SUBJECTS: World Economic Forum Financial Development Report 2009, Ken Henry's evidence before Senate Economics Committee.
CHRIS BOWEN:
Thanks for coming.
Firstly, I wanted to comment on the release of the World Economic Forum report overnight about global financial centres.
The World Economic Forum has ranked Australia as second in global financial centres. This is a considerable improvement on our result in previous years. This is a very welcome development.
The Rudd Government has had the policy of promoting Australia as a financial services hub for Asia for sometime and this report shows that we have a considerable advantage to build on.
This report shows that Australia has weathered the global financial storm better than any other comparable nation and our ranking as a global financial centre have reflected that. This is a very welcome report, there is more to do, and I will soon be receiving the Johnson Report into promoting Australia as a financial services hub, to build on those reforms that the Rudd Government has already enacted.
We are committed to doing whatever is necessary to promote Australia as a financial services hub in Asia. But I am delighted that this report show that Australia's prudential regulation; the quality of our banking sector; the quality of our financial sector; has stood Australia's economy in good stead in the global economic crisis. It shows that the Government's actions such as the bank guarantee have been important in ensuring the stability of the Australian financial system and that stability has led into these rankings, of second in the world. Better than the United States, better than Hong Kong, and better than Singapore. The second best global financial services centre in the world: it is a very welcome report.
I also want to make a few brief comments on Ken Henry's evidence before the Senate Committee today.
Dr Henry made it clear that if we withdraw stimulus now, it will be at the cost of 100,000 jobs. 100,000 more Australians on the unemployment line than need be the case. Those who argue for the immediate withdrawal of the stimulus need to justify their position; they need to justify why in the face of this evidence from Dr Henry, they believe 100,000 more Australians need to go on the unemployment line. They need to justify why they think it is acceptable to have 100,000 more Australians on the unemployment line, than is necessary.
This just underlines what the Government has been saying; we are getting through this crisis well, but there is more to go. Prematurely withdrawing the stimulus could result in more Australians on the unemployment line than is necessarily the case.
Happy to take some questions.
JOURNALIST:
Does that mean though that you would look at raising taxes? Because one of the things that Ken Henry said was that you had do either do that or rein in government spending in order to return the budget to surplus?
BOWEN:
We have indicated that as the economy returns to normal we will be reining in spending through our Budget rules, which will be that increases in tax revenue will be banked to contribute to a reduction in the deficit and a return to surplus, and expenditure growth will be capped at 2 per cent. So Dr Henry was referring to Budget rules that are already in place and will be therefore (inaudible] in the Budget bottom-line going forward.
JOURNALIST:
(Inaudible) So you won't be raising taxes to deal with this?
BOWEN:
No, we have made it clear that we will be banking the tax revenue that comes from the economic recovery. We will be using that to draw down the deficit and move into surplus and we will have very strict budget rules in place, and international economic institutions like the IMF have indicated that Australia's rules are the strictest in the world when it comes to returning the budget to surplus over time and that has been welcomed and commented upon.
JOURNALIST:
What do you make of the Opposition: they've already come out and said that the Budget forecasts have unemployment reaching 8.5 per cent and that Ken Henry's assessments aren't a precise science?
BOWEN:
Well the Opposition said at the time of the Budget that the unemployment forecasts were too optimistic. The Opposition were then arguing that we were being too optimistic in our predictions. Now they argue that we are being too pessimistic.
Now Dr Henry made the very important point today that just because unemployment was originally forecast to be 8.5 per cent, that does not mean that we should put policy settings in place to get to 8.5 per cent. If we get a lower unemployment figure then that is a good thing: a welcome thing. Now Treasury predictions and forecasts are by there nature conservative and that is as appropriate. The fact that they may turn out to be better than what was originally thought is a good thing. A sign that Government policy is working well rather than something for the Opposition to carp on about; the fact that we may get a better result than might what otherwise been the case.
JOURNALIST:
Given we didn't get that result, can we trust the 100,000 figure that today, of 100,000 jobs that might be lost?
BOWEN:
Well Dr Henry is a very well respected economist and one of the foremost public economists in the nation. When Dr Henry makes a statement like that it should be taken very seriously. The Opposition is very interested in making cheap political points, but they instigated this process; they wanted Dr Henry and Mr Stevens to give evidence and that is what's happened. Now they can't say that they don't like the evidence. They need to accept the evidence that is before them and all of the overwhelming evidence is that the stimulus needs to remain in place, so the economy can be as robust as it can be.
JOURNALIST:
Do you think Ken Henry's evidence should spell the end of the Opposition's campaign of the need to wind back the stimulus?
BOWEN:
I think the Opposition's campaign to wind back the stimulus should never have started. So yes, in answer to your question, I do think it should spell and end to that, because their economic credibility has been hit for six.
Every time the Governor of the Reserve Bank gives evidence, the Secretary of the Treasury gives evidence, the things that claim are shown to be false. Now they have made this claim that the stimulus should be withdrawn; they have claimed victory over the global financial crisis although they weren't involved in the efforts to combat it; and now they say the stimulus should be withdrawn. They do need to revise their position.
JOURNALIST:
Helen Coonan says she disagrees with the evidence that if the Government was to withdraw the stimulus it would hurt employment. What do you say to that?
BOWEN:
I will take Ken Henry over Helen Coonan any day.