Interview with Alexandra Kirk

ABC AM Program

29 January 2009

SUBJECTS: Economic Security Strategy; IMF Report

INTRO:

As we mentioned earlier in the program, the Federal Government is currently working on an economic stimulus package. Treasurer, Wayne Swan, says the IMF forecast released overnight shows the deterioration of the global economy is much deeper and more protracted than previously thought. He says the Government's first stimulus package was effective and that all measures, including tax cuts, are still being considered for the next package. He spoke to Alexandra Kirk.

KIRK:

The Queensland Premier, Anna Bligh, says that the benefit of the $10 billion economic stimulus package has dried up, that retail sales had a brief respite but that's well and truly over. Was such a short reprieve really the most effective way to spend such a big chunk of the surplus?

TREASURER:

Well, if you have a very close look at the IMF report they are recommending precisely what the Government put in place last October. And you are now beginning to see in the reporting of companies like Woolworths that that $10 billion Economic Security Strategy did have a beneficial impact on lifting demand. What we are faced with is a very sharp contraction in global demand. What the IMF is saying in this report is that governments must act directly and quickly to boost that demand in the face of this very savage reduction in global demand.

KIRK:

You're now looking at bringing forward next July's tax cuts as part of a second stimulus package, but the IMF is urging governments to shy away from tax cuts. They see them as the least effective way to stimulate the economy, that people squirrel them away instead of spending the money. Will you heed that warning?

TREASURER:

Well, I don't know where you get the notion that we are looking at one particular measure. All options are on the table and we will be guided by a couple of very simple principles. But what we need to do is to boost demand, to do it in a way which is temporary, but also to make sure that as we do it, we have a plan for the sustainability of spending in the longer term. That's what the IMF is calling for and that's certainly at the forefront of our thoughts.

KIRK:

So, will the Government definitely target tax cuts to low income earners?

TREASURER:

I'm not speculating about what particular measure the Government may take in any particular area of policy. When we moved last October with our Economic Security Strategy there were many that questioned the wisdom of it and there were many that questioned the size of it. But we were ahead of the game in putting in place that Economic Security Strategy to boost demand precisely, as we now know, at the time when there was a sharp contraction in global demand.

KIRK:

There's some suggestion that the pokie spending is up. Has some of your big spending package been gambled away?

TREASURER:

Well, the evidence from Woolworths just yesterday, showed that there was a very significant impact on spending on the basics of life, such as school shoes, such as socks and jocks, such as polo shirts and so on. I think the evidence tends to indicate that many Australians spent the economic stimulus package responsibly and the benefit of that has been increased security in employment for many Australians.