing time for the global economy but where opportunities for Australia in the long term are still very good.

GILLON:

Treasurer, Wayne Swan, appreciate your time.

TREASURER:

Good to be with you.