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

27 September 2011

Interview with Stephen Dziedzic

ABC Radio, AM Program

27 September 2011

SUBJECTS: European sovereign debt; global economy; Australian budget

DZIEDZIC:

Mr Swan, you say Europe and the US need to get their houses in order but they've got far fewer levers to pull now than they did when the GFC hit.  There's not much more they can do to stimulate their economies.  What steps should they take?

TREASURER:

Well, I think there are a number of steps that have to be taken in both Europe and in the United States.  In terms of Europe, they need to put their public finances on a sustainable footing and also in Europe they need to ensure the stability of the financial system.  In the United States, they've certainly got to deal with their fiscal challenges as well and I think President Obama's jobs bill is a very good start.  But the problem in both Europe and the United States has been political gridlock.  That political gridlock has to be resolved.  There has to be political courage and political will to face these challenges head on.

DZIEDZIC:

You say Europe has to put in place credible fiscal consolidation plans but isn't it true that if they're inflexible or if they cut spending too savagely that that could put the very sluggish recovery that we're seeing at the moment at risk?

TREASURER:

That can happen but you can put in place a medium-term fiscal consolidation which supports the economy in the short term but makes savings in the longer term.  There will be different solutions for different countries.  But also in Europe what we need to see is a sense of urgency.

These matters were discussed at length at the G20 Finance Ministers Meetings and at the IMF, and so I think the Europeans now understand there is a degree of urgency required to implement all of their commitments that they first made on the 21st of July.

DZIEDZIC:

Mr Swan, Australia is in an enviable position due to the strength of Asia and Europe's trying to impose a financial solution across several countries, many of which are facing intense political domestic pressures.  Should you be very careful about preaching to Europe from your vantage point?

TREASURER:

No I think it's very important that we have a discussion about these matters globally because when you have an economic event in a place like Europe or elsewhere in the globe, we are all interconnected and in the long run we are all affected.  That's why we've got a G20 process in place to deal with global financial imbalances.  It's true that Australia is in better shape than almost any other country in the world to ride out this turbulence but we will be affected as well.

DZIEDZIC:

If Europe doesn't grapple with these problems, what are the ramifications for the world economy and what are the ramifications for Australia?

TREASURER:

Well, I think it's very important that we see prompt action from the Europeans.  I'm satisfied from what I've heard on the weekend that they are moving to implement all of their commitments because it is urgent.  We've had a big hit to confidence and that is producing slowing growth in developed economies.  It's really important that we deal with that and the way that confidence can be impacted is through prompt action in Europe as well as in the United States.

DZIEDZIC:

Are you still equally determined to deliver a surplus by 2012-13 and how determined can you be, realistically, given the financial uncertainty?

TREASURER:

Well, I'm determined to deliver a surplus in 2012-13.  It's just common sense to observe that if global growth slows, that does impact on our growth and can have consequences for revenues and for the budget.  But the Government is determined to bring that budget, to bring that budget back to surplus in 2012-13.