HOST:
Listening to that conversation on the line is the Assistant Treasurer David Bradbury who has taken the time to join us. Welcome to the show.
BRADBURY:
Good evening Waleed, good to be with you.
HOST:
Shadow Treasurer Joe Hockey had something to say about this today, as you might have expected. Here's a little bit of what he did have to say:
[Audio]
He's right in one respect, isn't he David Bradbury, that ultimately the reason you have a cut in interest rates is because the economy is struggling and that we need some kind of stimulus?
BRADBURY:
Well, look, if it was that simple, I don't recall Joe Hockey in all of those years of the Howard Government, whenever there were interest rate cuts attributing to poor performance in economic management reflecting poorly on the economy.
The reality here is this is the sort of glib rubbish that you get from the Opposition masquerading as economic commentary.
HOST:
Sure, but I'm asking you the question about economic strength.
BRADBURY:
And I'll address that very specifically but you did lead in to the discussion with the quote from Joe Hockey – no one looks more unhappy about this rate cut than Joe Hockey – but to go to the heart of the point that you raise, we have always said that there is some softness out there in the economy, that the patchwork nature of the growth that we've been experiencing, the structural change that is specifically referred to by the Reserve Bank in their statement, the structural change that the Australian economy is currently undergoing are putting pressure on some sectors of the Australian economy. In fact that is at the heart of our economic narrative, it's why we're trying to introduce a minerals resource rent tax which will come into effect but importantly why we want to spread the benefits of the resources boom.
HOST:
So at the heart of your narrative is that you must deliver a Budget surplus, what is it, next week? And I would have thought that the fact that you have interest rates being cut shows that there's actually a need for some kind of stimulus which implies not Budget surplus at all but actually the maintenance of some kind of deficit until we do get that stimulation going. So if one of the arguments for maintaining a Budget surplus is we need to maintain downward pressure on interest rates and that downward pressure is clearly happening anyway without the surplus, why do we need it?
BRADBURY:
A couple of important points here. Let's have a look at the backdrop against which we are preparing our Budget. First and foremost, unemployment is at very low levels in this country. In addition to that, inflation is contained and it's because inflation is contained that the Reserve Bank has the capacity to cut rates as they did today. In addition to that, the economy is returning to trend growth and on top of that we are experiencing a record pipeline of investment in this country like we've never seen before.
Now, when you look at the backdrop that exists against the criteria that I've just set out for you, they are all of the circumstances in which a Government should returning the Budget to surplus. They are signs of an economy where the public sector should be reverting to a more contractionary position and that is what we intend to do. As a Government we have to live within our means. Through the difficult times of the global financial crisis we obviously had to borrow some money to support jobs. That was the right thing to do at that point in time. But with all of the economic indicators coming back to a position of greater balance, now is the time for us to be returning the Budget to surplus.
I'd make this important point: this is not some abstract, esoteric debate. We are carrying some debt and it's not unusual for countries to do that, but much lower levels than any other country that is a comparative country. But when you have debt, you pay interest on that debt. We have to start to pay down some of that debt. You can only begin to do that when you return your Budget to surplus otherwise it's all that dead money we're paying out of the economy, that is why it's important that we do hand down a Budget that is in surplus next week.
HOST:
I'd love to keep exploring this, unfortunately I do have to get a wriggle on. David Bradbury, good to talk to you, thanks very much for your time.
BRADBURY:
Good to talk to you Waleed.