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Transcript of interview with Lyndal Curtis: ABC radio AM Program: 31 August 2009: economic stimulus.

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31st August 2009


SUBJECTS: Economic Stimulus

HOST: The Federal Treasurer is refusing to bow to Opposition calls for the Government to begin withdrawing its multi billion dollar Economic Stimulus Program. While this week’s National Accounts figures are expected to show that Australia continues to avoid a recession, Treasury advice warns that withdrawing the stimulus could stall the economy. The Treasurer Wayne Swan spoke to our chief political correspondent Lyndal Curtis a short time ago.

TREASURER: The stimulus was designed to be both timely, temporary and targeted, and of course it will be withdrawn over time, and it has its maximum impact in the June quarter of this year, and also in the September quarter of this year.

CURTIS: But the economy is a lot stronger than you thought it would be when you designed the package. Does that not mean that there needs to be some, in your words, recalibration?

TREASURER: Well there has been some recalibration because we look at the demand for the programs, and we look at how the programs are being implemented. But what we do know is that the economy has required substantial support, a substantial boost to demand

because of the global financial crisis and the global recession. If we had not put the stimulus in place, we would be looking at a completely different economy - without the support of our stimulus package. It has saved tens of thousands of jobs, supported tens of thousands of small businesses, it has filled an investment hole, it has avoided a technical recession, and it has had a dramatic impact on confidence, and to prematurely withdraw it would risk stalling the economy.

CURTIS: The signs are that the next move in interest rates will be up rather than down. If the Reserve Bank is looking at withdrawing its monetary policy stimulus, yet you continue with the fiscal stimulus, is there a chance that the two could be working against each other for a while?

TREASURER: No there’s not a chance the two would be doing that at all because, as I’ve indicated before, the stimulus is designed to be withdrawn. It reaches its peak in terms of the cash payments in June, and the infrastructure investment flows through at its peak in September and December, but it then begins to be withdrawn. That’s why the stimulus was designed that way - to fill the hole created by the drop in global demand, and to provide vital investment because the private sector had withdrawn. As the private sector returns, the stimulus is withdrawn.

CURTIS: You say Australia has escaped a recession. Is the threat of any chance Australia may go into recession now receded?

TREASURER: Well certainly global growth is still fragile. People shouldn’t forget that the IMF has forecast a contraction in advanced economies of -3.8 per cent this year, and the outlook for next year is still at best very choppy. So the stimulus is very important to support jobs, to support small business, and to support confidence in our economy. And I think those who are calling for the withdrawal of stimulus are principally those who opposed it in the first place. And if we had not put in place the stimulus Australia would be a very different place, with much higher unemployment and many more business failures.

CURTIS: Are you beginning to think unemployment may come in lower than your forecast at budget time?

TREASURER: Well we’ll be looking at all of our forecasts when we produce our mid-year update later in the year. There is no doubt that the stimulus has been very effective in supporting employment and supporting business. And as a consequence of that it may well be the case that unemployment is somewhat lower than we forecast in the budget and that would be a terrific thing.

CURTIS: People are though still losing their jobs. As someone who says they are committed to looking after those out of work or at risk of losing jobs, why withdraw money from social housing as you did last week and put it into schools?

TREASURER: Well the size of the stimulus is the same; what we’ve done is recalibrate the various parts of the program. And of course there has been very strong demand from primary schools, and what we’ve done is slightly shave the commitment in the housing area. But we have delivered, and will deliver something like 19,200 homes and we have also refurbished something like 10,000 homes - four times more than we put in the original package. So this has been quite successful. What we’ve done five months into the program is to recalibrate some of the spending.

CURTIS: But why should those needing housing pay for a $1.5 billion dollar blowout in primary school spending?

TREASURER: Well we’ll still be delivering something like 19,200 houses. We have delivered something like 10,000 refurbished dwellings - that’s a very, very big commitment in terms of housing. And of course what we’ve done is respond to the increased demand in terms of schools. That’s the common sense thing to do in these circumstances.

CURTIS: As you look though to the future while you have to start reining in your spending, can you continue to wear blowouts like the one in the primary schools program?

TREASURER: Well in terms of the total program we have stuck to our budget. That’s why we’ve recalibrated the spending, that’s what we’re doing. We are putting discipline into the program - it’s been very successful and the challenges we’re talking about here are the challenges of success.