GLOVER: Penny Wong, good afternoon.
WONG: Good afternoon.
GLOVER: This is good news for households.
WONG: Its good news for households, good news for small businesses its the interest rate cut that many families and businesses have certainly been hanging out for. Its 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, thats 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 its certainly much lower than it was when we came to office. So thats 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 were going in the years ahead, we still see an economy thats very strong.
Lets remember our economy is bigger than it was... seven per cent bigger than before the global financial crisis. Weve got an unemployment rate with a five in front of it. Weve 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: Thats right.
GLOVER: ... the fact that theyve only got one lever, and yet an economy in two parts. And thats partly due to the fact that this Government did not put in the mining tax in the way first suggested ...
WONG: Im not sure Id 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 ... thats a matter for him. What I would say is in terms of the patchwork economy, youre right, thats one of the tough aspects of whats happening in Australia at the moment.
Some businesses are doing it very tough, and others which are in the faster lane are doing well. Thats why were 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 Banks job a lot easier.
WONG: The purpose of the mining tax has never been to slow down the sector; its 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 arent gaining the benefit. Thats the purpose of it. And Id 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 heres where the Opposition has said in the past that the banks have been thumbing their nose at the Government.
WONG: Well, Ive 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. Theres no doubt Australian consumers will expect their bank to pass the full cut on. If their bank doesnt, Id encourage them to shop around.
GLOVER: Do you expect they will though? Because theres no sign, given past cuts, that they will.
WONG: Ultimately, they have to do the right things by their customers; theyre 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 Id 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 havent have certainly had the reaction in the community and from their customers that you would expect.
GLOVER: Some people believe that the Reserve Banks 50 basis point cut is a sign that they dont expect the banks to pass it on. They think, look, if we give them 50 basis points then maybe theyll pass on 30 and thats better than we couldve 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 were sort of getting into the mind of the Board of the Reserve Bank and I wouldnt want to try and do that. Theyve 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 Id say to people, if your bank doesnt choose to do that, then have a look around for a competitive rate elsewhere.
GLOVER: Minister, its all dependent I guess on the promise youve made to keep the surplus of the Budget when it comes out. Its going to be a very painful period for the Government, trying to meet that claim, isnt it?
WONG: The surplus is important and its a surplus in 2012-13 but also in the years ahead. Its 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 its also important to have disciplined fiscal policy, because it does give the Bank room to move and the Governments made its view clear on that.
It doesnt mean itll be an easy Budget, Richard, but well keep the interests of particularly low and middle income Australians at the forefront of our minds.
GLOVER: Okay, and whats 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 youll get clean air on Budget day?
WONG: This is certainly a difficult time in federal politics, isnt it? And theres 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 Ministers 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: Theyre self-inflicted distractions though, arent 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 hes said hes actually going to fund something and given any details about what hes going to do for the future of the country. When have you ever heard him say something that wasnt 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, Im working on helping the Treasurer bring down a Budget thats 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.
ENDS