NEIL MITCHELL: I was listening to the BBC this morning, and they said Australia is leading the world, Australia has shown the world that the bad days are over, coming out of recession, the global financial crisis is just about - well not finished, but on the way out. Well, that's because interest rates went up, and you're paying more. On the line is the Finance Minister, Lindsay Tanner, good morning.
LINDSAY TANNER: Good morning, Neil.
NEIL MITCHELL: How's the boss, is he all right?
LINDSAY TANNER: [Laughs] I haven't spoken to him in the last 24 hours, so I'm not sure.
NEIL MITCHELL: Yeah, is he working, or is he still off crook?
LINDSAY TANNER: Oh look, I don't know, Neil, knowing Kevin, he's kind of always working, even when he's not.
NEIL MITCHELL: Yeah, gall bladder's nasty stuff though, it knocks you around.
LINDSAY TANNER: Yeah, it is, no, it is, my dad had those problems many years ago, so I have some idea of what it's like.
NEIL MITCHELL: Okay, well I hope he's back in the middle of it soon. The financial markets were pretty generous overnight, are the bad days over? Are they right, are the bad days over?
LINDSAY TANNER: I think it's too early to make that call, Neil, but certainly this is a very significant thing, we've had interest rates at really extremely low levels for a period of time that were never going to last, it was, as the Reserve Bank Governor said, an emergency setting, because the world was in diabolical trouble, and over the past few months, the signs have been improving, and we've had better unemployment figures than perhaps we expected, and things are looking a little bit better than perhaps people thought. But I think it's a bit early just to be calling victory.
NEIL MITCHELL: Okay, well does all that mean that it's time to look at winding back the stimulus?
LINDSAY TANNER: Well no, it doesn't, because that's actually playing a crucial role in keeping the economy in half reasonable shape, and I think we need to take note of the fact that the economy isn't exactly kicking goals at the moment, it's just ticking over at a half reasonable pace. In normal circumstances, we'd look at the current growth rates and say, God, that's terrible, it's just that they look all right, compared with everybody else in the world, so it's important that the stimulus is there still, keeping that ticking over for the next 12 or 18 months.
NEIL MITCHELL: Have we avoided recession in Australia, can we at least say that?
LINDSAY TANNER: We can certainly say we've avoided technical recession so far, and of course people are...
NEIL MITCHELL: That's hardly very brave, I'm talking about, you know, are we enough - can we now say we're through it sufficiently to say we have avoided technical recession in this period?
LINDSAY TANNER: Yes, I think we can probably say that, but we need to be wary about the international situation, there's been some scepticism about the strength of Chinese growth, of course that's played a significant role in helping Australia ride through these difficulties, some people are suggesting that that might falter, I'm not in a position to judge, but there is still a risk of a second wave of bad news internationally. And one of the lessons of course we've all learned from the last year or two is just how connected we are with what goes on internationally, whether it's in the US, Asia, China, it very much influences what happens, so I certainly can't give you a rolled gold guarantee that we're not going to go into much more difficult times over the next 12 months, but I think it's pretty unlikely.
NEIL MITCHELL: Okay, and you think that you'd be reasonably confident we have avoided recession?
LINDSAY TANNER: Yeah, I'm reasonably confident that in a year or two's time we'll be able to look back and say no, we haven't had the two consecutive quarters of negative growth, but I can't guarantee that, from where things are at the moment.
NEIL MITCHELL: No, well people talk about the W, don't they, we've heard of the J-curves and all the rest of it, but the W, which is down, up, down, up?
LINDSAY TANNER: There's a letter for everything in this game, unfortunately [laughs]. Yes, that is an argument, in fact I actually had somebody in the business community put that to me the other day, saying that they think that might happen. Now I think if it does, it'll be international factors that cause it, just as it's been international factors that have caused the initial downturn. I think if you look across the global situation, it doesn't look very likely, because I think there are some positive signs out there, but we've had to become very cautious about these things.
NEIL MITCHELL: Do you think that the banks should pass on this interest rate increase immediately?
LINDSAY TANNER: Look, typically they do, and ultimately that's, you know, something that I think people have come to expect. We'd be very disappointed if they pass on any more than this increase, we've all now come to terms with the fact that a significant proportion of the money that they're lending to Australian home buyers of course is coming from overseas, and the cost of that money has sky-rocketed in recent times, and that's been a factor that's changed how they set their interest rates, but we don't believe there's a case for them doing anything other than just passing on the Reserve Bank level increase.
NEIL MITCHELL: Well, Warren Truss, the opposition, is saying maybe they shouldn't even pass this on, do you agree with that, is that a possibility, they could actually hold this?
LINDSAY TANNER: Look, I think that's probably an unrealistic assessment, ultimately for every dollar that somebody's borrowing, Neil, there's a saver on the other end of it, who's getting paid an interest rate on their deposit, so it's a two-way process of course, and the official Reserve Bank interest rate basically does flow through to interest rate settings across the board, in one form or another, so it would be a nice thing if that were to occur, but I don't think it's realistic to suggest that it will.
NEIL MITCHELL: Is it also fair to suggest though that further rises are inevitable in the short term?
LINDSAY TANNER: Look, I don't think that's right, clearly we've indicated, and the Reserve Bank Governor's indicated that when you've got interest rates that have been set at emergency levels, you know, the lowest in 50 years, way below where they were about 18 months ago, that it's reasonable to assume that at some point in the future, they're going to cease to be at that low level, so that you'll see rate rises at some point. But exactly when that'll occur, I wouldn't speculate on, because again, if we don't know what the strength of the global economy's going to be over the next six to 12 months, and if that could start going backwards again, well that would have a very big influence the other way. So I think we can speculate, you know, on all these things, and obviously we don't speculate about details on these things, about whether interest rates are going up next month, or the month after, but it's very difficult to foretell the future on this stuff.
NEIL MITCHELL: Is it time for the bank guarantee to be reviewed?
LINDSAY TANNER: Look, I don't believe so, Neil, because it's actually got an inbuilt mechanism for withdrawal, and that is that once things get more normal internationally, then the cost that the banks have to pay for guaranteed borrowing, they actually pay a fee which is quite a significant fee, for every dollar that they borrow with the guarantee. Now when the price of money internationally was sky high, and nobody was wanting to lend to anybody who wasn't Government guaranteed, that meant they were virtually using it for everything, but that's now long past, and it's barely over half of their borrowing now they're using the guarantee, and of course as the price of money that they're borrowing starts to head back towards normal, then they'll have a disincentive to use the guarantee, because it's costing them money.
NEIL MITCHELL: Now, another thing, Godwin Grech has stepped down from Treasury, has left Treasury, are you aware of that?
LINDSAY TANNER: Look, only from the media reports today, and...
NEIL MITCHELL: So you don't know what his pay deal is?
LINDSAY TANNER: [Laughs] To be honest, I've got no idea, these things of course, they're staffing issues for Treasury, and I can understand why that would have happened, but I know very little about it, I confess.
NEIL MITCHELL: And had you heard the rumour that Joe Hockey is being directly sounded out about whether he'd be willing to take over from Malcolm Turnbull?
LINDSAY TANNER: Um...
NEIL MITCHELL: Come on, there's a free kick.
LINDSAY TANNER: [Laughs] I've learned over the years, Neil, that in opposition, when you get an opposition that's in strife, there are rumours every day, and some of them are well-founded, and some of them are whacky, but I just wish they'd get their act together, and tackle this issue of climate change, and get a coherent position they can all sign up to, so that we are in a position to try and get our bill through the senate, you know, we accept that it's reasonable to seek to negotiate, but we've got still nothing to negotiate with, but they're all over the shop.
NEIL MITCHELL: Thank you very much, the Finance Minister, Lindsay Tanner.
-ends-
| Media Contact: | Website: |
|---|---|
| Nardia Dazkiw - 0418 144 690 | www.financeminister.gov.au |
