HENSCHKE: If you woke up this morning and you heard the World Bank President Robert Zoellick saying were in a danger zone in 2008 he said many people have said that they didnt see the turbulence coming, leaders have no excuse now. And dangerous times will call for courageous people. How courageous do we have to be, Penny Wong?
WONG: (laughs) Good to be with you, Ian. Can I say a couple of things. Certainly there is a lot of volatility on world markets. Theres concern in markets about the sovereign risk issues in Europe, and there is a need for politicians to ensure they implement good policy and good economic policy.
But I do want to make this point, and its a very important point. Australia isnt immune, but we do face this turbulence from a position of relative strength. We have low public finances, our unemployment rate by comparison with most of the advanced economies is very low. The IMF is predicting that well continue to grow, and we are in a region which is continuing to grow. So, there are a lot of fundamentals which mean we do face this turbulence from a position of strength.
HENSCHKE: Speaking about that position of strength, Wayne Swan was named finance minister of the year. Youre the Finance Minister. Did you share that prize with him?
WONG: (laughs) This is the difference in terminology between what we use in Australia and whats used internationally
HENSCHKE: Does he scratch your name on the bottom and just put a little thing, and Penny Wong at the bottom, or not?
WONG: Actually, I think what Wayne said is really true, he said this is an award for Australia. Its an award which recognises not just what the Government did, but what Australian business did and Australian workers did when we came through the global financial crisis and averted a recession.
HENSCHKE: Now one of the ways that was done of course was through an economic stimulus package, we all got cheques in the mail, I think it was $1000, wasnt it? We all got a cheque for $1000, we had the building revolution, the education revolution where we had buildings put up all over Australia. And we had I suppose, successful from an economic point of view but not successful from the people who put the pink batts up in the roof the insulation package as well. Are we going to see another stimulus package?
WONG: Im not going to be speculating about those sorts of issues, Ian.
HENSCHKE: But its said dangerous times call for courageous people. So could we see, what courage will we see coming from
WONG: The courage is in holding to the right policy settings. And you know what the most important policy setting is? It is the fiscal strategy. It is the strategy that we put in place when we went into deficit to stimulate the economy, to save jobs. And we said at that time, this will be targeted, and it will be temporary. And we will put in place these very strict fiscal rules that ensure that we pay off this debt, that we put the budget back on track to get into surplus, and we apply this discipline. Now the sorts of things that Robert Zoellick is talking about is precisely this, the need to ensure that governments apply clear fiscal rules, and that markets see that.
And can I say, Ian, this is one of the reasons why it is so disappointing that Joe Hockey has walked away from a commitment to be transparent about his election costings. Because what that says is he wants to continue what he did at the last election, where we had an $11 billion black hole that they tried to hide from the Australian people.
In a time of this economic uncertainty, what we do need is certainty around things such as your budget policy, certainty around how much money your policies cost. And what Joe Hockey is saying at the moment is hes walking away from his commitment to a Parliamentary Budget Office, and his commitment to make his policy costings transparent to the Australian people. That is very irresponsible generally, but particularly so at this time.
HENSCHKE: Im talking to Penny Wong, acting Treasurer and Minister for Finance, about the world situation, the economic situation around the globe. Elizabeth has called in from Elizabeth, good morning Elizabeth.
CALLER: Good morning. I wish to congratulate Penny Wong and say thank you very much for a $150 billion debt which will take 20 years to get over. We had $96 billion which took ten years, and we now have a Government who tells us everything is just, you know, the best in the world, and we are left with another Labor Party horrendous debt. I wish to congratulate her on the best ever mismanagement of an economy. And Im old, and Ive seen it before, and I have never seen a Labor Government do anything that ruined this country. Im sorry to sound so angry, but I am.
HENSCHKE: Thanks for your thoughts, Elizabeth. Lets go back to Penny Wong. You hear the debt figure there, is she correct about the debt figure?
WONG: Id make a point about our debt figure, that we actually have one of the strongest sets of public finance figures anywhere in the world. Our net debt peaks at just over 7 per cent of GDP. Thats about one-tenth, one-tenth of what most of the other advanced economies are dealing with.
HENSCHKE: Is it possible though that they are absolutely awful and were just bad? I mean, when it comes to debt.
WONG: I think when youre at one-tenth of the average of most other advanced economies, it probably says something about the strength of your public finances. But can I just take this square on: yes, we went into deficit to stimulate the economy. Why did we do that? We did that to avert a recession, to avert hundreds of thousands of Australians being on the unemployment queues. To avert
HENSCHKE: But what can we do this time?
WONG: At the moment, what we see is an economy thats continuing to grow. What we see
HENSCHKE: Can I just point this out though please, Penny Wong, there was news yesterday that China has showed its third consecutive month of a mild contraction in manufacturing. Now, if China starts to slow down, and thats where a lot of our mining royalties, a lot of our mining money is coming from, what is going to happen then?
WONG: What Id say to you is this, we are still seeing growth in our region. It is true that we are seeing more risk and more volatility on global markets. But Id again make this very strong point: we are in a good position as an economy to weather this turbulence. We have very low public debt. We have, by global standards, very low unemployment.
And can I just pause on that for a moment. We entered the global financial crisis with about the same level of unemployment as the United States. Our unemployment figure now, on the other side of that crisis, has a five in front of it. The United States has a nine in front of it, nine per cent plus. That just gives you some sense of the relative strength of the Australian economy. Im not going to gild the lily, obviously these are turbulent times, but the important thing here is to stay the course, to apply discipline, and to make sure that we put in place policies that improve the competitiveness of the Australian economy.
And thats why were investing in skills. Thats why were trying to get more people into the workforce. And thats why were putting in place a mining tax which we invest across the economy in the form of lower company tax. This is all about strengthening the Australian economy.
HENSCHKE: The Australian dollar hasnt been strengthening. Whats that going to mean? Because this time last week it was almost $1.04, its down as low as 96.9 cents. Thats a big drop. Is that going to help or hinder Australia?
WONG: Ian, weve got a floating dollar, and it is going to move around. And as Ive said earlier, were seeing a lot of movement on global markets. The higher dollar, I think I might have been on your program before, its been good for some people, but the higher dollar has made things harder for other sectors of the economy. Some of our manufacturers and export industries have found it harder to compete with a higher dollar. So theres always a mixed set of consequences, depending on where the dollar is.
HENSCHKE: Can I just, I know youve got limited time, I just want to get one other couple of, well, two quick questions.
WONG: Sure.
HENSCHKE: The first one is on interest rates. Theyre set by the Reserve Bank, but you obviously have some thoughts on this. If we had slightly lower interest rates in this country, it would help a lot of people whove got big mortgages, it would give them money to spend, and spendings been contracting. Are we likely to see an interest rate drop, and do you want to see it drop?
WONG: I have a very clear view about this, the Government has a very clear view, which is that the independence of the Reserve Bank is paramount. Interest rates are set by the independent Reserve Bank, and that has been one of the strengths of the Australian economy, as has the clarity around the Governments budget settings and the Governments fiscal policy. These are very important policy settings to ensure we have certainty and to ensure we can deal with some of the turbulence we see on global markets.
HENSCHKE: Just one last question. Clearly theres a lot of talk again about Kevin Rudd and the fact that hes out there garnering support, and trying to get support. Have you had a discussion with him about what he wants to do?
WONG: Ian, you know the talk around. The talk around has been Liberal Party members and senators trying to get this talk up, because thats what theyd rather be talking about. And its unsurprising. They dont want to talk about the economy. They dont want to talk about budget policy, because on that front, they really have no answer. What they have is a $70 billion black hole, by the admission of Mr Robb, my counterpart, which theyre not able to fill. And thats why theyd rather talk about everything else.
HENSCHKE: So your supports still directly behind the Prime Minister?
WONG: Absolutely, and what Id say about this is, we have a Prime Minister in Julia Gillard who is tough, decent, and is absolutely focused on looking to the national interest. And its disappointing at this time that we see a continued campaign by the Opposition to look to their own political interest, rather than things that are in the national interest.
HENSCHKE: Thanks for your time Penny Wong.
ENDS