SUBJECTS: Australian economy, China, financial services hub, RBA
KAREN TSO:
Australia may be known as a global commodities powerhouse, but the country's potential as a regional financial hub is also being pushed to the world. Financial Services Minister Chris Bowen is currently in London, promoting the idea, and overnight he caught up with Guy Johnson from our London bureau who started by asking if Australia's economic dream run can continue.
GUY JOHNSON:
The RBA issued a statement today that the 18 year expansion is set to continue in the Australian economy do you agree with that?
CHRIS BOWEN:
Well certainly the Australian economy has been doing well. Certainly we're pleased that we've been able to get through the global financial crisis better than any other comparable nation, our unemployment is around 5.8 per cent, next year it's expected to peak at 6.75.
Our growth is strong and government debt is going to peak at 10 per cent of gross domestic product. We think the fundamentals of the Australian economy are very sound and we're optimistic about the future.
GUY JOHNSON:
Do you think the growth phase is definitely here and that you're about to see another, or, an extension of that pattern of 18 years?
CHRIS BOWEN:
Well, we're not through the wars in terms of the global financial crisis; a number of our major trading partners are still in difficulty. We recognise that and that can have a reverberation but the fundamentals are very sound and we're very optimistic about the future of the Australian economy and we're very optimistic about the growth potential of the Australian economy.
GUY JOHNSON:
You talk about your trading partners, the key trading partner obviously for Australia, in many people's minds remains China. China is effectively guaranteed 8 per cent growth, is likely to continue to stimulate the economy very strongly. But is there a worry that Australia is too dependent on China and the growth that it generates?
CHRIS BOWEN:
No, we are a diversified economy, including our trading partners. Yes China is our largest trading partner and we have a good trading relationship with the United States as well as Europe.
China is of course a major purchaser of our commodities, also education and one of the reasons why I am here in London is to talk about Australia's credentials in financial services exports having gotten through the crisis so well we think we are very well placed to be a financial services hub in and for Asia and I've been talking to a number of people in New York and London about that potential and about what more we can be doing together.
GUY JOHNSON:
So Australia is not a commodity country or is it a commodity country that does a few other things? Just give us, a sort of, where is the emphasis? The commodities look like the main story.
CHRIS BOWEN:
Look there's no doubt that commodities are very important to the Australian economy – have been and will be – but we are capable of doing much more. As I said, financial service in Sydney and Melbourne can be global financial centres. Also we're a major education centre in Asia Pacific. Education and higher education are very important exports for us, so across the board, we think we are a diversified economy. Tourism of course is important to the Australian economy as well. So there are lots that we do well and lots that we can engage with the rest of the world on.
GUY JOHNSON:
Is there any worry within the government as to what the RBA is up to? Another meeting coming up on Tuesday could be the third consecutive rate rise coming through, the economy looks like it is on a self sustaining course now but we live in a volatile world and I just wonder, a lot of central banks are taking the view at the moment it's better to risk inflation than risking deflation so I guess that if you've come through this downturn without too much of a scratch then it's probably a sensible thing. What do you think?
CHRIS BOWEN:
We have a convention in Australia that the government does not comment on a Reserve Bank decisions...
GUY JOHNSON:
That's why I asked a convoluted question…
CHRIS BOWEN:
Well good try. But we don't comment on Reserve Bank decisions other than to say this, interest rates in Australia have been at 50 year lows. We and the Governor of the Reserve Bank said to the Australian people some time ago that they should expect the movement to be up and the fact that there have been some movements up is a sign of some strength in the Australian economy. Markets and others have predicted further increases but I don't have the luxury of commenting on that as an economic minister of the government other than to say that the increases so far have been a sign of the resilience of the Australian economy and that we have confidence in the decisions that the Reserve Bank makes.
GUY JOHNSON:
Very nice to see you, Chris Bowen.
CHRIS BOWEN:
Thank you for your time.