Interview with Mike Carlton & Sandy Aloisi
Radio 2UE, Sydney
22 April 2009
SUBJECTS: Budget Speculation; IMF Report
SANDY:
Well, today it's the turn of the International Monetary Fund. It's now revealed that the cost of bad debts worldwide could reach more than $5.5 trillion Australian dollars, and that's double the amount that was predicted in January.
MIKE:
Yesterday the Reserve Bank Governor, Glenn Stevens, conceded, admitted that Australia is already in recession. One way to avoid prolonging that, he says, is to instil confidence in the economy. And he does reckon that we are well placed to get out of it, better placed than most, I think.
SANDY:
And the IMF says it believes the downturn will last a year but Mr Stevens, says that our banks and the Government are in good shape, (inaudible), to withstand it.
But the Treasurer, Wayne Swan, is on the line from our Canberra studio.
Good morning.
TREASURER:
Good morning. How are you going?
MIKE:
Good. Never better. What sort of stimulatory package can we look forward to in the next Budget?
TREASURER:
Well, I can't speculate about the detail of this Budget but what I can…
MIKE:
You can if you want to.
TREASURER:
Well, I'm not going to on your program this morning. But as you are aware, and we've discussed this before, there is a very substantial stimulus in the economy right now. Payments are going out in terms of those Tax Bonuses. But also we've got very substantial investment flowing over the next year and more – investment in social housing, investment in school modernisation, investment in energy efficiency. So, one of the aims of this Budget is to continue that substantial fiscal or economic stimulus, but also to put in place, I think, the policy settings for the future that will enable us to take advantage of all of the opportunities that arise once the global economy begins to revive.
And that's what this IMF report today is so important. It points out the challenges ahead, and unfortunately this report, when it comes down, I think will have the fifth downward revision in growth in just six months. So, that really gives you some sense of the challenge we face in this forthcoming Budget – the most difficult global conditions in our lifetimes, and also a pretty sober outlook. But I think Glenn Stevens is right. Of just about any country in the world, we are far better placed than most other developed countries.
MIKE:
Okay, but it's obviously got to be an expansionary Budget. You can't do anything else. That means a huge deficit, doesn't it?
TREASURER:
Well, certainly it's why we have to continue fiscal stimulus, or economic stimulus. And certainly the speed of the global growth downturn in the March quarter has put a wrecking ball right through government revenues, and what that will produce is a higher temporary deficit. There's no doubt about that because the revenue downgrades, Mike, just from the last Budget through to our last statement in February were $115 billion.
MIKE:
And that's continuing.
TREASURER:
Yes, and the forecast from the IMF that will come out overnight (inaudible) further downgrade to global growth. That will further impact upon growth here and will most certainly further impact on government revenues. And that will certainly mean a higher deficit. It will certainly mean higher unemployment and it will certainly mean that we've got to continue to stimulate our economy as we go through and weather this storm.
SANDY:
What will it mean for just you and I on the street? I think it's been called a monster budget this morning. We can look forward to a monster deficit. What will it mean for the ordinary Australian's budget?
TREASURER:
Well, I think this Budget is very important for ordinary Australians…
SANDY:
But how will it impact on us?
TREASURER:
What it will continue to do is to cushion Australians from the full impact of this savage global recession, and also as importantly, put in place the building blocks for future growth so we can take advantage of the opportunities that arise as the global economy begins to recover. So, it will be a Budget about stimulating economic growth, about creating jobs, and also looking to the future to take advantages that come from our underlying strengths. Because the other thing that Glenn Stevens said yesterday – and he's absolutely right and I think I've said it to you on this program many times – there are underlying strengths in the Australian economy that many other developed countries wish they had.
MIKE:
Now, many of our listeners are self-funded retirees and a lot of them are doing it really tough, Treasurer.
TREASURER:
Too right they are.
MIKE:
You're not going to belt them again in the Budget by withdrawing some of the superannuation tax arrangements are you?
TREASURER:
We certainly understand that pensioners and part-pensioners, many of whom are self-funded retirees and other self-funded retirees that rely solely on their own income, are doing it tough. This is going to be a tough Budget. As you are aware…
MIKE:
You can't be tough on them.
TREASURER:
As you are aware, we have made commitments to look at the base rate of the pension and decisions there flow through to many self-funded retirees. So, we're taking that into account as we go forward putting this Budget together. What we will do is our best by all Australians, including pensioners and self-funded retirees.
SANDY:
What about reports this morning, Treasurer, that the Government will move to close loopholes that can be exploited by the rich to avoid tax, such as those that claim for hobby farms and that sort of thing?
TREASURER:
Well, given the challenge to revenue that I spoke about before, there is certainly going to be no room in this Budget for wasted money – money that is not productive or money that goes to people who are not paying their fair share. So, we'll certainly be looking at all of those issues. But I can't speculate about any particular issue which is raised from day-to-day in the papers. What I can say is the Budget will be responsible. We'll focus on stimulating the economy to…
MIKE:
Treasurer, every Treasurer I've interviewed since Harold Holt has told us there'll be a responsible Budget. Could you get a new cliché? Please.
TREASURER:
I'm sure you don't want the opposite.
MIKE:
Exactly. Give us the day the Treasurer is going to have a really irresponsible Budget and throw money around like water. Never heard that one.
TREASURER:
Well, we're not going to be doing that. We're going to really reinforce the fundamentals in the economy.
MIKE:
Alright. Malcolm Turnbull is saying you ought to bring forward the tax cuts. Is that a possibility?
TREASURER:
Well, I'm not going to comment on what Malcolm Turnbull's had to say today, because to date he hasn't had one positive solution in terms of economic stimulus and nothing for the future. I mean, this is the guy that said we should sit back and wait and see. And of course the IMF report that will come out overnight will demonstrate why that suggestion from Malcolm Turnbull over the past few months is so utterly irresponsible.
SANDY:
Okay Treasurer, thanks for your time.
TREASURER:
Good to be with you.
