HELEN DALLEY: The Prime Minister has said the London summit will give world leaders a chance to compare their economic stimulus packages and discuss how to deal with toxic bank assets. Back in Australia, the discussion is all about jobs, whether the stimulus measures will work, and whether we have anything to fear from a popular Chinese import. And to talk with us about these issues, we're joined now by the Finance Minister Lindsay Tanner in Melbourne. Lindsay Tanner welcome to Sunday Agenda.
LINDSAY TANNER: Good morning, Helen.
HELEN DALLEY: Now the Sunday Telegraph is reporting this morning that the Chinese Australian woman at the centre of the row over Defence Minister Fitzgibbon's trips to China, Helen Liu, has links to form... to Prime Minister Rudd and former Prime Minister John Howard. Should we be worried about this Chinese connection given all the deals we are doing with China?
LINDSAY TANNER: I am not aware of any reason why we should be worried, Helen, and all of the story illustrates really is the fact that prominent business people do tend to meet with leaders of both sides of politics. It's one of the things that we all do is attend business functions, we end up being photographed with a very wide variety of people. So I don't think there's anything sinister at all in the fact that Helen Liu has had previous contact with prime ministers, that happens with a very wide range of business people in this country.
HELEN DALLEY: Is she more than a business person, is she a lobbyist for the Chinese Government?
LINDSAY TANNER: I am not aware of her being anything more than a business person, obviously I don't know very much about her, as far as I know, I've never met her and the only knowledge I've got about her affairs is what's been in the media. So I am not aware of anything other than her being a successful businesswoman of Chinese background but I think there's been quite a bit of stuff in the media about this and people can form their own views about it. But the fact that she has been photographed with former prime minister John Howard does tend to suggest that we shouldn't assume that there's anything particular sinister about this. She's a businesswoman and like many other business people, she has had significant contact with public figures over the past.
HELEN DALLEY: All right, let's move to the wider, sort of, Chinese context. The Prime Minister and President Obama seem the best of friends in Washington, but meanwhile the opposition leader Malcolm Turnbull was complaining about Mr Rudd's advocacy for a bigger role for China in the International Monetary Fund, saying he sounded like a roving ambassador for Beijing. Should we be worried about that Chinese connection?
LINDSAY TANNER: Look, I think Malcolm Turnbull's just trying to stir up some old yellow peril sentiments frankly, Helen. The truth is that the current global circumstances, in part, reflect the disruptive impact of the economic rise of China, the huge imbalances in current account surpluses and deficits for example, across the world, with that enormous bubble that developed in the United States. It's very much a symptom of the emergence of a new economic super power in China and the world's inability to adapt to that. And one of the factors of that, of course, is the major global institutions like the World Bank and the IMF still reflect the world of 40, 50 years ago when China was a very minor economic player and very closed rather than the modern era. So, it's entirely logical for Kevin Rudd and other countries to be promoting a greater role for China in the governance of the world economy because it's now on track to become the world's biggest economy within the next, I think, it's 10, 20 years and it's certainly up there as one of the dominant economies in the world and it's very, very important for Australia so, to somehow suggest there's something wrong with Kevin Rudd promoting a great role for China in global economic governance, I think, is both absurd and it's a deliberate attempt by Malcolm Turnbull to play to latent antagonism towards China and Asia in the Australian populous.
HELEN DALLEY: All right, you say China is very important to Austria but at the same time Treasurer Wayne Swan locked a Chinese company's $2.6 billion bid for Oz Minerals because the South Australian gold and copper mine was too close to the Woomera weapons testing range. Now, industry analysts say that government move could scuttle the deal and push Oz Minerals into administration. Can your government really allow that, afford that to happen?
LINDSAY TANNER: Well, it's not clear what the outcome will be and there is the possibility that a revised deal will be worked out and put to the Government at some point. But these decisions are made on their merits. Each individual proposal for foreign investment in an Australian company is considered by the Foreign Investment Review Board and then a decision's made by the Treasurer and they have to be made according to the circumstances and merits of the individual deal. And in this case, there's been something a bit unusual and that is that it's intimately connected with a longstanding weapons testing area that the Australian defence forces have used over many years and clearly that does raise issues that don't apply in other circumstances. So I don't think too much should be read into this decision because it does involve a pretty unusual element that typically won't be there in other similar decisions of this kind.
HELEN DALLEY: All right. So it's not necessarily a precursor to the decision on the Chinalco bid?
LINDSAY TANNER: Not at all. I think you need to really look at these things on a case by case basis. To be honest, I don't know whether any of the Chinalco bid circumstances that involve defence weapons testing ranges but I suspect they don't. And so this shouldn't be seen as some kind of precedent or scene setter for a decision on the Rio Chinalco preposition. It's really a one-off.
HELEN DALLEY: All right, let's move on. What is the hard evidence that the Government's stimulus packages are working? Prime Minister Rudd seemed to get more urgent in his warnings of dire consequences for the economy if not enough action is taken by world governments. Is there any chance of slowing down the job losses that we seem to be suffering in nearly every industry?
LINDSAY TANNER: Yes, there is. And I believe the stimulus packages are already having that effect. The retail figures in December, for example, indicated that compared with other similar nations, we were seeing still relatively robust activity. The thing we have to keep in mind is that what would have happened had there been no stimulus, would have been far more dire outcomes on jobs than we're currently seeing. The impact of the pressures that the Australian economy is copping from overseas is just enormous, it's absolutely enormous. And therefore, it's really crucial that we push back as hard as we can, get money moving, get spending happening, get jobs being sustained and created and we'll never be able to know exactly scientifically what impact the stimulus packages had when we get to some unknown point in the future. But there's no doubt that they are having an impact and that had we not taken those steps, then the economic situation would be far worse than it currently is.
HELEN DALLEY: Do you agree with some economists who say the unemployment rate will get to eight per cent or more?
LINDSAY TANNER: Look, I don't engage in the forecasting game, Helen, and obviously the Government relies on Treasury forecasts, they're the experts, they are the people who spend their entire lives trying to work out these things and it's an in-exact science, if we went back over the years and looked at the various forecasts that people had made, including Treasury, you'd see that sometimes they got it right, sometimes they were a little bit out. But they have to model the ingredients that they've got, the projections that they can bring to bear at any given point in time, our current projection is that unemployment will hit seven per cent around the middle of next year and there are mixed signs, we've seen a recent resurgence in the Australian sharemarket, we've seen some reasonably positive figures on some indicators. So there are mixed signs. Clearly there is a lot that's negative out there at the moment but it's not all negative.
HELEN DALLEY: All right. Briefly in a document leaked to the Weekend Australian the Property Council of Australia warns federal political parties that 23 foreign banks are either withdrawing or are planning to dramatically scale back their commercial property lending in Australia. Now shouldn't that be a concern if the Government thinks it's true?
LINDSAY TANNER: Well, it is a concern, although I note that some of the identified banks did deny the story and did suggest that they were committed to Australia for the long-haul. It's difficult for anybody to know exactly what the true picture is on this front but that's why we've established the Australian Business Investment Partnership as a means of plugging any holes in lending to the commercial property sector that could emerge as a result of foreign banks pulling out when loans are rolled over, as they typically are every few years for these major projects. And the Liberal Party is planning to block this in the Senate and it will be on their own heads if they do succeed in blocking this legislation and therefore we see major property developments that are already underway are in place losing their financing, seeing fire sales, seeing job losses, as a result of this. That's why we're doing this, that's why we are putting this initiative in place, the Liberal Party and Malcolm Turnbull are trying to block it.
HELEN DALLEY: Well, billionaire financier George Soros, among others, is calling for the reigning in of financiers like himself and he's looking for big things to come out of the G2O meeting, some real action. What sort of real action will Prime Minister Rudd be pushing?
LINDSAY TANNER: Well, there are really four areas of interest, a couple of very obvious ones of course is further stimulus to the world economy, there's different views on that, of course. The Americans have acted to stimulate economic activity, there's some European countries who are resisting that. That's one thing. Reforming regulation, there's no doubt that there is an urgent need for more coordinated regulation of the financial sector across the world although still, you'd have nation-based regulatory systems, greater aid to developing nations who, of course, are starting to cop the flow on consequences of the global financial crisis and the recession that's emerged from it. And finally the reform of international institutions like the IMF which of course, as we talked earlier, Kevin Rudd is pushing, very strongly, in order to ensure that those international institutions do reflect the wider distribution of economic clout around the world and that they have got stronger resources to bring to bear.
HELEN DALLEY: All right. We'll in light of some of key governments in the G20 moving away from wanting to spend more to get out of this recession, Prime Minister Rudd's push on that score could be in danger of being ignored.
LINDSAY TANNER: We don't know what the outcome of the G20 meeting will be but I believe that the overall commitment will be to continue its stimulus of economic activity. There's different views. I think you've seen Germany, for example, initially very resistant to any kind of stimulus and they have a long history of being very fiscally conservative and very conservative on monetary policy because they've had a history in their country of hyper-inflation, back in the 1920s, and lots of things that have made them very cautious on these issues. But we then saw Germany then enact some very significant stimulus packages. So we don't know how this will unfold. There are different views but I think the overall global position in going to be one of support for continuing and strengthened stimulus because people realise that, without it, the plunge in activity, the plunge in exports, the plunge in production of goods, that we're seeing, will continue and will deepen.
HELEN DALLEY: Lindsay Tanner just how tough a May budget is this one going to be?
LINDSAY TANNER: It's certainly involving some tough choices for the Government because we've had a number of things that have - that we've been working on that we're committed to tackling; for example the university sector has been starved of funding by our previous - the previous government, the Howard Government. And we've had a report from Denise Bradley that's explored all the issues there and sent out a reform agenda. So there's quite a number of issues like that that we are committed to tackling but of course our primary objective has to be to ensure that we get back into surplus as quickly as possible. We've been forced into deficit by an enormous drop in our tax revenues and of course we've had to add to that with temporary stimulus packages, that really do hit the budget for the forthcoming two years, but we've got to have a very, very close eye on where things are going to be in three or four years time. That's why we're going to face some tough decisions, some difficult choices, and some changing priorities, that's just an unavoidable reality of the circumstances we're in.
HELEN DALLEY: Lindsay Tanner, we thank you for joining us this morning.
LINDSAY TANNER: Thanks very much, Helen.
HELEN DALLEY: Finance Minister Lindsay Tanner speaking there from Melbourne.
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