SUBJECTS: Stimulus, debt, National Accounts, monetary policy, government advertising, Clark case
DAVID SPEERS:
Joining me now is the Minister for Financial Services, Superannuation and Corporate Law, and Human Services. Thanks for joining us Chris Bowen.
Let's get straight to the economy. As the Prime Minister pointed out today, there's a strong rise in job ads, up 4.1 percent last month, the strongest rise in 18 months, but isn't this further evidence the economy's doing well and it doesn't need more stimulus?
CHRIS BOWEN:
No it's further evidence the economy is doing well, better than any other developed economy in the world. We are the only major advanced economy not to be in recession – it's certainly evidence of that – and a range of factors have played into that and contributed to that.
SPEERS:
So why don't we need to keep then, what the rest of the world, which is suffering, are doing?
BOWEN:
Because we have had some encouraging figures but there is still a long way to go. You know economic growth rates, out last week, were 0.6 per cent. That's certainly better than anywhere else in the world but it's a long way short of our trend growth and most importantly, it's a long way short of the rate of economic growth necessary to keep unemployment static, let alone reduce unemployment.
So if you say, '0.6 is fine', 'we don't need the stimulus', 'we'll withdraw the stimulus now', what you're doing is waving the white flag on unemployment and consigning many hundreds of thousands more Australians to the unemployment queue – that's point A. And B, denying Australia the investment in schools and infrastructure which is so important for future productivity growth.
SPEERS:
But you're also trying to get rid of unnecessary debt. There's a lot of debt. You didn't mention debt.
BOWEN:
Well Australia's debt rate is very manageable and below every other comparable nation in the world. The Opposition runs around trying to create a scare campaign on debt, and talks about mountains of debt, and unbelievable debt…
SPEERS:
It is unprecedented…
BOWEN:
Well, no, it's not actually, David. The level of debt that Australia has now is equivalent to the early years of…the middle years of the 1990s. It's not unprecedented at all….
SPEERS:
But the end result…
BOWEN:
No, even when you look at our total level of debt at the end of budget projections, we will have government debt at around 13 per cent of GDP compared to 80 per cent for the average advanced economy so it's not unprecedented.
It is manageable and most importantly it's prudent to have a budget deficit at a time when the economy has been going through its greatest shock in 75 years.
SPEERS:
If the growth rate is still well below trend, if we're not out of the woods, you obviously don't think there's a need to lift interest rates?
BOWEN:
Well, look these are matters for the Reserve Bank. What we've tried to do and what we have done is have fiscal policy and monetary policy working together.
Now the Governor of the Reserve Bank recently said, the size of the fiscal stimulus is about right and he would be the type of person who would say, if he didn't think it was about right.
He has said the size of the fiscal stimulus is about right and importantly, the Governor of the Reserve Bank, the Treasury, the IMF and the OECD all predict sluggish growth for Australia, below our long-term trend but included in those predictions is the assumption that our stimulus will continue. If we take the stimulus out, you are really pulling the rug out from that economic growth.
SPEERS:
The Reserve Bank Governor has also said he will soon start increasing interest rates…
BOWEN:
What he said is that interest rates are at the lowest level in fifty years. They're emergency rates and Australians should prudently build into their calculations increases…
SPEERS:
So if rates are going to go up to try and tighten monetary policy and your still spending, loosening fiscal policy, you've got the economy being pulled in two different directions.
BOWEN:
No you don't, because the stimulus package by its own designs starts to wind down. I mean we designed this stimulus package so that the majority of the spending was right up front when it was necessary and then it winds down as the economy recovers and it will continue…
SPEERS:
It doesn't wind down for a while.
BOWEN:
Well of course some of the major infrastructure projects will take some to deliver but they're also very important for productivity growth. I mean we've had under investment in infrastructure in this nation for a decade and the same people who under invested in infrastructure are now calling for us to pear it back, that's not surprising.
SPEERS:
Well some of that so called infrastructure spending includes these school halls which will each as you know have to have a sign out the front promoting what the governments doing. The electoral commission is somewhat worried about this saying they must be more than six meters away from these schools when it comes around to election time because they are polling booths as well and we know your argument is that the former government spent on a lot on advertising but don't you think that people are sick of this, this argument between the two sides when it comes to government advertising. Don't they want a fresh approach, an end to this spin at the cost of tax payer's money?
BOWEN:
Well look David, a couple of points: firstly, the fact that we are even talking about signs at schools shows that the Liberal party has conceded the economic debate, conceded the rest of the argument the best they can do is criticise our signs and say they should be…
SPEERS:
Well they are criticising you on a whole range fronts…
BOWEN:
Point two: as you say Government spending programs have always had a requirement that there be some sort of signage to let people know what program is being funded under, what level of Government is funding it. Schools are funded by state and federal governments under a range of programs, it's more than appropriate to have a sign…
SPEERS:
State governments don't put up a sign saying we built this…
BOWEN:
Sometimes they do, sometimes they don't, and the roads to recovery program under the previous government had 70,000 signs across the country, many of which are still up David.
SPEERS:
This is my point, aren't people sick of this argument, they did it so can I?
BOWEN:
We have massively scaled back government advertising, we have brought in new rules that government advertising must go through the auditor general to ensure that it is proper information for the community, not political spin. So we have really acted here, but I'm the first to agree with you here David that the standard operating procedure is for an opposition to criticise government advertising from opposition and then to do it from government.
We have actually taken a different approach. We have very substantially reduced the amounts of government advertising and put in guidelines to ensure that the auditor general signs it off as being appropriate community information.
SPEERS:
Look a final question for you, the High Court last week had a ruling that state MPs or former state MPs don't have to pay the 15 per cent tax on their superannuation like the rest do. Are you worried about that is there anything you can do what are you doing?
BOWEN:
Look, I have received preliminary advice on this David it is a concern but the court is entitled to make its ruling, we are working through the implications, there are varying legal views I've read relating to the extent of the implications of this decision, how many states might apply to and the fiscal impact on the Governments bottom line. We'll be working through that, I'll be talking to my colleagues about our response and what we may or may not be able to do.
SPEERS:
But it's far to say that those former state MPs might be lining up thinking 'right I'm heading to court and get thousands of dollars back in tax I've paid'.
BOWEN:
Well it depends on the finer constitutional details of the establishment of their superannuation fund. Now there is a view that this will only apply to South Australia and Western Australia, I've seen other views that it might apply more broadly. There are constitutional scholars and legal advisors working on advice for the government on this issue as we speak.
SPEERS:
Alright, Chris Bowen thank you.
BOWEN:
Pleasure.