SUBJECTS: National Accounts, foreign investment, commodities, infrastructure, Budget
KAREN TSO:
Assistant Treasurer welcome [inaudible]… GDP figures.
CHRIS BOWEN:
Certainly they are encouraging numbers, it is of course good to be the fastest growing developed economy in the world in the face of the worst recession around the world in 75 years but we are not under any illusions that there aren't more difficult times to come that the world recession does have some way to run and it's going to continue to impact and we need to continue to be vigilant.
JOURNALIST:
Mr Bowen, given the national interest concerns over the Rio Chinalco deal is it conceivable that we could see tighter restrictions and regulations on this deal by the Treasury?
BOWEN:
We have a bipartisan tradition of not commenting on individual applications while they are being considered other then to say we're open for foreign investment, we recognise the benefits of foreign investment for Australia but we have a process to ensure that each individual foreign investment is in the national interest which the Treasurer will weigh up and make a decision on in due course taking into account all the advice. Apart from that I can't go into what may or may not be the outcome.
JOURNALIST:
I do sense [inaudible]… improving position [inaudible]… changed expectations about the level of investment required. What's your view on that [inaudible].
BOWEN:
The bottom line is these decisions need to be made for the long term not in response to any particular economic circumstance at any particular point in the economic cycle. The Treasurer will weigh up what's in the national interest in the long term and he'll make that decision based on the best advice available to him. He is going through that process other then that I really can't speculate on what the outcome will be.
JOURNALIST:
Okay, let's move back to the GDP numbers because yesterday we also saw the Q4 number revised lowered to minus 0.6 per cent. We're still looking at this positive number for Q1, the treasurer has come out today and conceded that there might be some upside risk to some of the Treasury's forecast issued in the budget. Tell us how much greater could these numbers be then what Treasury issued.
BOWEN:
You'll recall that a number of people pilloried that Treasury's projections and forecasts…
JOURNALIST:
With due respect they did actually, the long term forecasts were a little overly optimistic and the short term forecasts were a little bit bearish…
BOWEN:
There are a range of views, but their was a chorus saying that the Treasury was being to optimistic and we said at the time that the forecasts were conservative based on the best advice available and we stand by that and you cant change your forecast projections based on one quarters results and of course they are very encouraging, they're very good results, they've shown the impact of the Governments stimulus action, they've shown that they're flowing through into household spending compared to comparable nations.
Take us compared to Canada for example, our household spending growth up, Canada the reverse. Similar economies neither have suffered the failure of deposit taking institutions but very different government responses. So we've seen that flow through but in terms of projections and forecasts, the budget projections aren't very old, they're only three weeks old and there is some water to go under the bridge yet. But we stand by them, but as we said at the time, they are conservative.
JOURNALIST:
It's an economic climate that is moving very quickly indeed. One big concern economists and market watchers have is the business recession that seems to be playing up while the government has managed to address the consumer side and really prop that up with some of the stimulus packages. Business investment is still a concern what can the government do to address that?
BOWEN:
There's two points to note there firstly, we've taken the view that in the very short term we needed to boost household spending to deal with the contraction in the business sector and secondly of course our very important general and small business tax break which is still flowing through the system, only passed the parliament a coupe of weeks ago and is being taken up by business. All the indications are, we saw the car sales figures out yesterday we saw that flowing through, the small business tax break flowing through the car sales figures and we'll see that I'm sure having and impact on investment figures going forward.
JOURNALIST:
Commodities are such an important foundation to the Australian economy; we have seen the markets rallying, where do you think we are in this cycle? Do you expect this rebound to continue and how important is it to the Australian economy broadly?
BOWEN:
Our job in the Government is to be stimulating growth, it is not our job to be commenting on any particular market whether it be the stock market or the commodity market but there is no doubt that the world recession has impacted on terms of trade we've seen that we have our projections in the budget on terms of trade but other then that I cant speculate on what may or may not be happening in commodity prices around the world.
JOURNALIST:
The number for GDP has been better then many had hoped. Now that we are seeing better signs could we potentially doge a bullet on the employment front as well?
BOWEN:
We can't be triumphalist about this, this is a very good figure, a very good result but there is some way to wash through the system. As you know you need to keep the economy going to take into account people entering the workforce for the first time so you have new people entering the workforce and the economy needs to grow to a rate, generally around 2 per cent to stop unemployment going up, what we're doing is keeping the growth rate positive in the face of world recession in the face of almost every other country in the world, certainly developed countries have negative growth rates but there will be continuing impacts on unemployment from the global recession, we've been up front about that for a long time and we continue to have this conversation with the Australian people to say there are tough times ahead.
JOURNALIST:
How do you try to engineer growth so that all parts of Australia participate?
BOWEN:
We have to respond to the national economy, we don't have the luxury of having different settings for different areas, state governments will respond as they see fit for the circumstances in their own states we can only respond to what are the national figures, we have a stimulus package which applies across the board, we have considerable investment in infrastructure in NSW, certainly major freeway expansions in the Hunter Valley etcetera.
So we certainly doing our bit there to stimulate the NSW economy but you will see differences across the board and you'll see bouncing around month to month quarter to quarter, states overtaking each other and falling back, that's the nature of the economic cycle we are in.
JOURNALIST:
Assistant Treasurer we thank you for your time.
BOWEN:
Always a pleasure.