SUBJECTS: Nation Building and Jobs Plan
TIM COX:
Good morning to you Chris Bowen
BOWEN:
Good morning Tim.
COX:
You could spend an hour here just answering technical question except I'm sure you're busy. Where's the $42 billion coming from
BOWEN:
This will come from the deficit of course we are going into deficit because of the downturn in our revenues. Nevertheless this will be a deficit spending as you said in your introduction many countries around the world are in deficit now, the average across the developed world is 7% of GDP ours is much smaller. But it will be funded through bond issues as Government deficits are.
COX: Where does the Future Fund stand in all of this?
BOWEN:
The future fund is separate, it continues to receive any budget surpluses and it pays for the superannuation obligation of the Commonwealth into the future. But it is separate to this process.
COX:
Just to clarify, the payment of $950 will be for individuals rather than a couple?
BOWEN:
Yes, that's right it goes to the individual. So if you've got two people one might be under $100,000 and one might be over it will go to the one who is under.
COX:
What if they are both under?
BOWEN:
If they are both under they both get it.
COX:
What's your expectation or desire for the way individuals and families will spend this money? An online poll yesterday said that 50% would be using it to pay off debt. At a domestic level that is battening down the hatches isn't it?
BOWEN:
People should spend it on what they see as in their best interest. Now for some people that will be spending it on things that they've been trying to find the money for but haven't been able to. Maybe the washing machine got a bit dodgy and wanted to replace it and now they can. For other people as you say it will be paying off their credit card debt or paying it down. Now that's great, if that's what's in their own best interest in their view that's fine. That does two things: it means that they feel more confident in the future and it means that if they don't have big debt hanging over their head they can spend money on things that need to be spent on in the coming months.
So they might need their car repaired next month and maybe if they had that credit card debt they wouldn't do it but they feel free of that debt so they will do it. It also means that they have a bit more discretionary spending; they don't have that repayment every month so they might spend it on other things and spread the payments out and that's fine. It also means the banks and financial institutions have that money back to lend to someone else which is important in this time of tight credit.
We are not lecturing people on how to spend it. We expect most people will spend it sooner rather than later but people should spend it on what is in their own best interest.
COX:
When the PM said yesterday 'we will throw everything at this but there is no guarantee of success'. There is an element of a gamble in it and $42 billion is a hell of a stake. Is this the last stimulus package Chris Bowen?
BOWEN:
We'll continue to respond as we need to.
We had the stimulus package in December and there is evidence coming through that that had a positive effect in keeping growth going through that very important December period, we've got this big stimulus package, we've got the budget in May.
This is a very serious crisis around the world. Half of our top 10 trading partners are in recession. China which is very important to the Australian economy is slowing dramatically it will have more of an effect and we'll respond as we need to. But as your listener Carl said earlier, we are being upfront and honest with people. This is a unique set of circumstances, there is no text book for this. Policy makers haven't faced this situation since the 1930's and indeed it is different from the 1930's in some respect.
So there is no magic solution, no text book which can say if this happens do this, policy makers are responding to an entirely new set of circumstances. We're being honest and saying there is no guarantee about this, but this is our best chance, this is what is necessary to get us through to keep unemployment as low as possible and we'll do more if it is necessary.
COX:
Philip Ruddock who has been in the Parliament for 35 years, so twice as long as plenty of people who'll benefit from this says that this is a very nasty echo of the way the Whitlam Government spent when it was elected in 1973 in which a successful economy was damaged by ill thought out decisions.
BOWEN:
It is a ridiculous statement in all due respect to Philip, who I do have some respect for, he is the Father of the House, but we are faced with a situation in which there is an economic downturn around the world. Now we can sit back and say well we are re not going to spend money, we're not going to go into deficit, every other country in the world is going into deficit, we're not going to intervene, we're not going to keep unemployment low we're just going to let shops see their sales go down and therefore layoff people and see unemployment skyrocket. We could do that but we won't. I don't think the Australian people would expect us to.
COX:
I don't think nobody is suggesting you don't spend any money but $42 billion is a staggering amount of money. Have you been able to get the full cost benefit analysis of what the first stimulus package provided?
BOWEN:
There is still figures coming through of course
COX:
Will you wait till they're all present?
BOWEN:
You deal with the evidence that you have in front of you. The world economy has deteriorated substantially even since December. The IMF has downgraded its forecast for world growth three times in four months. Let's just think of that, three times in four months way down, not just small reductions big reductions. If you sit back and wait to long then you've left it too late.
If you wait for unemployment to go up and for people to be out of work then you've been irresponsible, you've let the Australian people down. You need to be ahead of the curve and that's what we've done.
COX:
With those sorts of forecasts coming through, does that reduce the Australian Government's ability to repay the debt it is incurring with this and the first stimulus package?
BOWEN:
We've put in place a set of rules for budget spending and that is two things: when economic growth returns we've got what we call economic stabilizers - it's a fancy word for saying when the economy is going well tax revenue goes up as you would expect more people are working the government makes more money. We've said we'll use that to pay down the deficit and go into surplus and also that we'll keep spending growth to 2% a year. Now that's a very strict regime compared with the former government where it was as high as 4% in a year. It's a very strict regime to get us back into surplus when the circumstances allow it and when that is the responsible thing to do.
COX:
Chris Bowen thanks for your time.
BOWEN:
Pleasure.