ALI MOORE: While we all had eyes yesterday for what was happening in America in Canberra the federal Government was announcing its own piece of news. To quote the Treasurer, a $40 billion black hole has been smashed in the federal budget by the global financial crisis.
Lindsay Tanner is the federal Finance Minister. Good morning, Lindsay Tanner.
LINDSAY TANNER: Good morning, Ali.
ALI MOORE: Can I ask you, first of all, do you think that we'll get from an Obama administration a more aggressive approach to deal with the financial crisis? Will it make a difference?
LINDSAY TANNER: I think it probably will, Ali, but time will tell. I think the boost to confidence in the United States by the change of administration, particularly with the election of President-elect Obama will be very, very significant but, of course, we can't be certain about what specific strategies the new administration will take in dealing with the crisis but we're obviously optimistic that things will improve in the United States.
ALI MOORE: A $40 billion black hole. I'm just wondering, I guess, how quickly this news has come upon you. I mean, if you were the chief financial officer of a major listed company and you said nothing and suddenly you announced a $40 billion black hole you'd be losing your job. I mean, how quickly has this $40 billion black hole developed and should we have known about it earlier?
LINDSAY TANNER: Ali, managing the finances of the federal government's a little bit more complex and vast than your average listed company and in this case we've certainly indicated in recent weeks the expectation that the surplus would be eroded by changed protections for growth. I've made statements like that and Wayne Swan certainly has but, of course, you don't know the actual degree of that until you've got the Treasury numbers and this is a result of pretty complex analysis and accounting and I was not even making any prediction privately about these things because it's very difficult to estimate unless you're actually doing the sums yourself and, of course, that's a vast exercise.
ALI MOORE: I suppose even if you're doing the sums, the Treasury's - well, I think I'm being fair when I say hasn't got a fantastic record of being incredibly accurate with its forecasts. I mean, you only have to look at what happened with alcopops. They've overestimated the tax take from that by something like a billion dollars.
Are you confident that they've got it right? I mean, this mid-year forecast doesn't even assume a recession in the US. It's got zero growth in the US but not a recession.
LINDSAY TANNER: Look, I'm confident that Treasury's got it right as much as you can get these things right. This is a very inexact science because you are basing these forecasts on a whole range of variables, all different factors, and it is extremely difficult so I believe we've got the best available assessment of where things are going to head.
We've seen in recent times that Treasury has underestimated the strength of the Australian economy to [mobile phone breaks up] difficult things to estimate so I think we can take some heart that the growth projections… [phone drops out]
ALI MOORE: Oh, well, that was about to happen. There was no two ways about that. Hopefully we'll get Lindsay Tanner back, at four minutes to nine. A dodgy mobile there. Because, of course, the next question has to be well, if you've got a $40 billion black hole, what impact is that going to have on government spending? And certainly already the Treasurer has talked about infrastructure spending and also money for the states and what will happen to that.
And we'll get, hopefully, the federal Finance Minister back shortly.
...
ALI MOORE: Lindsay Tanner has - well, we've managed to get him back on the line. Lindsay Tanner, the next question, as I was saying, has to be, what is it going to mean for government spending, for infrastructure spending and, I guess, also money for states?
LINDSAY TANNER: It's certainly making our challenge to put together next year's budget even more difficult, Ali. There's a lot of pressure, there's a lot of things that it's important for us to invest in but we're committed to both pursuing our reform agenda and also keeping the budget in surplus, doing everything we can to keep the budget in surplus.
Nobody can predict where these international forces will head and if things worsen even more internationally that'll make it even more difficult for us.
ALI MOORE: But is that $20 billion infrastructure spend safe?
LINDSAY TANNER: The infrastructure funds that we announced in the budget this year are long term funds so the $41 billion that were projected in those funds are not $41 billion that are all going to be tipped out into the Australian economy over the next year or two. There's already about $26 billion either in the funds or on the way into them, so we've got more than enough money available to do the kind of early investment that we need to both improve our economic capacity and to keep economic activity going.
The $41 billion that was the projected amount from surpluses in the budget this year is always about long term investment not just the next two or three years.
ALI MOORE: Lindsay Tanner, can we really avoid a recession?
LINDSAY TANNER: I think we can and obviously that's - it's a very important objective of the Government to keep economic growth and jobs growth in the positive. Nobody can predict what these international pressures will do. I'm optimistic that things have improved and that we've seen the worst of these circumstances in the United States and in Europe but I can't guarantee that, I can't predict it, but we'll be doing everything we can to push back against these very powerful economic forces.
ALI MOORE: Lindsay Tanner, thank you for joining us.
LINDSAY TANNER: Thanks very much, Ali.
ALI MOORE: Lindsay Tanner there, the federal Finance Minister and certainly the language is tough. Talk was of the $40 billion black hole being smashed into the budget and, of course, the Prime Minister has warned of it being tough, ugly and hard.
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