UHLMANN: A short time ago I was joined by the Finance Minister from Adelaide. Penny Wong, welcome.
WONG: Good to be with you, Chris.
UHLMANN: Is the Prime Minister trying to muscle the Reserve Bank into a rate cut?
WONG: What the Prime Minister is doing is explaining to Australians why it is a good thing for the Government to ensure we bring the budget back to surplus. She's making a very important economic point that bringing the budget back to surplus does give the independent Reserve Bank the room to move should it see fit.
So I think that's a very sensible proposition and one of the key reasons why we do want to bring the budget back to surplus at this time.
UHLMANN: I noticed today the Prime Minister was pointing the Reserve Bank to its 1959 mandate, why didn't you instead point them to its 2010 Statement of the Conduct of Monetary Policy which is co-signed by the Treasurer where inflation targeting is the key?
Is that not going to be the key anymore in monetary policy? Do you intend to rewrite that agreement?
WONG: No, not at all. In fact I think on this program previously I've been asked about other people suggesting that we should be changing those policy arrangements. I don't believe we should be. They have served Australia well.
The question, though, at the moment is explaining very clearly why it is in the interests of Australian households for us to ensure we have a budget back in surplus. That means some choices and some difficult decisions, but it is very much with the interests of Australians in mind that we are doing that.
UHLMANN: Is there some confusion here, because between 6 October 2009 and 10 April 2010 when the Reserve Bank put up interests rates five times to 4.25 per cent, the Government then said there was no link between the amount of spending it had out then, which was quite a lot, and interest rates. Clearly, there is?
WONG: Well look, if you're referring to the sort of proposition that Tony Abbott has been making today, it's not a proposition that bears up to any scrutiny. Mr Abbott has been out today suggesting that Australian Government borrowings are increasing interest rates. If that were the case, then the United States, which is borrowing far more than Australia, would have far higher interest rates and they don't. The reality is...
UHLMANN: No I was referring to in fact the government spending between 2008 and 2010 and whether or not that pushed up interest rates at the time the Government said it didn't.
WONG: Why did the Government put stimulus into the economy, Chris? Because your question doesn't recall that. The reason we did was because as you know the global financial crisis was wreaking havoc in the global economy. Because of the action that the Government took to protect jobs, we see Australia now with an unemployment rate with a five in front of it very, very unusual, very rare amongst the advanced economies, and we have an economy that's seven per cent bigger than it was prior to the global financial crisis.
When you look at many other advanced economies, they haven't even recovered to the same levels.
UHLMANN: When you look at those figures too, an unemployment rate of 5.2 per cent, interest rate at 4.25 per cent cash rate, surely those figures are all good. Are you going to manage the economy now for the slow lane?
WONG: What we'll do, what we have to do is look at the whole of the economy and I think behind your question is a very important issue which is that there are very different experiences in Australia at the moment of where the economy is at.
As you know, there are some sectors doing very well and growing very fast and there are other sectors which are doing it tough. That's why we are putting in place policies such as the investment in skills, the minerals tax which is about spreading the benefits of the boom. But it's also one of the reasons why bringing the budget back to surplus is a good thing.
If we have a situation where the Reserve has the capacity and the flexibility to move on rates, that is obviously a good thing in an economy which is undergoing transition.
UHLMANN: What if the Reserve Bank cuts the cash rate and the commercial banks don't pass it on?
WONG: That's a whole another debate isn't it. But I think the Governor has made clear, or certainly the RBA made clear, they look at the actual rates in the economy. We have made our views clearly about banks making those decisions and I think the key to that is competition and encouraging consumers to make sure they shop around to get the best rate for their arrangements.
UHLMANN: Now overnight shadow treasurer Joe Hockey has said that the age of entitlement must end and as you as Finance Minister look ahead to Australia's future where we have an ageing population, where we have quite extensive welfare costs, surely every single welfare dollar must be spent wisely. That's a perfectly reasonable statement, isn't it?
WONG: You know Chris, I think that you say as much about your politics and your philosophy in the savings measures you take as you do in your spending measures. And I think it says something pretty serious and disturbing about Liberal party philosophy, that Joe hockey is saying to Australians I think that we should give millionaires tax breaks on their private health insurance. I think we should give millionaires paid parental leave at a high rate, but I think we shouldn't go harder on the pension.
Now that says something about your priorities, doesn't it? Now it is the case as Finance Minister I do have to look at the long-term, I have to look at how you fund increases in health and education, as we have, not just for next year, but for years to come.
And we've made a lot of savings decisions. Chris we've offset unlike the Opposition all new spending and we've made some difficult decisions, but I think if you look at them, they are decisions which recognise the need for fairness, like means-testing the private health insurance rebate, something Joe Hockey opposes.
UHLMANN: Penny Wong, we'll have to leave it there, thank you.
WONG: Good to speak with you.
ENDS