JASON MORRISON:
To the Assistant Treasurer Chris Bowen who's been good enough to join us this evening. Good evening to you.
CHRIS BOWEN:
Good evening Jason.
MORRISON:
You've heard Ross' analysis then, you've been on hold right the way through that. I mean he does spell it out quite well, the cut expenditure, you increase taxes or you sell something which is it going to be?
BOWEN:
Well look over time we are committed to a surplus over the cycle, but what we have said today is we are being upfront with people about what impact this world crisis is having on the Australian Government. You know we have seen economic growth in China halved, it's as low as it has been for seven years, of course the Chinese economy is very important for us. But just as importantly are the top ten trading partners, five have gone into recession and more expected to go into recession all that has an impact on the Australian economy; has an impact on Australian Government revenue. You'll remember last year Jason we announced that we expected our Government revenue to be $40 billion down over the forward estimates. That's been increased to $115 billion. To give you some idea of the impact that's about half what we raised in revenue on any given year we are down over the four years. That's a very big impact and so…
MORRISON:
If you had known it was going to be this crook back when that estimate came your way would we have been handing out $10.4 billion before Christmas?
BOWEN:
I think what we are seeing now is the importance of the Governments earlier response. We pressed that button late last year. Some people said that we acted too quickly, that we shouldn't have put that money out and I think the figures we are seeing now show that was 100% the right decision. You are seeing a very big falls in consumer's spending around the world in December, but there still some more figures to come out, but in Australia we are not seeing that level of fall and certainly some instances of positive growth. So what we are seeing I think is that we made the right decision last year. Around the world you've seen governments respond in more than one tranche and we'll respond in more than one tranche and we will respond again in the not to distance future.
MORRISON:
So if it had been, if that right decision as you call it, hadn't have been made, were would we be now? What are they telling you?
BOWEN:
Well certainly…
MORRISON:
What would that $115 billion figure be?
BOWEN:
Well in terms of expenditure and gross domestic product or growth you would see lower figures if we hadn't stimulated the economy when we did.
MORRISON:
You heard Ross' thing, he's a real world man…
BOWEN:
Yeah…
MORRISON:
Would that…are we talking about buying a month here with most business's that you've helped out, if you want to put I that way…
BOWEN:
Let's look at the medium term. Businesses don't want to lay people off the vast majority of people, don't want to lay off if they can avoid it, but what we need to do is ensure as much as we can to 'move heaven and earth' as the Prime Minister puts it to ensure continued, robust growth. So that means stimulating the economy. Now some people spent that stimulus we gave them, other people might have saved it and are planning to spend it soon. Other people are waiting to see what happens, but it's all about confidence now we've got a lot going for us in Australia. Times are very tough but we do have a lot going for us and we need to also keep reminding people that confidence is very important and spending is important at the same time so…
MORRISON:
Talking to you is interesting because you're a Sydney MP your electorate is sort of out towards the Blacktown way and that part of Sydney…
BOWEN:
Fairfield.
MORRISON:
Fairfield ok. So you are in an area that has been hit pretty hard by all of this now and that people are in fact starting to tell you that they are feeling it tough now.
BOWEN:
Of course the area I represent are doing I tough…
MORRISON:
It's a battler's area. We look at this and we say well the Government is all but saying, if anything, it's going to reduce tax not increase it. That's what I've been given, that's the message that seems to be there. Ross says you've got nothing left to sell. That's debatable. So you start cutting expenditure. You can't cut from welfare because you've got an environment there - I imagine a lot of people are saying 'I've lost my job, I pay my taxes [inaudible]…we are going to have to start cutting back on services that are in the community…
BOWEN:
Well what you see is what Ross and I would call 'automatic stabilisers' - that's the jargon - what does that mean? It means that the budget responds to the economy. So when times are tough, like there are at the moment, welfare payments go up and our tax revenues go down. When things start to turn around when things get better, tax revenue will automatically go up and our expenditure will automatically go down because you'll find unemployment going down so therefore the payments go down, etc.
We are finding a lot of people moving onto the pension, for example, that weren't on the pension because their self funded retiree income is drying up with the collapses in the stock markets around the world. You'd see that is starting to turn around. You see the budget automatically responding to that, now we'll have to do this budget-by-budget of course, we are committed to a surplus over the cycle. That means when it is sensible to run a deficit, when the economy will need more money, we'll put the money into the economy. When the economy is booming again, that's the time when you run a surplus, and we will weigh up the decisions that we need to make to ensure that is the case. But you do have those what we call automatic stabilisers come into place, so some of it happens automatically.
MORRISON:
Okay you are in a position where you've got to take the country into deficit, are we going to be very public and upfront about the plan to get us back out of that? Because that is the criticism of Labor in the past, that it is easy to get in there but how do you get out of it?
BOWEN:
Well look a couple of things. Firstly we have indicated that we will put out all the figures in the very near future, about where the budget stands and the full economic outlook, which is something quite unusual, but we feel we need to be upfront with people. The second point is the IMF, which one the leading world think tanks put out a paper just very recently saying that budget deficits around the world will get to 7% of GDP. Now that is a massive figure…
MORRISON:
Credibility is on the line, I mean the Asian financial crisis they missed that entirely and they have over stated things in the past…
BOWEN:
When you are looking at around the world you've got the OECD, the IMF, and the World Bank. They are pretty much the three most respected world economic think tanks, and they, for example the IMF - as you say - they have changed their forecast four times, that's how fluid this situation is around the world. But the point I'm trying to make is that they have indicated that budget deficits around the world are going to go to 7% of GDP. Basically every country in the world is going in deficit, partly out of choice to stimulate the economy and partly because governments have no choice, their budgets are going into deficit. Now we are no different and we would be completely irresponsible to say, for example, well we have lost $115 billion so we are going to make it back and we are going to make sure we are going to stay in surplus and how would you do that, as you say you either increase taxes or cut revenue. We are not going to do that in this environment. It would be absolutely disastrously bad for the economy, bad for people.
We will respond as the situation responds and if the economic growth cycle turns to ensure we will go back into surplus and we will have to make the decisions based on the evidence in front of us at the time.
MORRISON:
So can we get an absolute. You say you are not going to increase taxes. There is another word that is used and that's 'charges' as well Government charges are they going to go up?
BOWEN:
Well what we are interested in doing is stimulating the economy Jason That means, not increasing taxes, it means not reducing expenditure. Of course there is always waste that can be dealt with and there are always individual decisions that need to be made on particular measures. What we are interested in doing is stimulating the economy and that means putting more money in not taking money out.
MORRISON:
I'm not sure if I got an answer to that one…
BOWEN:
Well we are certainly not talking about going out and saying, we are going to increase taxes and we are not talking about Julie Bishop 'we are going to cut taxes to increase tax revenue. I don't know she is coming from but…
MORRISON:
Well let's forget about the politics…
BOWEN:
This is about the debate about where we take the nation, that's not what we are about. What we are about - and there will be more details there about this very soon - it is about stimulating the economy putting more money back in.
MORRISON:
Yeah ok well I appreciate you coming on and I hope we can talk to you again.
BOWEN:
Thanks Jason, good to talk to you.