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Transcript of interview with David Speers: Sky News: 22 April 2009: CPI; recession; Budget speculation; G20 Washington Meeting.

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22 April 2009


SUBJECTS: CPI; Recession; Budget Speculation; G20 Washington Meeting

SPEERS: Treasurer, thank you for your time. Last year you said the inflation genie was out of the bottle. Is it now back in?

TREASURER: Well, what’s occurred is a big change in the international economy, and around the middle to the third quarter of last year there was a dramatic change and the balance of risk changed from high inflation on the one hand, to slowing growth and higher unemployment on the other. That has been acknowledged by every international economic institution. It can be seen not only in their forecasts, but unfortunately it can be seen in the damage that is being done to real economies around the globe.

SPEERS: But inflation is no longer the risk that it was last year?

TREASURER: Most certainly not, and of course we are now facing a very significant contraction in the global economy. We had a very sharp contraction in the December quarter, and all of the data is now indicating that globally there’s even been a further sharp contraction in the March quarter, and we’re certainly not immune from that.

SPEERS: Well, you’ve now, in fact, conceded we’re in recession. When did you know Australia was in recession?

TREASURER: Well, we don’t have the official data, and an official recession is two quarters of negative growth. And we won’t have that data for some time for the March quarter.

SPEERS: But you’ve said we are in one.

TREASURER: Well, because the data we’ve been looking at internationally over the last three to four weeks, five weeks or so, tells us that there has been a very sharp contraction in that March quarter. Internationally, if you look at the China result the other day, what’s going on in Japan, all of this data tends to indicate that Australia has been dragged into recession, although technically we don’t have the data in hand.

SPEERS: There was enough information for you to start using this word comfortably.

TREASURER: Certainly, and we’ve not used it lightly. We have sat back and made, I believe, mature judgements about our situation. We have moved early. I think the point Governor Stevens made yesterday is very important, because we are in a better position than just about any other developed country in the world, and one of the reasons we are in a stronger position is because both the Reserve Bank of Australia and the Rudd Government moved early with substantial economic stimulus first of all last October, and then of course

again in February this year backed up by the bank guarantees which have been very important in terms of financial stability. And that is one of the reasons - there are many others - why we are in a stronger position than many other developed countries.

SPEERS: And yet despite all this spending and the interest rate cuts, we are in recession now. Is there any evidence that it worked at all? I mean, the Prime Minister said the first stimulus package would create 75,000 jobs?

TREASURER: The evidence is everywhere. And it is undeniable that our economy, as a result of economic stimulus and its response…

SPEERS: What is that evidence?

TREASURER: Well, stronger data still than just about any other country in the world. Just take…

SPEERS: We started all of this in a stronger position.

TREASURER: Just take our retail figures. You know, they are far stronger. They are one very obvious demonstration of the impact of stimulus, but not the only one. And relative to other countries, confidence levels are much higher in this country. Look at what’s going on in housing in terms of first homebuyers. There is ample evidence around that economic

stimulus has worked and is working and will continue to work. But of course you can’t necessarily measure what would have happened had we not put in place economic stimulus. But there is plenty of evidence to indicate that economic stimulus in this country through both stimulus packages has provided vital support for employment in this economy.

SPEERS: You were under pressure to cut payroll tax to also help employment, to make it easier for employers to hold onto workers. Wouldn’t that be a good idea?

TREASURER: Well, there are plenty of ideas that abound, and we’ve put a lot of economic stimulus in the system. For example, over two-thirds of the economic stimulus we announced in February is still to flow through.

SPEERS: Yes, but payroll tax, Treasurer, would payroll tax do that job of helping employers keep working?

TREASURER: Well, we have to take choices about how we provide assistance to industry, and industry has been very clear to us that their first priority has been economic stimulus. And that economic stimulus from the Nation Building and Jobs package is still flowing through and will flow through very strongly over the next 12 months, and that will be vital support to demand which is what industry needs first and foremost. And in addition to that, we’ve also put in place our 30 per cent Investment Allowance, which I know small

business is using and very interested in. So, there is a fair bit of support out there for business.

SPEERS: One thing we know you will do in the Budget is increase the age pension. You’ve committed to that. You, amongst other Ministers, said you couldn’t live on the age pension. I’m wondering about the Newstart Allowance, though. It’s $60 a week less than the age pension. Only $225 a week. And more and more people are having to rely on the dole as they join the jobless queue. Why don’t they also deserve an increase?

TREASURER: I’m not going to speculate about the outcome of the Budget when it comes to either pensions or allowances or whatever. I simply don’t do that and I’m not going to do that.

SPEERS: But is it being looked at at all?

TREASURER: I’m not going to speculate about it.

SPEERS: If you can tell us that you’re going to increase the age pension, why can’t you tell us about the Newstart Allowance?

TREASURER: Because our position on the age pension was announced a long time ago. It was announced through the Henry Review. That has occurred, that has been out there and has been a public commitment for a long period of time. I’m not going to speculate about what may be in or not in this forthcoming Budget.

SPEERS: Alright. But do you concede that $225 a week is impossible to live on?

TREASURER: What I concede is that we have to do everything we possibly can to support employment and ensure that those people who are unemployed get all the support that we can possibly give them to get back into the workforce.

SPEERS: I know you won’t speculate on what will be in the Budget, but there is growing reports that you will be targeting tax breaks and benefits to the rich as you try and rein in some spending. Now, without talking about the specifics of hobby farms being taken away as a tax break or the Medicare Safety Net having a tighter means test, can you tell us, are there too many tax breaks for the rich at the moment?

TREASURER: I’m not going to speculate about particular measures in the Budget. But as I’ve said, the global recession has put a wrecking ball through revenue and a consequence of that is that we don’t have any money to waste. So, we’ll always be looking at a whole lot of issues. But I’m not going to speculate about that.

SPEERS: Without speculating on particular issues, at the moment are there too many tax breaks for the rich?

TREASURER: I’m not going to buy into taxation and where we might go in or out of the Budget, however cleverly you want to ask the question, David.

SPEERS: Alright. What do you expect to achieve in Washington over the next couple of days?

TREASURER: I think it’s very important to once again engage with G20 Finance Ministers to get their up-to-date assessments of what is going on globally, where the reforms need to be made, and how we will continue the G20 process through to the next Leaders’ Meeting.

SPEERS: Treasurer Wayne Swan, thank you.

TREASURER: Good to be with you.