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Transcript of interview with Fran Kelly: ABC, Radio National: 8 November 2012: US Presidential election; fiscal cliff; meetings with Christine Lagarde, Ben Bernanke and Tim Geithner; global economy; Treasury costings; Joe Hockey refusing to have policies costed

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THE HON WAYNE SWAN MP Deputy Prime Minister Treasurer


8 November 2012


SUBJECTS: US Presidential election; fiscal cliff; Meetings with Christine Lagarde, Ben Bernanke and Tim Geithner; Global economy; Treasury costings; Joe Hockey refusing to have policies costed

KELLY: Wayne Swan, welcome back to Breakfast.

TREASURER: Good morning Fran.

KELLY: Treasurer, Barack Obama won a decisive victory in the end, but the Congress remains divided. Do you think Obama’s re-election will inject more confidence into the global economy or create more uncertainty as the fiscal markets seem to be believing if you can judge from their initial response?

TREASURER: I think it’s a very clear result for the President. Of course, there’s still a Congress which is divided and of course when it comes to dealing with issues like the fiscal cliff, I think everybody’s got an interest in seeing that is resolved as quickly and as swiftly as possible and I think that will require in the United States for people to come together and deal with those issues and I do believe that the President will focus on those issues in the weeks ahead. But it’s a bit early today to make a call as to when these matters will be resolved.

KELLY: I can't believe people aren’t talking about it though, especially at the level of the meetings you’re having. You just stepped out of that meeting with Christine Lagarde from the IMF. How worried is she about this prospect of ongoing gridlock in Washington and that looming fiscal cliff?

TREASURER: Well Fran I can't pass on their views, but I have been meeting with a range of people in Washington as well as Mexico City with Finance Ministers from the G20. But here I met with the Federal Reserve Chair Ben Bernanke, Christine Lagarde and of course Treasury Secretary Tim Geithner. My own view is that we do need to get

some clarity on the path forward, but it will be difficult to see that coming in the weeks ahead.

KELLY: We certainly do need to get clarity on the way forward because if the economy of America does go over that metaphorical fiscal cliff, what will that mean? Recession in the US? And what might it mean for Australia?

TREASURER: I think it’s a big challenge because the fiscal cliff is a combination of tax increases and spending cuts. As you know there’s great uncertainty in the global economy and this adds to that. We’ve got weak global growth at the moment and of course that’s beginning to weigh on growth in our region. So if you put together the recession in Europe and the challenges in the United States, the global economy does face challenges in the weeks and months ahead. It’s really important therefore that these matters are dealt with in a sustainable way in the United States.

KELLY: Critically important to your budget surplus isn’t it? If the fiscal cliff, if the economy in America goes over that fiscal cliff, it would make a surplus even more difficult for you here in Australia, wouldn't it?

TREASURER: I think that’s a hypothetical question. What I can say is it would impact on global growth, we’re not immune from those impacts. The good news in the US is that the economy is showing some signs of recovery but if this issue were not dealt with, the economy could go into recession yet again. Some people talk about a hit to growth following from the fiscal cliff of between 1 and 2 per cent. So that’s a real challenge for the global economy and a challenge for everybody. That's why at the G20, in particular, I’ve concentrated on talking to Finance Ministers about what we must do to lift global growth. Part and parcel of that is to get rid of the uncertainty in both the US and greater clarity of what is happening in Europe. But also a whole range of policies across developed and developing economies to lift global growth.

KELLY: Treasurer, I know you’re reluctant to speak about the detail of your private talks with people like Ben Bernanke or Timothy Geithner, the Treasury Secretary, but what about the atmospherics? Are you picking up a sense that the US law-makers are prepared to move to make the right policy decisions to break this deadlock? Is there optimism there?

TREASURER: I think you can see a very clear result in terms of the vote for the President and I think that does give him greater authority in these circumstances. Of course he put out a message of hope: that what we must do in America, his message was that the challenges and opportunities need to be fairly shared. The things that we do together and the things that make us strong, that’s a message that went to the very core of the election campaign here and I think that message is the one he will take to Congress in the weeks and months ahead..

KELLY: And to push you on this a little harder though - are you getting that sense of optimism from the likes of Timothy Geithner?

TREASURER: I don't talk about the meetings I have Fran. But what I do know is that the challenges and the opportunities are there for all to see, but what they need is a political resolution.

KELLY: Treasurer, if I can bring you back home now. You’ve admitted asking Treasury here to cost three Coalition policies. Why did you do that and why did you give these costings then to the Fairfax papers?

TREASURER: I don't accept that characterisation. This was a document commissioned by the Government, it’s up to the Government to use it as it sees fit. There’s absolutely nothing unusual about that. These are matters of public debate and it’s entirely appropriate that information is released.

KELLY: I’m just wondering what you don't agree with in terms of the characterisation. You just said you did commission these costings from Treasury..

TREASURER: That’s right.

KELLY: And then you did give these costings to the Fairfax papers, why you did that?

TREASURER: There’s nothing unusual about it because costings go to the core of the current debate. You’ve got Mr Hockey who stated on morning TV that they’ve got a $70 billion crater in their budget bottom line and he’s refusing to have his policies costed at the Parliamentary Budget Office. I think the Liberals are very, very nervous about having their policies costed.

KELLY: The Shadow Treasurer says the result of this is that you have in his words, quote, ‘bastardised’ the Treasury, the Department, politicised the public service. It’s gotten to the point where the head of Treasury, Martin Parkinson, has been forced to weigh in and write a letter to the Shadow Treasurer saying that Treasury did not provide the advice to anyone outside Government and Treasury was asked for these costings - they weren’t unsolicited. Do you regret the fact that Treasury has been dragged into this?

TREASURER: What I regret is the way in which Mr Hockey has sought to politicise the Treasury. In the past, when the Liberals were in Government and when Mr Hockey was a Minister, the Treasury has supplied information to government, costing a whole range of issues. There’s nothing usual about that at all; this is all the work of Mr Hockey.

KELLY: Treasurer, you can't deny that you have used this document from Treasury to make a political point. And even in the way you’ve spoken about this, you said, Treasury gave us these numbers. Treasury didn't give them to you, you asked for them and then you leaked them to make a political point. Why wouldn't that directly politicise the public service?

TREASURER: Because it’s entirely appropriate for the Government to do that and past governments have done that as well. There’s nothing unusual about that at all.

KELLY: Did you think at all about the damage that might do to the impartiality of Treasury?

TREASURER: I didn't count on Mr Hockey running out to attack the Treasury. He’s made a habit of doing that, year after year.

KELLY: Didn't you immediately politicise this document when you released these Treasury numbers adding up the cost of the Coalition’s policies without also adding what might be savings from scrapping the carbon tax and the mining tax?

TREASURER: What we’ve done here is provide information in the public debate, that’s what governments do. Mr Hockey has not been transparent about his policies or his costings, he’s refusing to go to the Parliamentary Budget Office with his policies. So it’s entirely appropriate.

KELLY: Treasurer, thanks very much for joining us on Breakfast.

TREASURER: Thank you.