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

7 November 2011

Interview with Sabra Lane

ABC AM

7 November 2011

SUBJECTS: Global Economy, Access Economics Report

TONY EASTLEY:

The Acting Prime Minister Wayne Swan says the Government has been doing its own sums on how the global economic uncertainty has affected Australia's budget bottom line. He's indicated there may be some further spending cuts to bring the budget back to surplus.

The picture will be clearer when the Government publishes what's known as MYEFO, the Mid-Year Economic and Fiscal Outlook.

The Treasurer is speaking here to chief political correspondent Sabra Lane.

TREASURER:

Well it's a forecast from Access Economics. I can't say that it's accurate. What we are going to do is go through the normal process that we do as we prepare what is known in the jargon as our MYEFO, which we publish towards the end of the year. But what I can say and I have been saying now for months is that there will be an impact on our growth. We can see that in the forecasts put forward by the Reserve Bank on Friday. The Reserve Bank's forecasts are somewhat different to Access Economics but they both point to slowing growth in 2011/12 in the Australian economy. That does flow through to revenues. But we'll have to go through our normal processes in the MYEFO process, put all that together and then we'll publish it.

LANE:

Are you still going to stick to that promise?

TREASURER:

Well we are certainly determined to bring our budget back to surplus in 2012/13. We think having a very clear and consistent fiscal policy is important. When you have your budget hit by revenue write-downs such as I think we are seeing at the moment that does have an impact, and that means that tough decisions will have to be made in the context of the budget.

LANE:

Those tough decisions, will you look to cut Government spending further or will you look at tax increases? Are they the sorts of things, options you are examining now?

TREASURER:

Well because of the write-down of revenues we will certainly be looking for savings elsewhere in the budget. In past budgets, we have found over $100 billion worth of savings. We'd go through that process again. It's something that we do every year in the lead-up to our updates and in the lead-up to the budget. We'll be doing that again. But we are very determined to have a very clear, effective fiscal policy. That very clear and consistent and strict fiscal policy has made room for the Reserve Bank to lower interest rates in recent weeks. That's been very important and it's important as we go forward.

LANE:

Deloitte Access Economics director Chris Richardson, a respected economist, says that the Federal Government might do more harm than good by sticking to that surplus promise.

TREASURER:

Oh look, we think the implementation of our fiscal strategy is quite important for the reasons that I outlined before. We are seeing the consequences elsewhere in the global economy of lax fiscal policy. We have been absolutely determined to implement our fiscal rules. We're doing that but we will do it in a responsible and common sense way.

LANE:

Cutting Government spending more might prompt householders to save more thereby triggering the paradox of thrift, putting the nation's economy at risk of a deep downturn. Is that something in the back of your mind?

TREASURER:

Well we're still expecting reasonably strong growth. There are write-downs of growth in the Access Economics and of course you've seen lower growth forecasts from the Reserve Bank. But Australia is in a vastly different position from just about every other advanced economy.

LANE:

You say that you're looking for further savings. Given that a lot of the low hanging fruit has already been plucked. Are you looking at things like industry assistance and middle class welfare options which again Chris Richardson has urged you to have a look at and tackle?

TREASURER:

Well on the one hand he can't be urging me not to cut back and on the other now you're saying he is urging me to cut back. The point is we'll take common sense decisions. We are always on the lookout for savings. We have been up for a very big savings task over four years.

We will be making further savings in this process but we will do it in a way which is consistent not only with the economic outlook but our fiscal rules.

LANE:

Coalition says it's now going to keep the compulsory superannuation increase from 9 to 12 per cent - something that you are funding through the Minerals Resources Rent Tax. How much will it cost them?

TREASURER:

Well this is a bit more voodoo economics from the Coalition. On the one hand they now say they are going to support a measure but they are not going to support the other measure which funds this very important reform to superannuation. That is why they have got a $70 billion hole in their budget estimates before they make any additional commitment such as the one they've just made.

TONY EASTLEY:

The Acting Prime Minister Wayne Swan speaking to chief political correspondent Sabra Lane.