Doorstop Interview

Brisbane

4 August 2009

SUBJECTS: Reserve Banks statement on monetary policy; stimulus; Malcolm Turnbull

TREASURER:

I just wanted to say a few words about the Reserve Bank statement on monetary policy, because the Reserve Bank today has upgraded its growth forecast, citing the combined impact of economic stimulus and monetary policy. They also point to tentative positive signs in the global economy and also to the domestic impact of economic stimulus. But also here the Reserve Bank points to substantial head winds in the global economy, but the one thing we can see here in the Reserve Bank forecasts is that they are predicated on a modest recovery and economic stimulus being fully implemented. Now in terms of the head winds we will still see higher unemployment over time, we'll see lower business investment and we'll see less income from the commodities that we trade with the rest of the world. So we shouldn't underestimate the impacts of those head winds. But here the Reserve Bank is forecasting a modest recovery which is predicated on the full implementation of economic stimulus.

JOURNALIST:

Are you going to upgrade the Government's growth forecasts, and also with the RBA's more positive forecasts will you have second thoughts about the stimulus money you're going to pump into the economy next year.

TREASURER:

We're encouraged by the positive signs and impact of economic stimulus and that will have implications for our forecasts and they'll be revised in the usual way at MYEFO.

JOURNALIST:

Are you reconsidering the stimulus money now that the RBA has changed their forecast (inaudible)

TREASURER:

The RBA forecasts are predicted on the full implementation of economic stimulus. They're forecasting a modest recovery in 2009/2010 predicated on the full implementation of economic stimulus. And to reduce stimulus or to pull it back would pull the rug out from underneath economic recovery.

JOURNALIST:

Has Australia overreacted to the crisis?

TREASURER:

I don't believe so at all, we are dealing with the consequences of a global financial crisis and a global recession. I will just remind you that Australia is the strongest growing major advanced economy in the world, with the second lowest unemployment, and the lowest debt and deficit. And part of that story has been the timely and strong action from both the Federal Government and the Reserve Bank in terms of implementation of fiscal policy and monetary policy. We acted early and we acted in a powerful way and the consequence of that is that many Australians remain in work and many more bread winners get up in the morning and go to work. If we had not acted then unemployment would have been higher and we wouldn't be receiving the sort of report we're receiving from the Reserve Bank today.

JOURNALIST:

Are you reconsidering the Bank Guarantee now that Banks are finding it easier to raise money?

TREASURER:

Well in terms of the bank guarantee, that has been absolutely fundamental in insuring that we cushion this economy from the worst impacts of the global financial crisis and the global recession. But the future of the guarantee will be considered in the context of the G20. Other countries have guarantees in place and any change to the guarantee has to be considered in the light of what is going on internationally.

JOURNALIST:

Are you concerned about inflation becoming more of a problem over the next year?

TREASURER:

I think the Reserve Bank in its statement of monetary policy deals with that question. They don't necessarily see any risk in terms of the inflationary outlook in the document they have put forward today.

JOURNALIST:

Should Malcolm Turnbull say sorry to you?

TREASURER:

Look I'll leave all of the commentary and brawling in the Liberal Party about Malcolm Turnbull's lack of judgment and leadership to them.