HENSCHKE: Penny Wong, theres been a call by Peter Reith for you to have a sort of mini-budget. Is it that desperate at the moment?
WONG: Obviously we live in a global economy, and weve seen some real difficulties in global financial markets in recent weeks. But the reality is, Australias in a very strong position. We have very low debt levels. Weve got well regulated, well capitalised financial institutions, low unemployment, and a strong investment pipeline.
Very importantly, were hooked into the growing economies. So were in the right part of the world at this time. But theres no doubt theres obviously been some instability in recent times, particularly as a result of the conditions in the United States and in Europe.
HENSCHKE: Well Peter Reith of course was a senior Cabinet Minister in the Howard Government for five years, someone who certainly knows your job. He says that its a wake-up call for complacent policymakers everywhere. Do you think hes having a go at the Gillard Government, saying were becoming a bit complacent in Australia, just generally, because we think that were insulated in some way because were linked in with China?
WONG: This is a government that absolutely understands the importance of strong economic management. Thats why we ensured we intervened in the economy during the global financial crisis, and that meant that we came out of it in a better position than just about any other advanced economy.
But if Peter Reith is concerned about the economy, really he should be speaking to Joe Hockey and Warren Truss. These are men who have been running around Australia, in these circumstances, likening Australias position to that of Greece, which is not only utterly inaccurate, but is also, frankly, quite irresponsible.
HENSCHKE: Lets then go back and look at what Stephen Henderson said, whos involved in the market. He said the market was sitting around six and it dropped to three when we had the GFC. If its gone down to - its dropping a thousand points in a short period of time it seems to be heading back that way. The markets sitting around 4000 at the moment, so were not that far away from where we were during the GFC when all that extra money was pumped into the system to keep Australia going. So perhaps it is a fair enough thing to say lets have a look at where were headed.
WONG: Ian, lets just take a step for back a minute and remember where we are as an economy. And this is reinforced by the IMF the International Monetary Fund report on Australia, which came out a couple of days ago which reinforced that we are in a very strong condition to weather what the world throws at us.
As I said, our public finances are in a very strong position. Our peak levels of debt are about 7 percent of GDP, thats about one-tenth of the average of most of the advanced economies. So it just gives you some sense of the position were in. And we have a very strong pipeline of investment.
Now, it is the case that we are not immune from the sort of instability weve seen in the global economy, and on markets recently, and theres obviously uncertainty there. But I would say again, our fundamentals are very strong.
HENSCHKE: Ricks called in this morning with a question for the Finance Minister Penny Wong. Rick, your thoughts?
CALLER: Good morning Penny Wong. Look, I have a problem. Politicians have this unusual way of bending what is fact and what is fiction. We now find England is in such a situation, but prior to this, the English people were told that their economy was sound and everything was functioning well, but we now find the opposite. So how can we really trust our politicians? Are you politicians any different than them? Thats my question.
HENSCHKE: Penny Wong?
WONG: Thanks for the question Rick. Well Rick, if you dont want to take my word for it, you might want to have a look at what the IMF put out a couple of days ago, which was a very strong endorsement of the Australian economy and the Governments economic policy. It spoke about the fact that we have, as I said, low debt. We have a strong financial sector. Its well regulated, well capitalised, weve got low unemployment and we do have a lot of investment coming into this country as a result of the resources boom.
Now, obviously we are in a global economy. Were not immune, but were very well placed to weather what the world can throw at us.
HENSCHKE: Steves called in from Happy Valley. Good morning, Steve.
CALLER: Hi Ian, and Penny Wong. I was just - I guess you can make a comment on my comment. I just get a bit sick and tired of all the economists that tell us that things are absolutely marvellous and then, like, about a week ago interest rates were definitely going to have to be going up, and then in two or three days theyre all saying theyve got to go down, down. I think the truth of the matter is that not too many people know where the economy is going. And therefore I guess, I think its always - Im from the conservative - conservative type and that doesnt necessarily mean Liberal party but where you actually try and put a bit of money away for that rainy day. And I think that thats where we as a country are vulnerable at the moment, in so much as yes, we spent a lot of money and I was probably one of those people who thought we spent too much at the time. And now, if things do go pear-shaped, we havent got much money in the bank.
HENSCHKE: Penny Wong?
WONG: Well a few things there. First on the first part of Steves comments about where I think he was essentially talking about, we have different experiences of our economy at the moment.
If youre in the mining sector or in a firm that supplies or works in the mining industry youre obviously experiencing pretty reasonable times. And were getting much higher prices for many of our resources exports than we were 10 or 20 years ago. In fact were at a 140 year high in what we call the terms of trade. Thats the prices of what we sell to the world, compared to the prices of what we buy.
But I think what Steve is commenting on is if that there are different experiences. If youre not in the mining sector, youre not part of that part of the economy, then things are tough. People are spending less, consumers are saving a lot more. In many ways thats a good thing but it means if youre in a business which relies on household spending, obviously people are spending a lot less.
Can I just make a point about debt - I do want to emphasise this, because I think Steve spoke about your previous caller spoke about the UK. Were at 7.2 percent of GDP of the size of our economy in terms of peak net debt. Less than one tenth - one tenth of what the average of the advanced economies are. To keep it in perspective, our public finances are very strong.
HENSCHKE: Alright. Matthews called in from Flagstaff Hill. Last time the economy wasnt looking too good, there was a stimulus package we all got a $1000 cheque. Matthew youd like to see that happen again would you?
CALLER: Morning Ian, morning Minister. I guess my question was a little bit of a tangent from Steve in that the last time the GFC hit we had a nice surplus, the Government gave us all pink batts and a cheque each. I just wondered what the Governments tactic will be this time in that we dont have that bucket of money and obviously we cant even pay for flood repairs so weve got a new tax for that. So theres no sort of golden bucket for the economy to stimulate it. So what is the actual approach the government will take?
WONG: (Inaudible) Why we put money into the economy during the GFC was to keep us out of recession and it worked by virtue of government action, business action, Australians working together. We came through the global financial crisis in a very, very good position compared to the rest of the world.
HENSCHKE: But has he got a point that there is no money left in that bucket to stimulate the economy if things do -
WONG: I dont want to speculate about what might or might not happen. What I would say is I think our fundamentals are very strong for all the reasons Ive outlined. But would I would also say in terms of coming back to surplus, the Government has made very clear from the time we put the stimulus in place that we needed to have a very clear exit strategy out of deficit and into surplus and we are delivering on that. And we are working our way to bring the Budget back to 2012-2013 as weve committed to.
HENSCHKE: Last night there were a couple of commentators who made some comments that may be of interest to you Penny Wong, Finance Minister. One of them was Graham Richardson who said that this would be an ideal time to abandon the carbon tax because things are not looking that good it might be a way you can say, put that on hold lets deal with that one first.
WONG: Sure Ian. Well, when I was Climate Change Minister there were no end of reasons that people might put to me about why we shouldnt act on climate change then. Theres always a reason not to act but it doesnt lessen the central reason which is at some point, we as a very carbon intensive economy have got to start moving to a lower carbon way of doing business that will make us more competitive in the years to come. And the key question is, when youve got two parties saying, weve both want to reduce emissions how do you do it at the lowest cost? What the Government is putting forward is a price that economists have said very clearly is the lowest cost way to do it.
HENSCHKE: I think Graham Richardson was saying it was a good opportunity politically to get out of it.
WONG: (laughs) I think Julia, the Prime Minister has made her view very clear that this is the right thing to do and thats our position.
HENSCHKE: The other one was Warwick McKibbin, former member of the Reserve Bank Board saying it may well be not such a great idea, to just push on and deliver a surplus next year because it may not be the best thing for the economy. Are you still committed to making sure theres a budget surplus next year no matter what?
WONG: I think its very important to continue to provide certainty to the markets, to the economy. Weve outlined many times, I think including on this programme why we think return to surplus is important. Obviously, the global situation does make things more difficult but we do remain committed to delivering the return to surplus as weve outlined.
HENSCHKE: So no mini budget? Just to push it
WONG: Before the end of the year we have to update the budget figures in whats called the Mid Year Economic and Fiscal Outlook and well do that.
HENSCHKE: Thank you very much for your time this morning, Penny Wong, Minister for Finance.
WONG: Good to speak with you.
ENDS