TONY EASTLEY: Whether the Australian economy also slips into recession is the concern of the Reserve Bank board, which meets in Melbourne today, and most economists are predicting the Reserve Bank will cut interest rates again. Some are predicting a cut of at least 75 basis points, taking the official interest rate down to 4.5 per cent, a figure not seen since 2002. Well, many home owners will regard a decision to slash rates as fabulous festive news, it'll be another sign that the Australian economy is struggling to stay in the black. To discuss that, and other economic issues, we're joined in our Canberra studio by Finance Minister, Lindsay Tanner. To speak with him, Sabra Lane.
REPORTER: Good morning Mr Tanner, welcome to AM.
LINDSAY TANNER: Good morning.
REPORTER: As we've just heard, the National Bureau of Economic Research says the United States in in a recession, will Australia shortly follow?
LINDSAY TANNER: It's not exactly big news that the US is in economic difficulties, this is a central part of a spreading global downturn, that is putting very substantial negative pressure on Australia's economy, but we don't believe we'll head into recession. We've got also very strong stimulus now in the pipeline, cuts in interest rates already by the Reserve Bank, the government's $10 billion economic security strategy, the fall in the value of the Australian dollar, all of these things help to stimulate activity, stimulate jobs, and that's pushing back very strongly against those negative pressures from the international markets.
REPORTER: Chances are the Reserve Bank will aggressively cut interest rates again today, will you be disappointed if the banks don't pass it on in full to home owners, and to small business operators?
LINDSAY TANNER: We will be disappointed, we would expect that the banks would pass on as much as they can, in a timely way, of any interest rate reduction that does occur, these things have moved around a lot over the past six to nine months of course, because of the influence of the global financial crisis, but we believe that conditions are such that the banks ought to be passing on any interest rate cut. We'll wait and see whether the Reserve Bank does actually cut rates, and if so, by how much, and indeed, how the banks react. But there have been instances in recent times of course, where the banks have, independently of the Reserve Bank, cut rates, which has in effect been following the changes in international markets and international prices for lending.
REPORTER: Are you worried though about small businesses? They're still paying something like 11 per cent interest rates on overdrafts?
LINDSAY TANNER: Different small businesses will have different arrangements, they're quite distinct from home loans, because you've got a range of different issues there, particularly different risk profiles, and different circumstances. Clearly, lending to small business is a really crucial part of the overall economic situation, and I would certainly urge the banks to do everything they can, to keep lending, to keep investing, to keep ensuring that all of our small businesses across the country, can continue to go about their normal business, and continue to create jobs.
REPORTER: If the Reserve Bank does slash again today, that combined with your $8.7 billion in cash bonuses from your economic stimulus package, which will begin to find their way into bank accounts of families and pensioners next week, will that reduce the need for the government to act again, to stop the economy from slipping into a recession?
LINDSAY TANNER: It's difficult to estimate where things will head into the new year, because the international circumstances are so unusual, and those pressures coming from overseas, are so powerful, so that it's hard to estimate what the circumstances will be. We stand ready for further action, for further stimulus, from the budget, if and when required. We've obviously got the preparation of the 2009 budget well underway, but we stand ready for further action if it's required. Clearly the actions by the Reserve Bank are an important part of the picture, so that the stronger they act, then the more stimulus from other sources, will be flowing into the economy, so that probably makes it a bit less likely for any further budget stimulus, but it doesn't eradicate that possibility, by any means.
REPORTER: Given recent cuts and the fall in oil prices, and for those Australians in jobs, times are pretty good.
LINDSAY TANNER: Look, I wouldn't say times are good, because a lot of people are very worried. You've got to keep in mind that for those who are still in jobs, there's a degree of concern in many cases, there are others who've got problems with their level of superannuation, because after years of very strong growth, their superannuation accounts have reduced in value, so I don't think there are people out there who are blithely saying, you know, everything's fine. We've got problems, we've got issues to deal with, and things like reduced petrol prices help, there's no question about that, but I believe that people are up to the task, up to the challenge, whether it's government, or whether it's businesses or working people generally, people are up to the challenge in Australia. We're getting very powerful pressures from around the world, and that is having an impact, and even those who are not feeling it directly, are feeling concerns about where this might head. I think though they're up to the task of meeting these challenges.
REPORTER: Given all those pressures that you've talked about, they're pressures on your budget too, will you consider Shadow Infrastructure spokesman, Andrew Robb's suggestion, to encourage superannuation funds to invest in your nation building infrastructure program?
LINDSAY TANNER: The Opposition has really gone completely off the beam over the past few weeks, and this is yet another example of it. The funds that we are putting in place actually will create circumstances where it will be more favourable for people like superannuation funds to invest in big infrastructure projects, because there'll be an underpinning, a financial underpinning from the Commonwealth Government that wasn't previously there, and that will change the economic dynamics favourably to prospective investors. But if Mr Robb's suggesting that we should in some way mandate that superannuation funds invest in particular projects, I think there's an awful lot of Australians out there that get very nervous about that. This is directly the opposite of the position that the Opposition has had in the past, we've got Julie Bishop saying that we should keep the budget in surplus, and give tax cuts, and we've also got her finally drawing attention to the fact that Australian interest rates in recent years, have been higher than many countries overseas, apparently as if this is just something that's occurred in the last five minutes. These people really, are not up to the task of running the nation's economy, they are all over the shop.
REPORTER: Mr Tanner, thanks for speaking to us this morning.
LINDSAY TANNER: Thank you very much.
-ends-
| Media Contact: | Website: |
|---|---|
| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
