WONG: Good to be with you.
ALY: Now youre probably not surprised to know the Oppositions had some things to say about this today. Heres a bit of what your shadow, Joe Hockey, said.
[RECORDING] HOCKEY: Well the Reserve Bank makes absolutely no mention of the Budget position. In fact, it recognises that business and consumer confidence is fragile. Secondly, they recognise modest domestic growth. Clearly they are concerned about the performance of the Australian economy.ALY: I think we can take it as read theres some partisan bluster in there, but the central point that when we have cuts like this now 0.75 of a per cent in the last two months that that shows that there is a fundamental weakness in the economy, doesnt it?
WONG: I dont agree. And if you want to know what Joe really thinks have a look at his Bloomberg interview, I think from yesterday or the day before, where he spoke about the strength in the Australian economy and acknowledged that surpluses ensure that central banks like the RBA have room to move.
The reality is the RBA in the announcement today has lowered interest rates, as youve said, to a rate of 3.5 per cent, which is in fact lower than at any point when Joe Hockey was in Government in terms of the cash rate.
In terms of why theyve done that, its quite clear to anybody whos watching the news that weve seen a lot of volatility in global markets. Theres certainly a lot of concern about Europe. And unsurprisingly, that means the global outlook is seen as being less robust than people would hope.
ALY: Sure
WONG: But the reality is, a rate cut before the Budget, a rate cut after the Budget, really demonstrates what the Governments said, which is that a surplus gives the Reserve Bank the flexibility to move should it believes it needs to. And it has.
ALY: Ill perhaps come back to the issue of the surplus. But the last time we saw rates this low, we had a Western world that was in deep recession, and we, as a country, only barely escaped. Now, if this is a reflection of the economic forecast at the moment, doesnt that mean that were in some deep trouble?
WONG: Not at all, and I think its very important that we just take a step back and remember the sort of strength we see in the Australian economy. We see an economy where the world is wanting to invest. With $500 billion worth of investment in the pipeline, thats a massive vote of confidence in our economy. Weve got an economy with unemployment at a very low rate compared to the rest of the developed world. Weve got inflation contained. We have very strong public finances ...
ALY: Sure, but
WONG: ... and all of those things have led to a position where there is scope also in terms of monetary policy for the Reserve Bank to move. And its chosen to do so.
ALY: Sure, but at the same time, we have an economy that is significantly reliant on demand from China. And we have had consistent data now over several months showing that manufacturing is not growing very quickly now in China; demand for our resources from China is starting to shrink. Youve got Europe in a state of crisis, which must then flow onto Chinese and Asian demand more broadly. Are we looking at a situation where the cheques that have been coming our way are going to start to shrink?
WONG: Waleed, can I start by saying Im not one who thinks its either accurate, nor sensible for us to talk down the economy. And I think whilst Joe Hockey and Tony Abbott wish to do that, I dont think thats fair, nor accurate. Thats the first point Id make.
The second point Id make, in terms of Europe, our budget certainly forecast very conservatively for Europe. So we forecast in the Budget weve just handed down a contraction in Europe of around three quarters of a percent. That was significantly more conservative than the equivalent sorts of forecasts by the IMF and other international institutions.
So youve got to recognise, as the RBA has said, theres obviously a lot of concern about Europe. But I think its wrong to suggest that all is ruined, as some wish to
ALY: Im not suggesting
WONG: No, and Im not suggesting you were one of those (laughs).
ALY: No, no. Im just making
WONG: We still see growth in China
ALY: Im just making the point though that the mining boom might be more fragile than we think. I mean weve today got figures as well that show that weve got our first quarterly trade deficit for a couple of years and thats mainly because commodity prices are falling
WONG: Thats not the only reason
ALY: falling by as much as 10 percent. So were talking about a turnaround of about $5 billion in the space of a quarter. So, I mean, whats the upside on the economy? This mining boom thats been carrying us, is that withering away?
WONG: I dont think a record level of investment as I said, $500 billion of investment in the pipeline is a withering away. Australia has not seen in our history that level of investment in our economy.
Obviously, there will be different phases as the economy changes and theres a lot of investment going on, and youd anticipate that you will see greater levels of production after that investment has materialised and people have done all the things they want to do. But the fact is weve got a big vote of confidence in terms of the world investing here in our projects.
ALY: So just before I let you go, the other story thats been kicking around today has of course to do with the issue of people smugglers and a Four Corners documentary that aired last night arguing or apparently demonstrating that a people smuggler was admitted into Australia without the Immigration Department being prepared for that. Both the Opposition and indeed Kerry OBrien, the host of that show, made the point that its odd that a television program can figure this out but government with all its resources cant. Ive been listening today for an answer to that specific question from the Government as to why thats so and I havent been able to hear one. Have you got one?
WONG: The point that should be made here is that the investigation of these sorts of matters is in significant part by the Federal Police. But they have actually put a statement out today which talks about their current investigations. They obviously cant comment on the nature of those investigations so that obviously means that I cant either. But I would make the point that the Federal Police have engaged a number of investigations, a number of people have been arrested, a number of alleged people smuggler organisers are currently before the courts. So I think its important to recall that enforcement activity continues.
ALY: And others seem to have got through the Immigration Departments net.
WONG: I cant comment on that, I dont have any personal knowledge of that, Waleed. But what I can say is I understand the Immigration Minister has asked for an investigation into these issues. We have the Australian Federal Police put out their statement today. Obviously there is no perfect system, there was no perfect system under the Howard Government either. But our law enforcement agencies certainly do a very good job and work very hard at putting in place proper enforcement measures.
ALY: Penny Wong, thank you very much for your time.
WONG: Good to speak with you, Waleed
ENDS
