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(generated from captions) quite negative. And we're also probably seeing most significantly a much sharper downturn in mining investment than was expected. It was expected to tail off. And while overall levels still will remain high, we are just seeing that that transition is happening probably more quickly and with a slower pick-up in the sectors that are supposed to take the slack off that was always going to be very, very hard to predict.Some of the main changes that we're seeing is the - today it was announced the banking levy I suppose you'd call it, insurance levy. Is that something that was needed?Eempts it's my opinion that it wasn't. Australia already has very, very good prudential regulators. The Treasurer has pointed to what's been recommended offshore but Australia has quite a different system. That's been shown throughout the GFC to be very strong. I don't think it is the government's place to be acting as the role of the insurer of the private banking system. I think APRA can bring in its own regulation it is it needs to, but I think they've already done that and to me it seems like a cheap trick in terms of accounting measures. It sounds on the surface to be solid but I think it's coming from the wrong quarter. It should be coming from the banking sector and the banking regulators.Why is it coming now? I know that we've had a guarantee in place for the banks since the GFC. But I just found it quite interesting that the Treasurer was talking about how difficult the economy is and now we're looking at insurance policies for banks that might collapse?He did actually, in response to one of the questions, say oh this is for a rainy day further down the track. I'm glad he clarified that. You could take this as being gosh should we suddenly all be a worried? He needs to be more careful more on his messages. A cynic would say this is purely a built of creative accounting. No-one will argue with five basis points on your deposits to say that this is a draconian measure. You can argue that it is in some ways a little bit sensible to put money away for a rainy day but the timing of it one has to be a bit cynical. If you look at the levy on $10,000, it's $5 a year?It's not a great amount, but we have seen particularly if you look at Cyprus for example, what happens when bank deposits aren't guaranteed, it can be quite disastrous. To say that Australia is in imminent danger of that being a problem, we already have regulations that depositors have first claim, so yeah, it seems a bit strange the timing of it to be honest.

It always seems the aid
budget It always budget that's cut? As a budget that's cut? former member of the aid department you get about that sort of aid department you about aid department you get gresed
about that sort cynical and we've seen about that sort of thing. It is cynical and we've seen this
throughout the cynical and we've millennium development throughout It is always the throughout the globe with
millennium development It is always the aid budget
that goes It is always the that goes and obviously there's that goes and obviously been a stuffling towards the refugee policy so been a stuffling towards refugee policy so that there
will be some money going back.

will It is a shame in this will be some money It is a shame in this day and
age that It is a shame in age that wealthy countries like Australia are still not Australia are still not meeting their GNI targets in terms of aid budgets and given the overall amount is so small, it's not great policy, but I can understand why they do it, because foreign aid recipients aren't the ones who vote. How difficult is it going to be for any government whether Labor, Liberal, to actually operate in the current volatile global economy, as we've heard it is volatile? To be honest, I don't think the economy is that volatile. What's happening is it's taking longer to adapt post-GFC than a lot of people anticipated. The other thing is China, which is a large force particularly for Australia, is going through this structural adjustment with not the transparency we see. We see in the US Ben Bernanke says "We're going to do this on quantitative easing" , we don't have the same sense in China and that's a surprise for us. It's taking longer to come out of the GFC and we might have to get used to the fact that long-term growth rates are lower than they were for Australia 10-20 years ago. We are seeing changes with the Australian dollar falling below US 90 cents and the US economy picking up? I think that's a positive and it's important not to lose sight of the fact that the US has got lots of positives in its favour. The data upside, lots of good news stories coming out of the US. Even China, although we're seeing structural adjustment it's not like we're saying it's going from 7.5% target to 5.5, it's probably going to be in that 7-7.5 for some time, but that's strong growth. We're seeing other developing nations moving forward in a strong moving and adjustment in Europe. It's very easy to get bogged down in the bad news, but very important to look also at where the positive news is coming and to get some sort of balanced perspective on the outlook. There's so many numbers coming out that you're trying to grapple with what's happening. GDP going down from 2.75% down to 2.5%. What are other countries, what's their GDP at the moment? We're looking across the world at somewhere between 3.5 to 37.75, but that's across the board. They're big splits between the Chinas, even Brazil and India which is slower at around 5%, but still growing much more strongly than the advanced economy where we're seeing a lot of Europe still in negative territory, but the US looks like it's doing OK at around 2%, as well. For Australia we're below trend growth of 3%, but 2.5% is still in this global climate where things are not as strong as it has been, it's still not a bad outcome, but one that obviously is going to have impacts for the Budget outcome. We also saw that higher unemployment is forecast, up to 6.25%. Yes, and look that's not entirely surprising, but I noticed the Treasurer phrased that around what is happening in the mining sector. To ascribe it all to that is not quite genuine. A lot of it is in response to what's happening in the global economy. We are seeing tough times, but this is where the weaker currency where will have a big impact where we'll see positive impacts on manufacturing, retail and tourism as well. We should expect to see reasonable employment growth. That 6.25% is on the bearish side, but time will tell. What about interest rates? What is their long-term trend? We're seeing them going down, can they go down much further? I'd be surprised if we saw more than one more cut from the Reserve Bank this year, but there are those in the market who think we could get at least three more 25 basis point cuts and I guess that depends on which side of the global outlook you, perspective you take. If you really think we're in for doom and gloom prolonged you would need to see more interest rates. Particularly given how tough business is doing it at the moment there is going to be another one in the pipeline reasonably soon, but I would say that's probably the last of it. We're going to get a lot and
of stimulus from the currency and we need to wait and see. The Treasurer is quite genuine that we are going through a lot of volatility - not volatility, but transition in the global economy and we need to wait and see. The outlook is particularly uncertain, even more so than usual. Lower interest rates are having an impact on the housing markets. We've seen an upturn in some of the housing, especially in some of the main capital cities? Yes, and this is what the Reserve Bank has consistently pointed to in minutes each month, there are signs that previous interest rates feeding through. We are seeing it in the housing sector, we will see it in consumer spending. It's a bit up and down. Business is the last bastion that needs to come over. I suspect that's as much about the political environment and the need to get the election out of the way as it is about what's happening in economic conditions. There are some sectors - and we keep hearing the anecdotal evidence - some sectors are doing well while others are struggling. while others are still would you rate struggling. Overall, would struggling. Overall, how
would you Budget announcement

Budget announcement statement?
I might would you rate this economic
Budget announcement I might be a little harsh, but I think it's good we've got the harsh, but I think we've got the numbers on table. It's fair when you're table. It's lowering economic forecast there are going to be Budget lowering economic line implications. there are going to be line implications. The
Government is trying to do something towards heading towards surplus. We don't need to rush into it. Whether it's three or four years is irrelevant. Some of the measures they've announced today probably are more about getting a number that looks good rather than making real structural adjustments that sooner or later governments will have to make. And it will be interesting to see what happens in the coming years if you can actually achieve the surplus when they said they would. When the previous Treasurer announced a surplus and that didn't happen that becomes a political tool? Oh, politics and economics are absolutely inextricably linked. My message to the public is to say don't be hung up on whether we have a surplus this year or that year. What's the overall trend? It's moving in the right direction. What are the long-term threats? An ageing population, more health costs - those sorts of issues that need to be addressed. None of those issues are confronted in what's happening in the Budget at the moment. But in terms of where we're heading in the overall direction, it is the right direction and to say debt is bad point blank is wrong and it's the wrong message to get. We need to have a balance over the cycle and we need to spend money when the economy is doing it tough, otherwise the very going to
people worried about debt are going to be the ones out of a job. Independent economist Nicki Hutley, thank you very much for sharing your insights and giving us lay people more information about the numbers. And just to let you know, we're hearing that the Shadow Treasurer Joe Hockey will be giving a media statement at around 3 o'clock. That's in just under an hour and we'll aim to bring that to you when we hear more details. If aim to bring that to you've just joined us, Treasurer Chris Bowen and Finance Minister Penny Wong have Treasurer Chris have just given a statement on Government finances unveiling massive revenue writedowns since the May Budget. Deeper Budget deficits for the next 3 years of $17.4 billion worth of cuts. Here are the main figures:

The Government says a substantial decrease in nominal GDP has had a major impact on expected tax receipts.

An extra 70,000 people out of work.

Let's move on to border protection. The PNG arrangement will cost $1.16 billion.

Softening in our economy underlines the need for careful economic management. The economy doesn't need harsh and swinging cuts at this point in the cycle. That would make our economy smaller and would lead to higher unemployment. The economy and the Budget needs sensible, well thoughtout measures which support jobs and growth now, but return the Budget to surplus in the medium term and that is exactly the approach the Government has taken. The slowing in the world economy and the reduction in our terms of trade and the softening in the economy has meant a reduction in our forecast Government revenue of 33 billion over the next 4 years. We've taken responsible savings and revenue decisions which will amount to 17.4 billion over that period, or in billion over that period, or net terms $8.1 billion. Obviously net terms Obviously an area that's had some attention Obviously an area some attention in recent times is the Government's regional some attention in recent resettlement arrangement with
Papua New Guinea. I'd refer you to pages 40 and 41 of the statement which set out statement which set out the arrangements for the funding of this plan. The estimated operating cost of the arrangement is $175 million in 13-134 and a cumulative total of just over $1 billion over the forward estimates. This will be partially funded from a
reduction in the operating costs of the onshore network of $423 million over 4 years. There are also capital costs of $194 million in 13-14 to expand Manus Island facilities. Funding is offset from a reduction in the aid budget and $23 million from the reserve. The remaining costs of this package have been offset from whole of Government savings. In addition, Australia is providing additional $420 million in new aid to Papua New Guinea to go towards specific health, education, justice and law and order and transport projects and programs consistent with the arrangements that the Prime Minister entered into. This will be funded by redirections in existing AusAid programs, but not from existing PNG programs. In other political news, the Federal Opposition says it will now honour Labor's school funding commitments for 4 years. The Education Minister Bill Shorten has just spoken to reporters in Melbourne and we can bring that to you now.

to be at one of Australia's very good very good schools, talking about education and the future of better schools, so our children can get the best start in life. The future needs of Australia's school children and their parents needs the 100% commitment to the better schools plan. Australian school children and their parents deserve from their politicians and political parties a 100% fully funded fully costed policy which commits 100% to the best start in life for Australia's school children. Today, we've heard the Coalition provide neither a 100% commitment to the future of our schools policy nor a 100% commitment to the fully costed policies that Australia's parents require from their potential leaders. Labor has a a better schools plan, we've successfully negotiated this plan with State and Territories, with independent school, with the Catholic Education Commissions all around Australia. Labor's better schools plan is all about ensuring that schools and the children who attend them are funded according to their need. Labor's better schools plan is all about making sure that regardless of what post code you live in Australia, you get equal access, equal opportunity to the best resources so every individual child can reach maturity with a great education. But last week the Coalition wrote to every school principal in Australia, last week in this letter Tony Abbott wrote to every school principal and said, "The Coalition has deep reservations about the Government's new school funding proposals." So last week, every parent could read a letter with a Coalition said in black and white to every school principal that they don't support the Government's education proposals, our better schools plan, but they were not committed 100% to either funding the proposition or to indeed backing in the policies. Last week, this is what parents could believe the Coalition's view was - today the Coalition says "what happened last week, that doesn't matter, this week they say, "Believe us. We are committed." They are in fact not committed.To talk more about that and the rest of the day's political news I'm joinds again by Avellino in Canberra. We heard there from Bill Shorten about the Opposition, it was a bit of a backflip wasn't it on the previous standing that the Opposition had on Gonski?It was quite a big backflip. Only yesterday I interviewed Christopher Pyne for our Capital Hill program and he was saying that the Coalition would only pledge to keep the deal that the Federal Government had done year and Government had done for one
year and then it renegotiate it. It year and then it would seek to renegotiate it. It would seek
to renegotiate it. It to undo he said the damage the to undo he said the damage Government had done. The Opposition has never liked the Government's arrangments on education funding reform while the Opposition Leader Tony Abbott said once earlier this year that he was committed to the principles of the Gonski report, the Opposition always complained about the complained the Government had implemented them, complained about budget figures showing the Opposition said cuts to education in said cuts to education in the
early years although these funding reforms were designed to ramp up over time but now the Coalition is committed to keeping them for the State's that have signed up. You'd have to say that this is an issue the Coalition wanted to get off the table. The Federal Government been negotiates veriard with Victoria. We do not know whether that is something that made the Coalition do it, but the Government ha has been focussing all its attentions on getting Victoria to sign up and also whether it's showed up in the Coalition's own polling about whether the Coalition's stance is a negative for it, we don't know, but it's certainly trying to get the issue table for it before the election.In his press conference Tony Abbott did a say to Denis Napthine to take the best say the best course of action for Victoria so that was obviously some sort of nod?Yes, in the current environment we're inally all nods and winks and we have to try and read into it what we can. We don't know if a deal has been done with Victoria. The Education Minister had been reasonably optimistic I think when I spoke to him last week he was putting his levels of optimism at about a six out of 10 so more optimistic than not, a deal hasn't yet been announced, if it has been done, but certainly it is a big change in the Coalition's position on education reforms, to what it had only yesterday.Obviously today the big news is though the Budget statement and we heard that higher unemployment is expected and expect deficits in the years to come?Yes, and bigger deficits that than has been forecast just in May which is not all that long ago, not mat many weeks ago. Revenue has been downgraded yet again. Revenue has been consistently downgraded over the last four years and that's revenue forecasts, that's what the Treasurer predicted would be the money flowing into the Government's coffers, that is down $33 billion over the next four years from what was predicted in May. It's about $8 billion down for the year 2013-14 alone, so the Government's deficits for the next few years have increased. Now when I asked the Treasurer Chris Bowen on Monday whether the Government would keep its commitment to bringing the budget to balance which has a small sus plus, he did not commit to that, so probably unsurprisingly if you heard that interview the Government has announced that 15-16 will be a deficit of just under $5 billion but it's keeping its pledge of bringing the Budget back to surplus so back to a larger surplus than has been for cast for the year before that in 2016-1 #. It's not as big a surplus as forecast in Budget time for that financial year but it's about $4 billion.What are some of the mainor policy points that came out, you were in the Budget lockup as well?Some other things - one decision which people might be pleased about because there's been quite a campaign about this - the Government has im-Peased a cap on work represented education expenses of $2,000. The Government has also increased the efficiency dividend on the public service to save it about $1.8 billion over four years so it not only means public servant also have to become more ever but it's essentially p public service cuts. The G-20 look in other place is urging department look in other place before they
looked

look in other place looked at forced redundancies, before they looked at forced before they look at public
service job before
looked at forced redundancies, before they service job cuts but certainly the service the Government is service job cuts but the Government is tightening the screws yet again on the public service and the screws public service and that is
something that's been a the screws yet again on the
public service consistent approach of the Labor Government over a number Labor Government over of year, is to introduce temporary efficiency dividends which go on to a little bit bigger and permanent. The Government has also detailed the costs of the aslyum seeker arrangement with Papua New Guinea, that's the arrangement to send aslyum seekers to Papua New Guinea and say they will not in any circumstances come back to Australia. That's a little over $1 billion over four years. It includes a cost of expanding the Manus Island detention centre, that's a little under $200 million this year. It also says there'll be higher costs for community detention in Australia, some of that fund willing come out of the aid Budget but it is disht has offseat some onshore detention costs in Australia so that money will go into paying for the Papua New Guinea deal. It's also outlined how much money it will give in extra aid to Papua New Guinea which is part of this deal and that's $420 million over four years.We were also expecting to hear about a car industry assistance package. There's speculation that that might be noipsed part of an election campaign?If there is a consider industry statement to be had it happens slightly before an election announcement. I did take you through firs before on decisions taken but not yet announced, but there is half a billion dollars in 2013-14 and 2014-15 in decisions taken but not yet announced. There is also a similar amount of money on revenue decisions taken but not yet announced but there's about half a billion dollars of money the Government will spend but it's not yet telling us how, some of that might be the Finance Minister said deals that are commerceal in confidence but some of it is likely to also be for an election war chest or perhaps a car industry statement. happens before the election, this economic statement and something on the car industry, other things the Government had to do before it wents to the to do polls, speculation is rife about wlt Kevin Rudd polls, about wlt Kevin Rudd will
announce an election about wlt announce an election on Sunday or Monday, that would like be a September the 7th election. He's got to call that by Monday if he's going to but as I've said before about election speculation, in the end there is only one person who knows absolutely for sure when he's going to call the election, that's the PM and prime ministers usually call the election for when they think they have the best chance of winningCertainly we've been speculating quite a lot in the last couple of weeks.And we're back to normal. Australians have put up election speculation for decades. It was an usual UN usual move by the then PM is Julia Gillard to fix the election date. Usually we're in the realm of election speculation for quite a longer period of time.We'll have to wait and see what happens on Sunday. To talk more about the Government's economic statement I'm joined now by amp chief Shane Oliver. What did you make of today's announcement?Depressing basically.It had that tone to it didn't it?It did. This is the soud outcome. We've just had the biggest boom in the nation's history, we should be rolling in money like Norway is, huge budget surpluses and the inversion of public debt, yet we're not seeing that. Both sides of politics have let us down on this front. To get to is the specifics I was thinking maybe $20 billion turned out to be $33 billion in terms of the revenue shortfall alone let alone the extra spending in the last few months, so it's a pretty depressing set of numbers. I have no doubt that at some point we'll get back to surplus. These numbers are better than than the US, Europe and Japan and so on but they've been going through really tough time, we should better shape than this.Has been too much spending and now also not enough revenue or issate combination of both?It's a combination of both. These things are easier to say in hindsight. Through the very easy years of the boom which are of course the pre-2008 period we perhaps did put enough aside, we moved in the right direction, didn't do enough on that front and then in recent years we took too long to get the Budget back under control after the necessary blow-out in the deficit through the time of the GFC so as a consequence we're now at crunch time, the economy is slowing down to a crawl, and we're looking at a run of Budget deficits overation years which is actually worse than it was in the early 90s when we had the worse post war recession in our history and we had a massive banking crisis, so these numbers are quite depressing but it's errors on both sides, the revenue obviously having a huge impact here, obviously the Budget numbers were too overoptimistic and I think also on the spending side.How can we see such big changes in a matter of weeks from those forecasts?I can ask you that one? I just admit I'm perplexed. The economic growth numbers aren't that different to my own. I would have thought when I looked at the budget back in May, we were look at 2.5% growth at the time. I thought that the terms of trade assumptions were a bit the too high but so see such huge turn around in the revenue numbers does seem to be a bit surprising to me. Maybe the Government's decided to that to take a more cautious approach. I know in the May Budget there was some reference to international companies switching their tax payments between jurisdiction around the world and therefore avoiding or evading tax. There might be other factors going on as well but it is certainly a surprising turn around to see in a relatively short space of time.The Treasurer economy is not in a crisis, it's transition, because of the mining boom ending and China slowing. Is this the turning point for Australia's economy?I a turning point. As economy?I think it is a bit of a turning point. As I said
before, we've a turning point. As before, we've gone through the
biggest boom a turning point. As I said
before, we've biggest boom in our history, it got under way biggest boom in our history, got under way about 2,000, we got didn't know got under way about 2,000, didn't know it initially but it became evident through the didn't know it initially but became evident through the last decade, became evident through decade, that boom ended in term of decade, that boom ended of commodity prices two years ago and of commodity prices two years ago and it ended this year in
terms ago terms of the mining boom. We are going through a turning point boom.
terms of the mining investment boom. We are turning boom. We are going through a
turning point in our history and I think turning point in our and I think the Government now has and I has to deal with that. They've copped the rough end of the miming fwoom you like. You can't blame them for everything here. The fundamentals have certainly turned against them . I don't think we're at a crisis points yet, obviously growth will hang above the 2% level, we won't go into recession and there's plenty after onlio to be thrown at the economy, lower interest rates, still more to go on that front and plenty of scope for the Aussie dollar to fall, but at the end of the day what would have been nice if we could have mourt aside for a rainy day and that's the disappointment all month all of this. Norway has shown the way on this front. They realise medal years ago they weren't going to have this oil, they started putting money aside and that's what we should have done. So I think we can get through this, but the next year or so could be a risky period and the concern, the risk would be that if things detierate further that that return to a surplus that's currently in the numbers for 2016-17 gets pushed automatic further or alternatively the necessary tightening that will be required at some point becomes a lot more aggressive than is currently shown in the statement.How much more room is there with interest rates?There's still 257 basis points between now and zero so we're at 2.75%, the US, Japan they're at 0 so they could go all the way to zero. I don't think that will be necessary, I think we're almost certainly going to see a rate cut next week. The over that one is whether the reserve might say, "Well an election has just been called perhaps on reserve might say, "Well perhaps on Sunday, election has just been perhaps on Sunday, let's wait till another month or so, hopefully they want simple it, I think we'll probably see maybe another one or two more, probably taking us down to 2%, that should be enough to provide support for the non-mining parts of the economy and we are starting to see the housing sector pick up f you put that together with a much lower Australian dollar that should help lead to a brighter outlook as we go to next year. to you now. We're seeing the dollar go to 90 US cents. That is likely to have an impact on manufacturing? The Reserve Bank started cutting interest rates, did two months and and in the interim the banks raised rates. That was the first