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Early Agenda -

View in ParlView

Sky News, AM Agenda

8.30am, 19/08/09

ASHLEIGH GILLON: Minister, good morning

LINDSAY TANNER: Lindsay Tanner: Good Morning Ashleigh

ASHLEIGH GILLON: As Finance Minister what impact do you see this deal having on Australia's budget?

LINDSAY TANNER: Well it's very important for our longer term economy and longer term financial
situation for the government of course. It's a great piece of news for the Australian economy. It's
been on the drawing board for quite a long time and at various stages critics suggested it wouldn't
get up, it's great that is actually getting moving and we salute all of those involved because this
is going to be hugely important not just for Western Australia but for the whole Australian
economy.

ASHLEIGH GILLON: Does the deal guarantee this project will go ahead?

LINDSAY TANNER: Well there is still one or two outstanding environment assessments that need to go
ahead as I understand it. But I believe the project will proceed not withstanding the remaining
hurdles, and I can't pre-empt any of those processes, but certainly the fact a contractor has been
signed is very good news for Australia.

ASHLEIGH GILLON: Does it suggest that the mining boom is not over and that gas is the new
equivalent of iron-ore?

LINDSAY TANNER: It certainly suggests that liquid natural gas is going to be a major mainstay of
Australia's resources sector for a long time and that we are going to be dependent on the resources
sector for a big proportion of our export income for the indefinite future. But mining booms,
resources booms come and go and these things are all governed by global prices, by global demand
and nobody can really predict where they are going to head in a year or two let alone 10 years. But
it does really underline how important the resources sector is to Australia's future.

ASHLEIGH GILLON: We have seen a lot of diplomatic tensions between Beijing and Canberra in recent
weeks, and months does this deal prove those that those tensions have little impact on the trade
relationship?

LINDSAY TANNER: China has a very different political system to Australia and of course it has very
different interests to Australia so inevitably there will the odd tension here and there but
underneath that there is a developing and very strong commercial relationship that is very
important for both countries and it is a good sign that relationship is still in good health. If
you think about our long term relationship with Japan for example, where we have been major trading
partners for decades to the great benefit of both peoples, yet every now and then we have a big
argument, we have had a big disagreement about whaling for example for example but that hasn't got
in the road of the underlying strong economic relationship and I think you will see the same things
occurs with China.

ASHLEIGH GILLON: Looking more broadly at the economic situation at the moment, do you still think
the downturn that Australia has experience is the most challenging economic period that Australia
has seen since the great depression.

LINDSAY TANNER: The challenge that Australia has faced certainly has been the biggest challenge
Australia has faced since the great depression. It is too early to say how things have transpired
in the wake of that challenge because we can't be certain where the world economy is heading. There
are plenty of good signs out there but it is premature to call the global recession over or the
meltdown of the global financial system as having been fixed. All these things are still out there,
the news over the past few months has been very positive generally and the outlook has improved
since earlier in the year, but we are still very cautious about this. The challenge is certainly
the greatest we have faced in 75 years the question of how well we have come out of it, it is too
early to say.

ASHLEIGH GILLON: The chief economist of the IMF has said overnight that he does believe the world
has now entered the recovery phase; even the bears seem to be saying that the global economy will
enter the recovery phase by the end of this year. Are you surprised how quickly things have turned
around?

LINDSAY TANNER: One of the lessons that I, and I think others in the government, have learned over
the past 12 months is not to be surprised by anything in these circumstances, we have had an
incredible rollercoaster ride since the middle of last year and therefore I have learned to not
really be too surprised by anything. That is one of the reasons that I am still cautious, I am
optimistic, cautiously optimistic that things are improving and I think there are plenty of signs
that Australia's approach, both the government and the reserve bank have worked very well to
cushion Australia as much as possible from these impacts, to minimise job losses, to minimise
business closures, but we still have a bit of a distance to travel in this great challenge.

ASHLEIGH GILLON: As you said there have been a number of green shots in the economy, so why hasn't
the government reconsidered its stimulus spending?

LINDSAY TANNER: A lot stimulus spending is already in place and already moving . . .

ASHLEIGH GILLON: Some if it hasn't been spent yet . . .

LINDSAY TANNER: Yes that is correct. In some cases you have got for example certain groups of
schools that haven't received funding yet because they are in the third round of the program, while
others have already and building is well advanced. We believe that stimulus is still important in
keeping the economy moving in the face of what are still very substantial downward pressures. Keep
in mind that we projected that the economy would go backwards over the next financial year, the one
we have just started. Even if things are better than they were anticipated to be, it's still likely
growth is going to be pretty anaemic and certainly it is not going to be at the three to four per
cent kind of area that you would like, so there is still a need for the government to maintain
stimulus in those circumstances in our view.

ASHLEIGH GILLON: As you say, those stimulus packages were based on Treasury forecasts that now, in
hindsight, seem to be a bit too gloomy, as you say we haven't seen the negative growth predicted
and unemployment seems like it won't get to 8.5 per cent after all. If those Treasury forecasts
were over the top then doesn't it follow that the stimulus packages were too?

LINDSAY TANNER: I don't think that the Treasury forecasts were over the top and the Treasury
Secretary did actually warn against a second shock or a reverberation of the global crisis

ASHLEIGH GILLON: Do you think we will get to 8.5 per cent unemployment?

LINDSAY TANNER: That is the official forecast and we are standing by that forecast. We have a
revision in the normal course of events of all forecast in the latter part of the year, typically
in November or thereabouts . . .

ASHLEIGH GILLON: But it is unlikely to reach those levels.

LINDSAY TANNER: Well I think it is too early to say, keep in mind that these forecast related to a
financial year from July this year to June next year. We have only just got into this financial
year and suddenly everyone is declaring that the forecast for the financial year are wrong, I think
that is a very premature assessment.

ASHLEIGH GILLON: Could Australia have just of relied on cuts to interest rates to boost demand? A
lot of economists are saying now that the government didn't need to spend so much to keep the
economy afloat

LINDSAY TANNER: I noticed an article in the Australian today quoting a number of economist, most of
them are usual suspect people from sort of Liberal-orientated think tanks and Sinclair Davidson who
is a hardline supporter of the Liberal party on economic issues so I don't treat much of that
commentary with a great deal of credibility frankly. I think the general view among mainstream
economists is that the stimulus was necessary and together with the Reserve Banks' action has
ensured that Australia has so far stayed out of technical recession; that job losses have been
minimised; that business closures have been minimised; that economic activity, particularly in
sectors like retail and construction have been propped up and pumped up just at the time when
private investment was retreating.

ASHLEIGH GILLON: The reserve bank has forecast that rates will rise; your putting stimulus in but
the Reserve Bank is taking it out, isn't that a case of fiscal and monetary policy working in the
opposite direction.

LINDSAY TANNER: No actually it isn't and the Reserve Bank isn't quite doing that, the Reserve Bank
is just indicating in the normal course of events the circumstances that prevail now and have been
prevailing will eventually disappear and the ultra-low interest rates that we have had, the lowest
we have had for 40 or 50 years, will return to something vaguely normal, that's all the Reserve
Bank Governor has said, he hasn't said he expects to put interest rates up next month or the month
after that. All he is pointing out is that we have had interest rates at remarkably low levels and
that is because there has been an emergency.

ASHLEIGH GILLON: But interest rates are likely to go up as the stimulus spending is still following
through the economy.

LINDSAY TANNER: You are welcome to make that commentary but I don't necessarily agree with it and
we don't comment on what may happen to interest rates.

ASHLEIGH GILLON: When you have a look at the stimulus measures that you have taken, the opposition
says the Government has spent over a billion dollars on Chinese imported pink batts, is that right?

LINDSAY TANNER: Look I can't give you a figure but that is just a ludicrous position taken by the
Opposition, are they opposed to imports?

ASHLEIGH GILLON: No the point of the stimulus package was to increase demand in the Australian
economy.

LINDSAY TANNER: Well the bulk of the spending with respect to the insulation program has been in
the Australian economy.

ASHLEIGH GILLON: A billion dollars on pink batts from China

LINDSAY TANNER: So what. The point is that we are trading nation. If we are not buying things from
China, can we expect them to buy our natural gas? Is there going to be a deal worth $50 billion
from the Grogron fields? This is the kind of economic illiteracy on steroids view that is being
expressed by the Opposition. It is inevitable that when you are trying to stimulate the economy,
some of the elements that are in the schools buildings for example, there will the odd materials
here and there that have been imported, the odd hammer may be imported. The answer is we are a
trading nation, we import some things, we export some things, we manufacture a lot of pink batts
here in Australia but because of the inability to gear up the industry completely in this country
with a huge increase in expenditure on the pink batts and of course the fact that after a couple of
years demand will decline very quickly because you have go a run down in demand of course some will
have to be imported.

ASHLEIGH GILLON: Of course the Opposition argument has been that the stimulus spending has been
poorly targeted and that it just racking up an enormous debt and to pay that back the Opposition is
suggesting taxes will have to go up. Why cant the government rule out a new tax on the sale of the
family home, the thought of which is quite alarming to a lot of people.

LINDSAY TANNER: We have an independent review under the auspices of the head of the Treasury, Ken
Henry that is conducting a root and branch analysis which said in its terms of reference a
statement we don't want you to recommend an increase or broadening of the GST otherwise we want you
to look at everything and give us some recommendations. So it's premature for us to start
intervening and say by the way don't do this, change that, we are not interested in that because
that defeats the purpose of a comprehensive review. So we can play all of these juvenile games with
the Opposition about rule this in, rule that out, they will keep doing that, it's a usual resort
for desperate oppositions that have got no policy and are in big trouble. We are committed to a
serious analysis of the tax system by an arms length process and we will be judged the Australian
people according to the decisions we make not according to some ridiculos speculations that are
fuelled by the media.

ASHLEIGH GILLON: Just finally yesterday Challenger Financial announced it will be selling up to
NAB, are the big banks are getting too big, are you worried competition in this sector is
declining, is the government considering intervening to promote more competition between the big
banks and the smaller mortgage lenders?

LINDSAY TANNER: There are no specific plans but it is a concern. There are signs there of reasons
why we need to be concerned for the medium term about the strength of competition in our financial
services sector. The nature of the financial crisis is that is has impacted differently on
different institutions, it has had a particularly savage impact on many of the institutions that
have delivered a lot of the very vibrant competition in recent times. Some others have survived
reasonably well. But clearly it's an issue for the future. We have been very focused on ensuring
our financial system remains stable. We have basically the most stable financial system in the
world, we haven't had no institutions going broke of any significance, and we haven't had
government intervention to prop up institutions, to buy shares or to bail banks out. That is a
great thing for Australia and one of the key reasons our economy has survived as well as it has in
the face of this global storm. But the question of competition is one that clearly is going to
occupy the minds of both the government and the industry as things return to normal so I would
expect we will be examining these issues in the coming months.

ASHLEIGH GILLON: Will one of the issues you examine be extending the $8billion support package that
you have provided to mortgage lenders?

LINDSAY TANNER: We have got no plans of that kind but that is one of the possibilities that people
have speculated on. We have to tread very carefully because any intervention can end up favouring
one set of players against another it can have unintended consequences so it's a very challenging
area, but certainly we don't want to return to the bad old days of the 1970s where you had a
handful of institutions dominating lending and borrowers had to fall on hands and knees to beg for
finance for their home. We certainly have got an eye on this issue for the future but the important
thing is getting our way through the crisis first.

ASHLEIGH GILLON: Finance Minister Lindsay Tanner thanks for your time.

LINDSAY TANNER: Thanks very much Ashleigh.

AM Agenda

19 August 2009

ASHLEIGH GILLON: Welcome back to AM Agenda joining me this morning on our panel of politicians, the
Parliamentary Secretary for Employment Jason Clare, good morning?

JASON CLARE: Good morning.

ASHLEIGH GILLON: And the Shadow Housing Minister Scott Morrison good morning to you.

SCOTT MORRISON: Good morning.

ASHLEIGH GILLON: Scott, yesterday Malcolm Turnbull said that he believes Australia's relationship
with China has reached its lowest ebb in years that was just hours before this gas deal was passed.
Should he feel a bit silly about those comments now?

SCOTT MORRISON: No I think the relationship always goes down two tracks, I mean Australia will
always need to sell resources to China and China will always need to buy them and ExxonMobil and
the deal they've struck here is a massive deal for Australia and we welcome it and I think it is in
stark contrast to the rhetoric from the Prime Minister who said that the private sector's in
retreat and we're all, you know the public sector needs to come and take over the Australian
economy. What we see here is a great deal which ExxonMobil have put together; they're going to sell
resources into China. We have to remember that it was resources and our terms of trade that
actually ensured that we avoided a technical recession in March. And that's something the Prime
Minister just doesn't seem to want to talk about. he wants to re-write history about what's been
happening over the last 18 months which gives him the excuse to keep spending money.

ASHLEIGH GILLON: So you think Australia's relationship with China is actually going along okay.

SCOTT MORRISON: Well, I think Australia's economic relationship with China will always be strong
because it's in both countries interests but clearly there is some issues in our broader
relationship.

JASON CLARE: I think what it shows is you can stand up for human rights and you can stand up for
freedom of speech but that won't stand in the way of big economic deals. Malcolm Turnbull made
another mistake yesterday; he jumped out and said something without checking the facts first. He
came out ...

SCOTT MORRISON: (Inaudible)

JASON CLARE: ... well, no you've had your say let ...

ASHLEIGH GILLON: He does have a point about diplomatic relations though Jason because the media for
example weren't allowed in to the signing ceremony of this deal usually these things are
accompanied by masses of cameras and big, you know, shaking hands and big smiles ...

SCOTT MORRISON: I've been to them in China, it's true.

ASHLEIGH GILLON: ... the media weren't allowed anywhere near it yesterday, there's no doubt that
diplomatic relations are still pretty tense.

JASON CLARE: But this is the important point you can stand up for human rights, you can stand up
for freedom of speech, this is not a business only approach that the Howard government adopted, we
can stand up for the things that we believe in but it won't stand in the way of the economic deals.
The point I'm making is Malcolm Turnbull ...

SCOTT MORRISON: Hang on

JASON CLARE: No, hang on you had a go let me have a go ...

SCOTT MORRISON: Are you ... suggesting that the Howard government (inaudible)

JASON CLARE: So he said ...

SCOTT MORISON: ... suggesting that the Howard government (inaudible)

JASON CLARE: He said, he said ...

ASHLEIGH GILLON: Okay, one at a time.

JASON CLARE: ... he said that the relations are at a low-time ebb at the same time that you've got
the Minister turning up to the signing of a $50 billion deal that's going to create 6,000 jobs in
construction, thousands of jobs in economic development in Australia, it's another example of bad
judgement. I hate to do it, but I'm going to do it two weeks in a row and stand up for Wilson
Tuckey because he said its inexperience and arrogance which is leading to these sorts of mistakes
by Malcolm Turnbull.

ASHLEIGH GILLON: Well, Scott of course we heard Lindsay Tanner there really spruiking the
government's stimulus packages saying there's no need to pull back just yet. We saw Treasury saying
that these stimulus packages have kept Australia out of recession, Malcolm Turnbull voted against
those stimulus packages.

SCOTT MORRISON: So did I.

ASHLEIGH GILLON: ... Is there any regrets there?

SCOTT MORRISON: No, none at all, I mean what we're seeing is a consensus that now has emerged which
says that the Australian economy isn't merging better because it went into this recession better
globally and I think that's the key point that the Prime Minister refuses to acknowledge. He
refuses to acknowledge the role of out exports industries in March; apparently all of what has
happened has happened because of his own personal interventions. Now, there's one reason he wants
to do this and the one reason he won't to roll back his stimulus or except any argument that his
stimulus should be reconsidered as our economists are increasingly making and the Reserve Bank
Governor alluded to last week is he wants to keep spending money. And he wants to keep spending
money because he has an election next year and he wants to roll out the biggest pork barrelling
program in our national history.

ASHLEIGH GILLON: Is this all about buying votes Jason?

JASON CLARE: This mistake goes back to the 18 February when Malcolm Turnbull decided to vote
against the stimulus package. It was the first evidence of bad judgement. When the national
accounts came in on the 3rd of June they showed that Malcolm Turnbull had made a mistake. If we had
not stimulated the economy, if we hadn't put that legislation through we would be in recession
right now. The Treasury modelling shows that without the stimulus the quarterly accounts in March
would've been 2 per cent negative and with that goes a lot of business, goes a lot of jobs, goes
confidence going down rather than going up. He made a mistake on the 18th February ...

SCOTT MORRISON: No.

JASON CLARE: ... that lead him to flick from fear to smear and the Godwin Gretch affair. He's in the
problem he's in now because of ...

SCOTT MORRISON: No, (Inaudible)

ASHLEIGH GILLON: Okay, this is going to be the crux of the debate as we go up to the next election.

SCOTT MORRISON: I think it's true.

ASHLEIGH GILLON: ... The government's saying its stimulus packages deserve credit for keeping
Australia out of recession; the Opposition is saying it was poorly targeted spending and there
should have been enough ...

JASON CLARE: That's what business is saying everywhere ...

SCOTT MORRISON: Well I'm saying more than that.

JASON CLARE: ... whether I'm talking to big business or small business they all say the stimulus
package is working.

SCOTT MORRISON: I'm saying more than that. What the prime Minister did early this year and late
last year, he's cyclonic predictions about what was going to happen to the Australian economy were
clearly overstated and I think that's an emerging consensus ...

ASHLEIGH GILLON: And aren't we all glad?

SCOTT MORRISON: Well aren't we glad, aren't we glad? And he overstated it and didn't acknowledge
the inheritance that he had in terms of Australia's regulatory system, our financial system, our
financial strength, our terms of trade, the performance of the export sector, all things that are
not part of Labor's story. Apparently November 23 2007 was economic ground zero, nothing happened
before Kevin and as a result he's over-egged his statements, he's over-egged his stimulus and
they're not prepared to even consider pulling it back which means higher tax, higher debt and
higher interest rates.

ASHLEIGH GILLON: And I'm sure that's the theme we'll see played out again in Question Time today ...

JASON CLARE: This is important, show's how out of touch the Liberal Party still are.

ASHLEIGH GILLON: I do want to move through on to the Senate's vote on renewable energy targets this
week. Scott do you share some you National's colleagues concerns that Mr Turnbull and Greg Hunt may
have got their tactics wrong in pursuing this, that they may not be insistent enough over demands
for extra support for industries like the aluminium sector?

SCOTT MORRISON: No I don't agree and I don't think its, what's been happening on the Coalition side
particularly, I think, Greg Hunt's done ...

ASHLEIGH GILLON: Nationals have voiced those concerns.

SCOTT MORRISON: ... I that Greg Hunt's doing an outstanding job on this together with Ian Macfarlane
and I think what we'll see is, if the government continues to negotiate in good faith - and that's
the question mark - if they continue to negotiate in good faith we'll be able to support this bill
this week as we've always wanted to, we want to support it last week and we'll get a good deal for
the environment which is what we've been working for all week and a good deal for industry and
agriculture. I think these negotiations have been tough but I think they've shown that when the
government will come and negotiate with us then we can get a good outcome but they're not always
willing to do that.

ASHLEIGH GILLON: Well Jason as Scott alluded to, one of the big concerns here is that food
producers in particular are going to suffer, are you worried about that?

JASON CLARE: I think this is a good example of where Scott and I can agree on something that both
sides of politics want to see this renewable energy legislation go through and we want to see it go
through this week. There ...

Break in transmission from Sky News

JASON CLARE: ... through the course of the day. We want it to go through this week. Those
negotiations as you rightly put are occurring in good faith. I don't want to prejudice what those
negotiations look like or what they will finalise but one things for certain and that is that I
think good people on both sides of the House want to see this legislation go forward. It's a good
example of what can happen when you negotiate in good faith but when both sides of politics have a
view and there is legislation and there are amendments. The problem we had last week is that the
Liberal Party didn't have a view and they didn't have amendments, if they adopted the same approach
last week we would've got the ETS through.

ASHLEIGH GILLON: Unfortunately we have run out of time for this morning's program, Scott Morrison,
Jason Clare thank you for joining us as always.

SCOTT MORRISON: Thank you.

JASON CLARE: Thanks Ashleigh

ASHLEIGH GILLON: And that's all for we have time for this edition of AM Agenda.

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