GREENWOOD: The person whos actually got control of those levers, whos got to make some of those decisions, is our Finance Minister, Penny Wong, who joins me now. Many thanks for your time, Penny.
WONG: Good to be with you again, Ross.
GREENWOOD: Heres the big point, is that theres no doubt that as a result of, say, for example, whats taking place in the world right now, we can see there are nerves and concerns about the economy around the world. There are slowdowns in commodity prices, the forecast for economic growth in Australia has been cut down, revised down, by the International Monetary Fund last week. So really it makes your job all the more difficult to be able to, not only balance the budget this year, but next year as well.
WONG: We do remain determined to implement our plan to bring the budget back to surplus and there are some very good reasons for that. One of them is what were seeing, particularly in Europe, but more broadly, where markets are reacting to a lack of credibility in fiscal policy. In other words, markets dont like it when governments dont do what they say theyre going to do. And were very conscious of that.
But, weve made the very commonsense point that obviously the events that were seeing do make this harder. When youve got slower growth globally, thats obviously going to impact on Australia, which impacts on the Governments revenues. But I think its very important at times of great turbulence, that we do face this volatility internationally, this turbulence internationally, from a position of strength: low public debt, relatively low unemployment, and a big pipeline of investment. And many more people still in jobs than you would see in economies like the United States and in Europe.
GREENWOOD: I will agree entirely with all of that, except for one thing. And that is, of course, you are faced potentially with slower growth. Is it a situation, you believe, that the public should excuse a government at this point, because of whats taking place overseas, if it does not meet that stated aim that it had before the last election.
WONG: I think the Australian public are entitled to expect of the Government, and of the alternative government, that we put forward sensible budgets, sensible policies, and that we cost them properly. Thats what theyve had from us. I have to say what theyve had from the Opposition and I know you had Mr Robb on your program yesterday is a $70 billion black hole and an Opposition which talks down the economy. I dont think those things are good for the Australian economy.
GREENWOOD: OK, well lets say for example that you and the International Monetary Fund really had similar growth forecasts in the last little while. In fact, theirs was even stronger than yours. Theirs was 3 per cent, yours, at one stage, rather, for this year, yours was stronger, 4 per cent, theirs was 3 per cent. Theyve revised theirs down to 1.8 per cent. Do you believe at some stage the Government will have to revise downwards its forecasts of where economic growth will be this year?
WONG: There was a lot of talk before the last National Accounts about where the economy is at, and you might recall, in fact, those figures came in a little stronger than people had predicted. These things obviously do move around, and thats why the Government always updates its figures in the usual way. And the next round of updates is due in the mid-year review, which is before the end of the year.
I would say this though: lets remember that we are an economy that has a lot of underlying strength. We saw that not just in the last National Accounts, but we see that more broadly. We have very low public debt, less than one-tenth of the average of the major advanced economies. Weve got a lot more people in employment. Weve come out of
GREENWOOD: Just picking you up there on employment for a moment, the forecast in the Budget this year is for unemployment to be at 4.75 per cent. As you know and I both know, the unemployment rate now sits at 5.3 per cent, so if it stays around these levels, youre going to have fewer people in work, and therefore theyre going to be collecting unemployment benefits. Rather, youre going to have fewer people in work paying taxes to you, and more people unemployed collecting unemployment benefits from you. So thats just one small example, youre going to have fewer capital gains tax receipts, youre probably going to have lower company tax receipts this year. And yes, youre right, these things do move around the place a bit, but all of the signals, even right now, seem to predicate six months on almost from your budget, that really, it seems as though, you have got something of a black hole emerging yourself. And really, at some stage, youre going to have to take some fairly decisive action to fill that in yourself.
WONG: I dont accept the black hole. The black hole is on the other side of the ledger with the Opposition, which has a $70 billion black hole. But, in terms of the Governments budget, what Id say is this: we have a track record of doing whats required to respond to economic circumstances. Weve got a track record of making the savings which are required to ensure the Budget is improved about $100 billion worth of savings over our last budgets. And thats in the face of the global financial crisis.
GREENWOOD: Its true, because when you do look at those numbers, there is, in the future, significant savings. Because, as the Treasurer himself, and you, have also pointed out, from the economic stimulus that came after the global financial crisis, when there was significant spending, the Government is winding that back very, very rapidly. But still this even this financial year, there is more spending than what there is saving. The saving actually comes next year, doesnt it?
WONG: Weve got to remember a few things. First is, youre right, the vast majority of the stimulus package has been spent. What we are also managing is a very significant write-down in revenues. In other words, what Government thought it would receive in terms of tax revenues has been written down by about $130 billion as a result of the GFC. So obviously we have to manage that.
GREENWOOD: Did the Government miss a chance in the May budget this year to be able to cut the Budget even harder? I know that you said at the time that youd actually cut the Budget in real terms, all that type of thing. But Im talking about real, genuine cuts. The times at that time looked OK, yes there were natural disasters around the place, but given whats now transpired on international markets, do you believe the Government should have had the political will to go harder with that Budget?
WONG: There were some very significant cuts made in that Budget, some $22 billion worth of savings. Lets remember also that Budget had to also deal with very significant hit not only in terms of revenue but also additional expenses because we had to put the money into rebuilding particularly Queensland but other parts of Australia as a result of the natural disasters. So I think the Budget was absolutely the right Budget for the times. It made significant savings but also ensured we had the revenue thats needed to rebuild those communities which over the summer who were hit so hard by those natural disasters.
GREENWOOD: Well, given the scenario Ive laid out to you, which is, obviously, declining revenues, and increasing expenditure because of potentially higher unemployment, and as a result, you go into a budgetary process for next May where you do really have to face this difficulty if you are to return the budget to surplus. To do so youve got to cut your own expenditure even harder. Do you believe that there is the political will inside Government right now to really be able to cut a Budget in real terms?
WONG: Look, I think this is a Government that has a track record of responding to the economic circumstances. We did that during the global financial crisis and well continue to do that. And as we have continued to say we think having a sound fiscal strategy is very important a credible fiscal strategy is very important.
GREENWOOD: But theres a dilemma, isnt there. Because the problem is, if this global crisis now starts to unwind even a little bit more, youve still got a growing difficulty, because you may yourself have to go back and stimulate the economy again to keep the people in jobs.
WONG: Ross, look theres a lot of ifs in that, and I understand where youre going. But I think it is too early for us to say what the effect of this will be here in Australia. But what we do know is this there is a lot of volatility on global markets. There is a sovereign debt, a set of sovereign debt issues particularly in Europe. We are not immune as an open economy from all of this turbulence but we must remind ourselves that we do face this change with an enormous amount of strength for the reasons Ive outlined.
And I think its important for us not to get into a position where we forget the strength that we do see in the Australian economy. And can I just give you one measure we entered the global financial crisis with the same level of unemployment as the United States. Weve come out of it, and our unemployment rate has a five in front of it and theirs has a nine in front of it. So we are in a very different position to many other advanced economies. Something that many people including the Opposition seem to just want to dismiss.
GREENWOOD: No, it shouldnt be dismissed, I agree with that as well. Final thing, and that is, I want to play you a grab of the Foreign Minister today, who seemed to be a little confused. Jetlagged, Ill give him his excuse here.
[recording]
JOURNALIST: Are you Labors best chance at winning?
RUDD: You know something, Im a very happy little Vegemite being Prime Minister... being Foreign Minister of Australia. Your question was about being Prime Minister, there youve caught me getting off the plane, jetlagged. And as for the Prime Minister, as I said before, and said in the United States, I fully support the Prime Minister.
[end recording]
GREENWOOD: Penny Wong, do you sometimes forget which portfolio youve got?
WONG: (laughs) I think I have said a lot silly things when Ive been jet lagged before Ross. And I dont know if I want to share them with you and your listeners.
GREENWOOD: No, true enough too. Penny Wong, Finance Minister of Australia, always a pleasure to talk to you
WONG: Good to speak with you again.
ENDS