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

10 May 2013

Doorstop interview

Canberra

SUBJECTS: RBA's Statement on Monetary Policy; Interest rate cut; Tony Abbott Bringing Back Individual Contracts; Budget

TREASURER:

What a beautiful day. What we've got here today are many of our Treasury officials who've just popped out for a break. I particularly wanted to pay tribute to the hardworking Treasury officials around this time of year. They're committed to their country, they work very hard. I think if you 've been around the precinct in the last week or so, the lights have been burning bright here late into the night and they do that because they're very committed to their job and very committed to their country.

Today I wanted to say a few words about the Reserve Bank's Statement on Monetary Policy. I think what jumps out of this statement today is how much Australia has got going for it when it comes to our economy. We've got solid growth, we've got low unemployment, we've got a big investment pipeline, we've got contained inflation and of course we've got record low interest rates. So this report today I think confirms the underlying strength of the Australian economy. Of course, this week, the Reserve Bank cut interest rates yet again. They did that because inflation is contained and I think that's been welcome news for millions of families with mortgages and many people in small business. Somebody with a $300,000 mortgage will save $5,500 a year than when Mr Abbott was last in government.

It is very good news today that the ANZ has decided to pass on more than the 25 basis point rate cut and I think this is also a product of the competition reforms which have been put in place by the Government and I'm glad to see a more competitive environment out there and to see this rate cut greater than the Reserve Bank cut.

I think the discussion today in the Statement of Monetary Policy also points to two very important transitions which are under way in our economy and which are shaping the economic outlook. We're making a transition from an investment boom in resources to a very strong export-led surge. It's important that people understand that. We are moving from the peak of the investment phase in resources and moving to a new high in terms of the export phase. So we are going to see a surge in export volumes in the period ahead. But also, I think what we are seeing is a movement in our economy from the resources sector to the non-mining sector as well and that movement has been supported by lower interest rates. We've seen this in the report they've published today. You've seen it in the improvement in housing construction, you see it in the lift in retail sales, supporting growth in the non-mining sector of our economy.

Now these transitions from resource-led growth to non-mining growth are not always smooth. Big transitions rarely are always smooth but I think we are approaching this transition from a position of strength. A position of strength in our economy which is not matched by barely any other developed economy in the world. But it also brings with it pressures on our economy as well. And you can see these clearly outlined today in the Statement on Monetary Policy, particularly the sustained pressure that the sustained high dollar is putting on profitability right across our economy. Not just in terms of the resources sector but more broadly. It has been stubbornly high, particularly at a time when commodity prices have come off but also when interest rates have gone down to record low levels, the dollar has of course barely moved. That is putting pressure on broader price levels across our economy, not just the CPI, and of course that is impacting on profitability across the economy and when it hits profitability, what it also hits is government revenues. So there is certainly a substantial impact from this in terms of government revenues and I have talked a lot about that in recent weeks.

But what the Government is doing in the middle of these two big transitions is doing what we always do, which gives our number one priority to supporting jobs and growth. To make sure that as we go through these transitions we're always supporting employment. That's what the budget will do this coming week. It will find the balance but giving the number one priority to supporting jobs and growth in our economy.

I wanted to say a couple of things also about the announcement from Mr Abbott about their industrial relations policy. It says a lot about Mr Abbott he close to make this announcement in a boardroom. He didn't actually choose to make this announcement in a factory. He spent a lot of time in factories but he couldn't go to a factory to talk to the workforce about the threat that individual contracts pose to the basic working conditions of the Australian workforce. Because an emphasis on individual contracts leads inevitably to an attack on some of the fundamental working conditions that the Australian workforce takes for granted. Things like penalty rates, in particular, are threatened by that approach. So he can try to sugarcoat his approach, he can try to hide it behind the Productivity Commission but I think the Australian workforce knows when Mr Abbott is talking individual contracts they'll remember about what happened a couple of years ago when they were the centrepiece of the previous approach taken by Mr Abbott and Mr Costello when they were last in government. So that's just a few words on a couple of issues. I'm happy to take your questions.

JOURNALIST:

A lot of banks don't normally pass on even the full amount of the RBA cuts. Would you like to see the banks now give more back to their customers to make up for some of those?

TREASURER:

I think you can tell if you have a detailed read here of the Statement on Monetary Policy that the funding pressures that the banks have claimed have led to previous practices that they were adopting are not there like they were before. Certainly haven't been there for some time and it was good to see the full pass-through and it's got to see more than a full pass-through. I hope we see more of that activity in the future.

JOURNALIST:

The statement today talks of sub-trend growth and higher unemployment. Does that concern you?

TREASURER:

Well, I wouldn't quite put it like that but if you look at the growth figures today that the Reserve Bank has published, they've not changed their forecasts from their previous Statement on Monetary Policy. So I've been reading some of the commentary about a downgrade, but the growth forecast, there is no change.

But what they do talk about here is what I talked about here is what I talked about before and what I've been talking about for many months. Which are these two big transitions that are going on in our economy:the transition from the investment phase of the resources boom to a production surge and also, the transition from the resources sector itself to growth in the non-mining sector. The purpose of monetary policy particularly in the current environment is to encourage that transition. And indeed you see reference to that in terms of the analysis of what's happening in construction, what's happening in housing, what is happening in household consumption. But of course, when big transitions are on, particularly when the dollar remains stubbornly high, even in the face of lower interest rates and a lower terms of trade, that transition won't always be smooth and it may have some impact on employment in some sectors. There's nothing particularly new in that analysis. And their growth figures have not changed from what they were six months ago.

JOURNALIST:

The Statement says that business investment remains soft and that employers are cautious about hiring new workers. How do you address that or is it a result of them waiting for a Coalition Government?

TREASURER:

There's two things. A Coalition Government certainly wouldn't be assisting that process, because they would cut to the bone. Their stated position is that in the face of revenue write-downs such as the ones that we are facing they would take an axe to the budget, which would be an axe to health, education and jobs and what that would do would be to push up unemployment. What I made really clear at the end of last year when I outlined our revenue challenges and said it was unlikely we'd come back to surplus in 2012‑13, I said we had to do everything we possibly could to support jobs and growth and it would be deeply irresponsible to cut further to make up for revenue downgrades. So at the core of this budget is that belief I spoke about in my remarks earlier. Our priority, our number one priority from over the last five years has been always to put jobs and growth first. We did that during the Global Financial Crisis and we're doing it now to assist the economy and to boost employment in the face of these two big transitions. That is also assisted by monetary policy from the Reserve Bank which is cutting rates to stimulate further growth in the non-mining sector. So we're supporting jobs through our fiscal policy, through a pathway back to surplus over time, but consistent with supporting jobs and growth. The alternative from those that practice austerity economics, Mr Abbott and Mr Hockey, would be to take an axe to the budget in these circumstances which would push up unemployment.

JOURNALIST:

Given revenue is a problem, shouldn't we be looking at middle-class welfare?

TREASURER:

We're going to outline our savings process as we always do on Budget night. I'm not going to buy in to individual discussions of individual issues. What I'm going to do is the right thing to support jobs and growth. Make the savings in the Budget so we can find room to make the necessary wise investments for the future particularly in education and in disability services and have a responsible fiscal consolidation or return to surplus. It's all about supporting jobs and growth, charting a pathway to surplus and also making room for those important investments which will grow our economy into the future.

JOURNALIST:

It's been a week of bad news announcements related to the Budget, Family Tax Benefit, deferred tax cuts. Are all of the bad news announcements out of the way or can we expect more cuts?

TREASURER:

The Government is doing the responsible thing by our economy and by the Australian people. We will put in place economic settings which support growth and jobs. The most fundamental thing in the life of an Australian is the life of an Australian is the capacity to get a job and to have job security and to have the knowledge that the economy will grow solidly. This Budget is about supporting jobs and growth and making sure we get in place those investments so that their kids get a decent education and get the opportunity to get a job in the future and providing fairness to a whole group of Australians who've been locked out of mainstream participation for far too long. It's about ensuring the prosperity of this country is spread to every postcode right around the country.

JOURNALIST:

Can you rule out further cuts to the baby bonus?

TREASURER:

I'm not buying in to a discussion about individual measures at all. We've already put up a proposal to make it fairer and more sustainable which was rejected by the Coalition, Mr Hockey of course was rolled in the party room. It makes a bit of a joke when he gives speeches about the age of entitlement and how it ought to be cut back but when there is an eminently reasonable proposal to make a measure sustainable, he can't even carry his own party room and whilst at the same time running around with a Paid Parental Leave scheme that gives the most money to people on the highest incomes. They got a real problem in that area.

JOURNALIST:

(inaudible)

TREASURER:

I won't go into the individual measures that may or may not be in the budget on the night. What I'll do with is getting on with getting it all completed and working here.