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

2 October 2012

Press Conference

Canberra

SUBJECTS: Reserve Bank interest rate cut; foreign investment; Alan Jones and Tony Abbott

TREASURER:

I've got to be relatively brief, I've just come out of a meeting but I've got to go back. I wanted to say a couple of things about the interest rate cut and I'm quite happy to take a few questions.

I think it's pretty fair to say that working Australians and small businesses deserve cost of living relief and today that's what they got. Australians on a $300,000 mortgage have now received a total cash boost of around $2,500 in the last 12 months and these cuts have been made possible by our responsible budget policy.

Today at 3.25 per cent the official cash rate is lower than it was at any time under the last Liberal Government. It's also less than half the level it was when the Liberals left government. Today's cut means a family on a $300,000 standard variable mortgage is now paying around $4,500 a year less in repayments than when the Liberals left office.

So the bottom line is this: under the Liberals, rates went up and up and under this Labor Government, rates have been coming down, and that is a very welcome dividend from responsible budget management. Australians can be proud of our strong economy and our strong budget with a triple-A credit rating from all three global rating agencies and of course that has been recently reaffirm by Standard and Poor's. It's also true as I've been saying and as the RBA has said today, that we do have lower commodity prices, a higher dollar and of course global uncertainty. But when we look at these factors we should also keep a very keen eye on our fundamental strengths. We've got low official interest rates, contained inflation, solid growth, low unemployment, healthy consumption and a very big pipeline of investment. So today's announcement is good news for families and small businesses right across Australia.

Over to you.

JOURNALIST:

Will it be good news for families and businesses if the banks fail to pass on the full 25 basis points?

TREASURER:

I think that's quite a relevant question. We've only just got the decision, but I fundamentally disagree with Mr Hockey and Mr Robb who say they should be allowed to crimp something from the cut. Next question.

JOURNALIST:

Can I just ask what it means for budget policy too? The Reserve Bank has forecast a lower peak in the resources boom and an earlier one next year. Does that suggest you should be changing the budget strategy?

TREASURER:

I think you should have a close look at the statement, it's quite interesting. It refers to the fact that the economy is growing around trend. The Government's position has been and remains that with an economy which is growing around trend, we should be coming back to surplus. Now, of course, we know that lower commodity prices and a higher dollar have made that situation and outlook a little more complicated, but the fact is we shouldn't lose sight of the fundamental strengths in our economy. But I think we should read the statement in full. It does points to some greater weaknessin the global economy; I've talked about that in recent times. It talks about the situation in China, it talks about global uncertainty. What we are seeing here is what the Government has been putting in place which is a greater capacity for the Reserve Bank to respond with monetary policy. In a domestic economy where growth is at trend, it does give greater scope to the Reserve Bank to deploy monetary policy. That is precisely what is happening given those changed conditions.

JOURNALIST:

The Reserve Bank says China is growing by less than it expected. Is it also growing by less than you expected?

TREASURER:

We'll update out forecasts in the usual way. The fact is that the slowing of growth of China in the first instance has been domestically induced by domestic policy. And secondly, it's now clearly been impacted a little more by events elsewhere in the global economy, and most particularly in Europe. But we shouldn't forget a couple of things. Whilst China may be growing a little more slowly than people had anticipated, it's doing it from a very much bigger base. The Chinese economy for example is now 40 per cent larger than it was prior to the global financial crisis. So if you're dealing with growth rates of 7 or 8 [per cent] in China, you're still dealing with a very substantial impact on global growth, but clearly now affected somewhat by events in Europe. That's what the Reserve Bank has pointed to today in terms of its decision as one of the factors that it took into account.

JOURNALIST:

What would you prefer to people see do with the savings they get from this rate cut - pay off more of their mortgage or go to the shops and spend?

TREASURER: That's entirely a matter for individuals but as you're aware in particular, monetary policy has a longer timeframe in terms of its impact, and I think you can see in parts of the statement today an acknowledgement that there may well be some more impact of the monetary policy easing in some sectors and there's some other evidence that indicates that as well. But there's a longer lead time with monetary policy than fiscal policy.

JOURNALIST:

Given the backdrop of global uncertainty, are you encouraged by foreign companies wanting to invest in the local steel industry and given the cleaner technology and reduced emissions (inaudible).

TREASURER:

I'm not going to comment on the stories in the papers today. Those are matters for the companies. They're not matters which have come to me but as a general principle we're an economy which relies upon foreign investment to support jobs and to support our prosperity. When it's in the national interest we always welcome that investment as a source of jobs and prosperity, unlike our Liberal opponents who are out there trashing our international reputation when it comes to foreign investment and sending very confusing messages to the world about the willingness of Australia to take foreign investment.

JOURNALIST:

Treasurer, Ross Garnaut has gone on at length today about a range of factors, including the slowdown in China that have driven down the terms of trade 10% in the last 12 months. Is it time for business and other special interest groups to actually pull back on some of the demands, for example, for a business tax cut in the interests of the broader economy, given the conditions we see at the moment?

TREASURER:

I would caution against following every speech or every single piece of analysis which given by many people in the community, many of whom are very well qualified. Our job as the Government is to assess these matters in total. That's what we do in a measured way over time. The fact is that for a long time to come China is going to be a very, very important influence on regional and global growth, and nothing that I can see in the outlook is going to fundamentally change that medium-term outlook. Yes, there will be changes in the cycle. Yes, there will be some changes in the immediate term, but I think the growth outlook for our region is still one that is very good in the longer term, but nevertheless there will be bump if you like along the way.

JOURNALIST:

Has Alan Jones apologised sufficiently today when he returned to the air this morning?

TREASURER:

I don't think Alan Jones has really apologised at all. I think what you can see today on display is the very close linkage between Mr Jones and Mr Abbott.

When you have one of the most aggressive and abusive opposition leaders in our history, it's little wonder that people like Mr Jones feel free to fill the airwaves with their poison. It's not surprising at all.

JOURNALIST:

Do you think Mr Abbott should be boycotting his show as Kevin Rudd suggested?

TREASURER:

First of all, Mr Jones spoke at a Liberal Party fundraiser. Point number one.

Point number two, anyone who has ever listened to an interview between Mr Jones and Mr Abbott knows that it sounds like a Liberal Party branch meeting. So they are at one when it comes to a political critique but they're at one when it comes to a political style which is vicious, aggressive and poisonous and that's why I don't think Mr Jones should be on air at all and why I called for that over the weekend, for him to be removed from the airwaves. It's not something Mr Abbott has called for.

JOURNALIST:

The High Court has ruled in favour of Andrew Forrest. Is that good for Australia?

TREASURER:

I'm not familiar with the ruling today but everybody accepts the decisions of the High Court. I will go away and have a look at the ruling. I don't feel qualified to comment on that because I haven't read it. I'm aware of it.

JOURNALIST:

(inaudible)

TREASURER:

I've been in meetings all day today. I've been looking after my day job, which is the economy.

JOURNALIST:

Do you believe there is a stronger case this time for banks to pass on all of that interest rate cut than was the case in previous times?

TREASURER:

What I said before is I think that the view taken by Mr Abbott and Mr Robb, that they should be allowed to crib from any rate cut is just plain wrong.