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

4 June 2012

Interview with Sabra Lane

ABC Radio, AM Program

SUBJECTS: Global economic conditions, interest rates, the importance of having strong public finances, EMAs, polls

LANE:

Treasurer, thanks for joining AM this morning. Overseas markets had pretty big falls over the weekend; that's almost certainly going to be repeated here this morning.  How can you calm the horses in that kind of environment?

TREASURER:

Well I think it's really important to keep all of this in perspective.  We face these challenges from a position of strength; we've got solid growth, we've got low unemployment, we've got a healthy financial system, strong public finances, and we've got a huge investment pipeline. On top of that we've got contained inflation and in terms of the cash rate at 3.75 - lower than at any time under the previous government.

LANE:

Billionaire investor George Soros warned on the weekend, he said that Europe only had three months to sort out its problems. Treasury officials last week seemed to suggest that it might even drag on for years.

TREASURER:

I think the most important thing to understand is we've already factored into our budget a recession in Europe, a contraction of three quarters of a per cent, so I think it's just important to keep all of these things in perspective. Yes, it is true that the global economy does require some decisive action in Europe, but it's also true that we've known for a long time that there's going to be a very long and painful adjustment in Europe. But I think all of us who are concerned with the global economy would like to see some decisive action in Europe. It's true at the end of last year they did take action and things settled for a while, but what I think people want to see now is further action in Europe, but from an Australian perspective located where we are, we should never lose sight of how strong our economic fundamentals are, we should never lose sight of the fact that we face these challenges from a position of strength.

LANE:

The Reserve Bank meets tomorrow, there are expectations of another rate cut, some are predicting a quarter of a percentage point, some are predicting half a percentage point. Are you powerless to ensure that cut, whatever it is, is passed on in full to the commercial banks?

TREASURER:

Well the first point I would make is that the official cash rate is now lower than it was at any time under the previous government. So if you've got a $300,000 mortgage, you're paying something like $3,500 a year less than you were paying under the Liberals. Now, as for the decision of the Reserve Bank, we'll have to wait and see what they say, they take that decision independently but the most important thing here is that bringing our budget back to surplus. Making sure that we've got a very firm anchor in our medium-term fiscal strategy is not just important in terms of giving the Reserve Bank room to move, but it also sends a very important message about the strength of the Australian economy to global markets.

LANE:

You've talked about the need to keep the budget in surplus though, but the global slowdown might force you to abandon that whether you like it or not.

TREASURER:

I certainly don't speculate about what will happen in terms of the global economy, as I said…

LANE:

Do you concede that?

TREASURER:

No, but what I said to you before is that we've already factored in to our budget forecast a contraction in Europe of three quarters of a per cent. So the figures that we've got in the budget are entirely appropriate for the underlying strength of the Australian economy and do take into account the fact that Europe is going through a long and painful period of adjustment.

LANE:

You say that people should feel confident, and as you've pointed out it's the first time in decades unemployment's been below five per cent, the official interest rates been under five  per cent, inflation's under five per cent. So then why do Australians feel so under pressure, feel so poorly about what's happening?

TREASURER:

I think Australians do understand that there is great strength in our economy, understand that we came through the global financial crisis in pretty good nick compared to just about any other developed economy. We have a pretty arduous, if you like, and conflict-driven political debate at the moment, that comes probably from the most negative opposition in our history who's always out there talking our economy down every day of the week.  The most important thing that we have to concentrate on here is the fundamentals, and the economic fundamentals in Australia are strong and they do put us in a very good position to deal with global instability.

LANE:

Do you agree with Anthony Albanese that the government could have put more groundwork in before announcing the Enterprise Migration Agreement for Roy Hill?

TREASURER:

Well what we've done in terms of dealing with the mining boom if you like, and the investment boom which is coming with it - at half a trillion dollars' worth of investment - is to get ahead of the game and to put in place the sort of policies that are required to manage that..

LANE:

That's not the question.

TREASURER:

I know it's not, but you can always explain what you do in a better way but what we have done is put in place a set of policies which will maximise the opportunities which will come to Australia, maximise the jobs that will come to Australians and to make sure we spread them across our economy, as far and as wide as possible.

LANE:

Unions are now running a campaign against Minister Gary Gray for his involvement in putting these migration agreements in place. Do you fear that he will just be the first Labor minister targeted?

TREASURER:

I'm not worried about those matters, what my concern is is making sure that we get the right settings in place to strengthen our economy, to make sure we can create jobs for the future. Something like over three quarters of a million jobs have been created in Australia since this government came to power, that's extraordinary when you compare that to what has occurred in other developed economies around the world, and that's my focus.

LANE:

Onto some other figures now, the Nielson poll shows an electoral wipe-out for Labor. Only one in four voters supports Labor, most want to see Kevin Rudd back as Prime Minister.

TREASURER:

Well, the opinion polls will come week to week, month to month. I don't get focussed on opinion polls at all.  The numbers I'm concerned with are the numbers we were just talking about, and dealing with the challenges in the global economy. That fact that unemployment is at 4.9, the fact that we've got a half a trillion dollars invested in the resources sector, the fact that the cash rate is at 3.75 – they're the numbers that concern me.  I don't get concerned about opinion polls at a daily, weekly or monthly basis.

LANE:

But if those figures are sustained though, come 18 months Labor will be wiped out. You'll even face the prospect of losing your own seat; you're not fazed by that?

TREASURER:

Not at all. My concern is to make sure we get the economic fundamentals of this country right, particularly given the challenges we face in the global economy, and I believe political support follows that.

LANE:

Julia Gillard will lead the party no matter what?

TREASURER:

Absolutely.