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

17 November 2011

Interview with Fran Kelly

ABC National Radio

17 November 2011

SUBJECTS: President Obama's visit; global economy; US security alliance; uranium sales; mining tax; Mid-Year Economic and Fiscal Outlook

KELLY:

Treasurer, welcome to Breakfast.

TREASURER:

Good morning Fran.

KELLY:

Now you sat next to the President last night at the dinner. You talked economics, state of the global economy and perhaps more importantly surfing.

TREASURER:

We did, we talked about growing up. He talked about growing up in Hawaii. I talked about growing up on Queensland's Sunshine Coast.

KELLY:

The two surfing capitals of the world.

TREASURER:

Yes, that's right. We had a good yarn about life generally as well as a good talk about what's going on in the global economy, the US economy and what's going on in Europe but generally it was a pretty freewheeling, relaxed conversation.

KELLY:

And you're both surfers.

TREASURER:

We're both surfers.

KELLY:

Talk about what's going on in the global economy focused clearly on Europe. Italy has a new Prime Minister, an Italian Cabinet of technocrats in place now to fix the country. President Obama said in his press conference late yesterday the problem in Europe is a political one, not a technical one. So what do you think about this new Italian Cabinet?

TREASURER:

What we need to see is some action, that's what the world is looking for, that's what markets are looking for, that's what members of the G20 are looking for. We're all looking for some action. We've heard enough words over an 18 month period, what we need now is action.

KELLY:

And do you think it's a good move to have a purely, sort of, a Cabinet made up of technocrats, economists and academics, that they might have trouble garnering that political support they need?

TREASURER:

Well, only time will tell. I can't answer that Fran, but I think the world is waiting for action not just from the Italians but from Europe more generally. We've got to get that firewall in place. We've got to get the resources in place to ensure we don't see the sort of volatility continue and all of the impact of that for growth in the global economy and its flow-through effects to our economy as well.

KELLY:

Treasurer, the big talking point from the US President so far is the rotation of American marines through the Top End. As a courtesy, Australia advised China before the public announcement but still already we've seen that Beijing is unhappy. There's some commentary coming out of Beijing; it's clearly feeling threatened by this. Does it have cause to be threatened?

TREASURER:

Not at all, in fact as the President said yesterday, we all welcome the rise of China, particularly in this region and I think we admire what has been achieved in China. Hundreds of millions of people have been lifted out of poverty. China is growing very strongly and like countries in the region it faces challenges, the region faces challenges. The US has been committed to this region for a very long period of time and that's a positive thing for the region, but it's not a question of the US on one hand or China on the other. When we talk about the Asian Century we're talking about China but we're also talking about Japan, we're talking about South Korea, we're talking about Indonesia, we're talking about India. So this is a growing region which is going to supply a greater proportion of global growth for a long time to come, particularly given events in Europe. Our region is the hope of the side and what we need in this region is a degree of cooperation between the major powers and that's what I think all countries in the region are looking for.

KELLY:

Absolutely, but if we look at Australia's role within that as we're placed between those two - it's often talked about the role we play between those two - this massive presence of marines - 2,500 American troops being based in the Top End by 2016-17. Will Julia Gillard now be seen as Barack Obama's Deputy Sheriff in the region?

TREASURER:

Not at all. I mean, what we have had here for a long period of time is US troops which have been here for training exercises in significant numbers. We also have exercises with the Chinese as well. I don't think anyone in the region is surprised that we've had a 60 year relationship through the ANZUS alliance and I don't think anyone is particularly surprised that the US has been taking decisions about its global force posture. Part of those decisions is to do some more training in Australia. I don't think that's a great surprise to anybody in the region.

KELLY:

Australia's economic welfare is seriously linked to China and the trade links we have with China. The People's Daily, an official organ of the Chinese Government, says today quote: 'Australia aspires to a situation where it maximises political and security benefits from its alliance with the US while gaining the greatest economic interests from China'. But it cautions Australia could end up being caught in the crossfire, it says, 'if it plays China for a fool' - that's another quote. Now are we endangering our key economic relationship?

TREASURER:

Not at all Fran, I think if Europe has taught us anything, we are all interconnected in this global economy. I've spent a lot of time through the G20 working with countries around the world to put in place a range of policies and commitments that deal with global financial imbalances, such as the imbalances we are seeing in the European economy [which] are now impacting right across the world, also on countries like China and countries like Australia. We are all interconnected and what we've got to do in terms of our economic relationships and our strategic relationships is strive for greater cooperation to deal with the challenges that lie ahead and that requires everybody putting their shoulder to the wheel, not just the United States but China and all of the countries in the G20 facing up to these challenges. That's what we need to do as we go forward.

KELLY:

And these headline announcements they attract a lot of noise and a lot of attention but behind the scenes are you, as the Treasurer of this country making efforts to reassure the Chinese?

TREASURER:

Fran, I've been to China as Treasurer something like six times. I've put a lot of emphasis on that relationship. It is a very important economic relationship but it is broader than that. It is also a people-to-people relationship and that is strengthening over time just as our relationship must be a people-to-people relationship right across the region. You see, it is the Asian Century but the Asian Century is all about how this region in the global economy plays an increasing role and the US is a fundamental part of that. China is a fundamental part of that, Japan is a fundamental part of that and all of the other countries as you come down to Indonesia, India are a fundamental part of that. Working with all of those countries together is absolutely important to the future economy but also for stability.

KELLY:

Treasurer, a couple of days ago the Prime Minister announced plans to lift the ban on selling uranium to India. As the Treasurer, were you consulted? Were you part of that decision?

TREASURER:

I certainly discussed this matter with the Prime Minister over a period of time. The Prime Minister made her announcement I think in a timely way. I think it's about time we got cracking on the issue.

KELLY:

Because the Foreign Minister Kevin Rudd was reportedly furious he wasn't consulted. Why on Earth would the Foreign Minister get left out of this?

TREASURER:

I don't think you should necessarily assume media reports like that are accurate. I'm not aware of that.

KELLY:

Was Kevin Rudd consulted?

TREASURER:

Well, I know the Prime Minister has taken a decision, I know she's discussed that with Ministers.

KELLY:

And the Foreign Minister would be key to that, wouldn't he?

TREASURER:

I'm sure that the Prime Minister does what she normally does which is to talk to her Ministers and I'm sure she did it on this occasion.

KELLY

Treasurer, on Monday the final week of the Parliamentary year begins. The last major bill for the year is the mining tax. Will you get the mining tax through the lower house?

TREASURER:

Well, we're going to do our best to get it through because it's absolutely critical to spreading opportunity right across our country, maximising the benefits of the resources boom and spreading them right around to every corner, particularly to the 2.7 million small businesses that are going to benefit from a very substantial tax cut, particularly to those low income workers that are going to get a very big boost to their superannuation. So we're going to do our very best to get this through.

KELLY:

How are you going with getting the numbers? We've had Tony Windsor speaking on the program and he had some very definite things he wanted in place before he'd support it. Are you going to negotiate with the Independents and give them some of their demands?

TREASURER

Well, we're continuing to talk to the Independents and the minor parties as you do, and we'll continue to do that and hopefully we'll secure their support when the bill comes to the Parliament because it's a really important reform for the long term, and of course if it's not put in place then what's endangered is that big boost to superannuation for millions and millions of Australian workers and of course that tax cut for small business.

KELLY:

Are you confident of getting it through the lower house?

TREASURER:

Look I'm very confident that we can get this through the Parliament but I don't assume it as being a done thing.

KELLY:

Treasurer the political debate really will shift back to the economy next week. You're about to release MYEFO, the Mid-Year Fiscal and Economic Outlook. Will it be more of a mini-budget, will it increase spending cuts in this economic statement?

TREASURER:

Well, look I've been very clear that we've seen estimates for global growth lowered by the IMF - that will flow through to growth in this country. We've seen also the forecasts from the RBA in recent times which have brought growth down in 2011-12. So that means less government revenue. I've said there's been a significant hit to revenues that flows from events in the global economy and of course we'll have to take that into account as we go through and produce MYEFO but I've said we remain determined to return the Budget to surplus in 2012-13. Over and above that, we're continuing to work our way through all of the issues for the presentation of MYEFO.

KELLY:

But when you stand up with MYEFO will you be announcing and detailing some of the spending cuts?

TREASURER:

What I've said that we will be doing - as we normally do - is a savings exercise and because of what's occurred in terms of the global economy and what has occurred in terms of Budget revenues, there will be savings in this MYEFO.

KELLY:

Economists have been concerned that if you cut too deep and we've been hearing about deep cuts as the global economy (inaudible) of course, then you risk slowing our economy even further.

TREASURER:

Well, I've seen a lot of this talk. I think everybody should hold fire until they see MYEFO. I'd also make the point that we are still expecting growth of around trend in terms of 2011-12 but our fiscal objectives are very important and they are particularly important given the global economic environment we're seeing at the moment. So we want to send a very clear message that we are committed to fiscal discipline at a time when many countries around the world are doing very badly through an absence of fiscal discipline.

KELLY:

The Finance Minister Penny Wong has said that spending cuts to deliver a surplus would then take the pressure off, enable the Reserve Bank to lower interest rates. Isn't that what the Opposition has been arguing for all along? Remove the stimulus from the economy and enable the RBA to cut rates?

TREASURER:

Well, if the Opposition had their way Australia would have actually been in recession, so I don't think there's anything particularly credible about what the Opposition's been saying in any area of the economy, but we've made the point that when you move to stimulate the economy you have to put in place an exit strategy. We've done that, bringing our Budget back to surplus consistent with strong growth. The fact is we have an outlook for growth which is around trend at the moment and that's healthy compared to just about any other developed economy in the world.

KELLY:

Treasurer, thanks very much for joining us on Breakfast.

TREASURER:

Thank you.