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 March 2012

Interview with Linda Mottram

ABC Radio, Sydney

SUBJECTS: Floods; National Accounts; inequality and vested interests; ADF; ACTU

MOTTRAM:

Look I wanted to ask you first about the situation in New South Wales with the floods. Barry O'Farrell says it's half a billion dollar cost to the state. Obviously that's preliminary. If Mike Baird called you for help, what can you offer?

TREASURER:

Well, we've got a whole lot of arrangements with the states which simply kick in automatically. This is what occurred in Queensland with the flood disaster a year ago. I think the total cost of to the Commonwealth of the floods in Queensland and Cyclone Yasi was something like $6 billion. So it was a massive natural disaster which had a huge impact on our economy and a huge impact on our budget and the budget in the state of Queensland, but there are automatic arrangements which kick in. We work well with state governments. We have learnt a lot from the Queensland experience last year. There's no doubt about that.

It's far too early to tell what the economic cost of these floods will be. Many parts of the state are still under water. We won't know the damage to the public infrastructure. We won't know the damage to the private infrastructure. So what we've got to do is assess that as quickly as we can and make sure we get help to those most in need.

There are disaster arrangements which kick in in terms of income support, they kick in automatically. We are deploying our resources through Centrelink. So all of these things happen pretty well but you've got to keep a really close eye on it. That's why the Prime Minister was out there and we'll work really closely with the state government because there's just nothing more distressing for communities and for individuals to see their homes flooded and livelihood washed away.

MOTTRAM:

Sure. Now, as you say, a $6 billion cost to the economy from Queensland.

TREASURER:

The cost to the economy was actually bigger than that. That was just the cost to the Commonwealth Budget.

MOTTRAM:

Now, on top of Queensland, New South Wales, Victoria – the hit to the national economy is going to be huge. You've already got an incredibly tight budget. What is going to be the impact on the national budget as you now sit down and scratch your head about preparing it?

TREASURER:

Well, far too early to tell. In terms of Queensland there was massive dislocation to export industries, particularly the coal industry, but it's too early to tell. Certainly here in terms of agriculture there will be a significant impact, but in terms of impact more widely it's far too early to tell.

As I've said, we'll work really closely with the state government, with local communities, we've always done that. We've learnt a lot. We've got pretty good arrangements in place, whether it's immediate disaster management, or whether it's reconstruction and we'll deploy all of that in the weeks and months ahead. One of the things here that you've got to understand is that this affects people for a long time. So it's just not now and the immediate aftermath.

MOTTRAM:

Indeed. Absolutely. Now just onto the National Accounts yesterday, a much, much slimmer company tax take than you'd been forecasting.   Plus Martin Parkinson is warning surpluses long term are going to be much harder to come by. What further cuts are you going to make to the budget to achieve the surplus you're insisting on?

TREASURER:

Well, I won't be going through those this morning Linda. That's part of the budget process which we go through for the next couple of months. We bring down the budget in May. It's really important to come back to surplus and I think it's pretty important that I explain to your listeners why because we are still going to be growing at around trend, a bit over 3 per cent. It's important to realise that we are one of the strongest developed economies in the world and we've come through the global recession in great shape. Our economy is something like 7 per cent larger than it was prior to the global financial crisis. Whereas in the last quarter of last year, and this explains part of the weakness in the figures yesterday, we saw European economies like Germany, and Italy, and the UK, and the Japanese economy [contract]. So it was a pretty tough quarter. So a soft number, but in the circumstances of the last quarter of last year, quite a solid result. But what we are seeing is the continuing impact and aftermath of the global financial crisis, the impact of the cautious consumer, the impact of the events in Europe on business confidence all impacting particularly on revenue, particularly company tax revenue.

MOTTRAM:

You've always talked about budgets being tough. Is this one going to be tough?

TREASURER:

Yes it's going to be a really hard one to do because it's imperative that when we're growing at trend, and we are strong relative to the rest of the world, and given the fact that we've seen the consequences of financial instability in Europe and sovereign debt problems, to send a signal to the world that our finances are strong by coming back to surplus but also to give the Reserve Bank more flexibility should they wish to deploy monetary policy into the future. So those two things demand a surplus but because revenues are not tracking along with growth the way in which they have in the past because of the impact of events in the last couple of years, we are going to have to find significant savings in the budget.

MOTTRAM:

Significant savings at a time when we know the economy has different tracks and a lot of people are doing it tough despite the strength of some sectors. You're not going to be very popular if you start making cuts to programs that affect the lives of ordinary Australians who are in the tough lane.

TREASURER:

The most important thing to do is what is right for the long term and we've done that all the way through. When we deployed the resources of the Commonwealth during the global financial crisis and the global recession, we stopped a recession in this country. We've kept employment far stronger here than it is in any other developed economy. That was very important and as we've continued to grow following all those events it's very important to bring our budget back to surplus.

MOTTRAM:

Do you think Australians get that message?  It seems to me, just taking calls from people, that there is a sense of frustration with your message that that's all well and good about where Australia tracks in terms of the rest of the world but real daily lives people are hurting.

TREASURER:

Well, that's right, but the fact is that unemployment in this country is 5.1 per cent. Now the fact is that there are sections of the economy which are far weaker than others. That's why we talk about the patchwork economy. But the overall fundamentals of the Australian economy are far stronger than any other developed economy in the world. It is a time to believe in our strengths but that is not to say there aren't sectors of our economy which are doing it tough because there clearly are.

We've got a higher dollar. You know, that really impacts upon the tourist industry, education exports, it makes life tough for manufacturers, but the flip side of that is we are far stronger and there are swings and roundabouts here. And I do understand the frustration that people have when they hear us talking about our economy relative to the rest of the world and they say `but I'm working in a small business where demand is down in our community because the dollar has been high' or it's impacted on local manufacturing. I really get that and that's why I've been having this conversation with the Australian community over the past week. How do we spread the benefits of what are going to come to Australia through the Asian Century, through the mining boom. How do we take that and make sure that every Australian has got a stake in our future prosperity and to spread the benefits of this incredible amount of investment in mining to every corner of our country.

MOTTRAM:

It's not producing benefits for many people at the moment is it?  I mean, for all of the talk about the number of jobs that the mining boom creates, in fact it's not that many, and in fact we see the mining sector is not giving you much back in terms of your tax take.

TREASURER:

Well, that's just not right at all. The fact is that we've got a very big investment pipeline. It is one of the reasons why overall our unemployment rate is 5.1 per cent and it is one of the reasons why incomes continue to grow for most Australians. Income growth is still quite solid in Australia, unlike in any other country in the world and it is why we are still consuming around trend levels in our economy, but that doesn't mean to say that retail for example isn't soft. People have decided to save a bit more and that means they are spending less in the shops. What we do know is that many people now spend more on services than they do on traditional goods in many of the big retail shopping centres.

So these structural changes, Linda, are going on across our economy and I do absolutely understand that that means there are many people who are listening to this conversation saying this is not my experience. I get that. But what I have to do, as the national Treasurer, is to make sure we keep the basic fundamentals strong, keep our economy growing and also put in place a range of policies which further spread the benefits of that investment which is much narrower in our economy in mining and spread it further around our economy.

MOTTRAM:

Treasurer, I want to ask you about the fallout after your Monthly article in which you were critical of the influence peddling by some of the very rich. It was some of the very rich, wasn't it?  You've targeted some particular individuals but you haven't named other individuals who do have a high profile position in the public discourse because of the amount of money they have. People like Graeme Wood of Wotif – his high profile positions on environmental issues. Aren't you taking one side over the other?

TREASURER:

No, look I've made the point and I just urge all of your listeners to read the essay.

MOTTRAM:

It is a good read actually.

TREASURER:

It is nowhere near as rigid as some people have presented it. It is a very reasonable discussion of a whole series of issues about the power of vested interests in democracies and not just in Australia.

MOTTRAM:

But wasn't it ever thus, the rich have more influence?

TREASURER:

There's one big difference here. We are now in a huge investment phase of a mining boom and the reason I singled out three very wealthy miners was that they have continued to dress up their self-interest as national interest, through campaigns of very high profile, against the Minerals Resource Rent Tax which is going to be used to give a tax cut to small business and to build up the superannuation savings of millions of Australian workers. They've continued to do that, long after the Government reached the broad agreement about the design of the tax. That's why I singled them out but I wasn't talking about them exclusively. I was making the point that across many democracies and most particularly in the United States we've seen the power of vested interest, particularly say in the financial sector, twist public policy and it has produced a situation in a number of economies where there is growing inequality, growing economic inequality which is producing growing political inequality.

MOTTRAM:

Did you anticipate that this would create the sort of furore it has?   The talk of class wars?

TREASURER:

I couldn't believe some of the headlines to be frank, because they don't reflect the essay but having said that, I am delighted we are now having the type of conversation we ought to be having. I want more people involved in it because everyone in Australia, they've got a vote. We've got a great future in this country. I'm optimistic about our future and I want everyone to be involved in a discussion about how everybody has a stake in the prosperity that is going to come from the Asian Century. I think we can make this the Australian century in Asia and not just be a passenger in the Asian Century.

MOTTRAM:

I need to ask you one last question about your colleague the Defence Minister Stephen Smith. Should he apologise to Commander Bruce Kafer, the ADFA Commandant?

TREASURER:

I am very supportive of my colleague Stephen, he's a good friend of mine and I think he's done the right thing and if you have a look at all of the documents that were produced yesterday, in particular the document that deals with the need for the change in the culture of the Defence forces I think you absolutely understand the position that Stephen Smith has taken, and I'd urge your listeners to look at some of those reports.

MOTTRAM:

I do just want to sneak one last, last one in. Will you support Dave Oliver as Secretary of the ACTU?  It is a shift to the left. Does it signal more industrial confrontation?

TREASURER:

It's not up to me to support anybody. I mean, it's a decision that they'll take.

MOTTRAM:

But what it signals for where the debate might be going?

TREASURER:

Well, I don't know where the debate is going in the ACTU but I do know Jeff Lawrence.

MOTTRAM:

About industrial relations.

TREASURER:

Jeff Lawrence is a good guy. I know Dave Oliver, I think he's a good guy. I think he's a patriotic Australian who fights hard for the people that he represents. That's why he's a union leader. There are plenty of good people.

MOTTRAM:

You don't think it will stoke the fires of industrial dispute having somebody like Dave Oliver who is a much more fiery character there?

TREASURER:

Let's not, sort of characterise it like that. You know, I think union leaders, just like business leaders, are all of good heart. They want the best for the country. They know we have to create wealth before we distribute wealth in this community. They absolutely understand that. Dave Oliver understands that we've got some big challenges in our country when it comes to the future of our industrial structure and he's an articulate advocate for his members and that's what he should do.

MOTTRAM:

Okay Wayne Swan, thanks very much for your time today.

TREASURER:

Good to be with you.