HOST:
David Bradbury joins me now from Sydney. Minister thanks for your time. How confident are you, firstly, that banks will pass on all of this 50 basis point cut?
DAVID BRADBURY:
Good afternoon David, it's great to be with you. Well, can I say that, along with many other Australians, I welcome the decision that the Reserve Bank has taken today and I know that for many this will take a little bit of pressure off at a time when many people are really doing it tough, but also trying to come to terms with some of the changes that are occurring in the economy.
On the question of whether or not we expect these cuts to flow through to consumers and mortgage holders as a result of action by the banks, certainly it's our expectation that the banks are in a position to pass on these cuts in full. Certainly, when you have a look at their profitability and also if you have a look at what the Reserve Bank has previously said in recent times in relation to the cost of funding for our banks, all of these factors indicate that there is capacity for our banks to pass on the full rate cuts. I'd certainly be urging them to do that and I think that most Australians will be looking very closely at their banks, in the way in which they have done recently, to ensure that they'll mark up those that do the right thing and mark down those that don't. And in a competitive environment where we've encouraged people to pick up their business and to go down the road and to bank with someone else that gives them a better deal, we certainly hope that the banks are conscious of just how closely their actions are being scrutinised by customers.
HOST:
Well, we'll see what the banks do. Can I take you to the reason, the central reason, the Reserve Bank gives for today's big rate cut. Economic conditions have been somewhat weaker than expected, it says. Now, do you agree with that? That economic conditions are weaker, that there is some softness, increasing softness, in the Australian economy.
BRADBURY:
Well, certainly the Reserve Bank has pointed to some softness, as you put it, in the Australian economy. The Reserve Bank also makes the point in their statement today that considerable structural change is occurring in the Australian economy. Do we agree with those things? Of course we agree, because they are, in a sense, fundamental to the economic case that we have been prosecuting for some months now and I'll go to the heart of that case, and it's one that recognises that we are in an economy at the moment where sectors of the economy are doing very well, other sectors of the economy are not doing nearly as well. That is one of the principal reasons why we have been trying to introduce a Minerals Resource Rent Tax, to ensure that we can spread the benefits of the boom. And that's why we want to cut company tax rates. And you'll note, David, that Mr Hockey was out there today doing what we expect from the Liberals, talking the economy down. He must be the only person in Australia that looks like he dropped a fifty dollar note and picked up a five cent piece today. When he heard the news that interest rates were being cut, he must have been the only person in this country that thought that was bad news. But incessantly, they want to talk down the economy. But what I would say, is if he's serious about supporting growth in the economy, the very first thing he should do is go back into the Parliament when we next sit and support the cut to company tax. That's one way to make sure businesses get the benefit.
HOST:
Let's get back to what's going on in the economy. If you agree with what the Reserve Bank is saying about the economy being weaker than expected, why then is the Government going to be ripping so much spending out of the Budget next week to return to surplus? Isn't that running counter to what the Reserve Bank is doing here?
BRADBURY:
The fiscal policy that the Government is undertaking is entirely consistent with what we've been seeing from the Reserve Bank. In fact, it has been a central tenant of our economic argument that we need to make sure that by maintaining fiscal discipline and returning the budget to surplus, that we do give the Reserve Bank the flexibility it needs to take the sorts of decisions that it took today, that it deems to be appropriate in the interests of the economy. Can I make this point, and this is entirely consistent with statements made by the Bank today, and that is that unemployment remains at very low levels, inflation remains contained, we have growth returning to trend and we have a record pipeline of investment flowing into this country. Now these…
HOST:
But if you're reducing government spending by two per cent or three per cent, or whatever you do on Budget night, what's that going to do to growth, do you think, which is already below trend?
BRADBURY:
The circumstances I've just painted for you, David, they present the very backdrop where in which governments should be returning budgets to surplus. When you've got contained inflation, low unemployment, record pipeline of investment and growth returning to trend, if these are not the circumstances where in which governments start to return the budget to surplus, then I'm afraid you'll never get budgets back into surplus. It's important that we consolidate our finances. That's what we're doing. It's entirely consistent with the record ratings that we are receiving, from all the credit ratings, in terms of the position and standing of this economy and this country. We want to stay there and central to that is the need to demonstrate the fiscal restraint that global markets are looking for. At a time of global uncertainty, the best thing we can do to continue to show the confidence that we have in the economy and instill that confidence is to make sure we do return the budget to surplus.
HOST:
Finally, David Bradbury, while this is good news, today as you know, there's pessimism in Labor ranks about all that's been happening politically over recent weeks and months and some chatter on the leadership as well. In fact, in NSW the right faction, of which you're a part of, there has been movement away from Julia Gillard. Are you confident that she will survive?
BRADBURY:
That's news to me, David. I certainly am not picking up anything along those lines. In terms of where the Government's at, we are very much, I know there's a lot of chatter around about the polls, a lot of chatter around about various allegations and issues that have popped up in the last couple of days, but I'd make the point that we are very much focused on doing what I think all Australians expect of us. And that is handing down a budget that will be very important to the wellbeing, the financial wellbeing, of all Australians. In fact, a lot of the speculation, the chit-chat that goes on really misses the mark. The things that we are involved in in handing down a budget that will be returning us to surplus, that's something that will actually make a real difference to the lives of people. And I can say that's what I'm focused on.
HOST:
[inaudible] you're confident Julia Gillard will survive?
BRADBURY:
Yes, I am.
HOST:
Assistant Treasurer, David Bradbury, thank you.
BRADBURY:
Thanks very much, David.