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

25 July 2012

Press Conference

SUBJECTS: Inflation data, Australia's strong economic fundamentals, Tony Abbott's comments on foreign investment, Campbell Newman comparing Queensland to Spain, the importance of the NDIS

TREASURER:

Today's inflation numbers are a reminder that the fundamentals of our economy are in very good shape indeed. Today's figures show that both headline and underlying inflation in Australia has continued to moderate through the year to be at the lowest level in 13 years. Underlining inflation was well contained at 2 per cent over the year to June, down from 2.2 per cent over the year to March to be at the bottom of the RBA's target band. This is a remarkable achievement, especially against the backdrop of impressive economic growth, low unemployment, very healthy consumption and a massive pipeline of investment in resources. Australia now has contained inflation, lower interest rates and low unemployment. That is a remarkable trifecta for Australia.

Today's figures also show that headline CPI inflation was 0.5 per cent in the June quarter, and 1.2 per cent through the year, down from 1.6 per cent through the year to March. These outcomes are consistent with our budget forecast, with inflation expected to remain contained over the next two years. Now this is certainly welcome.

We do know that price rises can put pressure on families, part of the rise in this quarter was due to a 4.6 per cent increase in fruit and vegetable prices as a result of wet weather affecting certain crops in the eastern states. Of course there were some rises through medical expenses as well.

But on the whole most of the price rises this quarter were contained across the board. I think overall results today do shine another light on Australia's standout economy. Because we do have renewed volatility in the global economy. We have concerns in Europe intensifying yet again. But there's a stark contrast between what is happening particularly in Europe and around the rest of the world and Australia's rock solid economic fundamentals. The contrast could not be starker.

Right now we've got solid growth, low unemployment, strong public finances, a huge pipeline of investment, particularly in resources, we've got contained inflation and a lower cash rate. That is a very impressive combination by any standard.

We've achieved all of this during a period of heightened global uncertainty as well as some difficult structural transitions which are impacting certain sectors of our economy. What we have had in the middle of that is responsible economic management. We've built on the hard-fought reforms of the past and what we've built on also is the hard work of the Australian people, those people in the workforce and people running businesses, to get these remarkable outcomes.

Of course, contained inflation is also a dividend of the Government's fiscal discipline and has been vital to the recent interest rate cuts from the RBA. The RBA has only been able to cut interest rates because inflation has been contained. And the Government's budget discipline has contributed to this.

We should never forget that under the previous government interest rates went up 10 times, inflation was not contained during that period. But by returning our budget to surplus this year, we do give the RBA maximum flexibility to cut interest rates as they deem necessary.

And we have had 125 basis points of cuts since the end of last year. Of course this does bring real tangible benefits to Australian families. So for an Australian family, say with a $300,000 mortgage, you're now paying around $4,000 a year less than you were when the Howard Government left office. That figure is based on variable rates, not on the cash rate.

So because we've got these rock-solid fundamentals, families do feel the benefits of contained inflation, lower interest rates and of course the ultimate benefit of having a job with low unemployment.

I think these figures should give all Australians confidence in our economic fundamentals and to give us confidence at a time where there is volatility elsewhere in the world. So I think finally that these figures today give Australians reason to be optimistic and Australians reason to reject the doomsayers who constantly talk our economy down.

Over to you.

JOURNALIST:

The inflation figures, year on year (inaudible), is this a sign consumer confidence is still weak?

TREASURER:

I don't accept the linkage at all. I think what we now have is contained inflation. As I said before you have to go back a long way in Australia's economic history to see a situation where you've got low unemployment, you've got contained inflation, particularly underlying inflation at the bottom of the RBA target band, pretty healthy consumption - now people out there are still spending- and a huge investment pipeline.

They are a wonderful set of outcomes for Australia and that's why I say that these figures today are another indicator that the Australian economy is in good shape.

JOURNALIST:

(inaudible)

TREASURER:

If you have a look at it and you look at the non-tradeable figure, yearly for example, it's below its 10 year average. So I don't think there's anything exceptional if you were to look into non-tradeables as some might seek to suggest.

JOURNALIST:

The household interest (rate) cuts you've spoken about, are we likely to see more now that there's this inflation?

TREASURER:

That's a matter for the Reserve Bank. The Reserve Bank takes its decisions independently.

We had a very, very good speech from the Reserve Bank Governor yesterday about the fact that our economic fundamentals are in good shape. It was disappointing to see that speech was ignored by all of the television news reports last night because I think it contained very important information that Australians need to see and hear. But of course so much of our coverage of economic data concentrates on the doomsayers and doesn't really accentuate what is really positive in terms of our economic outcomes and I found that pretty disappointing.

JOURNALIST:

(inaudible)

TREASURER:

There's no doubt that there's a dividend over time for having contained inflation. The remarkable outcome we've got here, and I was referring to this before; on the one hand we have contained inflation, on the other hand we have low unemployment. We know we have got some structural pressures which is putting pressure on employment in certain sectors of our economy. But nevertheless we still have low unemployment, we have healthy consumption, we have strong investment and in that environment to have your inflation contained, such as we have, is a very, very good outcome. It is because inflation is contained that the Reserve Bank will take its decisions independently. But that contained inflation combined with the fact that we are bringing the Budget back to surplus - which means the Government itself is not putting upward pressure on prices through its spending - does give maximum flexibility to the Reserve Bank.

JOURNALIST:

(inaudible)

TREASURER:

I think we see that inflation is contained. What I would urge people to do is to read the Governor's speech from yesterday. I don't speak for the Governor, the Board and the Governor are completely independent of the Government.

But the fact is that so much of our news coverage of economic matters is seen through the prism of the doomsayers and the rent-seekers and all of those who seek to talk our economy down. It is not deemed to be newsworthy when we get such strong economic outcomes such as the ones I've talked about today.

It's not the inflation number I'm concentrating on exclusively here, but the combination that we've got that gives so much flexibility to a body like the Reserve Bank over time. It is rare in our economic history to be at a point where you can have low unemployment and also have a huge investment pipeline and healthy consumption and contained inflation at the same time.

It's the best possible combination we would want as a nation for our economy. But because it's good news it doesn't tend to get treated like so much of the handwringing, so much of the alarmist predictions which will come from people who want to peddle doom and gloom in our economy.

JOURNALIST:

(inaudible)

TREASURER: Anyone out there who is pushing their own barrow at the expense of the national interest. There's plenty of them from time to time.

JOURNALIST:

(inaudible)

TREASURER:

I actually think that it's very damaging for Australia that foreign investment policy in the Liberal National Party is now being taken over by Barnaby Joyce.

To be the Leader of the Opposition speaking overseas in an area where we settled this policy some time ago, with a degree of discussion and interaction with all sovereign governments around the world, we produced from that a set of guidelines for state-owned enterprise investment in Australia, not just the Chinese, but from state-owned enterprises right around the world and it's far broader than just Chinese investment.

Those guidelines have been I think very important in ensuring that we get foreign investment across particularly our resource sector which comes in a portfolio way working with other investors.

We see this for example in the LNG projects and so on in Queensland - Chinese investors, but also investors from elsewhere in the region, partnering with other foreign investors into domestic companies. That's a really good combination.

A lot of that has come about because we published these state-owned enterprise guidelines which require that for the first dollar of a state-owned enterprise, investment is declared and scrutinised by our Foreign Investment Review Board. At that time when we announced those guidelines we were opposed by the Liberal Party for putting those in place. They said they weren't necessary.

But we've bedded them down and they work for Australia and the pipeline of investment that has been coming our way has been creating jobs and wealth in Australia. Now Mr Abbott wanders off overseas and puts a very big question mark over all of that because he wants to play politics while he's wandering around the world. I think it's tragic that Barnaby Joyce is now apparently running foreign investment policy in the [Liberal and National Parties]

JOURNALIST:

Will those comments threaten any projects?

TREASURER:

I just don't think they're helpful. I think they create uncertainty. I don't think they're helpful.

JOURNALIST:

On COAG, Queensland Premier Campbell Newman said he won't contribute money for a trial site. If the states don't stump up their money for the disability scheme will this put at risk the whole project?

TREASURER:

I don't intend to comment on COAG matters until we see the outcome of COAG today. I think that would be most unwise.

But I do want to comment on some matters that Mr Newman spoke about yesterday, because yesterday the Premier of Queensland went out and compared the Queensland economy to Spain.

Now nothing could be more reckless and damaging, not just to the Queensland economy but to the national economy than the Premier of our third largest state comparing the economy in his state to Spain.

Spain has 25 per cent unemployment, unemployment in Queensland is 5.3 [per cent].

We have rock-solid financial institutions in this country that aren't under threat and don't have to be bailed out by government's like they've been bailed out in Spain.

This was reckless, it was damaging, it was unnecessary and it was all done to camouflage his embarrassment at the fact that he has reneged on an election commitment not to sack public servants. He is now planning to sack up to 20,000 public servants and he is holding the economy of Queensland hostage to his broken election promise.

JOURNALIST:

So Queensland isn't in trouble?

TREASURER:

No. The Queensland economy is strong and getting stronger. It is a major beneficiary of resource investment. Its unemployment rate is 5.3 per cent. It will get stronger as time goes on.

Queensland, like a number of parts of Australia, was hit hard by the Global Financial Crisis. But because the national Government put in place a set of policies to support our economy when global demand dropped as it did, Queensland, like the rest of the country has come through in better shape than just about any other developed economy.

For the Premier of Queensland, for a leader of that stature, to go out and compare his economy to Spain is absolutely reckless and very damaging to the national interest.

TREASURER:

To follow up on the National Disability Insurance Scheme. How important is it for the states to actually put in their part?

JOURNALIST:

The National Disability Insurance Scheme is a critical reform for social policy in Australia.

For too long the needs of the disabled in our community have just been put over there, they haven't been responded to fully and there's probably no state in Australia that needs a National Disability Insurance Scheme [more] than Queensland, because it's already got I think the lowest level of support from the state government of any government in Australia.

So I'm not going to reach any conclusions about what may come out of the COAG meeting, other than to say this: for a Labor Government there is no more fundamental reform and no greater Labor reform than putting in place a National Disability Insurance Scheme.

And we'll do everything we possibly can, responsibly, within a responsible budget to ensure that the needs of disabled Australians are not left behind any longer.

JOURNALIST:

(inaudible)

TREASURER:

We haven't made any announcements about Gonski yet. But that's a subject for another day. Thank you