TREASURER:
This decision by the Reserve Bank today is a welcome relief for homeowners, working families, and a welcome relief for businesses. They’re really feeling the pinch after eight interest rate rises in three years, and rising prices across the board. I think it reinforces the need to find savings in the Budget to build a strong surplus, to put downward pressure on prices and inflation, and ultimately, to put downward pressure on interest rates.
Now, I notice today there’s some bizarre comments from Dr Nelson – and I assume Mr Turnbull supports those comments – that inflation is a charade, or that it’s imaginary. I don’t think eight interest rate rises in three years is imaginary. When was the last time that Dr Nelson and Mr Turnbull went to a supermarket?
Inflation is a substantial problem in this country and this Government is determined to fight inflation, to bring down a responsible Budget, because working families and businesses out there are being hit for six by price rises and upward pressure on inflation, and ultimately, upward pressure on interest rates.
JOURNALIST:
But doesn’t this show that monetary policy is doing the job in fighting inflation and fiscal policy doesn’t necessarily have to play a part?
TREASURER:
Fiscal policy has to play a part because, you see, we’ve had eight interest rate rises in three years because fiscal policy wasn’t playing its part. We had the evidence yesterday that Mr Costello and Mr Turnbull were warned by the Treasury before the last budget that a spending spree would put upward pressure on inflation and interest rates, and indeed it did. And that produced the highest underlying inflation in 16 years - rolled gold evidence that the former government ignored the advice of the Treasury when it came to the budget, and as a consequence, their spending spree put upward pressure on inflation and upward pressure on interest rates.
JOURNALIST:
Aren’t you going to get a surplus without having to do any cuts at all?
TREASURER:
That’s not a bad line from a couple of commentators, Paul. But the previous government went on a spending spree and it falls to this Government to rein in spending. They had the fastest increase in spending in any four-year period in the last 16 years, and we’re going to rein in that spending.
JOURNALIST:
Aren’t you just cutting out their spending spree and their spending initiatives so that you go on your own?
TREASURER:
No, what we are going to do is bring down a responsible Budget. We’re going to build a strong surplus to fight inflation. We’re going to build a strong surplus so we can make the investments for the future and ease the capacity constraints that are also putting upward pressure on inflation. And we are going to build a strong surplus as a buffer against international uncertainty.
JOURNALIST:
[inaudible]
TREASURER:
What we should have with wage settlements is settlements which are reached based on productivity. That’s what we should have.
JOURNALIST:
Mr Swan, what do you think of an idea to implement a new tax to fund paid maternity leave?
TREASURER:
Well, there’s an inquiry by the Productivity Commission into paid maternity leave. We called that inquiry. There’ll be numerous submissions to that inquiry, all sorts of suggestions. We’ll wait and see what the outcome is. But I’m not going go in and support…
JOURNALIST:
[inaudible]
TREASURER:
Paid maternity is a good idea, which is why we’ve called the inquiry. But I’m not supporting any individual submission to that inquiry. What we are looking at through that inquiry is the social and economic benefits and cost of paid maternity leave. And one of the requirements of that study is to make sure that it doesn’t put an unnecessary burden on business.
JOURNALIST:
[inaudible]
TREASURER:
Sam, the problem is that we have the highest underlying inflation in 16 years and we have to deal with it. You have to acknowledge the size of a problem if you want to deal with it constructively, and that’s what we’re doing. We’re dealing with it constructively. The previous government ignored the problem. The result was eight interest rate rises in three years and the highest underlying inflation in 16 years. And now you have Dr Nelson and Mr Turnbull out there, so deeply out of touch, they can’t even admit there is an inflation problem. I mean, they are absolutely clueless. I think Dr Nelson’s statement today is broadly the equivalent of John Howard’s statement last year that working families had never been better off.
JOURNALIST:
Is there an inflation crisis?
TREASURER:
No what we’ve got is a substantial inflation problem which must be tackled, and that’s what the Government is doing and that’s what we’ve said from day one. From day one, we put up our hand and accepted responsibility that we had inherited underlying inflation at 16 year highs, and put in place a series of policy settings to deal with it and the Budget is another step along that way.
JOURNALIST:
The Reserve Bank has warned about the possibility of a wages breakout. Are you concerned that Labor’s industrial relations policy may undermine your anti-inflation Budget?
TREASURER:
No I’m not, because our industrial relations policy has wage rises based on productivity.
JOURNALIST:
Do you agree with the Reserve Bank that there are signs that demand is moderating and does this make this a little bit easier with the Budget task that you’re…
TREASURER:
Demand is moderating, but we have to do a number of things in this Budget. What we have to do is to put in place a set of policy settings that put downward pressure on inflation and we also have to make the investments for the future. We’re doing both those things in the Budget.
JOURNALIST:
Mr Swan, with inflation the way it is, is there any question that you might not be able to deliver on your promise to do everything humanly possible to protect working families from the cuts we’re expecting?
TREASURER:
I make no apology that this Budget is being delivered to assist working families who, in recent years, have copped it really rough from the previous government. They weren’t the beneficiaries of significant tax relief in recent years. They’re going to receive that tax relief and additional support in terms of childcare assistance. They’ve earnt that support and it’s being delivered.
JOURNALIST:
So, what’s your message to people up the income stream, especially when there’s speculation of means testing?
TREASURER:
Well, my message to everybody is that we’ll bring down a Budget which is fair and which is responsible.
JOURNALIST:
There’s been a bit of speculation about your Budget today from the ACT Government. It brought down its Budget. It predicated it on a 1.5 per cent of GDP Commonwealth Government surplus. Were they right?
TREASURER:
I’m not commenting on our bottom line for the Budget, you know that.
JOURNALIST:
Mr Swan, what is the size of the economy at the moment? Is it still...?
TREASURER:
It’s a trillion dollar economy and all the estimates will be there on Budget night.
JOURNALIST:
What do you say to Brendan Nelson’s accusation that you’re just spinning and confecting the existence of this inflation problem? Isn’t it true that since you’ve come in, you really have been running the hard political line on the inflation issue?
TREASURER:
Well, because it’s hit a 16-year high. And as I said yesterday, inflation’s a cancer. It eats away at prosperity. It erodes living standards. It makes growth eventually unsustainable if it pushes up interest rates too high. It has to be dealt with. It has to be dealt with in the long-term national interest of this country, and we will do that in the Budget because we are responsible economic managers. Brendan Nelson and Mr Turnbull are grossly irresponsible. The statements that have been made today, which I assume Mr Turnbull supports, are simply grossly irresponsible and deeply out of touch with what’s going on in the Australian community. Thanks very much.