E&OE - PROOF ONLY
GREENWOOD: First up on the program tonight, the Finance Minister Penny Wong joins me on Money News. Many thanks for your time Penny.
WONG: Good evening Ross.
GREENWOOD: First I want to talk to you about the story we’ve broken tonight on Nine News and here on Money News about the attempt, we believe a credible attempt, to try to destabilise the Reserve Bank board, in particular false rumours about internal negotiations or discussions about interest rate settings last Tuesday when interest rates were kept on hold, but at least there was, from their public statements, considered to be some suggestion they may have been thinking about increasing interest rates. Are you concerned when a board that is as sensitive for our economy as the Reserve Bank board, that there may be external attempts to try and destabilise it?
WONG: I’m not going to comment on the suggestions that you’ve just outlined, Ross. But the only thing I would say is the independent Reserve Bank is a strong and stable institution in our economy under both sides of politics. It has been so and it will continue to be so.
GREENWOOD: Although it is fair to say that there has been change at the Reserve Bank board in recent times, different composition of the board. Do you believe that that should lead to potentially any change in the stability of that board itself?
WONG: I believe it is a very stable institution, a very strong institution, and it is well respected as an independent institution, and that will remain so.
GREENWOOD: Can I move on then to events of the past few days, and in particular the big falls in the stock market, which of course are now making people wonder whether there may be a second global financial crisis. Your Government continues to say that Australia’s fundamentals are strong, but there’s no doubt that as a result of big falls, the Government makes less in capital gains tax, and gains less revenue as a result. Are you worried about the prospect of the Budget returning to surplus in 2012-13 as you’d promised?
WONG: First, the fundamentals in the economy are strong, and I think it’s important to recall that. There’s obviously a lot of volatility in the market at the moment, we’ve seen a substantial amount of volatility in global markets, and whilst we are not immune, you’d have to say, looking at our economy, we’ve got strong fundamentals, we have low unemployment, we have a very strong pipeline of investment, we have well-capitalised, well-regulated financial institutions, and we are in the right part of the world. We are hooked in to growing economies like China. So we are well-placed to weather any storm that the world throws at us.
Having said that, of course we’re not immune. The Government has been very clear about why we want to return the Budget to surplus in 2012-13. Of course the international situation makes it harder, but our plan remains a return to surplus as we’ve outlined.
GREENWOOD: So that is your plan. Can I just play you two pieces of audio, one is the Treasurer, Deputy Prime Minister Wayne Swan yesterday:
SWAN (RECORDING): We will bring the Budget back to surplus in 2012-13, we are not immune from the events that we’re seeing in global markets, they do impact on revenue–
GREENWOOD: Which to me seems to be reasonable. Okay, can I play you a piece of audio from the Treasurer today in Perth:
SWAN (RECORDING): We have put in place the objective of coming back to surplus in 2012-13 because that’s important to send a message to the world that there’s a very strong, consistent, and clear fiscal policy in Australia. But what we will do in a methodical way is we will prepare our estimates for growth and release them at the end of the year as we usually do. And we still expect to be back in surplus by 2012-13.
GREENWOOD: So the two words there were that obviously that we expect, and obviously our aim is to, you know, effectively get it back into surplus. It seems as though the language has drifted slightly–
GREENWOOD: …Towards the expectation, rather than the commitment which it has been since of course the Government has come back and been re-elected.
WONG: Ross, to be frank, I don’t think that the two pieces you’ve played are different.I think the Treasurer has consistently made the point that we are not immune from the global economy. We’re part of the global economy and obviously, the volatility we’re seeing in the global economy is something that has an effect on Australia. We’ve also said, for the reasons that I outlined in my previous answer, low public debt, good financial institutions, strong pipeline of investment, low unemployment. These are all things which demonstrate the strength, the underlying strength of our economy.
GREENWOOD: Though the stock market is always a forward looking barometer of where the economy might be in the future. We see unemployment for example rising today. Do you discount the prospect of this Government embarking on a second economic stimulus package just as it did during the first global financial crisis?
WONG: Let’s get the unemployment rate very clear. The unemployment rate rose very slightly to 5.1 per cent. In fact employment numbers remained broadly the same. There was a small loss in full time employment but it was offset almost in total by an addition of part time employment. So there was a very small net change. At a 5.1 percent unemployment rate, where are some of the other economies around the world, the US and the Euro zone are looking at nine percent.
GREENWOOD: Sure I understand that. Penny, you and I live in the real world. You go out there and you talk to a lot of employers and I know this. Now in the small business area, particularly in retailing. You and I both understand that retailing right now is hurting. And retail contributes 15 per cent of the workforce to this economy. The fact is at some point, those retailers are going to start to shed jobs, if they haven’t already. And that is going to put pressure on your unemployment rate. Now surely, given that this Government stands to try and get as many people as possible that has got to be concerning. And also has got to lead to a further deterioration in your hopes and ambitions to try and get that budget into surplus in 2012-13.
WONG: I think we all know that consumers are spending less and saving more. People have taken the opportunity to reduce their debt levels, to save more. That’s a decision many Australian households have made, and that obviously impacts on those parts of the economy which are reliant on consumer spending and retail is the most obvious one. But I think again, we should take a step back and say where is the economy heading. Have a look at the $430 billion in resource investment that’s coming into the economy. We have to look to that medium term and longer term and that’s why we remain committed to returning the budget to surplus and that’s why we are doing what we’re doing in terms of investing in productivity, investing in skills, investing in infrastructure.
GREENWOOD: And I would agree entirely with you when you look at all of that investment coming. Yes, there is a great and prosperous future somewhere down the track, largely based around resources. I keep on saying, the vast majority of small businesses in this country that employ people are in manufacturing, in services and in retailing. They’re the ones who are hurting because they’re the ones who are considering, they are having to make their way through higher interest rates, and cost pressures on this mining boom and mining investment boom, that is effectively squeezing many of them out of business.
WONG: I think there is no doubt that not every part of the economy is doing as well as the other. And there’s no doubt that small businesses that rely on for example, consumer spending. There’s no doubt that those businesses which aren’t in the resources sector or connected to it, are finding life tough. That’s one of the reasons why, as you know have planned a reduction in the company tax rate to be funded by the minerals tax. And of course, small business would get that ahead of other companies because we do understand that it’s important to try and alleviate some of those competitive pressures that sector is experiencing.
GREENWOOD: I’ll leave you with just one thought Penny Wong. If you’ve got to pay tax, you’ve actually got to make money first. You’ve got to make a profit. And a lot of those companies right now, you know that and I know that, are struggling to make a profit right now.
WONG: Look, the Government is very aware of how things are for some parts of the economy, and we do understand that. What we have to continue to do though is focus on implementing our productivity agenda, implementing our company tax agenda, and recognising we are investing in skills, so that we have the skills in the Australian workforce that we need.
GREENWOOD: Finance Minister, Penny Wong, always good to talk to you, appreciate your time.
WONG: Good to speak with you.