Interview with Fran Kelly
ABC Radio National Breakfast
7 May 2009
SUBJECTS: Retail Sales Figures; Economic Stimulus; Debt; Labour Force Figures; Budget Speculation
KELLY:
Treasurer, good morning.
TREASURER:
Good morning, Fran. It's good to be with you.
KELLY:
Treasurer, how much of the 2.2 per cent jump in retail trade do you lay claim to as a result of the stimulus cheques?
TREASURER:
I don't think there's any doubt that our economic stimulus has had a very significant impact on retail trade. It's up something like 4.5 per cent since the pre-November fiscal stimulus. So, there's a very dramatic impact.
KELLY:
Can you quantify it? I mean, we spend a lot of money now - $22 billion in cheques. Can you quantify how much of that's been spent?
TREASURER:
Well Fran, a lot of the economic stimulus is still to come through the system. Something like well in excess of two-thirds of the Nation Building and Jobs Package - which is direct investment in schools - is yet to flow through. But the payments that are out there and were there in December are still flowing through, and of course there are payments out there yet to flow through. There's absolutely no doubt that the economic stimulus from the package last year and the from package this year has had a dramatic impact on employment in this economy, and without that economic stimulus, unemployment would have been far, far higher.
KELLY:
Well, you keep saying that and claiming that. Mr Turnbull thinks he can quantify it. He says 80 per cent of the $10 billion handed out in December wasn't spent, it was saved.
TREASURER:
Well, Mr Turnbull somehow seems to think that less stimulus means more jobs. I mean, you've got the IMF out there today calling for strong economic stimulus across Asia. The Government here moved early, it moved decisively. The consequence of that is that we have cushioned this economy from some of the more savage effects of the global recession and we have provided vital support to employment and to business at a critical time when demand globally contracted very sharply first of all in the December quarter, secondly in the March quarter.
Now, Mr Turnbull wants to pretend somehow that less stimulus would mean more jobs. The fact is that he has said that he would have to borrow $177 billion to make up for the dramatic fall in revenues which have been caused by the global recession. Now, if he's going back on that and saying he would borrow nothing, then what he's admitting is that he would be sitting back and watching far higher unemployment, far higher output destruction. And of course if he was unwilling to borrow, what is he going to do in the circumstances where there has been a dramatic reduction in revenue? Is he going to savagely increase taxes or is he going to dramatically cut services. The truth is if he's not going to borrow, far higher unemployment would be the consequence and far higher economic destruction would follow.
KELLY:
You and he can both make these claims but without any sort of statistical analysis to underlie it we can't really prove anything. I mean, the truth is too that the cushioning that's come from this stimulus spending hasn't stopped the job losses. We are still seeing sharp rises in unemployment.
TREASURER:
Well, we said from day one that our economic stimulus would cushion the economy from the savage effects of the global recession. It is unquestionable that it has done that. If you look at the retail figures, Fran, if you go around the world for that period since November, up 4.5 per cent in Australia; -2.5 in the US; -2.2 in Germany; -3.1 in Japan. One of the reasons why our economy is in far better shape than most other advanced economies is precisely because this Government moved early to put in place economic stimulus.
KELLY:
You promised that the first stimulus package would create up to 75,000 jobs. Now, can you identify, perhaps not 75,000, can you identify one job that's been created because of this stimulus package?
TREASURER:
Well, we can certainly identify thousands of jobs that have been created in the retail sector. And if you go out there right now and you talk to the contractors that are beginning to work in terms of public housing, if you talk to those that are involved with our energy efficiency packages, if you go out there and look and talk to all of those people involved with our school modernisation programs, there are jobs being created and jobs being supported right across the board through economic stimulus. It is absolutely undeniable. And for Mr Turnbull to pretend that less stimulus would mean more jobs is simply voodoo economics.
KELLY:
The unemployment figures are due out today. Do you expect them to go up?
TREASURER:
I don't think there's any doubt that the slowing of growth and the sharp global contraction is leading to higher unemployment. I hope they don't go up today but I think that the slowing of growth will be reflected in the figures that we see over the period ahead. But what we do know is that economic stimulus has cushioned the impact of that savage global contraction and the consequence of that is that unemployment here is going to be much lower than it will be in many other parts of the world.
KELLY:
Treasurer, can we go to the Government's debt levels now. The Finance Minister, Lindsay Tanner, says it will cost around $3 billion to service the debt we're building. Are we getting to the point of debt overload where it's going to be dangerous to our credit rating, and that obviously will put pressure on rates?
TREASURER:
Well, the responsible thing to do in the current environment, as I was saying before Fran, is to borrow and to borrow in the face of this big crash in government revenues to support the economy. It's a complex situation because what we have to do at the moment is to put in place economic stimulus, but in the longer term put in place the savings that are required so we can make room for the vital investments for the future that will enable us to take advantage of the opportunities that come when global growth returns.
KELLY:
I know it's a complex balancing act for sure, but is there a sustainable level? What is that? Will you cap debt levels?
TREASURER:
What we will do is provide all of our economic forecasts on Budget night, Fran. And we can have a talk about those on Budget night.
KELLY:
Is there a figuring at what point the debt level puts pressure directly on interest rates?
TREASURER:
Fran, Australia is far better placed when it comes to net debt levels than any other advanced country, any other major advanced economy. We are well placed to, on the one hand, provide the economic stimulus that's required at the moment, and to put in place sustainable levels of support for the economy, sustainable levels of debt, and to make sure that we have a medium term fiscal strategy for the long term that returns the Budget to surplus once growth returns to trend.
KELLY:
Now Treasurer, you're looking for savings in the Budget. I've identified an easy way to save billions. You could delay the July 1 tax cuts until a year or two down the track. Why not do that?
TREASURER:
Because I'm not going to speculate about what may or may not be in the Budget on the program this morning, Fran.
KELLY:
Would you consider delaying the tax cuts?
TREASURER:
I'm not going to speculate about that.
KELLY:
What about scrapping the freeze on petrol excise? Good idea?
TREASURER:
Well, I'm not speculating about any of those matters that are floating around in the papers this morning, Fran.
KELLY:
It would be a good idea in this carbon constrained world, though, wouldn't it?
TREASURER:
I'm not speculating about any of those matters this morning, Fran, no matter how tempting your invitation.
KELLY:
Treasurer, thank you very much for joining us on Breakfast.
TREASURER:
Good to be with you.
