WEBSTER:
The Treasurer, Wayne Swan, is on the line. G’day.
TREASURER:
Good afternoon, Tim.
WEBSTER:
Thanks for joining us. Alright now, gee, there’s a lot of news around today, and I know you haven’t got all afternoon, but the RBA, it’s obvious they’ve slowed the economy down. Did they hit the brakes too hard?
TREASURER:
Well, it’s not only the eighth interest rate decision that we’ve had over the last three years that is slowing the economy, we’ve also got the change in international conditions. International financial market turbulence is slowing the world economy and pushing up borrowing rates for both households and business. So, it’s a combination of both of those things. But the RBA takes its decisions independently from the Government. What we said from day one is that eight interest rate rises was a problem, we would do everything we could to take pressure off inflation and interest rates, which is why we put the Budget where we did on May 13 – built up that surplus and started to put away some of that money for the essential investments for the future.
WEBSTER:
Alright. Now, everyone’s speculating today, if you were a betting man do you think they might drop rates by a quarter or a half per cent by the end of the year?
TREASURER:
I’m not speculating on what the Reserve Bank does. They take their decisions absolutely independently and I never speculate about them which ever way they were going.
WEBSTER:
But I noticed the Prime Minister said that he thinks it’s the responsibility of the banks to follow suit if they do cut interest rates, and that’s probably a pretty fair comment, but as you know, they’ve been a law unto themselves in recent times, haven’t they?
TREASURER:
It’s certainly the responsibility of the banks if the official rate comes down for them, in a reasonable time, to follow those rates down. And, of course, one of the reasons why we put in place our bank switching package was if people were unhappy with their bank then they had the capacity to move. There are concerns about the degree of competition in the banking sector, particularly given what’s happened to the non-bank lenders. The Government is pretty much focussed on the competitive aspects of the banking system. It’s important to have a well-capitalised banking system given everything that’s going on overseas, but on the other hand, it’s also important to have a banking system which is competitive and which strikes a fair balance between the needs of customers on the one hand, and shareholders on the other.
WEBSTER:
You know, the point was made to me during the week; it’s alright to say the banks are dropping in profits but it’s a difference between $4 billion and $3 billion, so they’re not exactly hurting too much, are they?
TREASURER:
Well, certainly there have been some poor decisions by banks in the past. These go back some time and the banks have been out there accounting for those, and of course their management and their boards ought to be held accountable for those decisions. But the Government wants a competitive banking sector, and I’ve said it time and time again, that’s why we’re putting in place our bank switching package and it’s why we’ve got an eagle eye on just how competitive the sector is.
WEBSTER:
Yeah, now the danger is, and there’s one economist who is saying that the retailers might start to shed jobs pretty soon, and I spoke to Gerry Harvey during the week, who, as you know, is a pretty down to earth bloke, and he reckons his trade’s down about 10 per cent, from about 13 down to three or four. So, is there a danger then that jobs become an issue in the rest of the year?
TREASURER:
Well certainly, as the economy slows, that has an impact on employment growth. But as you know also, there are parts of the economy where there are labour shortages, and in particular skills shortages. But certainly it will have an impact on employment growth, there’s no doubt about that. But I think there’s no certainty about the outcome of this process given the fact that, on the other hand, there are other things happening in the economy. For example, the very high terms of trade are certainly boosting the economy at a time that the slowdown is going on. So, there’s a variety of countervailing forces out there. I guess the one thing I can say to all your listeners is that if there is one country in the world that can handle these circumstances best it is, of course, Australia.
WEBSTER:
Yeah, absolutely. Now, just a quick question on politics. I notice that John Hewson has said, and its colourful expression, that Peter Costello doesn’t have the balls to ever contest the Liberal leadership because if he wanted to, he would’ve done it by now. And he’s thrown up an interesting trifecta. He’s thrown up Andrew Robb, Julie Bishop and Tony Abbott. I mean, do you really care who the Leader of the Opposition is?
TREASURER:
Well, that’s entirely up to them. What I care about is the legacy that they left the country. And of course, Peter Costello left the country with WorkChoices and inflation at a 16-year high and an abject neglect of investment in education and infrastructure. That’s what I am critical of the Liberals for, and it wasn’t only Peter Costello. Malcolm Turnbull was part and parcel of that and so was Julie Bishop and so was Andrew Robb.
WEBSTER:
Yeah, but you guys must discuss this. I mean, do you think you’ll see Peter Costello back or not?
TREASURER:
I haven’t the faintest idea. You know, Peter Costello has been vacillating on this and other issues for a long period of time. So, I’ve got no idea. What we would like is to see a fundamentally sound policy position emerge from the Liberal Party. When it comes to an issue like climate change, they’re just all over the shop. Essentially, what they’ve been in the process of doing is shredding of what remains of any economic credibility they ever had. I mean, Malcolm Turnbull, at the beginning of the year, said inflation wasn’t a problem. In the Parliament a few weeks ago he said it was a big problem. Now he’s out there today saying that the slowdown has been caused by the Government when he won’t even admit that inflation is a substantial problem. So, they’re just all over the shop.
WEBSTER:
Yeah. Now, this one I want to ask you dad to dad, mate, not broadcaster to politician. It’s about the alcopops tax, which I’ve been highly critical of, and I’ll tell you why, and a very quick story. The first weekend after you brought it in, I had a party at home – and you’ve got teenagers, I’ve got three of them – and they twigged pretty quickly to the alcopops tax. What I had at home was full bottles of Jim Beam, bottles of Coke, full bottles of Vodka, and they’re mixing it with apple juice and Sunkist and Fanta and god knows what. So, my question to you is this: were you really, and giving you the benefit of the doubt, bringing in that alcopops tax to try and prevent binge drinking? Because what I’m seeing anecdotally doesn’t support you.
TREASURER:
Well, too right we did. It was motivated by binge drinking, by all the advice from the police and the health professionals and, of course, the figures that are out this week actually bear out what the Government has been saying. There has been a dramatic drop in alcopop sales and there has not been a significant increase in the sales of bottled rum and other alcoholic drinks. So, I’m a dad too, as you correctly identified, I’ve got teenage kids. I’ve been talking to them about this for a long period of time. My kids are out in the club scene a fair bit.
WEBSTER:
Yeah, mine too,.
TREASURER:
And they say to me that the problem with the alcopops is that essentially the alcohol is just completely disguised, and that’s the whole case against it. It’s more marginal when you argue it about one or two other spirits, but the truth is that these people that have been producing these drinks have been disguising the alcohol. They have had a huge tax break which was put there in 2000 which has gone to the profitability of their bottom line and it’s come, I believe, at the expense of too many young Australians. So, I don’t apologise for it for a minute. My kids tell me that it is having a desired effect. It won’t happen like that across the board but certainly the figures from my department this week show that there has been a dramatic reduction and no consequent substantial increase in the bottle sales of spirits.
WEBSTER:
As you know, though, I mean, distilled spirits would come up with a set of figures and I’m sure if I asked the wine and brandy producers, they’d come up with a set too. Let me ask you this then, because I’ve said this often on the program as well. Can you come up with, what’s the word, a fairer, more sensible tax regime for alcohol, because as you know, there’s half a dozen taxes on beer – I think a lot of them go up and change today – I mean, can we get, based on alcohol volume, just something that makes more sense?
TREASURER:
Well, essentially, this loophole for alcopops was put there in 2000 when they last fiddled with the taxation. And essentially, what it meant was that if you were sitting down at home, as I have done many times in my life, watching the Rugby League, and you had a bottle of Bundy Rum which you were mixing yourself, you were paying a lot more tax than someone who was drinking an alcopop. That’s essentially the situation prior to what we did, which was to make it equivalent, whether it was a pre-mixed drink or if it was just the bottle of spirit and the soft drink separated. They are now treated exactly the same, which is the way it should have been back in 2000.
WEBSTER:
More streamlining coming on tax and alcohol?
TREASURER:
I’m not in the business of forecasting all of that.
WEBSTER:
And just assure the people of Australia, the ones listening to me, that we’re not headed for recession, because there’s a few doomsayers out there at the moment, isn’t there?
TREASURER:
Well, I think that sort of discussion is unhelpful and I think we just need to keep things in perspective. We are being buffeted by powerful international forces, that’s happening, and of course, all those interest rate rises have really hit the family budget, and then we’ve had the oil spike that came along. I think that was the straw that broke the camel’s back when it comes to consumption. What we’ve got to remember is that we’re in a much better position than many other countries. We’ve got a strong budget surplus. We can use that as a buffer against international uncertainty. We’ve got strong bank regulators that know what they’re doing. We don’t have the banking problems here that they have in the United States and in Europe. We’ve got a rising terms of trade. All those things tend to push things in the other direction. But it is a difficult time at the moment, given everything that is going on and the conjunction of these international forces.
WEBSTER:
Alright. Good on you. Thanks for your time.
TREASURER:
Good to talk to you.
WEBSTER:
Good to talk to you.