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Opposition accuses Treasury of manipulating growth forecast

The World Today - Tuesday, 11 November , 2008 12:10:00

ELEANOR HALL: But we begin today in the National capital where the Federal Opposition is accusing
the Treasury of manipulating its forecast on economic growth to match the Government's political
rhetoric.

Treasury officials are predicting that the economy will grow at two per cent this year while the
Reserve Bank's estimates have a one in front of them.

The Liberal Party has seized on the difference.

But the government is warning that in doing so the opposition is entering dangerous territory.

In Canberra, Alexandra Kirk reports.

ALEXANDRA KIRK: The Government's been keen to point to the relative strength of the Australian
economy in the face of the global financial crisis. And its $10.4-billion fiscal stimulus package
is a key consideration. Legislation underpinning the package is being introduced into parliament
today.

But the Opposition's taken issue with the discrepancy between two high powered outlooks; Treasury's
snapshot, released last week, forecasting the economy will grow two per cent this year, versus the
Reserve Bank's assessment, out yesterday, opting for 1.5 per cent.

Opposition frontbencher Andrew Robb thinks something's amiss.

ANDREW ROBB: It's smells to me of, it's got the smell of manipulation about the Treasury forecast,
I think they were required to get a two in front of their growth forecasts so that the Prime
Minister wasn't embarrassed.

ALEXANDRA KIRK: A government source has told The World Today Mr Robb's entered dangerous territory
by casting aspersions on Treasury and that it's not the first time the coalition's attacked
Treasury and the Central Bank in an effort to score political points.

Opposition treasury spokeswoman Julie Bishop thinks the Reserve Bank's figure is closer to the
mark, but hasn't ventured as far as Mr Robb.

JULIE BISHOP: And the Reserve Bank's growth figure is five per cent, but what Treasury did in a
very unusual move and they said it was unusual was they factored in interest rate reductions in
order for the growth figure to have a two in front of it, because that's what the Prime Minister's
been saying. He's been assuring the Australian public that the growth rate will have a two.

ALEXANDRA KIRK: But Labor backbencher Mark Butler says both Treasury and the Central Bank are
right.

MARK BUTLER: The RBA models their growth figures on the basis that interest rates stay static,
while Treasury does their modelling on the basis on what markets expect to happen with interest
rates. Now the market expect interest rates to go down, Treasury has included that in their
modelling which is why their growth figures are different to the RBA's.

ALEXANDRA KIRK: And the Treasurer Wayne Swan's told Sky TV it makes sense for Treasury's modelling
to factor in future rate cuts.

WAYNE SWAN: They don't represent a conflict at all, in fact they are broadly similar. There is a
difference in terms of the Reserve Bank and the Treasury forecast because the Treasury forecasts do
take into account a loosening of monetary policy. For obvious the Reserve Bank forecasts do not.

ALEXANDRA KIRK: The Government's counting on its big spending package to boost economic growth.
With the legislation before parliament today, the Opposition says there are still a lot of question
marks.

JULIE BISHOP: The government has not provided any modelling, any analysis or any evidence to show
that spending half the budget surplus in this way will work. They're asking us to take them on
trust, they're operating on a wing and a prayer.

ALEXANDRA KIRK: Julie Bishop says the Opposition's taking the Government on trust.

JULIE BISHOP: So we're very cautious but we understand a stimulatory package is needed.

ALEXANDRA KIRK: The other half of the economic equation is interest rates. Labor backbencher Jason
Clare says his seat of Blaxland has the highest home repossession rate in the country. He's
concerned while mortgage rates are on the way down, interest rates on credit cards are bucking the
trend and continuing to rise.

JASON CLARE: It's credit cards where people are struggling more than anything else. It's not
uncommon for me to hear stories from financial counsellors about people who have half a dozen
credit cards who might be tens of thousands of dollars in debt and who are on the pension or are on
Centrelink payments.

Some of them are offering credit to people who can't reasonably be expected to pay it over a
reasonable time. If you paid the minimum amount on a credit card which is two per cent over the
time that is allocated for it every month, then it would take you something like about 20 years to
pay the credit card off. Now that's not reasonable and that's not appropriate.

ALEXANDRA KIRK: Jason Clare acknowledges the government has credit reform in train for next year,
but has in his sights pre-approved credit card offers.

JASON CLARE: To make sure that those letters that we get in the mail that say you're entitled to an
increase in your credit card limit are not sent to people who are unable to meet that increased
credit offer.

ALEXANDRA KIRK: On the matter of rising credit card interest rates, the minister for Consumer
Affairs Chris Bowen's office directed The World Today to the minister for Corporate Governance,
Nick Sherry, whose office said it was a matter for the Treasurer.

Mr Swan is overseas. A spokesman says just as the Government expects banks to pass on the full cut
in to mortgage rates as quickly as possible, the same should apply to credit cards. The Treasurer's
office says the credit card market is very competitive, encouraging consumers to exercise choice if
unsatisfied with the rates.

ELEANOR HALL: Alexandra Kirk reporting.