SUBJECTS: Budget, IMF, tax cuts, Julie Bishop, economic philosophy
CHRIS BOWEN:
Well this morning the Shadow Treasurer has called for quote 'broad and sweeping' tax cuts thinking that these would increase government revenue. Now the alternative Treasurer needs to explain how she thinks tax cuts will increase government revenue. She's practising voodoo economics at its worst. She needs to clear this up. Either she believes that tax cuts can increase government revenue or she doesn't.
Also this morning, the Shadow Treasurer has waved the white flag and effectively saying that Australia is in recession. The Opposition supported the economic stimulus package when it was announced by the Government last year. Now the Shadow Treasurer says the economic stimulus package will not ward off a recession in Australia. This is a concerning development. The Opposition should not be playing politics with talk of a recession. The Government will continue to respond and do what we think is necessary to ensure the protection of jobs and the promotion of jobs in the Australian economy.
Contrast this with the Leader of the Opposition who yesterday said that the Prime Minister was channelling Gough Whitlam when talking about improved regulation.
The Leader of the Opposition is representing the worst of the 'let it rip' mentality – the Wall Street mentality of greed, which says no regulation, no intervention, to protect Australian jobs.
The Government won't be distracted by outlandish claims such as that. We will continue to respond decisively and flexibly, as we need to.
JOURNALIST:
The IMF predicts the Australian economy will contract by 0.2% this year. Will the economic stimulus package stave off a recession?
BOWEN:
We'll continue to look at the figures that come out over the coming period and we will continue to respond as we need to with every policy mechanism that is open to us. To ensure that Australian growth is as robust as it can be.
JOURNALIST:
Correct me if I am wrong but the IMF gets its figures from the Australian Treasury doesn't it?
BOWEN:
The IMF uses a range of inputs, a range of mechanisms to make their predictions. The Australian treasury publicises its predictions, they're on the public record. They'll of course continue to keep their forecasts and predictions under monitoring.
JOURNALIST:
But they also get their figures from discussions with the Australian Treasury, so that would be the most recent Australian Treasury estimates?
BOWEN:
The most recent Australian Treasury estimates are on the public record. Of course, the IMF liaises with treasury and other Government instrumentalities and non government instrumentalities and uses their own economic data to make their predictions.
JOURNALIST:
Can you tell us how being a social democrat and how being an economic conservative is the same thing?
BOWEN:
Being a social democrat means that you believe in Government intervention as necessary to promote the economic well being of all Australians. Now being am economic conservative means that you are very careful with Australian Government funds. The two are not mutually exclusive.
In times like this we are seeing every government in the world go into deficit. We've seen the IMF talk about deficits of 7% of GDP, that's both conservative and social democratic flavour.
Governments around the world are at one in what's necessary to respond to this crisis and that's increased government intervention, increased government spending and deficits where appropriate.
Malcolm Turnbull is the only political figure in the world it seems who doesn't believe in deficit spending at this particular stage in the cycle.
JOURNALIST:
Isn't it reasonable to say from what the Treasurer was saying this morning -he is only talking about company tax receipts -that based on what he said, that in fact the budget would go into deficit this financial year and stay there across the forward estimates?
BOWEN:
What the Treasurer made clear this morning that the global financial crisis will have an impact on the Australian economy and on government revenues and that will mean a temporary budget deficit. It will mean of course that there is a reduction in Government revenue.
JOURNALIST:
Can you define temporary for us?
BOWEN:
The budget will be in deficit for as long as it takes to ensure robust growth in the Australian economy and we would expect the budget will return to surplus when the economic cycle allows it.
JOURNALIST:
What's the economic cycle we're talking about? Three years? Four years?
BOWEN:
Economic cycles vary in length, economic cycles tend to be shorter or longer, no economic cycle is exactly the same as the other and the only thing certain about this crisis around the world is its fluidity. But we will ensure that as soon as the economic cycle allows the budget to return to surplus it will return to surplus.
JOURNALIST:
Alright, and one last thing. If you have a deficit is there only one way to pay for it and that's through higher taxes?
BOWEN:
A deficit means that for a certain period of time government revenue is less then government expenditure and the economic cycle when it returns to positive growth, that would mean the government revenue would increase in the natural course of events and you would see a return to a surplus.
JOURNALIST:
But don't deficits mean higher taxes in the future?
BOWEN:
No, the deficit means that government revenue is temporarily outpaced by government expenditure, so what you see are the automatic stabilisers kicking in.
JOURNALIST:
And one last thing, do you think that Julie Bishop has lost all credibility?
BOWEN:
Well I think Julie Bishop lost all credibility a long time ago. Every time that she makes a pronouncement she gets it wrong. It's a matter for the Leader of the Opposition as to whether she continues in the role. But clearly, the Australian people can have no confidence in any economic statement that she makes.