TOPIC: NATIONAL ACCOUNTS
E&OE - PROOF ONLY
SMYTH: Minister, welcome to Drive.
WONG: Good to be with you again.
SMYTH: You must be popping champagne today.
WONG: Well, I think the country should be very proud of this. These are extraordinary figures, really extraordinary. 1.3 per cent growth in the last quarter. 4.3 per cent, our economy grew through the year. They are extraordinary results. And, really, Australians should be proud of how well our economy is performing, particularly given where the global economy is.
SMYTH: What do you think explains the richness of these figures?
WONG: The good news from the figures is that we see growth not only in business investment – which is a good thing, it shows the confidence that business investors have in the Australian economy – but we also see households being able to both save as well as continue to consume. So household consumption grew but we also see people saving at very high rates compared to what they used to save in the early part of this century. So these are very good figures, as I said, quite exceptional figures, particularly in the circumstances. Well above what markets anticipated and Australians should be proud of it.
SMYTH: Were you as surprised as many of the commentators appear to have been? I see the Commonwealth Bank Chief Economist said he had to pick his jaw up off the table when they came out today.
WONG: (laughs) I do tell myself what I think it would be, and this was certainly higher than I anticipated and that’s a good thing. That’s a great thing because behind these figures is a story about economic strength. Behind these figures there’s a story about resilient businesses, higher incomes, and people being able to save more. These are good things. And I know not everyone in the country is in the mining boom fast line. And I know there are still challenges out there for many sectors. But it’s good for us to be reminded as a country how resilient we are and that’s what these figures show.
SMYTH: It’s not consistent growth, is it? It’s still very much a patchwork economy.
WONG: We do have a patchwork economy, but let’s get this into perspective. Growth through the year of 4.3 per cent – that’s well above trend. It’s a very, very good, very strong result.
SMYTH: The Liberal Opposition put out a release today suggesting that South Australia is way out of step; that our growth here in the March quarter was only up about half a percent. That’s a long way off the national average isn’t it?
WONG: I’m sure people in the Liberal party, whether State or Federal, might like to continue to talk the economy down. I reckon it’s probably time we backed Australia’s economic strength. I think that’s what we should be doing. Of course, the Government understands there’s a patchwork economy. That’s why we’ve got the mining tax – that’s about spreading the benefits of the mining boom to more parts of the country. It’s why we’re investing in skills and education – almost doubling schools funding, more people in university, more people in vocational training. This is about making sure we use some of the benefits of the mining boom to improve the skills base of the Australian people, so we can make sure we have more opportunities into the future.
SMYTH: These figures of course relate to the March quarter. Since then, the situation in Europe has deteriorated quite rapidly. Are you concerned that we might see a slowdown come the next set of results?
WONG: Let’s not immediately jump to the negative. Remember, the March quarter came after a period of volatility in Europe as well, which we saw towards the end of last year. There’s no doubt that there are real concerns about what’s occurring in Europe. We know that we’re going to continue to see bouts of uncertainty because there’s a long and painful adjustment that Europe has to go through. But I think these figures remind us that we, as Australia, face this uncertainty from a position of real strength and we should have confidence in our capacity as a country to handle whatever uncertainties the global economy might throw at us.
SMYTH: You’re listening to Drive with Michael Smyth. My guest this afternoon, the Federal Finance Minister, Penny Wong. Minister, what’s this likely to mean for interest rates?
WONG: Well, as you know, the Government has been very clear about why we need to not only come back to surplus in 2012-13, but continue to build those surpluses over time. And one of the key reasons for that is we want to make sure we give the Reserve Bank the room to move.
We’ve seen an interest rate cut prior to the Budget, an interest rate cut after the Budget, and that’s very welcome, not just to households but also to those businesses which aren’t in the mining boom fast lane. Obviously, interest rates are a matter for the Reserve Bank. What the Government can do is what we’re doing, which is make sure we run a sound budget position. You don’t add to price pressures which means the bank’s got room to move, as it has.
SMYTH: Do you suspect, had the Reserve Bank Board been aware of just how strong this economic growth has been, that we mightn’t have seen that cut yesterday?
WONG: I don’t like to second guess the Reserve Bank, but I would just say this: we also see inflation being contained. This is one of the things that I think needs to be emphasised. Not only are we seeing very strong economic growth and low unemployment rates, we’re seeing inflation contained, interests rates down, and a very strong pipeline of investment which is a real mark of confidence by global investors and business investors in the Australian economy. Remember, half a trillion dollars of investment in the resources pipeline – that’s an extraordinary vote of confidence in Australia.
SMYTH: You’ve acknowledged this is a patchy effort across Australia. What more can be done to make it more uniform?
WONG: I think it’s about making sure we use the benefits of the boom wisely. And I think the Government’s approach with the mining tax and making sure the benefits of that flow through to families, particularly low and middle income families through the School Kids Bonus, where people get assistance for kids’ education costs. We need to continue to invest in education and training and we need to make sure we continue to work on productivity. And all of these things are about using the benefits of the boom wisely.
SMYTH: Penny Wong, we appreciate your time. Thank you.
WONG: Good to speak with you.