JOHN STANLEY: Inflation, remember, was - beginning of last year inflation was the big problem, inflation was the big enemy that we needed to fight, but all of that very, very quickly turned and today, the latest inflation figures did show that inflation continues to ease. It's risen by half a per cent during the June quarter. The nuts and bolts of that are we had higher petrol prices and higher house prices over the past three months, a slight fall in food prices, which some of you I know did find a little bit surprising. The Finance Minister Lindsay Tanner is the Government man talking about this afternoon. He's meeting this afternoon, unions on their push to have the Labor Government in Canberra replicate what the New South Wales Government's doing and try to force all government procurement to head in the direction of local producers, to really push things in that direction and where possible, by things locally. I'm not sure how he feels about that, but the inflation figures which still continue to ease - I spoke with him earlier this afternoon and asked him, first of all, what he made of that.
LINDSAY TANNER: They do show that the inflation threat has subsided substantially as you'd expect because the economy's been slowing on the back of the global recession. They do indicate that there's still an underlying significant inflation level there, but broadly, I think they're in line with the expectations in the market.
JOHN STANLEY: Okay so, are we - we've had a series now of economic indicators indicating that the economy is travelling better, certainly than the Treasury or the Government predicted back in the May budget, is that a fair assessment now?
LINDSAY TANNER: Certainly there's been one or two things of that kind, John, but it's really too early to say and we are very much hostage to events internationally and, for example, the IMF is still predicting that the developed economies around the world will contract by almost four per cent this year. Now that's a huge negative pressure on the Australian economy. China's been doing a bit better than expected, that's helpful, but it's way too early for us to be declaring victory or saying we're out of the woods. We've still got some big challenges in front of us and there are many things that could still go wrong.
JOHN STANLEY: Is there a chance that despite that, we could record growth this year, even, albeit very small?
LINDSAY TANNER: Look it - that's possible given that the estimate of negative growth that is currently there is a pretty modest one. It's just not possible to speculate on these things other than to say that you can't rule out those kind of possibilities, but I think we would respond by saying that we are sticking to the forecast that Treasury's put out. They get revised in the general course of things latter - in the latter part of this year and that's when the revision will occur and if there's any change that's when it would occur. But again I'd caution that although there's been some positive signs, past examples of this problem of global recessions and slow-downs, have not been even. They've often been jerky, so things will improve, but then they'll get worse again, so we can't assume that there's just going to be a steady improvement from here, even though in recent times there's been a few good signs.
JOHN STANLEY: Because the impression, for us is that you've got Access Economics, the Reserve Bank and others talking things up and the Government being fairly careful, if not talking things down certainly trying to provide a counterbalance to the very confident talk we're having from so many other organisations?
LINDSAY TANNER: Well I think the Reserve Bank's been pretty cautious in its assessment. Access Economics tends to underline its assessments in either direction for the purposes of getting the message through, that's fair enough, they're are private organisation...
JOHN STANLEY: [Interrupts] Getting the message through, or getting [laughs] their name in lights?
LINDSAY TANNER: Well it's probably the same thing. [Laughs]
JOHN STANLEY: Yeah I think so, yeah that's probably right, yep.
LINDSAY TANNER: But - and fair enough, they're a private organisation they're entitled to do that, but we have to be much more cautious because we have the direct responsibility for managing the economy, so it's good that we've had these positive data in recent months. They do show that the Government strategy and the Reserve Bank strategy have been having a positive affect, with lower interest rates and a very substantial stimulus injection into the economy, but it's very premature to be drawing conclusions about this. There's still a long way to go.
JOHN STANLEY: Even so, you're the man who'll be charged with trying to claw back the debt that has built up through the stimulus packages, through the collapse in revenues, do you these figures, if they do carry through make your job a little more easy?
LINDSAY TANNER: Well I'd certainly rather have these figures that we had recently than the opposite that suggested things might be even worse than we projected. There's no question about that, John, that I'd rather have things on the upside because we do face a major challenge. The Government's been upfront about that that we now have substantial budget deficits that have been imposed on us by a giant collapse in taxation revenue caused by the global recession, and we've got to battle our way out of that. We're projecting a return to surplus in 2015 - 2016 and thereafter we start paying down the debt that has accumulated in the meantime. If things turn out not as bad as projected, that of course helps us in that task, but one way or another we are still going to face a very big challenge on that front.
JOHN STANLEY: Yeah the other issue which people keep raising now, is that you may have spent too much on the stimulus, that you mightn't needed to have spent as much money, that the economy is not going to get into the trough that had been expected, is there any scope to pull back any of that stimulus money?
LINDSAY TANNER: I don't believe so, John, and I think that those kind of assessments they're coming from people like the Opposition that have been all over the shop. It's not that long ago that they were accusing us of being too optimistic about the Australian economy, now, they're saying we're too pessimistic when broadly, our position hasn't altered our assessment - hasn't changed. We believe the stimulus has been appropriate, of course, much of it is now in the works and it wouldn't be an easy thing to turn that...
JOHN STANLEY: [Interrupts] Is there - are there any aspects of it that haven't been spent, that could be held back?
LINDSAY TANNER: There's obviously some things that are - where money is going to flow more towards the end of this year and into next year, but broadly speaking we believe that the stimulus has been a key element in the process that's occurred so far. We don't believe there's a case for modifying it. We're obviously monitoring all of the economic data all the time because there's a lot of things in play here, but the other thing that we should keep in mind is that the stimulus is temporary, whereas the challenge to get the budget back into surplus and to pay down debt is longer term, so really the focus has to be on the total of the Government budget, not just one element of it that's already in [indistinct]
JOHN STANLEY: And just a final one, you've got - the union's there this afternoon, arguing again that the Government ought to be its using its own procurement policies to buy locally. New South Wales Government's headed further in that direction, are you prepared to listen to them on that?
LINDSAY TANNER: We've had numerous meetings, John, and we believe that it's fair enough to look at ways of improving information, improving opportunities for Australian companies to compete for Government business, but we do caution on a couple of fronts. One is that we're a trading nation and we don't want to take [indistinct] measures giving artificial leg-ups to Australian companies because that'll invite retaliation against Australian exporters from other countries and we're not a huge economy, we're not in the same league as the US or the Europeans or China, so we can't afford to get into that kind of battle and it's that kind of stuff that caused the global recession in the early '30s into...
JOHN STANLEY: [Interrupts] It sounds like a no, to me.
LINDSAY TANNER: ... the Great Depression. So we've sort of been not interested in formal discrimination, but there are various things we can do to make it easier for Australian companies to compete and we do note that the vast bulk of what we spend, either already goes on Australian goods and services, it's probably - it's certainly two-thirds of what we spend and most of the rest on imports goes on stuff we don't make. So we don't make fighter jets in Australia...
JOHN STANLEY: [Interrupts] No that's right.
LINDSAY TANNER: ...we have to import them. We don't make photocopying machines, so there's some issues here. We're happy to talk to unions and try and improve from where we've been but we're not in favour of the kind of thing that New South Wales Government's done.
JOHN STANLEY: Good luck with that, we'll talk soon. Thank you.
LINDSAY TANNER: Thanks very much.
JOHN STANLEY: There he is, Lindsay Tanner the finance minister. You may have some thoughts on that, particularly the question of trying to skew as much of Government procurement towards buying the local product. The New South Wales Government has done that and some people felt a bit uneasy about it. Federal Government says it won't mandate it, but they say most of what they buy is already Australian produced.
-ends-
| Media Contact: | Website: |
|---|---|
| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
