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

30 November 2011

Interview with Kieran Gilbert

SKY News Channel

30 November 2011

SUBJECTS: Mid-Year Economic and Fiscal Outlook

GILBERT:

Treasurer, thank you very much for your time. The Baby Bonus cut has been described by the Opposition as a rip off for the forgotten families of Australia. Of all the savings you've made, why target new mothers? Haven't you opened yourself up to an easy attack here?

TREASURER:

Well, let's get this into perspective. The fact is that we are resetting the Baby Bonus at $5,000. It's gone up from $3,000 in a relatively short period of time. We are a big supporter of the Baby Bonus. We are a big supporter of family payments but we've got to make the Baby Bonus sustainable over time. The fact is that we have dramatically increased the amount of assistance we provide to families when it comes to childcare, the education tax rebate, the childcare cash rebate. A very big increase, for example, in family tax benefit payments to teenagers as well, up to $4000 per child. We're a big supporter but we have to make these payments sustainable over time and that's what we're going to do and $5000, I think, is pretty generous.

GILBERT:

But you know that cost of living pressures are hurting families out there, working families. Why make this decision at this time, targeting new mums?

TREASURER:

Well, we're not targeting anyone at all. What we have done is substantially increase a range of payments for families over a period of time. There really wouldn't be a government in a long time that's done as much as us when it comes to childcare, when it comes to the education tax rebate, when it comes to family payments particularly those increased family payments for teenagers. But I understand some people won't like this particular change but we are tightening our belt across the board, making our budget sustainable.

You've got a really graphic illustration at the moment, with what's going on in Britain, to see the difference between Australia and other developed economies elsewhere in the world. We've got low unemployment. We've got strong job creation. We've got low levels of debt. What we've got to do is send the message to the world about the underlying strength of our economy and the fact that we're serious about fiscal policy because the reason they're in trouble in Europe is they haven't been serious about fiscal discipline for a long period of time.

GILBERT:

On the public service cuts, the union is warning of 3,000 job losses. You and the Finance Minister have said that forced redundancies won't be needed but you can't give any guarantees on this, can you, because it's going to be decided agency by agency.

TREASURER:

That's right and that's the way it should be done. It should be done agency by agency where they can work out what is best in terms of shopfront service delivery. If they are a service delivery agency what actually suits them in their circumstances, rather than say a very blunt instrument that the Coalition have put forward which is a total freeze. What we want to do here is to make sure that everybody tightens their belt, that includes the government as well, that's why this has been important, but we want to do it in a way which works for the agency.

GILBERT:

So there could be a few thousand job losses, is that possible?

TREASURER:

Well, there is a lot of turnover in the public service as we go through any one year. The fact is we don't think that there should be any forced redundancies. We'll work our way through this issue with our agencies.

GILBERT:

There are some concerns among economists that the terms of trade assumptions in MYEFO are too optimistic. If there is even a minor decline in China's growth, the surplus will be gone in an instant, won't it?

TREASURER:

Well, these sorts of criticisms are made every budget and every update. You might well recall the budget the year before last everybody said that our terms of trade assumptions were too optimistic and they turned out to be far too pessimistic at that time because the terms of trade surged after that. The fact is that the Treasury is very conservative when it does its forecasts. If you look at our forecasts across the board in terms of growth, or terms of trade, they are broadly similar to what you're seeing more generally from the Reserve Bank of Australia, broadly similar to what you're seeing more generally from the IMF, the OECD and broadly similar to what most market economists are saying at the moment. So I think our forecasts are conservative. Naturally when there's volatility in the global economy things can change dramatically but we are in the Asian Century and irrespective of the swings and roundabouts in the immediate term in the economy, growth is going to be stronger here, a greater proportion of global growth is going to be supplied from our region and that is reflected in our terms of trade. But having said that, we still in our forecast published yesterday have the terms of trade coming off next year and coming off after that.

GILBERT:

Do you need to start warning the electorate that a deficit is possible, in fact is likely given the ongoing uncertainty in Europe and the likelihood of a deep recession there.

TREASURER:

What we have to do is make our best judgement as to where we stand at this point in time. That's what we're doing. If we look at our forecast we are forecasting a recession in Europe. We're forecasting lower growth in the United States but we're still forecasting trend growth her and reasonably strong growth in our region.

Now these things change over time. We hope the worst doesn't happen in Europe, everybody hopes that. We want to see them get their act together. It's very important for the global economy. What we've done here, I believe, is put in place realistic forecasts about the future and it's a good thing that Australia's fundamentals are in such good nick. But one of the reasons why we've made the savings is to send a message to the world that we in Australia are serious on the one hand about fiscal policy but also serious about supporting jobs and jobs are the fundamental driver in any economy to the security of families. That's what we're most serious about, making sure we continue to grow, get the jobs growth that comes with it and the peace of mind for Australian workers that comes with that.

GILBERT:

You were willing in the initial stimulus in the wake of the global financial crisis to fund halls in every school, cash payments across the board. It was an enormous spend. Obviously you've done it once, if there is another global downturn of that magnitude you'd be willing to do it again, wouldn't you?

TREASURER:

Well, there's two points about that. Back in 2008 and early 2009, seven of our top ten trading partners went into recession and global demand and demand in our region fell off a cliff, and we moved in correctly with pretty stunning results to support our economy in those circumstances. We're not in those circumstances in 2011 but many agencies and indeed Fitch overnight have all made the point that we have a degree of policy flexibility when it comes to both fiscal policy and monetary policy to respond should that be required, if conditions change dramatically in the global economy, but I don't speculate about that. What we've done here is put in place our best judgement about the here and now and likely outcomes.

GILBERT:

But don't you think that there needs to be a bit of preparation of the electorate that that might be likely once again given there are so many forecasts around the world that Europe is essentially on a precipice right now and could drag the world into a very deep recession.

TREASURER:

I think I've been and the Prime Minister has been very frank with the electorate about the challenges in the global economy. We've talked about little else in the last couple of months and we've been to international meetings talking about these matters and I've talked about them extensively domestically. I think Australians are acutely aware of the dangers in the global economy and what I say to all Australians is that this Government has a proven track record of dealing with global instability and volatility and because we have strong fundamentals in our economy we are in the best position of just about any other developed economy to respond to events should they take an unexpected turn.

GILBERT:

Do you think that there's been in our political discourse a simplistic debate that surpluses equal good and deficits are bad, and isn't the Government culpable in some degree in fostering that sort of fiscally illiterate perception of things?

TREASURER:

Not at all. When we moved to stimulate the economy we put in place a set of fiscal rules that said we would return our budget to surplus as growth returned to trend and that's precisely what we're doing and I made the comment at the time that you can't be Keynesians on the way down and not be Keynesians on the way up. So what we are applying I think is pretty good fiscal discipline and it is required by the circumstances that we are in, but of course there are those who will go around and talk down our economy particularly the Liberals and National Party who will go around all the time misrepresenting the level of debt, misrepresenting the fundamentals in the Australian economy. We should have less of that talking down of our economy and more recognition of the fundamentals and the challenges of the wider world because they are formidable.

GILBERT:

Treasurer, thanks for your time this morning, appreciate it.

TREASURER:

Good to be with you.