LEON DELANEY: Federal Finance Minister, Lindsay Tanner. Good morning.
LINDSAY TANNER: Good morning Leon.
LEON DELANEY: How are you today?
LINDSAY TANNER: I'm not too bad.
LEON DELANEY: That's the way. From what I read today, it would appear that the government might be considering exceeding its self-imposed $200 billion borrowing limit; a limit which in itself has caused some people to be very worried that perhaps we're borrowing too much. Is that true?
LINDSAY TANNER: Look, this is one of the issues that inevitably emerges as a result of further deterioration in the budget position because of the global recession just getting worse and worse. You might recall we put out figures in February showing very large deficits for the next two or three years. We're now expecting those deficits will be even bigger, because the tax revenue has just eroded even further - company tax, capital gains tax, income tax receipts have plunged dramatically because of the collapse of economies that we trade with. And that of course does have an effect on our immediate borrowing needs. But, there is no specific decision as yet under contemplation Leon. But there's no question the budget position has deteriorated further.
LEON DELANEY: So, it is possible that ultimately the government may borrow more than the $200 billion limit now in place?
LINDSAY TANNER: Look, this is an open question. One point that I think people don't often note is that we're also big lenders as well as borrowers, so the Future Fund of course has billions in it, much of which is in effect in loans. HECS of course is a loan system. There are billions out on loan to non-bank mortgage providers to help that sector compete with the banks. So, the current net debt is about 70 billion, because as well as being borrowers we're lenders on the other side of the ledger. So when you net out the two, you get net debt of about 70. Clearly that's going to increase, but we're very committed to getting a trajectory for getting the budget back into surplus. And that's one of the reasons this has got to be a tough budget Leon. We, we've got to stimulate the economy in the short-term, but we've got to have a path back to surplus in the medium-term.
LEON DELANEY: That's kind of a contradiction in terms isn't it - it's got to be a tough budget on the one hand, but a stimulatory budget on the other?
LINDSAY TANNER: It certainly appears that way, and that's part of the challenge - is that we've got to get money circulating, sustain jobs, sustain growth in incredibly difficult conditions now, but at the same time lay the groundwork for tightening the budget and making sure that we get back to surplus as quickly as possible. We can very easily manage the big deficits that we're forecasting over the next few years, but we can't afford to allow them to continue indefinitely. So, although they're unavoidable in the immediate future, we can't just sit back and say, oh well, that's life, the global economy's turned down, we'll just have to live with it. We've got to have a pathway back to surplus to avoid ending up with a serious debt problem.
LEON DELANEY: The, the Opposition is accusing the government of running up a debt which will leave the country burdened by higher taxes and debt repayments in the years to come. Now, that argument appears to be getting some traction with just ordinary everyday people that I talk to, expressing the view that, well yes it's nice to get $900 in the pocket now, but does this mean that I'm going to be paying higher taxes down the track?
LINDSAY TANNER: Leon, the Liberal Party and Malcolm Turnbull have been totally hypocritical and hysterical about this issue. They've admitted that were they in government, they too would have to borrow in order to cover the huge hole in government revenue as a result of the loss of tax receipts. And they too have said, yeah, they'd have a stimulus package too, just a different kind, and smaller magnitude. So, while they're out there prancing around, going on about debt and deficit, their own admitted position would leave the overall debt position for Australia in a very similar place to where the government's projecting. It would be only marginally lower. So, they really are trying to whip up hysteria, when in fact the true position is that any government that's in the position that Australia's in at the moment would be having to do the kinds of things that we're doing. Sure people can debate, you know, how much should go on this, how much should go on that. That's, there's no absolute right and wrong there. But the overall position on debt is effectively unavoidable - it wouldn't matter who was in government.
LEON DELANEY: A key part of the criticism though is that the cash handouts are essentially wasted because they're poorly targeted and because many of the people who receive them, simply bank them rather than spend them back into the economy.
LINDSAY TANNER: Well, Leon, I don't agree with either of those criticisms. First, if you look at our retail sector - which employs a huge proportion of the Australian workforce - our recent months have been far better than almost any developed nation. We've seen dramatic drops in retail activity in many other major countries. Ours has held up quite well. And the key reason for that - and people like Woolworths will tell you this - the key reason for that has been the payments going into people's pockets. And the second point is that, for most people, even if they don't spend the payments immediately, in effect they will be spend in ensuing months, because, if you use one of those payments to say pay down your credit card today, then what that means is that money that you receive from your ordinary income in a month, or two months, or six months, that otherwise might be used to pay down your credit card; you will be spending. So, the effect over a period of time is that the vast bulk of that money will be spent. It's just some of it isn't spent straight away. But all of it benefits economic activity, and benefits jobs.
LEON DELANEY: What about people taking their $900 and spending it on alcohol, on pokies, or going out and getting a tattoo; or as one man apparently in North Queensland said, he's going out to get some high-class hookers?
LINDSAY TANNER: [Laughs] well, yes, well, inevitably there will be some people who do some dubious things with the money. I think that's, that's just unavoidable. Although, I'd have to say that we need to bear in mind that, there's a lot of people work in hotels; there's people who work for breweries; there's people work in these industries. And although we have a debate about what the tax level should be and what advertising restrictions there should be, there's an awful lot of people out there who earn a living in industries associated with alcohol for example, who work in pubs and clubs or casinos; and we shouldn't by any means treat their jobs as, as inconsequential either. So, yeah, there'll be some things that people do that are pretty odd, and that, you know, individually we might turn up our noses at. But in a sense that's beside the point. The real issue is getting lots of money flowing, sustaining jobs, and making sure that we keep people in employment as much as we can.
LEON DELANEY: The criticism of the cash payments though, isn't just coming from the Opposition, the IMF itself apparently has cast doubt upon the efficiency of such payments, or the effectiveness of such payments, and have suggested that instead, investment in infrastructure is much more important.
LINDSAY TANNER: Look, I think you need to look closely at what the IMF and the OECD have been saying, and it's pretty clear that their positions are absolutely in line with what the Government's been doing. Keep in mind that the total stimulus package that we put out in February, about 70 per cent of the money is going to infrastructure, it's going to building new school buildings, to maintenance on existing school buildings, to building new homes, to insulating homes, to building new roads, to building level crossings on railway lines, all of these kind of things that ultimately make up more than two-thirds of the package. The IMF has made it plain that that's where the primary emphasis should lie, so I don't think it's really being critical of the Australian Government's position, and in fact, broadly these international agencies have held Australia up as an example of the right thing to do in the total picture.
LEON DELANEY: Okay, every time forecasts are updated, it seems the news just gets worse and worse and worse. Surely there is a risk that we've spent too much too soon, and we're simply going to run out of capacity, to keep on borrowing, to prop up an economy, which has shrunk, and which will then leave us in a weakened position, and take a very, very long time to recover?
LINDSAY TANNER: Look, I don't believe so, Leon, this point of course is something that it's impossible to be absolutely certain about, because we're not dealing here with physics or maths, or anything like that, we're dealing with kind of living human economies, where all kinds of things are very difficult to predict, and you make your projects and your assessments, and exercise judgement. So I don't believe that's what history will show, in retrospect say, in five or 10 years time, but you can't have absolute certainty about these things, and of course the reverse is that if you wait too long, you can suddenly find yourself with a huge pool of people unemployed, and a situation far worse than it otherwise would be, and then it's a very long, arduous climb back into a reasonable economic state after that. So it's ultimately a matter of judgement, I don't believe that that assessment will end up being proved correct, but these are not matters of absolute precision, these are just matters for judgement.
LEON DELANEY: Is it possible though that we will find ourselves in a position where we've borrowed so much, that our national credit rating is lowered, interest rates go up, and there is a need in the future years for the Government to increase taxes?
LINDSAY TANNER: Oh, look Leon, this is one thing that we are very, very strongly focused on, and that is the overall credit rating. We're fortunate that we start from a very, very strong position, stronger than virtually any other country in the world, but you are quite right to point out that there are limits, and this is one of the reasons why it's so important to have a plan to get the budget back into surplus as quickly as possible, while at the same time sustaining jobs and growth as much as we can, in the short term. But we clearly do have to sustain that credit rating, and we do have to minimise the extent to which we accumulate a temporary debt burden, because if we take our eye off the ball here, you'll find that we have deficits spreading out, and adding to the debt every year, that adds to the servicing cost, that threatens the ratings, all of those things are very important issues, and we are very conscious of them, I can assure.
LEON DELANEY: This is an international financial or economic tsunami, and that means that much of it is beyond the control of our Government, or any one particular Government, for that matter. In that case, if the tide just keeps on coming in, and coming in, and coming in, it doesn't really matter how much you spend, does it?
LINDSAY TANNER: Look, it does matter, and it clearly is very heavily affected by what's happening internationally, but I think we need to acknowledge that things can't keep going backwards indefinitely, you know, there is a certain point where, just by the sheer nature of human activity, the economy can't keep deteriorating in countries like the United States or the UK, at the rate it's been deteriorating, because otherwise people will stop eating, and they'll be walking round naked. So these things - the rate of deterioration is clearly slowing, and there are some possibilities that in some of these countries, things have hit bottom, but you just don't know, in fact you don't know that they've hit bottom, until you can look back some time afterwards. So it can't keep continuing indefinitely in the way it has been, but of course you can't tell at the time that they've hit bottom, so it's certainly a very worrying situation.
LEON DELANEY: Is the Telegraph right, that the Government will continue the First Home Owners' Grant boost?
LINDSAY TANNER: Oh look, I can't speculate on decisions in the budget, but this is one of a very wide range of issues that we have to give very careful consideration to, because of the fact that things have deteriorated significantly internationally over the past few months. At the moment, the boost is due to finish on June 30, keep in mind that there is an ongoing existing First Home Owners' Grant that will continue, come what may, that's the situation as it is at the moment, that the boost will end on June 30, whether or not there should be any modification of that of course, along with a whole lot of other possible stimulus options, are things that are under consideration in a very general sense, but I don't think people should assume it'll be continued.
LEON DELANEY: Indeed, and I'm told that you're blowing out the candles today, so when you do blow out those candles, will you be making a wish, and what's it for?
LINDSAY TANNER: [Laughs] Perhaps a quiet life, but I've got to the stage, Leon, where there are far too many candles, and far too little breath left, for the process to be a happy one, I'm afraid.
LEON DELANEY: [Laughs] Maybe wish for a speedy resolution to the international economic crisis.
LINDSAY TANNER: I think I'll be there with virtually all Australians, wishing the same thing, it's an extraordinary situation.
LEON DELANEY: Thanks very much for your time today.
LINDSAY TANNER: Thanks very much.
LEON DELANEY: Lindsay Tanner, Federal Minister for Finance.
- ENDS -
| Media Contact: | Website: |
|---|---|
| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
