TREASURER:
The Reserve Bank today cut interest rates by 25 basis points or a quarter of one percent. This is good news for Australian families and it is good news for Australian business. It is good news for jobs, it's good news for households. The Government is working hard to take the pressure off interest rates by keeping inflation low. That's what we've been focused on; fixing up the challenges of the Budget and reducing the upward pressure on inflation and that's come to bear with lower interest rates.
Combined with a fall in petrol prices, Australians have now had, over the last few months, the equivalent of a three quarter of one per cent cut in interest rates. Petrol prices, of course, have fallen considerably. If they stay at these levels, they will save families around $1,000 a year on their fuel bills. That's hugely important. The abolition of the Carbon Tax, $550 a year of a saving for everyday households has been recognised by the Reserve Bank in their statement as one of the contributors to this decision. Because by removing the price on carbon – by getting rid of the Carbon Tax, we have got electricity prices to come down, we've taken upward pressure on inflation out of the equation and we are actually now giving people real relief in their household bills.
I have no doubt that this cut in interest rates will help to lift business confidence and consumer confidence and that means more jobs for Australians. We obviously live in a low-interest world. The majority of our trading partners, apart from China, have virtually zero interest rates. So, the Reserve Bank does have more room to move. That's why the Government will continue with its credible plan to get the Budget back to surplus, to repair our balance sheet and to deliver the sort of safety and security Australians expect by having a Government that is living within its means.
I want to say emphatically, as I have always said throughout my political career: I expect the banks to pass these cuts on immediately. In fact, the Bank of Queensland has already moved and I congratulate them for that. But I also expect this to be passed through, particularly for small business owners and to be passed through for everyone that has a credit card. We expect this to cut through right across the spectrum of credit.
I want to express how mindful we are that this is also having a negative impact on self-funded retirees and people who rely on their savings in the bank for their income. Now the fact that we got rid of the Carbon Tax and importantly, kept the tax cuts associated with the Carbon Tax, means overall they still get the benefit of these changes. So I would say in conclusion, this is good news for Australia. It is going to help the Australian economy. It is going to help to create more jobs because business is going to be able to pay less for their debt as consumers should pay less for their debt and as people with a mortgage should pay less for their debt.
REPORTER:
You said the Reserve Bank has more room to move. Is that statement about the future? That is to say, do you think the Reserve Bank has room to go further in future months?
TREASURER:
The Reserve Bank has room to move by us helping to reduce inflationary pressures in the economy. There is no doubt the Reserve Bank has room to move.
REPORTER:
After today?
TREASURER:
After today.
REPORTER:
In 2013, you told the ABC that interest rates aren't being cut because the economy is doing well; they are being cut because the economy is struggling. Do you still hold that view?
TREASURER:
No because it is different circumstances today, and nothing illustrates it better than the statement from the Reserve Bank where they said, 'The inflation recorded is the lowest increase for several years. This was affected by the sharp decline in oil prices at the end of the year and the removal of the price on carbon'. So, getting rid of the Carbon Tax reduces costs in the economy, it lowers inflation and it means the Reserve Bank can move to lower interest rates.
REPORTER:
The same statement says that unemployment will get higher and that growth will be below trend for longer; that does not suggest a stronger economy.
TREASURER:
Well in fact, the Reserve Bank is now aware of our revised forecasts in the Mid-Year and Economic and Fiscal Outlook, so they are taking that into account. Yes, there is much work to be done and we are expecting that the IMF will have something to say about the world economy in the next few days as well with a further concern expressed about some of the headwinds that we are facing but we are getting there. The plan is working. We said if we did the hard yards in the Budget last year, if we make the structural reforms, we can help take the pressures off families and you are starting to see it flow directly through to household budgets.
REPORTER:
Treasurer, are you worried at all that some investors, savers, people with self-managed super funds, will find themselves increasingly forced to take on what are expensive and risky investments that generate a return [inaudible].
TREASURER:
It's up to individuals how they save and spend their money. Now, I am in the middle of a Cabinet meeting so…is there any more questions on the RBA?
REPORTER:
You – sorry, I am just having a mental freeze.
TREASURER:
That's Okay. Phil?
REPORTER:
If [inaudible] and you are on the right track, why is that not being reflected in your levels of public support? And do you agree with your colleague Ian Macfarlane that it would be good if Julie Bishop gave a public statement?
TREASURER:
I am not getting into gossip, I am not getting into gossip. I am diligently keeping to my commitment on New Year's Eve. And dealing with gossip – I am not going to respond on that second issue. I have no doubt – no doubt at all, that Julie Bishop is absolutely 100 per cent supportive of the Prime Minister – as we all are – and as we are determined to get on with creating more jobs, easing the pressure on households. It's coming into play right now; the shackles are off the Australian economy. I say to Australian business: go and employ Australians. Go out there, have a go, employ more Australians because the costs of doing business are down and that is as a direct result of initiatives taken by this Government and other factors coming into play such as the cut in oil prices and obviously other factors in the economy.
REPORTER:
Treasurer, the Prime Minister was talking yesterday about the problem of the debt [inaudible] – that that is your priority but obviously a surplus is quite a number of years away. And he also seems to be saying - you seem to be saying that the hard work is done and that you can maybe afford more tax cuts for small business, that you won't be making cuts to the Budget that affect family household budgets. How does that picture all add up?
TREASURER:
It does add up and it is credibly adding up, unlike the previous Labor Government, who made lots of promises but could never pay for them. Look, the challenge we have at the moment Lenore, is we are spending as a Government, $100 million a day more than we are receiving in income. That's what the deficit means for everyday Australians. We are, as a Government, spending $100 million a day more than we receive in taxes. Now, there is only one way to fix that and that is to get your spending down, otherwise you have to increase taxes. Now from our perspective, we are constantly focused on how we can do that; get to a balanced Budget but at the same time create an environment where jobs are created. Last year alone, we saw nearly 600 jobs a day created in Australia – three times the rate of Bill Shorten, three times the rate of Labor in their last year in Government. We are still doing that despite the economic headwinds. Now our economic plan of getting rid of the Carbon Tax, which we always said would reduce inflation – getting rid of the Carbon Tax, getting rid of the Mining Tax, unshackling business, getting the Budget on a credible path back to surplus; we are delivering. But there is still much work to be done.
REPORTER:
But if you are not going to make significant new spending cuts and you are maybe going to give tax cuts, how does that make the deficit [inaudible].
TREASURER:
We already have announced that we are not proceeding with the PPL as one measure but there will be other measures, as well.
REPORTER:
Treasurer, the West Australian Premier has said that Mr Abbott has been let down by some of his colleagues and he has singled out you in [inaudible] by saying that, 'I don't think the Treasurer has done a very good job, his last Budget was flawed and therefore the leader ends up [inaudible]'. What is your response?
TREASURER:
I don't respond to comments like that.
REPORTER:
Do you believe though, that given the pressure that Mr Abbott is under, your own performance has contributed to the situation that the Government now finds itself in or…
TREASURER:
Michelle, I will leave it to others. Everyone has got an opinion. I'm focused on delivering jobs and growth, delivering infrastructure and that's exactly what we are doing and this is evidence of it. David, you have one last question. There you go.
REPORTER:
The Prime Minister said yesterday that the answer to – part of the answer of the Budget deficit is through economic growth; that growth is the best way to get back to surplus. The Reserve Bank is saying that growth is going to be slower and unemployment will be higher. Does that make the task of getting back to surplus just that much more difficult?
TREASURER:
Of course it does, of course it does. And we are in many ways heavily influenced by what is happening amongst our trading partners, and of course we have some exposure to the Senate because 86 per cent of Government spending relies on legislative change. Eighty six per cent of what we spend relies on legislation and if you want to reduce spending, you have to change the legislation. The only areas where that's not necessarily the case are in defence and foreign aid and there is no room to move in those two areas. So, if Bill Shorten really wants to reduce the cost of living pressures on everyday Australians, he can support our plan to fix the Budget mess he created. That's a good start. Thanks very much everyone.