EASTLEY:
When it was elected back in November, the Rudd Labor Government was passed a confidential "red book" from the Treasury Department.
Now snippets of economic advice contained in the book have been made public and they reveal the stark economic challenges the new Government has inherited.
In it, Treasury urges the Government to begin a fresh wave of economic reform.
The Government says it's heeding the advice and Australians should expect to feel some pain when Labor's first Budget is handed down in just over three months.
The Federal Treasurer Wayne Swan has been speaking to Samantha Hawley in Canberra.
TREASURER:
I think the briefing document underscores the magnitude of the inflation challenge that we inherited from the previous Liberal government. But it's a challenge that we are going to tackle because this Government won't shirk the tough decisions and the big economic challenges like the Liberals did.
HAWLEY:
And it does say that Labor has been elected at a pivotal economic juncture, but it urges your Government to start a fresh wave of economic reform similar to that that took place in the 80s and the 90s. Will your government do that?
TREASURER:
Yes, we began that task on day one. I mean the best way to strengthen the Australian economy is to modernise the economy and to modernise the economy we've got to deal with the twin investment deficits that we inherited, the skills crisis and also the infrastructure bottlenecks.
HAWLEY:
Well, it outlines the number of sort of short and medium term challenges; inflation is obviously one of them. There's predictions that interest rates will go up again next week. Do you think they have to?
TREASURER:
Well, the parting gift to the Australian people from the Liberal Party was the highest underlying inflation in 16 years, and those price rises are putting upward pressure on interest rates and they're certainly hurting working families and hurting business.
HAWLEY:
So how many more interest rate rises do Australian home owners have to bear?
TREASURER:
Well, that's a matter for the independent Reserve Bank and we strengthened their independence as one of our first acts of the incoming Government. But what we have to do in Government is take the pressure off the Reserve Bank by dealing with the inflation problem that we inherited.
HAWLEY:
But in the short term, you're saying, any rate rises that Australians are having to deal with are a result of the Howard Government years and there's nothing that your Government can do about them?
TREASURER:
Well what I am saying is that the Howard Government let the inflation genie out of the bottle. It's been on the march for a long period of time, particularly over the past two years, so it's taken some time to develop and it will take some time to deal with.
HAWLEY:
Ok, well it's not only of course interest rate rises, the rise in cost of petrol and the cost of groceries, but now the Finance Minister Lindsay Tanner has warned people to brace for pain in the May Budget. What does he mean by that? And how much more pain do Australians have to bear?
TREASURER:
Well we have to deal with the inflation challenge and we have to modernise the economy and to deal with the inflation challenge the Federal Government itself has to lead the way.
The previous government was spending like a drunken sailor. That has an impact on inflationary expectations in the economy.
So what we've said is that we have to make additional saving during this budget process, over and above the savings we took to the Australian people in the last election, if we're going to deal with this inflation problem.
HAWLEY:
Is it not better then now to admit that $30-billion in tax cuts probably isn't the best move?
TREASURER:
Look, the most important thing the Federal Government can do is to cut back on spending. We're going to do that, but there is room for the tax cuts. They're very important.
EASTLEY:
The Federal Treasurer, Wayne Swan, speaking to Samantha Hawley.