BARTHOLOMEW: Finance Minister Penny Wong joins us now. Minister, good afternoon.
WONG: Good afternoon, good to be with you.
BARTHOLOMEW: Either way you look at it I suppose, a downgrade of growth is not good news.
WONG: I would make the point that these forecasts from the IMF have Australia outperforming all other advanced economies, which is a pretty good result and broadly consistent with the estimates that the Government had in the mid-year review. Its a very strong result, particularly given where the global economy is.
BARTHOLOMEW: Could it though even be too optimistic? Westpac chief economist Bill Evans says even achieving that rate isnt a done deal. He thinks its predicated on some fairly aggressive easing of monetary policy.
WONG: Theres no doubt theres a lot of different forces at work in our economy a high dollar and lots of investment. But I think its important to recognise where we are: weve got a very large investment boom; weve got strong employment figures; weve got an economy that is coming back to trend; and thats why its responsible to put in place a surplus. Its a buffer against global uncertainty, and its also the best opportunity if the Reserve Bank wishes to reduce rates it does give them room to move should they see fit.
BARTHOLOMEW: You say the IMF broadcasts are broadly consistent with the outlook that has the budget returning to surplus in 2012-2013. But by how much now? Its going to be around $1 billion or so, isnt it?
WONG: Theres no doubt that achieving a surplus at a time when were seeing revenue not at the level that we previously anticipated, is tough. Weve spoken about that. But we have to come back to why were doing this. Were coming back to surplus because its the responsible thing to do, its about making sure that the RBA has got room to move, and its also about recognising that there is global uncertainty and the IMF talk about that its good that Australia can achieve a buffer against that uncertainty.
BARTHOLOMEW: The Wall Street Journal leads with the IMF warning about negative effects of too much austerity, suggesting now may not be the time to be reducing spending. And Commonwealth Bank boss Ralph Norris has told Fairfax media the pursuit of a surplus is mindless. He says its the biggest threat to the Australian economy.
WONG: I think hes wrong. In terms of the journal that you spoke about, lets remember this: there is a very big difference between the sort of austerity budgets that youre seeing the European economies being forced to undertake because of past and current problems, and the balanced budget the Government is pursuing.
The reality is we are in a very different economic position. The IMF has made that clear. Its confirmed the strength of our economy and confirmed that we are expected to outperform every major advanced economy over the next two years.
And thats why it is so extraordinary that we see Tony Abbott today being so negative. That even on a day when the IMF says your economy, the Australian economy will outperform other major advanced economies, hes out there talking down the economy.
BARTHOLOMEW: But the Global Financial Crisis is said to have cost your Government revenue of about $140 billion. Wouldnt people understand that now, of all times, might not be the easiest time to deliver what could be a token surplus?
WONG: It isnt the easiest time to manage the Federal budget, but what youve got to focus on is what is the right thing to do for the economy. It is a responsible thing to bring the budget back into surplus, for the reasons Ive outlined
BARTHOLOMEW: ... but its a surplus that could evaporate very easily with a few more hits to the bottom line. Is it worth the pain to fall over the line to the tune of a couple of hundred million dollars?
WONG: Theres a lot of ifs in that. What Id say again is this: youve got to decide how youre going to run your fiscal policy. And weve made very clear for some time now, just as it was the right thing for the Government to step in at a time when the private sector was pulling back because of the Global Financial Crisis; as we see the economy strengthening; as we see investment continuing, it is important that we bring the budget back to surplus.
BARTHOLOMEW: It has been eroding, the surplus figure, for some time though. Youre facing a shortfall in revenue from company tax. Treasury estimates continue to fall short by a few billion dollars youre budget deficit rising to close to $40 billion. It makes the job harder again. So what now? Whatever it takes? More and more cuts to get there?
WONG: Certainly the job is harder, because weve seen, as Ive said, revenue not being as strong as was previously anticipated. You used the figure, and youre correct, $140 billion written down over a number of budgets as a result, over a number of years, of the Global Financial Crisis. And weve seen some softness in revenue between budget and the mid-year review, and thats all very public.
But that doesnt detract from the core issue, which is the extent to which the Government, through the budget, is influencing the economy. And the judgement that we have made, very clearly, is that it is responsible for us to ensure we bring the budget back to surplus.
BARTHOLOMEW: The Opposition says the Government is certainly influencing interest rates. What do you say to those claims that your Government borrowing is to blame for high rates? Our net debt forecast to peak at one-tenth of other major economies though, is that borrowing too important?
WONG: I have to say, were all waiting for the day when the Coalition under Tony Abbott actually says something constructive instead of something negative. And if they are so concerned about agreeing with the Government about coming back to surplus, its about time they fronted up to the Australian people and told them how they would deliver it. Because they talk a lot, but theyre never prepared to put their costings and their savings into the public arena. And they dont have any credibility if they simply continue to be negative.
BARTHOLOMEW: Penny Wong, thanks for joining us.
WONG: Good to speak with you.
ENDS