GREENWOOD: The Finance Minister Penny Wong joins me now here on Money News. Many thanks for your time Minister.
WONG: Good to be with you.
GREENWOOD: The first question I guess is that youve really come up against a Coalition that after the banking issue seems to be having a bit of a sting in its tail. They are saying effectively that you as the Finance Minister and yourGovernment have not cut in hard enough effectively as a result of the strong dollar eroding your revenues and reallymore action should be taken.
WONG: Lets remember what we have delivered today. This is a MYEFO, a Mid-Year Economic and Fiscal Outlook, that includes $3.4 billionin savings. Its a document that demonstrates that despite a $10 billion hit on Government revenue, we are still on track to deliver a surplus by 2012-13.
Now obviously what we have done is complied with the strict rules we put in place. We have offset new spending. Weve done what we did during the election campaign which is to spend a dollar, we made sure we saved a dollar. I have to say this is far more than what both Mr Hockey and Mr Robb were able to do given that we know that their costings had a $10.6 billion black hole in them.
GREENWOOD: Leave aside Hockey and Robb for one moment, lets go to Access Economics director Chris Richardson. He has argued of course that the Government has not done enough to restrain inflation and to prevent overheating of the economy. He also suggests that the year after you return to surplus in 2012-13 notwithstanding your forecast date, he still expects that the budget will fall back into deficit.
WONG: On that lets start with this. First, the Government believes absolutely that we have to invest in capacity in this economy. The challenge of this term of Government is to manage growth. What we have seen in the figureswe have released today is a very good story more jobs, unemployment down, strong growth.
But the flipside of that is youve got to managethat well. Youve got to do what we are doing which is bring the budget back to surplus. And youve got to invest in infrastructure, in skills, weve got to invest in reducing the corporate tax rate. All of these things are about building the capacity of the economy and managing growth.
GREENWOOD: Because one of the key issues and one of the key forecasts inside your forecast today are that the unemployment rate will continue to fall. Now quite clearly if the unemployment rate falls back down towards 4.5 per cent, as you say, by 2011-12 then what also happens is that the Government makes morerevenue from tax receipts and pays out less money in unemployment benefits, which quite clearly has a demonstrable impact on your bottom line.
WONG: We are an economy that is having to deal with the challenge of growth. I think thats a challenge a great many countries around the globe would want to have, isnt it Ross? And obviously a lower unemployment rate, that meansmore Australians are in jobs. It also means that the Government has got to do what its doing, bring the budget back to surplus and make investments in the skills of Australians, in infrastructure, so we canboost the capacity of our economy.
GREENWOOD: The other thing I also noticed is that a lot was made before the election, a lot is made about of course the expenditure that the Government had made to get through the Global Financial Crisis. But the net debt of the country, which was expected to peak out around about $93.7 billion that was in 2012-13 when the budget came into surplus now because of, if you like, this blowout effectively in the budget because of the very strong Australian dollar, now its going to peak one year earlier at $94.4 billion. The issue that I note is its still going out to 2013-14, the debt is still well above $92 billion and I remember from the budget papers themselves it was then almost a straight line down to around 2018-19 when net debt would disappear. Is it still the Governments anticipation that that debt can be paid off in such time?
WONG: We are still on track to meet coming out of net debt over the timeframe that you have outlined. But lets remember also that our peak debt position is substantially better than almost any other major advanced economy. Our economy is in a far better position than most of our competitors and most of the other advanced OECD economies. But weve still got to keep doing what we said we would do, bring the budget back to surplus, invest in skills, invest in infrastructure.
GREENWOOD: But even your own forecast today also anticipates that inflation will go out to 3 per cent beyond, which puts pressure on interest rates. One of the accusations against this Government of course is because of the expenditure and Im even a little sympathetic here because I recognise that youve got to invest in the ports and the rails to actually get more export income but the problem is that that stimulus still does place pressure on interest rates.
WONG: Weve put in place a stimulus before and during the Global Financial Crisis which has delivered an economy that is growing, an unemployment rate which is down and strong job creation. So that was the right decision. Its also the right thing to do to wind that down.
GREENWOOD: Just a final quick question for you Minister. Its Penny Wong of course Im speaking with. Can I just ask a question, and I say this with all seriousness. Its not a joke, its not a jeer. Is the Prime Minister well at the moment?
WONG: Well I sat with her yesterday in Cabinet and then on the plane.
GREENWOOD: Shes in good form?
WONG: Shes in good form and shes always good for a wry comment.
GREENWOOD: I ask in all seriousness, as I say, simply because shall I say her performance and her language over the weekend in a series of interviews, including with Laurie Oakes, were not what I call characteristic. Regardless of which side your politics are or whether you agree with her or not, the one attribute of the Prime Minister is shes a wonderful debater and shes a terrific advocate. And yet over the weekend some of the language that she used and the way in which she described things did not seem characteristic to her normal self. I just wondered in fact whether it was something, that she might not have been all that well.
WONG: Well she seemed fine yesterday, thats all I can say. In these jobs I find some people like what you say, some people dont. People have different views about your media performances. She has certainly got a pretty big travel schedule, we know that. But thats part of the job of being Prime Minister and last night when I spent a bit of time with her as I said, we flew into Sydney and then had a meeting here this morning she was in good form.
GREENWOOD: Finance Minister Penny Wong, I appreciate your time.
WONG: Good to speak with you.
ENDS