E&OE - PROOF ONLY
SPEERS: Penny Wong, thanks for your time. Did the Reserve Bank get it right today?
WONG: I’m sure this interest rate cut will be welcomed by families, by business owners around Australia. And, as the Government said, we wanted to return the budget to surplus for many reasons; a buffer in a time of global uncertainty, but also to give the RBA the flexibility to move, and it’s very pleasing for many Australians that it has.
SPEERS: The Reserve Bank in its statement says there’s ‘modest domestic growth’ and a ‘weaker and more uncertain international environment’ since its last statement a month ago. Are they right on that? That the outlook is, at least internationally, weaker and more uncertain? And what does that mean for the budget?
WONG: Of course anybody watching what’s happening on global markets, what’s happening in Europe, would agree that there is more uncertainty in the global economy. We factored in a very conservative figure for Europe in the Budget. You might recall our figures were more conservative in terms of their reduction, their recession, than many of the international organisations. So we believe it’s important to return the budget to surplus for the reasons we’ve outlined.
SPEERS: But surely Treasury and the Reserve Bank were in agreement back when the Budget was put together on the outlook for Europe. Now, the Reserve Bank is saying it’s ‘weaker and more uncertain’.
WONG: As I’ve said, we’ve factored a very weak outlook for Europe into our Budget. There’s no doubt there’s a lot of uncertainty in global markets. I think it’s very important to recall a few things though.
We can face that uncertainty as a nation with a lot of confidence. We’ve got a strong pipeline of investment; we’ve got unemployment at low levels; we’ve got inflation contained; we’ve got room to move on monetary policy, and we’ve seen that happen a number of times now. And we can face this uncertainty.
SPEERS: I guess what I’m getting at is, despite the worsening situation in Europe and the weaker news we’ve seen out of the US and even China – concerns over its growth weakening as well – you’re saying the Government will still get the budget back to surplus?
WONG: We are committed to bringing the budget back to surplus. And the reason is that we believe it’s the right thing to do. It’s the right thing given where our economy is at. It’s the right thing given where the global economy is at. It’s the right thing in terms of ensuring the Reserve has the maximum flexibility to move, as it has today.
SPEERS: It does talk, the Reserve Bank in its statement, about further weakening in Europe, but as I say, further moderation in growth in China. What’s the biggest threat to the Australian economy at the moment?
WONG: Obviously the global economy is where everybody’s eyes are focused…
SPEERS: But Europe, China or the US?
WONG: The global economy. What you would say is obviously we are in the region which is growing. We are intricately linked with China in terms of our trade prospects –
SPEERS: So, you worry that that’s like that –
WONG: – in terms of our growth prospects. But what I would say is this: it’s a question of what you think the right policy settings are. And the right policy settings at this time are to ensure you deliver on your fiscal policy and bring the budget back to surplus – we’ve laid out the Budget, and how we’re going to do that; that monetary policy has room to move to deal with the day to day issues in the economy – and that’s what we’ve seen the Reserve Bank do, both prior to the Budget and subsequently.
SPEERS: How much of this cut will be passed through, do you think?
WONG: I always say to you whenever you’ve asked me that question that banks should do the right thing by their customers. I’m sure customers would expect the rate to be passed through in full. And, if it isn’t, then people should look around for the best deal possible.
SPEERS: And the Government expects that as well?
WONG: Of course we would want that, of course we would expect that. But the reality is, we don’t regulate interest rates. What we can do as a Government to influence this is to enhance competition and that’s what we’ve done as a Government. And we’ve seen more Australians switching banks since, and as a result of, the Government’s policies.
SPEERS: Finally, given the uncertain and weaker global economic environment, what is introducing the carbon tax going to do to the economy? What impact will it have?
WONG: I was asked this question when I was Climate Change Minister, and what I’d say is this: that there is probably never the right time from many people’s perspective to introduce an economic reform, but it doesn’t mean it’s not the right thing to do. It is important we get a price into our economy. It’s about changing the way our economy works over time. It’s about giving the signal to investors about investing in clean energy processes, in clean energy jobs. And we’ve designed it very carefully, as you know, with substantial amounts of assistance to industry to manage that transition.
SPEERS: So is there no level of global financial deterioration that would cause a rethink on the Government’s part on this?
WONG: Like I’ve said, I’ve been asked that question regularly, both as Climate Change Minister and now subsequently as Finance Minister. If any Government waited, this problem won’t go away. We’d still have to deal with climate change. We’d still have to find a way to reduce pollution, to shift our economy to a less polluting basis. And we need to do it in a way that is at the least cost.
What is damaging for the economy, or what would be damaging for the economy, is the policy that the Coalition propose to reach the same target at a higher cost to the economy. That’s what would be damaging.
SPEERS: Penny Wong, thank you.
WONG: Thanks, very good to be with you.