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  Interview: Lindsay Tanner June 15, 2008  Watch our reportThis week, Ellen Fanning talks to the Minister for Finance and Deregulation, Lindsay Tanner. EF: Time to look at national politics, our guest this morning is the Finance Minister, Lindsay Tanner, who is in our Melbourne studio. Good morning to you Mr Tanner. LT: Morning Ellen. EF: We keep hearing the R word, ‘recession’, being bandied about in America and here. Is it time to acknowledge, do you think that despite the commodities boom rising petrol price and food prices mean Australian households, many of them, are in recession? LT: There's no doubt there's a lot of people out there doing it tough Ellen. I'm very conscious of this. I'm still managing to do the family’s supermarket shopping most Saturday mornings and I’ve seen over the past year or so what's happening to prices in many areas like dairy, dried fruits and cereals, so there's no question, there is a lot of people doing it tough there. But we have some things about to unfold that will assist, significant tax cuts coming into play on 1 July, the education tax credit and also the increase in the child care tax rebate will help a lot of families deal with these things, but we don't underestimate the way that there's a lot of people really struggling. EF: We'll talk about those budget measures in just a moment. But would you acknowledge that the word recession is appropriate for many Australian households, that's how it feels? LT: Look, recessions are things you talk about for national economies. So when individual households are doing it tough, then obviously that's a different phenomenon, that’s something that relates to their particular circumstance. We shouldn't forget though that we’ve still got very low unemployment in Australia, and that's really the key economic indicator that matters when you are talking about words like recessions, we have a lot of money coming in from China and other Asian nations for our minerals, and a lot more is going to come in during the second half of this year. Now that doesn't flow through the economy evenly, some people benefit more than others, but it does flow through the vast bulk of the economy and it's the key factor that’s keeping unemployment low, the critical thing for the overall health of not only the nation's economy, but also the families, and working people out there who obviously need to have good economic circumstances to keep their opportunities in reasonable shape. EF: This week we learn that consumer confidence is at levels though not seen since the last recession, what was that, December '92. I just wonder if it walks like a duck and quacks like a duck, why can't we just say it feels like a recession. LT: Oh look, I think we are a long, long way from recession Ellen. In fact all of the indicators across the nation, including in the States, by the way, that don't have much in the way of mining and don't benefit as directly from that mining boom show that we are still in quite strong economic growth circumstances, we have got employment still very strong, there's a lot of money around. We shouldn't ignore the fact clearly that there are lots of people in some areas where people are doing it tough but there's no question we are a very long way away from recession in Australia. EF: It’s just that you spent a lot of time up until the last election sympathising with working families, and talking about this idea of mortgage stress. I just wonder whether or not you are prepared to call it a recession in the lives of ordinary Australians. LT: Look, I don't think it's that an appropriate description, because the term recession applies to the national economy, and there is lots of people out there who are ding very well, so inevitably there is going to be at any time groups of people, families particular areas that are struggling, but that is simply the nature of an open market economy like ours, and that will often reflect other factors as well. It will reflect illness, it will reflect family circumstances, there's no recession in Australia, but there are plenty of people who are doing it tough particularly because of higher prices, and that is why it's so important that we get inflation under control, that’s why it is so important we have got a very strong budget surplus, and that’s why it's so important that the Liberal opposition don't block the budget measures that we are going to be dealing with in the parliament in the next two weeks. EF: Alright, we have seen unemployment figures, nearly 20,000 jobs lost in the past month, how hard are the times going to get? LT: Look, we don't make predictions about where the future is going to head in terms of levels of employment. EF: Well the question, I guess, this week, I think was that a blimp that we saw this month or is that an upward trend in unemployment? LT: All sides of politics know very well that you don't rely on monthly figures to tell you too much because they move around enormously. Sometimes you’ll see that in a month when you expect things have softened a bit that you’ll see that the numbers have gone up by 60-70,000, other times they go backwards a little bit, it's the trend over an extended period of time that matters, and the National accounts that were published last week show that we have actually still got reasonably strong growth, it's 3.6% over the year, employment is still very strong, and in most areas of the economy most parts of the country, you have still got the economy in quite good shape. The real threat is inflation, that's the biggest worry, that's why people are paying higher prices in the supermarket, that's the factor that we are absolutely committed to getting under control because if we allow that to become entrenched then we get the dog chasing its tail phenomenon, then we get prices and wages going up and up and up. And of course lots of people aren't able to participate in that, people on fixed incomes, a lot of people lose out there, and of course we get major economic inefficiency, poor investment decisions. So although there are those pressures now, we have got to keep the lid on inflation. EF: We saw this morning Martin Ferguson talking about the impact of Asian price caps on fuel and the need to do something about it. Realistically what can Australia do about that? LT: We can put pressure on other countries to remove subsidies that do distort choices that people make and do reduce the extent to which they can move into other technologies. What we are really seeing here Ellen, is a once in a lifetime transformation in Asia where hundreds of millions of people are moving up from very basic peasant lifestyles into lifestyles that are much more resource intensive, like ours, and so that is benefiting Australia at one level, we are getting a huge increase in our mining prices and so the money coming from that is enormous benefit to Australia. But at the same time of course, they are also demanding more petrol, and that is putting huge upward pressure on petrol prices, and it's outstripping demand and of course we have to pay those global petrol prices as well, so what Martin Ferguson is suggesting is very sensible, it is important for Australia to put pressure on these other countries but of course we can't force them to make those changes. EF: OK, Citigroup was quoted as saying widely this week that if petrol prices stayed as high as they are they would erode half the boost to household incomes provided by tax cuts in this budget and if fuel prices when to $2 a litre, it would totally offset the budget measures, so I just wonder to what extent that demonstrates that there's very little that you and Wayne Swan and Kevin Rudd can do for all your sympathy about working families, to affect the bottom line? LT: Well there are things we can do, and of course the obvious response is that if those tax cuts weren't there, then the situation would be a lot worse for working people struggling with those higher petrol prices. EFL But can I just ask you to address that point though of that analysis which is if petrol prices keep going the way they are, it could wipe out all the benefits you had tried to direct to working families? LT: Look, I haven't seen the Citigroup analysis, but there's no question that the increase in petrol prices erodes the spending power that people have got, whether it's from our tax cuts or whether it is from other things. That is one of the reasons why we were so committed to keeping the tax cuts even though there was a lot of pressure, a lot of commentary to junk the tax cuts. We were so committed to doing that because we knew that a lot of people out there really needed that tax relief in order to be able to cope with these kinds of things. EF: Sorry to interrupt, but if you made the promise to help working families and that help is eroded by higher fuel prices, do you need to do more? LT: We believe we have got the setting right here, and it is also really important that we are changing things for the longer term as well. That's why we are investing in green car technology, so that we get a change in the way the Australian car manufacturing industry operates and it's part of the global shift to much more fuel-efficient cars. That’s why we are investing big time in infrastructure. EF: Hybrid cars are one thing, they'll come off the production line in 2010. But we are talking about the here and now for working families, I wonder is there any scope for a mini budget given that conditions are so different to when you brought down the budget? LT: Oh, look, we’ve got no plans for a mini Budget, and of course nobody knows where petrol prices will be in a month's time, two months time, these things obviously move around a bit, it's difficult to predict where they will go. You would be aware of course that there has been spectulative activity off the back of those increased prices that adds to the problem, so we have also got to take that long-term view. We believe that the things we’ve put in place will assist working people to cope with the pressures that petrol prices are putting on them. And don’t forget that market incomes, private incomes are also expected to rise very substantially as a result of that money flowing through from China. It will mean lots of people work more overtime for example, it will mean small businesses all around the country earn more. Now it's not even, I emphasise that, that there are plenty of people won't get the benefit from that, that's a problem that none of use can ignore. We shouldn't ignore the fact that we’ve got a lot of positive things in this economy as well. EF: What is your plan though if petrol prices go to $2 a litre. I mean, would you rule out ever cutting the petrol excise? LT: Look, we haven't made specific plans for particular price levels for petrol because even if, hypothetically, the petrol price did hit that level, nobody can tell whether that would just be a momentary event, and it drops back to $1.50 within a month or two, or whether it's just a weigh station on to an even higher price, you can't tell these things in advance and you can’t even necessarily know at the time. So it's a bit pointless to engage in endless war games of what we'll do if the price hits this level or that level. We have indicated that our overall tax review under the head of the treasury Ken Henry is amongst other things, going to look at the intersection between the GST and petrol excise, but the excise issue is actually only one very small part of this. The Liberals have proposed cutting it by 5 cents. Now, a, that gets wiped out in half a day's fluctuation in prices anyway, but more importantly, b, that money has got to come from somewhere so the working people who get that 5 cents a litre are basically going to be paying higher taxes somewhere else. That's what the Liberals aren't telling them. EF: OK, a couple of quick questions if we can, we are nearly out of time. I saw two comments this week, one from the Premier of South Australia predicting the commodities boom will last for a100 years, and another from the head of the Reserve Bank saying that interest rates will remain high while ever the resource boom continues. Terrifying prospect for many people, those two things, juxtaposed. Are both statements accurate in your view? LT: Look, I don't think we can predict anything about what the world will look like in 100 years time, particularly what Australia’s mining income will be, so I’m afraid I’d have to disagree with Mike Rann on that one, I just think you really can't predict anything beyond about maybe 5 to 10 years on these things, anything beyond that is just guessing. EF: OK, did Kevin Rudd consult you before announcing the $35 million donation to Toyota? LT: Yes, in fact we had extended discussions over the last months rather, on these issues, and the real important thing happening, is we can't allow the Australian motor vehicle industry to be left behind. There's a transformation to get under way. EF; I’m sorry to move you on but can just I ask you, did you say that you thought it was a good idea, did you support it? LT: Yes. EF: You did support it? LT: I did. It's the implementation of an election promise, it is part of a $500 million green car investment fund that is designed to encourage the vehicle manufacturers to change the focus of their manufacturing effort, to much more fuel efficient cars, that's what’s happening all around the world. We can't afford to allow the Australian industry, which is pretty small by world standards, to be left aside to wither on the vine, so it's really important that that assistance is focused on moving the industry to where the rest of the world is heading. EF: OK, one very final question then. The ICAC, Independent Commission Against Corruption, looks to be drawn into the Iguana Joe's controvery, New South Wales minister, John Della Bosca and his Federal MP wife Belinda Neal. Clearly the Belinda Neil issue is going to be a distraction for the government in Parliament on Monday. Why offer the opposition a chance to claim a scalp. Should she go? LT: I think the way that Kevin Rudd has handled this is entirely appropriate. We all have to behave in public, all those of us who are in public life in an impeccable way whether we like it or not. We can't afford to be dragged into the ordinary altercations that private citizens sometimes get involved in. But I think the response has been perfectly legitimate but appropriate. It has been balanced so Belinda is having some counselling about that. That should be the end of it, nobody has died here, nobody has lost their life savings, she's accepted I think that she shouldn't have allowed the situation to get to where it did. But I think it is important to keep it all in perspective, and I think we should rule a line under it here. EF: Lindsay Tanner thanks so much for coming in this morning, we appreciate it. Lots of issues, little time. Thanks again. LT: Thanks very much Ellen. |
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