FRAN KELLY: Well, Finance Minister Lindsay Tanner is actually acting Treasurer as well, at the moment, while Wayne Swan is over in Washington. He too is on his way home. Lindsay Tanner, thanks for joining us again.
LINDSAY TANNER: Good morning, Fran.
FRAN KELLY: This G20 summit, what's it achieved for Australia? What does it mean in real terms?
LINDSAY TANNER: A couple of things. One, the fact that decision-making internationally has shifted to the G20 level is hugely important for Australia because we are there, we're not part of the G7, G8, we are part of the G20. That is absolutely critical. It means we've got a seat at the table in the key decision-making level internationally. In the case of this specific meeting, the commitment by all the countries involved to regulatory reform and to report back on reform within about six months is very significant and equally the commitment not to increase any trade barriers, not to lapse into protectionism, is enormously important for the world economy and, inevitably, for Australia. So there's a number of outcomes that have been important. Commitment to further fiscal stimulus is also very significant.
FRAN KELLY: Just on that, the commitment to further fiscal stimulus, countries developed and developing are already doing that, aren't they, trying to revive growth by spending, Australia included? Did we really need a global summit to get us to do that?
LINDSAY TANNER: That wasn't the only issue that people there were talking about, Fran, and inevitably it's varied across different countries so it never hurts to have people together agreeing collectively to take action of this kind and I think the best way of illustrating it would be that I suspect you'll find there will be further stimulus taken by at least some of the countries around the table in the wake of the G20 summit.
FRAN KELLY: Perhaps including Australia, but we'll get to that in a moment.
One of the issues singled out by the summit was executive pay. Realistically though, what steps can a government do, whether it's the Australian government, the Chinese government, the British government, do about that?
LINDSAY TANNER: It depends overwhelmingly on what happens in the United States. There are some options in Australia and we'll certainly be considering those possibilities but the main action is international. The heart of the problem has been in the United States. That's where we've seen these really grotesque packages that have emerged, particularly in financial services, and it's not just about feeling angry about the level of pay that some of these people have been getting, it really is about a serious distortion to decision-making in the financial system and one of them…
FRAN KELLY: Yes, but what can governments do to….
LINDSAY TANNER: Well, Kevin Rudd proposed one very straightforward option which I'm certainly committed and the Government's committed to pursuing and that is to change capital adequacy rules that apply internationally to take into account excessive executive pay that is designed to reward short term risk-taking so that's one very concrete thing that governments internationally can do. The difficulty for smaller economies like Australia is that we compete in a global labour market for top level talent, for executives, and that's the reason why these things spill over into Australia and that's the reason why it's important to tackle the problem at its source which is the United States.
FRAN KELLY: Okay. The Prime Minister has said - he said again yesterday - that Australia will do whatever it takes to protect the economy, that the Government will do that. Presumably that means including going into deficit, though he won't mention that. You've explained yesterday that the Government, well, it doesn't want to talk about deficit because it's trying to maintain confidence but surely a deficit is a normal part of fiscal policy. There's a good chance our Budget could be headed that way. Isn't it time, just to be straight with people, and admit we might need a deficit to keep the economy moving, to try and get people understanding that, so it doesn't look like some kind of fiscal failure?
LINDSAY TANNER: Fran, our job is to manage the nation's economy, not to deliver newspaper headlines and one of the issues that is very, very important at the moment is maintaining confidence. That's why we are avoiding some of the wilder speculation about what might happen in the international economy…
FRAN KELLY: It's not that wild to think that we might be going into deficit at some point, though, is it?
LINDSAY TANNER: …in our economy and with respect to the state of the Budget. We have projections that are put together by Treasury showing the budget remaining in surplus and we're certainly sticking to them so I'll deal with the facts at hand, I'll deal with the formal forecasts that are put forward by the various relevant regulators, like Treasury and the Reserve Bank, but I don't want to get into speculation about this might happen, that might happen, because all of that, when it's negative, when it's doom and gloom, simply fuels the confidence problem. Our job is to sustain confidence not to undermine it.
FRAN KELLY: All right, in terms of confidence, there's that $10.4 billion stimulus package due to be paid out, I think, on December 8. You're already talking about the possibility of a second tranche which you say is likely to be spent on localised infrastructure projects. Presumably this is very good news for the mayors and shire presidents who are arriving in Canberra tomorrow. How much is on the table there?
LINDSAY TANNER: We haven't concluded any proposal of that kind but we obviously have an important discussion to occur with representatives of local government today and tomorrow and the issues of infrastructure are obviously pretty central to that. Let me make one thing really clear, the possibility of further spending stimulus really relates to the prospect of the news from the international economy getting even worse. Inevitably we spend - governments spend money from time to time on particular things, and the issue of stimulating economic activity is going to be with us for some time but you'll only see a major stimulatory package of the kind that is about to roll out occurring again if, in my view, you see further deterioration in the world economic outlook. It has deteriorated seriously, that's why we've put this first package together. I don't believe there'll be a need - I certainly hope there won't be a need for further major stimulatory action but we can't rule that out because we are not clear about exactly how bad the recession internationally is going to end up being.
FRAN KELLY: But there is money on the table for the mayors tomorrow?
LINDSAY TANNER: Look, I'm not going to comment or speculate on what announcements might occur during the course of the substantive meeting tomorrow. We've got an important discussion about long term reform, about making local government a genuine partner in the process of governing Australia. It delivers a lot of important services locally to people but I won't speculate about announcements.
FRAN KELLY: Okay, and just finally, you've called - you're looking at trying to make savings in the coming Budget. I wonder, as Finance Minister, whether you're supportive of the six billion dollar support package for the multinational car companies. Some of those look like they might even survive - not - not even survive in their home markets. Is it a good idea to be investing that?
LINDSAY TANNER: The six billion dollars, of course, is over 12 or 13 years. It's very easy to make that number look very big if you leave off the period of time…
FRAN KELLY: Still half a billion a year.
LINDSAY TANNER: …that it applies to. So it's still over a very long period of time and it's payment by commitment, it's payment when contracts are entered into, when investments are made, when research and development is initiated. We're involved in assisting the transformation of the vehicle manufacturing industry in Australia, Fran. That's what occurred in the early to mid-1980s under the former Labor government, when you did have very substantial amounts of money spent to make the industry internationally competitive and to tear down the tariff walls. We've got a different transformation challenge now and that is to produce low emission cars, to produce fuel-efficient cars. Other industries around the world, in Europe, in the United States, are facing similar challenges. If we don't assist the industry to make that transformation then it's under threat of disappearing and it's something that we're committed to ensuring doesn't happen.
FRAN KELLY: All right, Lindsay Tanner, thank you very much for joining us.
LINDSAY TANNER: Thank you very much, Fran.
FRAN KELLY: Lindsay Tanner is the Finance Minister.
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