SUBJECTS: Nation Building and Jobs Plan
HOWARD SATTLER:
The Assistant Treasurer, Chris Bowen joins me on the line. How are you Minister?
CHRIS BOWEN:
G'day Howard, good afternoon.
SATTLER:
Well what a day.
BOWEN:
It certainly has been a big day, a big package.
SATTLER:
It is a defining day isn't it?
BOWEN:
Well, that's one way to putting it; I'd agree with that. We are faced with the greatest economic crisis in the world since the 1930s and extraordinary times call for an extraordinary response.
SATTLER:
What do you do if this doesn't work?
BOWEN:
We will continue to respond. We had the stimulus package in December. The evidence is that this was the right button to push and we will continue and we will way up the evidence as it comes in, but I have to say, most of the evidence coming into the PM, the Treasurer, the rest of us, is that's it pretty bad around the rest of the world.
SATTLER:
Alright, if my maths is rotten and you're the Assistant Treasurer so you can correct me if I'm wrong, it was about $10 billion before Christmas and another $42 billion today. When is the Government going to run out of money?
BOWEN:
Look, we are going into deficit. The deficit is still a lot less than what you are seeing around the world, you are seeing across developed countries, on average, deficits of 7% of GDP. Now our deficit is substantially less than that. We are projecting 2.9% next year and 1.9% this year, so we are still – while running a budget deficit – not engaging in the sorts of deficits you see overseas; the United States…
SATTLER:
So where are you getting the money from? You aren't printing it are you?
BOWEN:
No, the Government borrows. Bonds are issued and people around the world buy those bonds.
SATTLER:
So there are people there to buy Australian Government bonds?
BOWEN:
Yeah and that's how governments around the world finance their deficits.
SATTLER:
So what do you want people to do with this money? Do you want them to do what you recommended them to do before Christmas and just go out and spend it?
BOWEN:
Well look it's a matter for people themselves, but the important point is this: some people will spend straight away, some people will go out and say 'yes, I've been trying to find the money to buy X. Y, Z, we really need it and we will spend it when we get it'. Other people will say 'well let's pay down our credit card a bit, or let's pay it down so it's less'. Now those people will still feel confident to spend during the year. If you have a $4,000 or a $5,000 credit card debt and you pay a substantial whack of that off in one go with the bonus payments. You are more likely to spend next month and the month after that on things you need…
SATTLER:
So you are happy for the payments to be used for that purpose?
BOWEN:
If the right decision for them is to pay down their credit card debt, then that is also good for the economy. But obviously, we expect the majority of people to go out and spend it, but many people will pay down their debt and that's fine too.
SATTLER:
What about those who just buy booze and get drunk?
BOWEN:
When you do a big package like this you are always going to find some people who spend it more wisely than others. However, we believe in trusting the Australian people and the vast majority…
SATTLER:
Can you do that?
BOWEN:
Yes, it's there money at the end of the day. It's the Australian people's money. We aren't going to lecture them on what is right to spend it on. If they decide to spend it on a holiday, well good luck to them, they are supporting jobs, there are people employed at hotels and restaurants. You might say that's a waste of money, but if that's what a family wants to do with their money, have a bit of a break – have a long weekend away or a holiday – then good luck to them.
SATTLER:
People are asking questions off air, these bonus payments, $950 for lower and middle income families. Is that for a combined income or for each individual? So a couple will get $1900?
BOWEN:
That's correct. If there are two people earning $100,000 then they get bonus payments.
SATTLER:
Okay, and the workers, the same thing, those earning under $100,000 will receive a bonus payment?
BOWEN:
That's correct.
SATTLER:
Alright, now I want to talk to you about interest rates.
BOWEN:
Yes.
SATTLER:
Today, already, ANZ and Westpac have announced that they will go the whole hog and reduce their rates by 1%. What's the story with the other banks? What's your message to them?
BOWEN:
We certainly want them to pass it on, in full, as soon as possible. Now there was evidence, with past cuts, that they reduced it in tranches, but we want it passed on in full, as soon as possible. We are delighted with the decisions of ANZ and Westpac to pass it on in full and the sooner it's passed on by the others, the better.
SATTLER:
What can you do if they don't?
BOWEN:
Well, of course, we work in a market economy, the government doesn't set interest rates, but we certainly are encouraging them to. I know the Treasurer is in communication with the chief executives of the banks and he will be making the Government's view very clear.
SATTLER:
Has he rung them today has he?
BOWEN:
He is constant discussions with the chief executives about those things…
SATTLER:
So what does he say to them? Does he say you better pass it on or else?
BOWEN:
Well, he talks to them about what their situation is with their financing costs, he takes Treasury, and APRA, and ASIC advice on what the financing costs are. He makes it very clear to the banks that our advice is that their financing costs are such that the cut can be passed on and that we will be saying that publicly. We will be publicising our view, as we do and we will be commenting negatively, if they aren't passed on…
SATTLER:
Naming on shaming those that don't?
BOWEN:
Well that's certainly the very hard-line that the Treasurer takes with them.
SATTLER:
Have you got any more power over them than you do with the oil companies because you are the Minister for Competition Policy too and those bloody oil companies – pardon the vernacular – they just sort of thumb their nose at you?
BOWEN:
We do work in a market economy and we don't have the situation where Ministers determine the price we pay for petrol or anything else. The answer to that is competition and getting more competition in, and similarly, in banking, we support competition in the banking industry. So loo, there are a range of mechanisms the government use here. I don't agree with going back to the 1970s where Ministers sat around tables in Canberra setting interest rates or the price of bread or the price of petrol. At the end of the day, we need to get vigorous competition to sort those matters out.
SATTLER:
Now $42 billion today – that's a mind boggling figures, I'm sure you would agree – is there anymore room to move if this doesn't work or is that it?
BOWEN:
It's not so much if this doesn't work…
SATTLER:
We need to avoid a recession.
BOWEN:
Absolutely, and if the world situation deteriorates further…and let's not beat around the bush here Howard, the risk is on the downside. The risk is not that we acting too much, the risk is on the downside, the global situation will get worst. We will respond.
SATTLER:
So you have got some more room to move – without giving me a favour – but you can still manoeuvre?
BOWEN:
As I say, the rest of the world is going into recession; the rest of the world has lower interest rates than us. It is widely recognised that Australia has room to move.
SATTLER:
Okay, well, I hope you don't have to.
BOWEN:
Of course, we all hope that the situation will improve and that we won't have to, but when you've got your largest trading partner, China, slowing its growth predictions, having it in fact, the lowest growth rate in seven years. From Western Australia you know what that means for the Australian economy.
SATTLER:
We sure do. And you would predict, would you, that unemployment would go up?
BOWEN:
Yeah our forecasts are that unemployment will hit 7% in 2009-10…
SATTLER:
Is that across Australia, because we are only at about three point something at the moment…
BOWEN:
Yes that's a national figure; it will vary from state to state. But there will be an increase in unemployment; we have been upfront an honest about that. What this package does us, what our previous package has done, and what the Budget will do is minimise the impact. We can't stand here like King Canute against the world…
SATTLER:
I thought this was the Budget.
BOWEN:
There's still a Budget to come in May Howard.
SATTLER:
Strewth. What's that going to tell us?
BOWEN:
We'll assess the situation and the developments between now and then and we'll be responding then.
SATTLER:
Alright, thanks for your time.
BOWEN:
Good on you Howard.