NEIL MITCHELL: The Reserve Bank, according to the headlines and discussion yesterday, the Reserve Bank has declared Australia is in recession. You wouldn't have to be Einstein to work it out, as I said. On the line is the Finance Minister and the Acting Treasurer, Lindsay Tanner. Good morning.
LINDSAY TANNER: Morning, Neil.
NEIL MITCHELL: Okay, we're in recession, what's the next shot in your locker?
LINDSAY TANNER: We've got a budget coming in about five or six weeks, Neil, and that's obviously pretty crucial. But the big stimulus package that came out in February was of course staggered across a number of months and so the payments coming from that and the money going to build school buildings, to insulate homes, to build new houses, has really only just started to flow. So, there's a lot of money starting to move into the Australian economy to sustain jobs and to pump up growth again.
NEIL MITCHELL: But that will not avoid recession, will it?
LINDSAY TANNER: Look, the OECD report that came out last night does make it pretty clear that we're likely to see some more negative growth for periods of time during the course of this year. But I'll make the call on recession when the data actually shows it. It's obviously getting grimmer. The world situation is absolutely dire and we can't avoid all that. We're in much better shape still than all the other major countries around the world, but the pressures that are bearing down on Australia's economy from that are pretty hard to resist. We're pushing back as hard as we can but they are overwhelming.
NEIL MITCHELL: But yeah, this isn't just a semantic discussion, though. The Prime Minister said that it was crucial Australia avoid recession, which is why he had stimulus packages. The Reserve Bank's saying we can't avoid it and we're already in it. Does that - surely means that the stimulus packages have not achieved what they were supposed to achieve.
LINDSAY TANNER: Well, no, it doesn't, Neil. Because first, the Reserve Bank statement by Ric Battellino, as I read it last night, was in effect saying that as far as most people are concerned, it feels like we're in recession. That's probably splitting hairs to a degree, but I'm not sure they've actually declared Australia as in recession. And secondly, you have to get this money moving and it does take a bit of time. There is no magic to this; it's simply trying to fill in the hole that's been left by this collapse in mineral prices, by this collapse in economic activity around that world. That takes a little bit of time. And the real question is, how much damage do we suffer as a nation on the way through? And we're doing everything we can to minimise that damage, but we can't prevent all of it.
NEIL MITCHELL: Well, if the Reserve Bank says we feel like we're in recession, do you feel like we're in recession?
LINDSAY TANNER: Oh, look, there's plenty of things around the place that suggest that, yeah, it feels like a recession. But the evidence is actually mixed and so we've seen some good figures in recent times about retail sales and various other things, so it's not easy to necessarily make that call. And of course, none of sees everything in what's going on in the economy. I've got a reasonable idea of how things feel in Melbourne, but of course I can't tell you much about what's going on Townsville, because I haven't been there recently.
NEIL MITCHELL: Well, we're going to have to revise our forecasts, aren't we? Presumably unemployment is going to be worse than forecast?
LINDSAY TANNER: Look, I think there's a fair chance that's right, but those forecasts will be revised with the Budget. The la… most recent ones were published at the beginning of February and they showed unemployment hitting around seven per cent in the middle of next year. Now, there's clearly a very substantial risk that there will be revised forecasts that will be more gloomy than that. It's not guaranteed, but clearly that's a very big risk.
NEIL MITCHELL: Now, I know you're not going to tell us what's in the Budget, but presumably it is being revised by all these outlooks and inevitably it's got to be tough, hasn't it?
LINDSAY TANNER: It does and you're right, it's very difficult to put the Budget together in these circumstances, because the ground keeps moving all the time. And we are very focused on making sure that Australia can get back into budget surplus as quickly as possible. It's important to note that the two stimulus packages that we put out, even though they're lots of money - there's billions and billions of m… dollars - are temporary payments; that they really hit two or three years, but they don't continue indefinitely. And of course we are also focused on leaving the structure of the budget in as good a position as possible, so that when recovery really gets moving that we can get back into surplus as quickly as possible. That means tough decisions.
NEIL MITCHELL: One change that's been reported today is that you're looking at special long-term investment bonds linked to inflation for help - to help self-funded retirees. Are you willing to confirm that?
LINDSAY TANNER: Oh, look, I can't confirm that, Neil, and that's been one of a number of suggestions that have been floated in the debate about how we ensure that you've got - both got investment moving and also that you've got strong, healthy, secure investments for people like self-funded retirees who've taken a real battering as a result of the stock market falls over the past year or so. But I can't confirm that we're proposing to do anything of that kind. These are complex questions.
NEIL MITCHELL: Okay, fair enough. Can you - in a general sense though, what are you looking to achieve from the Budget? You've got to save money, obviously; step one, save money?
LINDSAY TANNER: Step one is to keep things tight as possible, so that the debt problem that we are now moving into because of the collapse in revenue, remains sustainable and manageable; and that we can get back into surplus as quickly as possible.
NEIL MITCHELL: Not just the collapse in revenue; spending as well.
LINDSAY TANNER: Oh, there's - the short-term spending inevitably does add to that, that's absolutely correct. But again I emphasis that it's short-term, it's to stimulate economic activity and it's not locked in forever.
NEIL MITCHELL: Yep.
LINDSAY TANNER: There's a - this might sound like a finance minister's hair splitting, but it is very important whether a payment is only in the budget for a year or two or whether it's in there forever. Because inevitably the year or two goes and you get to another budget, if it's no longer in there, that really does help. We got a big commitment about pensions and irrespective of anything else we've got to deliver something for pensioners. We got a range of other issues that somehow we need to address as well, so it's going to be very challenging.
NEIL MITCHELL: Okay, well you got two things there. Tighten up, one; and deliver to pensioners, two. Number three?
LINDSAY TANNER: Oh, there's of course the ongoing commitment to invest in infrastructure through our infrastructure fund - that's a very important thing - there'll be some announcements, I think, fairly soon about that. But that's an ongoing thing, because that's about ensuring that we both stimulate the economy now but make it more productive for the future. We've been very conscious of the criticism that one-off payments don't leave a legacy so we've tried to get a good balance with most of the money that's there to stimulate economic activity leaving something for the future; whether it's new primary school buildings or new roads or whatever, those things are important for the future economy as well.
NEIL MITCHELL: Okay, new roads. You want to give us a hint on the Frankston bypass.
LINDSAY TANNER: [Laughs] Sorry, I can't obviously comment on where the decision might go there. But I note that the Victorian Government appears to have indicated that it's going to proceed irrespective of the funding arrangement.
NEIL MITCHELL: Oh, yeah, but that was all smoke and mirrors. They're asking for people to put in expressions of interest and they don't know if they're expressing interest in 750 million or 350 million [laughs]. It was a bit of John Brumby in a hard hat [laughs].
LINDSAY TANNER: [Laughs] Well, we politicians like putting on hard hats [laughs]. The - I think you'll find that the expressions of interest will be asked for on a condition basis of, you know, a couple of different alternative arrangements. I'm not privy to exactly how the Victorian Government's approaching that.
NEIL MITCHELL: Okay, fair enough. No, okay, fair enough. Will you be looking at supporting the car industry?
LINDSAY TANNER: Well, we've already got a very substantial package of course, that you'd be aware of, which is about enabling the car industry to transform; and that of course is billions of dollars, but it extends that over an extended period of time. The other thing we've put in place, which I think's really important, is financial capability for car dealers, because the two major financiers of car dealers who in effect have to buy the stock or finance their stock, have both left the Australian market. And so the Government's had to step in with a special arrangement with some assistance from the banks at least, and other financial players, to ensure that we don't have a whole heap of car dealers just going broke through lack of finance. So, we've already got some significant things in place to assist the vehicle industry generally.
NEIL MITCHELL: Will you look at trimming the public service?
LINDSAY TANNER: We've actually reduced it a bit in the Budget last year. I think what you'll see is that the initiatives in the Budget this year will broadly be neutral; they might increase fractionally, they might reduce fractionally; but it's actually the total amount of spending and what it's spent on that really matters. The question of the total number of bodies is a secondary concern, but we have done a lot of savings, a lot of trimming of our expenditure on ourselves, on the functioning of government. It's getting towards almost $1 billion a year that has been saved as a result of the initiatives I've put in place, and we've got a few more coming, reforming things like property arrangements, for example, it's very boring and archaic stuff, but it does actually save significant amounts of money.
NEIL MITCHELL: Okay, the stimulus checks, are they still being held up by the High Court action?
LINDSAY TANNER: I understand the High Court is about to consider this, I can't recall the precise day when we're likely to get some indication of it, but that is a major issue, it's a major problem of course. The Government believes it does have the constitutional power to make these payments, but that has been challenged. It's the High Court's job to umpire these disputes, so I hope that we get a resolution very quickly, and I hope that the Government's decision is approved.
NEIL MITCHELL: Sooner the better.
LINDSAY TANNER: That's right.
NEIL MITCHELL: Just a couple of quick things, I noticed a report today, 40 per cent of credit cards of the banks haven't gone down - the interest rate hasn't gone down since the big drop started back in September. Now haven't we got some moral pressure on the banks here? After all, you've effectively, well not bailed them out, but guaranteed them.
LINDSAY TANNER: We have been putting pressure on the banks, and it's true that the picture is mixed with credit cards, it - that would be, in effect, an average. The overall picture has been that there has been some reduction in credit card interest rates, not as much as you've seen on mortgages, for example. But the reason is that credit cards, by definition, tend to be a bit riskier than mortgages, because the lending is not backed by any asset, so if I borrow $10,000 on my credit card, it's not linked to an asset, whereas at least if I borrowed it for my mortgage, it's linked to the value of my house, and it's also linked to the credit worthiness of the individual as a result, so…
NEIL MITCHELL: It's still a bit rough; forty per cent of them haven't reduced their interest rates.
LINDSAY TANNER: Well, I think it's difficult to analyse that, Neil, without knowing some more information, because you know, I haven't actually seen that report, and it's - possibly that's true. But of course ultimately it's a commercial product, and we don't have to borrow against our credit cards, we all need somewhere to live and most of us, or a lot of us need mortgages to finance that; we don't have to borrow against our credit card. And the credit card market's quite competitive; you get a lot of different rates, a lot of different products. So I'd like to see the banks doing more, but I'm not prepared to call it, that this is absolutely crook, without knowing more about it.
NEIL MITCHELL: Okay, just a quick thing, I've got a board full of people here, wanting to plug their business, look for a job, advertise a job, a few of them, retirees wanting to know what to do, because we're sort of trying to give people an outlet for those sort of frustrations. What's your advice to these people, even kids graduating from university? I was at a graduation ceremony the other night, and 40 kids or so going out in media, and I thought, well I know the industry, you haven't got a hope of getting a job. I mean what do we say to these people? What's your advice to them?
LINDSAY TANNER: Look, there's a number of services on different fronts that people can access, and I think that the answer is, that - I need to talk more about specific examples - but there are lots of things people can do, and I think persistence and patience in the situation that the economy's now in, is always the best piece of advice that you can give anybody. And ultimately people will get jobs, they will find opportunities in most cases, but it's just quite a bit harder, so that means, you know, looking around, it means getting advice. We've got the job networks for example, which we are reforming very substantially to assist particular kinds of people; there's a range of things that people can do. A lot of jobs come by word of mouth, a lot of jobs come just by being in the right place at the right time, so it's obviously too complex for me to give you a detailed analysis here, Neil, but persistence and patience, I think, are always the key.
NEIL MITCHELL: Okay, now just finally, who would have thought of this? Mark Latham's former chief of staff, Dr Mike Richards, says that the former Opposition Leader was a narcissistic loner, drowned by paranoia, had persecution anxiety and destructive rage. Who would have thought that of Mark Latham?
LINDSAY TANNER: At - some time ago, Neil, there was an article, in fact just after the 2004 election, in the Financial Review, where Labor sources were quoted saying those things, and it was widely thought this could have been the gentleman you're referring to. Well, these comments, if he's made them publicly, suggest that maybe it was him. Look, I don't want to comment about Mark Latham, I'm afraid he's a figure from Labor's past and it's Mike Richards's prerogative if he wants to criticise him publicly, but…
NEIL MITCHELL: What was he like to work for though?
LINDSAY TANNER: Oh, look I - you know, I didn't vote for him in the ballot, but I got on perfectly okay with him, Neil, and he gave me an additional responsibility, and you know, we worked perfectly professionally together. And you know, Mark had his strong points and for a period of time, he was very popular, and very politically successful.
NEIL MITCHELL: Ah, yeah, but the Australian people got it right, didn't they?
LINDSAY TANNER: Look, in retrospect, you know, you just don't know these things. I look at what occurred in the last term of the Howard Government, and frankly I disagree with the point you've just made, but…
NEIL MITCHELL: Well Mark Latham would have had us at war with the United States by now [laughs].
LINDSAY TANNER: Well, look…
NEIL MITCHELL: [Laughs] You don't want to talk about it because it's ugly history.
LINDSAY TANNER: [Laughs] I think that was slightly unfair comment, Neil, but look, these things are all very subjective, and you just never know how things turn out. And the fact is, we have to accept the verdict of the people, we've had lots of election defeats over our history, and you know, there's no value in arguing about whether we should have been victors, or we should have been defeated, the fact is the people made the decision, we live by it, accept it, learn from it and move on. And fortunately, the following time, we learned from our mistakes, we had a different leader, and we won.
NEIL MITCHELL: Okay, I appreciate that. Thanks very much for speaking to us.
LINDSAY TANNER: Thank you very much, Neil. Good to talk to you.
NEIL MITCHELL: Lindsay Tanner, the Finance Minister, and Acting Treasurer. It is savage stuff on Mark Latham, but I strongly believe that he would have been a disaster as Prime Minister, and the Australian people usually do get it right. John Howard says that, and I think even John Howard would have to say they got it right, when they dumped him.
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