INTRO: The Federal Government insists that Australia is still well-placed to ride out the current financial crisis. Finance Minister, Lindsay Tanner, says Australia’s ability to sell commodities to China will protect Australia from the buffeting. The Finance Minister is speaking here with AMs Sabra Lane.
TANNER: It’s clear that the impact in the United States financial crisis is washing through most major economies and tightening credit in a way that reduces economic activity and the authorities have made a choice to ensure that credit keeps flowing – that means, of course, interest rate reductions, as we’ve seen in Australia, and it also means pumping money into financial institutions to ensure that that gridlock of money is unlocked.
LANE: The IMF says this is the most serious financial shock since the Depression and it says there’s a 60 per cent chance the global economy will be in a recession by Christmas.
TANNER: The IMF’s assessment also points out that Australia is very well positioned. They projected our growth rate will be about 2½ per cent for the financial year that we’re part way through, that the unemployment figure will have a four in front of it and we’re one of only a couple of major developed economies that are in this good a shape. The IMF also commends Australia’s economic management, our strong surplus and good regulation of our financial sector. So, there is a very major problem on world financial markets that’s impacting on the global economy and Australia is very well positioned to ride that out. It’s impacting on us already but nothing like the extent to which it’s affecting the economies overseas.
LANE: The Prime Minister revealed yesterday that he’d spoken with Chinese Premier, Wen Jiabao, earlier this week. Mr Rudd says China’s continued strong growth will sustain other countries through this instability. But if most economies are taking a hiding, China can’t inoculate them all against a battering, can it?
TANNER: China is now a major influence in the world economy and it’s significant that the IMF doesn’t downgrade its growth prospects. The vast bulk of its growth is being generated by domestic activity. Exports are obviously significant. But the domestic growth of China is really what’s driving its very high overall growth rate, and of course, its demand for minerals, particularly Australian minerals. So, we are well positioned to continue to sell an awful lot of exports to China and we believe that that’s one of the important factors that’s protecting Australia, to some extent, from the influences of the US financial crisis.
LANE: The Courier Mail is reporting today that the banks aren’t passing on interest rate cuts to credit card holders. It says the banks are ripping off customers $900,000 a day. Are you concerned by that?
TANNER: Credit card interest rates, of course, typically are quite a lot higher than mortgage interest rates and there has been a pattern in recent times of movements in credit card interest rates, not necessarily following those that have occurred with the mortgage rate. There’s also been increased competition, fortunately, in credit cards. So, if you look over an extended period of time, you’ll see that they have moved around a bit – the rates that are charged for credit cards – and there are different deals. We would just urge people to shop around to get the best deal and, of course, to always be wise in how they handle their money, not get into too much debt on their credit cards, and to ensure that they are keeping the pressure on their banks and switching banks if they feel they’re not getting a good deal.
LANE: But all the banks are in the same basket here. None of them are passing it on. That’s hardly competition.
TANNER: The banks do offer different products and there are different interest rates on credit card products. So, we would urge people to shop around and to not overload their credit cards with debt, to be careful in running up debt, and to make sure that they get the best deal they can for the credit card that suits their needs.
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