E&OE - PROOF ONLY
GLOVER: Penny Wong, good afternoon.
WONG: Good afternoon.
GLOVER: This is good news for households.
WONG: It’s good news for households, good news for small businesses – it’s the interest rate cut that many families and businesses have certainly been hanging out for. It’s much needed and much deserved.
GLOVER: Has the Reserve Bank been behind the state of play on this one?
WONG: Governments make sure the Reserve Bank does what it does independently, that’s a matter for them. What they have done today is cut the official cash rate by 50 basis points and this means that the rate is lower than at any time under the last Liberal Government. And it’s certainly much lower than it was when we came to office. So that’s a good thing for families.
GLOVER: Yeah, but that in itself is a measure of a slowing economy. Glenn Stevens himself said this rate cut was due to an economy that was weaker than first thought.
WONG: But if you look at what the Reserve has said about where we are going in the years ahead, and where the Treasury has said we’re going in the years ahead, we still see an economy that’s very strong.
Let’s remember our economy is bigger than it was… seven per cent bigger than before the global financial crisis. We’ve got an unemployment rate with a five in front of it. We’ve created over 750,000 jobs since we came to office. These are all very good figures.
GLOVER: The thing that the Reserve Bank is struggling with, of course, is the two-speed economy –
WONG: That’s right.
GLOVER: … the fact that they’ve only got one lever, and yet an economy in two parts. And that’s partly due to the fact that this Government did not put in the mining tax in the way first suggested …
WONG: I’m not sure I’d agree with that, unsurprisingly, and as you might recall, what we have at the moment is a mining tax that much of the industry is willing to pay, opposed by the Coalition.
GLOVER: Willing to pay, according to Andrew Forrest, because no one has to pay anything.
WONG: I recall Mr Forrest previously saying the mining tax would have a huge impact on his industry … that’s a matter for him. What I would say is in terms of the patchwork economy, you’re right, that’s one of the tough aspects of what’s happening in Australia at the moment.
Some businesses are doing it very tough, and others which are in the faster lane are doing well. That’s why we’re trying to put in place policies like the mining tax, trying to ensure we spread the benefits of the boom. These are all policies that are about the future, and they of course include the very large investment in education and skills.
GLOVER: But of course a more effective mining tax, such as the one first proposed, would have slowed down the mining industry in a way that would have made the Reserve Bank’s job a lot easier.
WONG: The purpose of the mining tax has never been to slow down the sector; it’s been to use the benefits of the high profits in the mining sector to spread to other parts of the economy, and to parts of the economy that aren’t gaining the benefit. That’s the purpose of it. And I’d just again say this is still opposed by Tony Abbott. He still wants to protect high profits of miners rather than provide benefits to the rest of the community.
GLOVER: The Minister for Finance Penny Wong is here as the Reserve Bank decides to cut rates by 50 basis points, more than most observers expected. Penny Wong, part of the reason for the big cut is that the banks… the Reserve Bank has no confidence that the banks will pass on the full extent of the cut. Now here’s where the Opposition has said in the past that the banks have been thumbing their nose at the Government.
WONG: Well, I’ve also seen the Opposition, through my counterpart, Mr Robb, giving the green light to banks raising their mortgage rates. My view is this: banks should do the right thing by their customers. There’s no doubt Australian consumers will expect their bank to pass the full cut on. If their bank doesn’t, I’d encourage them to shop around.
GLOVER: Do you expect they will though? Because there’s no sign, given past cuts, that they will.
WONG: Ultimately, they have to do the right things by their customers; they’re the people who keep their business going and I have no doubt customers will expect it. But, again, what I say is the Government has done a lot to kick-start competition in the banking sector. We see more people switching loans to take advantage of the competition out there and I’d encourage people to shop around.
GLOVER: Do you expect them to pass on the cut today?
WONG: I think their customers expect it. I think –
GLOVER: But do you think it will happen?
WONG: Ultimately they have to make a decision, and different banks in the past have made different decisions. And I think those who haven’t have certainly had the reaction in the community and from their customers that you would expect.
GLOVER: Some people believe that the Reserve Bank’s 50 basis point cut is a sign that they don’t expect the banks to pass it on. They think, look, if we give them 50 basis points then maybe they’ll pass on 30 and that’s better than we could’ve achieved with a 25. In other words the extent of this cut is a very measure of the banks’ reluctance to pass on these cuts …
WONG: I think that we’re sort of getting into the mind of the Board of the Reserve Bank and I wouldn’t want to try and do that. They’ve got to make their decisions. I think that this is a very welcome rate-cut. I think banks will know that their customers would expect it to be passed on. And I’d say to people, if your bank doesn’t choose to do that, then have a look around for a competitive rate elsewhere.
GLOVER: Minister, it’s all dependent I guess on the promise you’ve made to keep the surplus of the Budget when it comes out. It’s going to be a very painful period for the Government, trying to meet that claim, isn’t it?
WONG: The surplus is important and it’s a surplus in 2012-13 but also in the years ahead. It’s important for the Australian economy now and in the future. It is about a buffer in what is a pretty uncertain global environment, and the Reserve Bank has spoken about that. But it’s also important to have disciplined fiscal policy, because it does give the Bank room to move and the Government’s made its view clear on that.
It doesn’t mean it’ll be an easy Budget, Richard, but we’ll keep the interests of particularly low and middle income Australians at the forefront of our minds.
GLOVER: Okay, and what’s the chance that this Budget will be delivered into clean political air? In the sense that every announcement for the last four or five seems to have been mired or distracted in some controversy. Do you think you’ll get clean air on Budget day?
WONG: This is certainly a difficult time in federal politics, isn’t it? And there’s a lot of focus on issues… a lot of focus perhaps not on the big policy issues. I mean, we delivered an aged care package, which is a very, very important reform – the biggest reform in decades. The Prime Minister’s announced our intention to launch the National Disability Insurance Scheme. These are all important reforms, not just Labor reforms but reforms for Australia. I got into politics because I wanted to try and do good things for the nation. And I think that it would be much better if federal politics could focus on policy issues rather than other issues.
GLOVER: They’re self-inflicted distractions though, aren’t they? No one had to recruit Peter Slipper to your side of politics. No one had to leave Thomson dangling on a tree for so long.
WONG: Can I ask you the last time you heard Tony Abbott put forward a serious policy proposition? Something where he’s said he’s actually going to fund something and given any details about what he’s going to do for the future of the country. When have you ever heard him say something that wasn’t negative and was about the future of the country? And this is an environment which is full of conflict and he likes a fight. Our job as the Government is to get on with governing and, as Finance Minister, I’m working on helping the Treasurer bring down a Budget that’s good for the country.
GLOVER: Well, everyone who has a mortgage will appreciate the extra dough in the envelope. Penny Wong, thank you very much for your time.
WONG: Good to speak with you.