Interview with Steve Price
Radio 2UE, Sydney
23 January 2009 (Australian time)
SUBJECTS: Trip to New York; global financial crisis; foreign banks
PRICE:
I’m pleased to say the Treasurer has come to the studio here in New York. Treasurer, good morning.
TREASURER:
Good morning. How are you going?
PRICE:
I’m good thank you, and thank you very much for coming straight in to see us.
TREASURER:
It’s a pleasure.
PRICE:
I mentioned that the last time you were here you returned home and to me you looked like you’d seen a ghost. Does actually being on the ground here give you a better idea of what’s really happening?
TREASURER:
I think it’s very important to be on the ground talking to policy makers, talking to investors. G’day USA is all about talking up the strengths, the underlying strengths, particularly of the Australian economy, because there’s a world of difference, say, between the strength of our banking sector in Australia and what’s going on in the United States and around the world. So I’m here really to talk about what a great place Australia is to invest, what a great place it is to do business, and of course what a great place it is to go for a holiday.
But of course while I’m here I will be able to update myself and the Government on what policy makers are seeing and thinking about current events. Because the real feature of this global financial crisis, which is now turning to a global recession, is the speed with which it changes. And I think we are in one of those periods now. When I was here last October there had been a sudden deterioration in the global outlook and I think it’s pretty fair to say that that has occurred again. What we are now seeing in figures for the December quarter, throughout the G7 and again now in China, in South Korea, is a marked contraction in growth, which is very sobering and which will have knock-on effects for countries like Australia. We’re not immune from that, and certainly we are exposed to it, but as I’ve said on so many occasions, Steve, if you wanted to be in any country in the world in these circumstances, the country you’d want to be in is of course Australia.
PRICE:
That is an optimistic view, and do you think that’s important? I raised that point about the role of people like yourself and the Prime Minister, and how pessimistic you can be, but you have to let people know what’s really happening.
TREASURER:
You certainly do. We have to be upfront and frank with the Australian people about the scale of the challenge, and also engage them in a conversation about what we can do to combat that challenge. And of course this will call upon all of our reserves of energy, on our capacity to innovate, and I think most importantly on our capacity to work together. This is a big challenge. We have seen in the December quarter across the G7 countries a very severe contraction in growth, and of course we’ve now seen the announcement about Chinese growth, which has dropped below 8 per cent. And you saw, I think today or overnight, an announcement about a contraction in South Korea of 5 or 6 per cent.
These are our major trading partners and what we are now seeing is the unwinding of the mining boom, and all of the consequences that will have for our economy, and of course for growth more broadly. And of course we saw that I guess in the announcements from BHP the other day. But here was a classic example of what you were raising. Yes, BHP sadly - and it is a tragedy for all of those who have been retrenched or stood down - have stood down in excess of 3,000 people. We need to keep in mind that despite all of that this company is still a very big investor in Australia, that commodities in the long-term for Australia will be a continuing source of our prosperity, and that those commodities are still an enduring and underlying strength for the Australian economy that the rest of the world will still wish to invest in for a long time to come. So it’s a balance, I guess.
PRICE:
That $5 billion put on the lost export income because of the China downturn, I mean, is that the figure the Prime Minister used, $5 billion?
TREASURER:
Yes it is.
PRICE:
That’s going to have a major impact.
TREASURER:
Certainly, there will be a very significant impact on government revenues flowing directly from the unwinding of the mining boom, and most particularly, this dramatic slowing in Chinese growth. No doubt about that at all. And we’ve been upfront and frank about that as well.
PRICE:
So will you have a second financial stimulus package?
TREASURER:
Well, we said we’ll sit down and prudently and responsibly examine all of this data as it comes in. And we’ve said since last October when we brought down the first economic security strategy, which at the time was well ahead of the game in terms of what was happening internationally, that we would have all options on the table and if we needed to take further steps, we would take them. We are essentially on a footing all of the time to respond to these issues as they emerge because sometimes the issues are not conventional either. There are all sorts of…
PRICE:
There’s no history to this, is there?
TREASURER:
There is no history. There is no off-the-rack policy.
PRICE:
You can’t go back and say, last time we did that or somebody did this, because it’s not happened like this.
TREASURER:
There is no off-the-rack policy that somebody can pull out of the cupboard and say this suits.
PRICE:
Yeah, you can’t go back to the Keating recession and say, well this is what they did then, we might do that again.
TREASURER:
You can’t go back to anything. What we are dealing with now is something the likes of which the world hasn’t seen in over 70 years. We’ve seen this crisis commence in financial markets, spread out in all sorts of unpredictable ways, produce slowing world growth, which has itself produced further flow-on effects in financial markets. And of course that further affects confidence, which brings wealth destructions in terms of what’s occurred on the stock market, the unavailability of credit and so on. And of course that all results in unemployment. Now, we haven’t felt all of the force of those forces impacting elsewhere in the world, but we’re certainly not immune from them, and as they rear their head, if you like, in our economy, we stand ready to respond in a responsible and innovative way to do whatever we have to do, whatever we have to do that can responsibly be done to support jobs, to support business and to support growth.
PRICE:
I notice that the Opposition Leader Malcolm Turnbull has accused you today of putting bank profitability before jobs. Let’s have a quick listen to what he had to say while you were in the air:
MALCOLM TURNBULL:
It’s got nothing to do with supporting employment. It’s got nothing to do with supporting small business. It is simply designed to do one thing, and that is to insulate the big banks from taking write-downs on their loans to the commercial property sector.
PRICE:
Is he right?
TREASURER:
No, he’s not. But the problem is, from Malcolm Turnbull it’s just business as usual: pretty crude, partisan, short-term politics. This is an issue that has arisen - the possible withdrawal of foreign banking syndicates from banking syndicates in Australia and the knock-on effects to businesses that employ tens of thousands of people. Now, this hasn’t occurred yet, but we are certainly preparing ourselves, and if that were to occur, then we have a scheme in mind to deal with that. We have not even announced the scheme yet, Steve, yet it has already been condemned by Malcolm Turnbull. But let me say this: whatever arrangements we’ve put in place have nothing, whatsoever to do with protecting bank profits. They’ve got everything to do with protecting the national interest and supporting the livelihoods of tens of thousands of Australian workers who could be innocently impacted upon by decisions of foreign banks to withdraw capital to their home countries.
PRICE:
There was speculation that you would perhaps become, the Government would become the lender of last resort. I don’t think you like that term, but is that what you’ve got in mind?
TREASURER:
Well, we are looking at a variety of options, but I can assure you of one thing: they will use public funds responsibly, and the decision-making that takes place around whatever arrangement we put in place won’t be protecting the profits of any particular individual syndicate. It will be to support viable businesses where Australians work, and who should be supported if decisions are taken elsewhere in the world to withdraw capital from our economy.
PRICE:
As you know, average workers quite often spend up to their budget. There’s not much fat left at the end of the week.
TREASURER:
No, of course there’s not.
PRICE:
So the PM did say, and I guess you’d support him on this, you’d rather not see people laid off. That perhaps they might have to work less hours. Is that really practical, given what you know about…
TREASURER:
Well, it’s horses for courses, isn’t it, Steve. It will depend on the circumstances of the worker, their industrial agreement, the circumstances of the enterprise. Our industrial relations system is based around enterprise bargaining and let me say, Steve, there are a number of industries in Australia where precisely that is happening at the moment. It’s happening in the automotive industry in parts of Australia…
PRICE:
Staying on holidays longer…
TREASURER:
All of those sorts of flexible arrangements.
PRICE:
So we have to become flexible and open our minds up to doing things differently, do we?
TREASURER:
Well, we have to be flexible. We have to be innovative. But you know the most important thing we have to do is understand the nature of the challenge, and I guess be united in how we meet it. And that goes for everyone. It goes for workers. It goes for employers. It goes for everyone in the community. We are dealing with a challenge the likes of which we haven’t dealt with in a long time.
PRICE:
Barack Obama certainly gave this country some hope the other day. Do you think that is going to be a positive thing?
TREASURER:
I certainly do. I think he gives us a lot of hope. I think he underscored a point I guess I’ve been making through this interview - that we all need to work together, that in this sort of environment it’s the things that we do together that make us strong. And listening to him the other night, it wasn’t just the words that I took out of the message – it was the strength, and I think that is what the world is looking for. The world has always looked to this country for leadership. Looked to it for leadership in terms of security, looked for it in leadership in terms of economic innovation and economic growth. So, it will be good to see a new leader here with a new mandate and a new set of policies.
PRICE:
Great to see you in New York. Thank you very much for dropping in. I appreciate it very much.
TREASURER:
Good to be here.
PRICE:
The Australian Treasurer, Wayne Swan.
