SUBJECTS: National Accounts figures, stimulus, NSW politics.
JOHN STANLEY:
The Minister for Human Services, Financial Services, Superannuation and Corporate Law, Chris Bowen is on the line with me now. He's got a lot on his plate at the moment. Mr Bowen, good afternoon to you.
CHRIS BOWEN:
Good afternoon John.
STANLEY:
Well for a senior Financial Minister, it's very, very good news but is it possibly too good?
BOWEN:
No, as you say it's a remarkable result. It does show we're the only economy in the advanced world to be growing, to have grown over the last year. This is something we can take some heart in but we can't get too carried away. You've heard us say that because we mean it.
There's too a long way to go yet and we can't get ahead of ourselves. There's a lot of impact that could still be had on the Australian economy. Unemployment still has some way to go and as we saw in these figures, the amount of money coming into our economy through exports has fallen quite dramatically, in fact, the biggest fall on record. So we're not getting ahead of ourselves. This is a very strong result, a result we're very pleased with, but we still have some way to go yet.
STANLEY:
But if other economies are going into recession and we're managing to stay above the line, 0.6 of a percent is quite substantial. Doesn't that suggest that if we were putting a little bit less money in through stimulus, we could still keep our heads above water and save a bit of that money for further down the track?
BOWEN:
No, Treasury have done quite a bit of analysis on this and if we didn't have the stimulus in place, all the evidence indicates we would have been in negative growth in this quarter and last quarter, and we would have been in recession for most of last year.
That's very clear to us, John.
There are two lines of arguments out today. Joe Hockey saying we should, 'withdraw the stimulus'. That does two things; one is that it means there would be a lot more unemployment, more people than necessary being in the unemployment line.
Two, it means Australia would be denied a lot of important investment in schools, infrastructure, roads – that have been neglected for some time, that we want to fix.
There are two impacts from that course of action, so we won't be going down that road.
STANLEY:
No-one's denying that the stimulus has had a substantial impact and has worked, but the debate has been over the extent of it. Isn't he arguing that we should scale down the stimulus rather than withdraw it altogether?
BOWEN:
Well he and Mr Turnbull argued, to start with, that it wouldn't work, that it wouldn't have any impact – that it was a waste of money. Now they seem to be arguing that it's working too well, that it could overheat the economy and that we should withdraw it.
I heard the Australian Chamber of Commerce and Industry – Peter Anderson – talking a little while ago, they're no great friends of the Labor Party, but they were saying they're really worried about what will happen when the stimulus ends. They have a completely opposite view to the Liberal Party, saying the stimulus is very important to keeping economic growth strong in Australia.
Really, for the Liberal Party to say, in the first place, 'we don't think the stimulus is going to work', 'it's just a sugar hit', 'people aren't going to spend their money', 'it's just going to get saved' and now to say it's overheating the economy just shows the complete and total inconsistency.
STANLEY:
We are going to have debate aren't we, leading up to the next election, because interest rates inevitably do have to go up and when they go up from what you, the Reserve Bank and the Treasury have described as emergency levels, the argument will be, they mightn't have had to go up by this much if you hadn't spent as much money as you have?
BOWEN:
John, interest rates are at their lowest level in 50 years and so the Governor of the Reserve Bank and we have said people should factor in some increases into the future. That's a mater of fact, as the world edges towards recovery the cost of money is going to go up around the world and interest rates in Australia, people should count on making their calculations, some increase into the future.
But our point is you need to create around 30,000 jobs a month to keep unemployment static, so that means to keep unemployment at the levels it is today. That means growing the economy at between 2 and 3 per cent a year. That has been very difficult in the current world environment but to withdraw stimulus now would make that task much, much harder.
Now we are going to see more increase in unemployment, we've been honest about that from the beginning; we think that's got some way to go. We've still got eight out of our top ten trading partners in recession we've seen the impact of that on our revenue which has fallen by $11 billion in one quarter. That's the biggest fall John since records began.
So that's the sort of impact we're dealing with as the Government and as a nation and we really strongly feel that as I say; the stimulus is really important now because it's going into the investment phase, it's going into investing in science labs and language classrooms and school halls and new libraries which is really important for future productivity and also into infrastructure, roads, ports, rail which is important for future productivity as well as keeping money coming into the economy we think there's still some way to go.
STANLEY:
The suggestion is that consumer spending was by up by what 0.8% is that right this time?
BOWEN:
That's right…
STANLEY:
So the rest of the economy was down by 0.2%?
BOWEN:
Well you've still seeing some impact of the stimulus, the direct payments to households. Not all of that was spent straight away, people saved it for when they had household expenditure coming up, and some people saved it for a rainy day when the washing machine broke down et cetera. We said that at the time, this money will be spent over the next 12 months, we're still seeing that flow through but now our stimulus package is going into phase 2 which we always designed it to, which is to say we need to give money to households in the short term because that was the quickest way of stimulating the economy, then we moved to the investment-side into schools and infrastructure and then the stimulus is designed to slow down out of its own volition and the money is weened off the economy as we edge towards recovery.
Joe Hockey says stop the stimulus, well the stimulus is designed to slow down as the economy edges towards recovery.
STANLEY:
We will be left with a substantial amount of debt, with unemployment now not going to get to the 8.5%, that will have to be revised down, fewer people on welfare and perhaps a more buoyant economy, more taxpayers are you getting an idea in your mind as you see the figures of what the lower level of debt might be?
BOWEN:
Well John we released as it happens budget updates twice a year, we'll do that latter in the year, we don't do that monthly in response to monthly figures because they do tend to bounce around a bit, we have the mid year economic forecast which will be out latter in the year and that's when revise all those forecasts in relation to the budget parameters, unemployment etcetera.
STANLEY:
But it won't be as high as 8.5%?
BOWEN:
Well we're not making any comments or predictions yet, as I say we've still got some way to go.
STANLEY:
Just a final one, because you've worked in Parliament House in Macquarie Street in the NSW Government as an adviser, I think you were an advisor when Nathan Rees was an adviser I think going back a few years. A lot of discussion about politicians and private lives, should private lives stay public? Are you concerned the events in the last few days may have seen us cross a line?
BOWEN:
Well John I think there is a balance to be struck here, when you go into politics you know to a certain degree that anything you do in your private life you're going to be fair game. You do know that to a degree. I think some of the reportage of some of the more if you like salacious details of Mr Della Bosca's arrangements was a bit over the top and unnecessary in the public interest, I don't think we needed all the details about text messages and those sorts of things. But I do think that when you go into politics you accept that if you have if you like a scandal in your personal life it's going to be on the front page of the paper.
We all know that, so I think there is a balance to be struck people will have different views; maybe this has just gone a little bit over the line but most of it I think was fair reportage.
STANLEY:
Okay, Mr Bowen I appreciate your time.
BOWEN:
No problem.