CLARK:
Wayne Swan, good afternoon.
TREASURER:
Good afternoon, Philip.
CLARK:
A rate cut is welcome news for mortgage payers, that’s for sure.
TREASURER:
Yes, too right it is. It’s going to put more than $500 a year back in a lot of family budgets. There’s been something like 740,000 people with mortgages who’ve never had an official RBA rate cut. So, I think this will be something different for them. It’s certainly welcome.
CLARK:
It does seem – I was discussing this with Chris Richardson from Access Economics – it does seem to be something of a contradictory story going on here. You’ve got big profits in the corporate sector and there’s no indication that inflation is, by any stretch of the imagination, under control. Has the Reserve Bank abandoned its 2 to 3 per cent goal?
TREASURER:
Not at all. The Reserve Bank deals with that in the statement they issued this afternoon. But it is part and parcel of the countervailing forces which are impacting on the Australian economy, and I talked about that at length when we brought down the Budget. But the Reserve Bank is saying that in the immediate term it can see inflation coming down and that’s an important thing. But they’re also saying we need to be quite careful in terms of our policy settings. So, it’s a very difficult environment at the moment. But the Reserve Bank’s taken the decision to cut the official rates, and I’m certainly happy that the major banks today have indicated that they are going to follow suit in a reasonable amount of time.
CLARK:
Well, it takes the pressure of you, I guess, because if they hadn’t, there’d be a lot of pressure for you to suggest that you ought to be doing something about it.
TREASURER:
Well, I’ve been doing a lot about it. The Government made it clear from day one we had to deal with the inflationary pressures in the economy – that was the whole point of the Budget we brought down [in May]. The savings we put in place, the delivery of the tax cuts, the creation of the investments funds were all put in place to create the environment and to make the room for the Reserve Bank to bring rates down.
I’ve got to say, Philip, I was absolutely stunned in the Parliament today because the Liberal Party couldn’t bring themselves to actually welcome the rate cut. I was just stunned, absolutely stunned. I’ve never seen anything like that in my whole time in the Parliament.
CLARK:
There ought to be, realistically, from now on more rate cuts, shouldn’t there?
TREASURER:
That’s entirely a matter for the Reserve Bank because they’re independent. But what we have to do – and I made this clear in the House today and so did the Prime Minister – we have to continue putting in place policy settings that put downward pressure on inflation, which will therefore give the Reserve Bank further room to move into the future. What’s that mean? It means doing something about those capacity constraints that are out there in the economy, putting that investment into road, rail and ports, making sure we’re not engaged in wasteful spending. It means all of those things that amount to a disciplined economic policy. That’s what we’ve been putting in place in the nine months that we’ve been in power.
CLARK:
You must hear this as well as you move around the country, as I said to Chris Richardson earlier; sitting in this position here talking to people day after day, it is perfectly plain that stories of BHP and Rio and the immense amounts of their money being made selling iron ore and gas and whatever to China and India or whoever, is all very well but for people struggling in Western Sydney or anywhere else with petrol prices and mortgage rates and wage increases nowhere matching all of this, it’s tough. We’re not living in a time of boom, although you read these figures and we’re told that you are – there are two economies going on here.
TREASURER:
We’re certainly not living in a time of boom but we are in the middle of a commodity boom when it comes to the prices.
CLARK:
Who’s making the money out of that? The ordinary person isn’t.
TREASURER:
Well, certainly some of that money comes through to the taxpayer and that’s why we were so insistent upon delivering our tax cuts. A lot of people out there on modest incomes and lower incomes hadn’t received any significant tax relief for a long period of time. That was one of the reasons why we were so insistent on delivering those tax cuts, as well as delivering the additional childcare assistance, as well as delivering the additional assistance to pensioners and to carers. We were absolutely insistent that those people had earned that money and that in an environment of heightened inflation domestically, added to by the substantial increases in the price of fuel internationally, that people deserved that relief.
CLARK:
I know you’ve got this review of the tax system going, but can we realistically look forward in the Budget next year to some movements at last in pensioner income?
TREASURER:
We’ve said very clearly that we think there is a significant case that can be mounted, particularly when it comes to the rate of the single pension. That’s gone off to the Henry Review. They will be reporting by next February, and we’ve made it clear that we will be acting when we receive that report.
CLARK:
Okay. Right. Good to talk to you.
TREASURER:
Good to talk with you.