Interview with Lyndal Curtis
ABC Radio AM Program
4 March 2009
SUBJECTS: National Accounts; Economic Security Strategy.
CURTIS:
Mr Swan, welcome to AM.
TREASURER:
Good morning, Lyndal.
CURTIS:
Economists are tipping a positive National Accounts figure. Given the economic figures we've seen over the quarter, are you reasonably optimistic that that will be the outcome?
TREASURER:
I think, Lyndal, we'll have to wait until 11.30 today to see the final outcome. But what we do know from the data that has come in from around the globe is that we have seen the sharpest synchronised contraction in the global economy in our lifetime. It's impacting upon both developed economies and developing economies. If you look at some of the figures – the US in the December quarter – 1.6; the UK – 1.5; Japan – 3.3; Taiwan – 6.1; and yesterday a negative in Canada of 0.8. So, that will impact on Australia. I don't think there's any doubt about that. And we'd be kidding ourselves if we pretended that it didn't impact on Australia.
CURTIS:
You are expecting things to get worse before they get better. Can we get out of this year without a negative number?
TREASURER:
Well, I'm not going to speculate about that. There's no doubt there will be an impact from this very substantial synchronised global contraction. What I do know is that things would be a lot worse if the Australian Government and the Reserve Bank had not acted early and acted decisively.
CURTIS:
You say that things would be a lot worse if you'd not acted. Do you have Treasury modelling to show what would have happened if you had not put in place your stimulus measures?
TREASURER:
Well, I think we've seen the beneficial impact of the Economic Security Strategy come through in the retail sales figures for December, and again I think in the figures yesterday for the retail sales figures for January, which of course won't be reflected in the data that comes out today. But what we do know…
CURTIS:
But those figures don't measure why people spent the money. They only measure that people spent the money. Is it possible that interest rates alone and the fall in the value of the dollar could have led to the sorts of figures we've seen on retail trade and balance of payments?
TREASURER:
Well, there's a couple of points we need to make. First of all there is going ahead already a very substantial stimulus in the system. A very substantial fiscal stimulus first of all from the Economic Security Strategy which only began to flow through in December, and then of course future fiscal stimulus which will come through our Nation Building and Jobs Plan. You've also got the stimulus that flows from the cuts in the official cash rate – something like 400 basis points over a six month period. Those things will all impact on the economy as we go through this year. But what is also happening simultaneously with that is this sharp global contraction, particularly in the December quarter, which has had such a dramatic impact on so many developed and developing countries around the world, and most particularly a dramatic impact on our trading partners. Seven of our top 10 trading partners are now in recession so that will also impact and work the other way.
CURTIS:
But it's not possible to prove or disprove that things would have been worse without the stimulus package alone?
TREASURER:
Well, I think we know that the stimulus package that began to flow in December has already had a positive impact. But what we will see in the National Accounts is the impact from those other factors that I've been talking about – this very sharp global contraction, the impact upon confidence, the consequent impact upon investment and so on.
CURTIS:
You paid out nearly $9 billion in December but only a relatively small amount of that has showed up in the retail trade figures. Isn't Malcolm Turnbull right in saying that most of it's been saved and you didn't get that much bang for your not inconsiderable dollar?
TREASURER:
I don't think that follows at all. Malcolm Turnbull's approach is simply to sit and do absolutely nothing. The Government acted, we acted early, we acted decisively. I think it is very much the consensus of most business leaders and market economists that the Economic Security Strategy certainly had a beneficial effect in terms of support for jobs and business through December. There's no doubt about that. And certainly it supported consumption again through January and we've seen that in the retail figures that were out yesterday. For Malcolm Turnbull to simply say, and make bland assertions along those lines for which he has no evidence, indicates that he has no alternative policy other than to sit and wait and do absolutely nothing. And the consequence of that is outcomes which will be far worse than those that we have seen so far.
CURTIS:
You said the last time you were on the program that you're looking at reordering your Budget priorities. Some of those include education reform, paid maternity leave, defence spending, what's likely to give?
TREASURER:
Well Lyndal, I'm not speculating about the Budget. We're going through our Budget process. All of that will be announced on Budget night in May.
CURTIS:
Wayne Swan, thank you very much for your time.
TREASURER:
Good to be with you.
