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

8 October 2011

Interview with Sabra Lane

ABC Radio, AM Program

8 October 2011

SUBJECTS: IMF Article IV Report

LANE:

Wayne Swan, the IMF has given the Government a 'thumbs up' on many policies but it's also given you some pointers, saying that if the situation with the global financial markets worsens you have fiscal space to delay your return to surplus. The Fund's given you a get out clause in your promise to deliver a surplus in 2012-2013 - are you tempted?

TREASURER:

Well, that's a very strong endorsement of the Government's stewardship of the economy and I think that that there would be Finance Ministers right around the globe would give anything to get a report like this from the IMF. It does make the point that we have strong fundamentals. It makes the point that there is room to move if necessary in terms of macro-economic policy, but the Government's determined to come back to surplus in 2012-13. What we do say is that there is a need for a very clear application of fiscal policy and when it's (inaudible) to apply it in a way in which the fiscal rules are outlined.

LANE:

One of the downsides it says is that Australian house prices are over valued by 10 -15 per cent and that a fall of that nature, combined with current consumer spending which is quite low, could knock the stuffing out of the economy. Do you agree with its valuation of house prices then?

TREASURER:

No, I don't share its assessment in terms of housing. There is a shortage of housing in Australia, a structural shortage of housing. Yes it is true that house prices have softened somewhat across the country, as there is a shortage of housing. What that means is that there is a lot of pressure to increase supply.

LANE:

The Fund recommends that the Government grasp the opportunity of the mining boom and squirrel away more of the money to reduce Government debt and build up public funds. It says substantial surpluses to deal with future global shocks rather than tax cuts. Will you listen to that advice?

TREASURER:

Well, I don't think that's a correct interpretation of what they had to say. They've strongly endorsed the Government's program of tax reform, strongly endorse the MRRT and strongly endorse what we are doing to spread the opportunities from the mining boom where we're giving a tax cut to small business for example, an overall cut to taxes when it comes to the corporate rate, they're strongly supportive of that.

LANE:

But the report actually says on the MRRT - the proposed Minerals Resources Rent Tax - it actually recommends that you broaden the proposed tax?

TREASURER:

Well, they have said that they would prefer another design but they strongly endorse the concept of a Resource Rent Tax and they strongly endorse the concept of spreading the opportunities from the mining boom around the economy, particularly to those that aren't in the fast lane - the 2.7 million small businesses that will benefit from a $6500 instant asset write off, for example.

LANE:

The Fund says, regarding Australia's big four banks, that the authorities that are being used should consider higher capital requirements. Will you ask APRA to do that?

TREASURER:

APRA has already reported on our big banks and just how strong they are in the current circumstances, it's given them a very big tick -

LANE:

But the IMF says that even given the current reporting that those banks, the authorities should consider asking those banks for higher capital requirements?

TREASURER:

I don't think anybody should have any doubts about how strongly capitalised Australian banks are and how strong they are particularly in this international environment to deal with all of the circumstances that we're seeing given the global volatility.