MICHAEL SMITH: Now here's a voice that I hope has at least an undercurrent of optimism associated with it, and that is the voice of the Federal Finance Minister, Lindsay Tanner. G'day.
LINDSAY TANNER: G'day, Mike, how are you?
MICHAEL SMITH: Yeah, well thanks, Lindsay. Lindsay, what is your latest read on the economic circumstances that we're sailing into?
LINDSAY TANNER: Well, look, I'm very pleased to hear that you're pushing for a bit more optimism, Mike, because we do face a big challenge, there's no doubt about that. But we - we shouldn't talk ourselves into kind of a state of doom and gloom because there's still lots of great strengths in the Australian economy. We have creative, imaginative businesses, we've got dedicated workers. I believe, although I'm obviously biased, that the Government has got the economic settings right. So, yeah, we've got some big challenges and what is going on internationally is putting big downward pressures. But there's a lot going for us, too, and we should be optimistic we're going to get through this.
MICHAEL SMITH: I hear a lot of commentators say that this is the worst since the Great Depression of the thirties, etc, etc, etc. What do you say to that comparison, Lindsay?
LINDSAY TANNER: Look I - first, I think it's too early to say that - we don't yet know what's going to happen internationally; the United States is clearly in significant difficulties and you've got European economies starting to [inaudible] recession. But we don't know how deep it will be, we don't know how long it will be for. But the other thing, Mike, that I think people forget is the world is vastly different now from the 1930s. In the 1930s the governments were only about 10 per cent of the total economic activity; we didn't have computers; most economic activity was - was with goods and physical whereas now it's mostly in services. The world's just such a dramatically different place that I think we're better off to focus on the future, tackle the problems that we face and not get too hung up about, you know, just how terrible it all is, is it as terrible as this or is it as terrible as that. I think people really need to take a bit of a reality check here and say, look, we've still got lots of strength in our economy and we should just be getting on with it.
MICHAEL SMITH: You sound like you're paraphrasing John Howard when he was interviewed with the Fox network over the weekend...
LINDSAY TANNER: [Laughs]
MICHAEL SMITH: ...did you see that interview?
LINDSAY TANNER: I did, and I'd have to say that - well, I saw parts of it, I suppose, is the true story. And I'd have to say that without commenting specifically...
MICHAEL SMITH: [Laughs]
LINDSAY TANNER: ...about, you know, his particular points, I think he's clearly in the same zone as you and I are. Which is that it doesn't serve anybody's interests for us all to be sitting round asking, you know, just how bad is it? You know, we've - there's no question we've got a serious challenge in front of us and the Government is very conscious of that. But we want to be talking the economy and Australian businesses up, not talking them down.
MICHAEL SMITH: Well I spoke on Friday night with 10 what I thought were fairly rock solid positives, and one of them included your $10.4 billion economic stimulus that you'll be injecting into the economy that will hopefully hit the shops in December. Have you got another shot of that scale in the locker?
LINDSAY TANNER: It's a possibility; we haven't ruled that out. We haven't ruled out further spending stimulus, not necessarily of that size but one of the things that we've learnt over the past few months is that when you're dealing with such unprecedented international circumstances, you don't go around ruling things out, you've got to keep your options open. We're prepared to do whatever is necessary to keep economic growth going, to keep jobs growing. And we are very conscious of the fact that the current forecast could get worse. I don't believe they will, but the current forecast for what's happening internationally show very significant slow-downs. It's possible that things could end up being even worse in places like the United States and Europe and Japan than those forecasts suggest. I'm not assuming that that's the case; in fact I don't think it will be, but we're prepared for that eventuality if it occurs.
MICHAEL SMITH: Well, a lot of economists, a lot of industry insiders when they speak frankly say there's a helluva lot more chooks yet to come home to roost, you know, with derivative instruments and credit default swaps, etc, etc, etc. You'd have some insight, Lindsay, wouldn't you?
LINDSAY TANNER: Oh, look, I wouldn't claim to have any more special insight than anybody else who has got some expertise in this area, clearly. But I think there's been a fair bit of exaggeration as well, so we just have to be careful about these things. Like, yes, the lack of regulation of credit default swaps has been an issue, but some of the commentary about this is almost like saying, you know, what would happen to the insurance industry if every house in Australia burnt down overnight?
MICHAEL SMITH: [Laughs]
LINDSAY TANNER: Well, the answer to that question is that the last thing we'd be worried about is the insurance industry [laughs] if that happened because nobody would have anywhere to live.
MICHAEL SMITH: Yeah.
LINDSAY TANNER: So, you know, and of course the likelihood of it happening is pretty much in the zone of, you know, a meteorite hitting Australia. So the credit default swaps issue is really about insurance, that's effectively what they are, and the lack of regulation clearly is an issue. But some of the scarier statements about what all this means, I think, don't connect with reality.
MICHAEL SMITH: There was one other matter, Lindsay, I wanted to have a quick yarn with you about, I've written my blog today on executive pay and, in part, drawn on what Geoff Dixon, CEO of Qantas, said over the weekend in a frank interview. He said it was wrong that he as CEO stood to gain 70 million bucks from this, you know, heavily financially engineered or geared buyout - private equity buyout of Qantas. He said it distorted his thinking and that of his management team. You've had a bit to say about grotesque executive pay packages over the weekend, what can the Government do about it?
LINDSAY TANNER: Look, there's a number of possibilities, none of them are straight forward. But one thing that I think we've learned in recent months is that the action really on these issues is international. The pressure for huge increases in executive salaries has really been driven from the United States and the fact that we have an international labour market for top executives whether we like it or not. That has only had a bit of an echo with Australia but enough to make it an issue...
MICHAEL SMITH: Yep.
LINDSAY TANNER: So Kevin Rudd's pushed this issue internationally. And I think the real thing we need to do is to build in this issue into the rules that govern how financial institutions operate. The big problem we've had on this front is that not only have we just had the outrage of people getting paid ridiculous amounts of money, in some cases for doing not very well, but it also has distorted their decision making [inaudible] it spills over into bigger problems.
MICHAEL SMITH: Yeah, well that was very much the case, I think, with what Geoff Dixon had to say. Lindsay, we're just way out of time, I'm going to have to let you go. Thanks for having a yarn with us.
LINDSAY TANNER: No worries, it's good to talk to you again, Mike.
MICHAEL SMITH: Yeah, you too, mate. Lindsay Tanner, the Federal Finance Minister.
-ends-
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