27-September-2011
Portfolio Media Releases
Monday, 26 September 2011
Transcript: Interview with Ross Greenwood 2GB
Topics: Interest rates, economic vulnerability
E&OE………………………………………………………
ROSS GREENWOOD:
Many thanks for your time Andrew.
ANDREW ROBB:
My pleasure Ross.
ROSS GREENWOOD:
Here’s the point about it though, the Reserve Bank has given fairly strong guidance so far that it would prefer to keep interest rates on hold. Why do you believe it is the time to start thinking about cutting interest rates?
ANDREW ROBB:
We’ve had 90,000 job losses in the last three months, the Westpac survey on Friday, the Westpac-ACCI survey, showed that inflationary pressures were coming off and that of course unemployment was rising. They felt that there should be a consideration and I just feel that what is coming down the pipeline from the rest of the world is potentially of such an order that anything we can do to fireproof this economy we should do.
ROSS GREENWOOD:
And you think that interest rates being lower would effectively fireproof some parts or some sections of the economy?
ANDREW ROBB:
Well what can we do when we face this sort of uncertainty and potential threat from overseas? We’ve got no capacity to control what happens outside our shores and I do feel that the government has been found seriously wanting in the sense that they have not set us up or fireproofed us for a situation like that that we are confronting.
We are far more vulnerable than we were four years ago in terms of weathering some sort of economic storm and the government I think needs to start to live within its means.
I think it also needs to scrap the carbon tax, those two things would give confidence and in combination with interest rates coming off I think that we would start to see costs reduced across the economy; that’s about the best thing that can happen in the months ahead, so that we are in some sort of position and business is in some sort of position to hold on and to hold people in jobs.
ROSS GREENWOOD:
Of course the Treasurer Wayne Swan has been feted by Euromoney as the best finance minister in the world in the past 12 months because of number one the stimulus and then taking away the stimulus program. He spoke after he received his award in the last day or so, let’s have a listen to what he had to say: “It is no doubt that the recent events that we have just been discussing impact on global growth that flows through to domestic growth, that flows through the budget revenues and that does have an impact so it means that that objective that we have set, that determination to come back to surplus in 2012-13 just gets harder.”
Harder, or impossible Andrew Robb?
ANDREW ROBB:
I don’t think they’ve got any prospect myself, I felt all along that they’ve been making Pollyanna assumptions about revenue next year which are not achievable or unlikely to be achieved and it’s been to me a political ploy.
While they’ve been talking about a surplus in 2012-13 they’ve been presiding over the four largest deficits in our history and none of those deficits have been paid off, we’ve got a gross debt, national debt now heading towards a quarter of a trillion dollars.
So we’ve got all that hanging around our head we are in a demonstrably worse position to weather the storm than we were four years ago.
We are certainly better off than most of the other developed countries, I don’t deny that, but we should be much better off seeing that four years ago we had no debt, between $50 and $70 billion worth of assets and four and a half per cent unemployment.
ROSS GREENWOOD:
Given the fact that at the last election your own party also said that it could forecast a return to the budget surplus sooner rather than later, do you believe now given the circumstances around the world that you could make such a claim even today?
ANDREW ROBB:
The fact is the government has spent too much, that’s been the problem.
If it hadn’t spent the last two tranches, we supported the first $10 billion because the economy was really tanking and confidence was shot back in 2008 and that was an important part of dealing with that immediate outbreak of financial problems around the world, along with the buffer that this country had and the ability to reduce interest rates at that time et cetera and we still had China coming down the pipeline.
We would have cut off spending a lot earlier than this and we wouldn’t have been spending anywhere near the amount, $40 or $50 billion overspent, now that happens to be the size of the deficit at the moment.
So if they had shown economic prudence, financial prudence, had not increased taxes and had taken pressure off interest rates by not increasing spending then I think we would be in a much stronger position than we are now to weather any storm that might be coming.
ROSS GREENWOOD:
Well of course you talk about that storm and one of the issues of the storm is Greece and exactly what Europe does about Greece. Alistair Darling is a former Chancellor of the Exchequer in the United Kingdom, he’s also been speaking in the last day or so and it really is quite a concerning prospect that he’s come out with: “Governments now realise that it’s only a matter of time before Greece defaults and that’s why it is imperative that the Eurozone countries take action now to try and resolve this problem and not let it drag on for the next few weeks because the risk is it will bring other countries down with it.”
Yes, well given the fact that you or Joe Hockey could have been at Washington this weekend at that meeting of the International Monetary Fund you would also be alarmed and concerned about what you were seeing or hearing at that meeting no doubt.
ANDREW ROBB:
Well the thing that bothers me Ross is the contacts I’ve got in the business community which would have to be exceeded by the government surely, but the senior contacts I have who are in touch daily with world markets have been telling me since at least January, February this year that it was well known that Greece would ultimately default and that what was going on overseas was they were trying to work out how to manage that.
Now, if that is true and if our government has known about it for all these months, the fact that they keep saying everything is ok to me means that they haven’t been giving some straight talking to the population.
It’s a failure of the government to call it as it is and I think because of that, people aren’t silly, they are saving at record levels now, households around the country, for a good reason that is they’ve felt anxious now for 12 months and yet the government keeps saying everything’s ok, everything’s ok.
I think that sort of front that they keep putting on which is there for political reasons is unnerving Australians.
You add the carbon tax and you find confidence is being undermined, so the government if it decided to talk in a mature way, treat Australians as adults, told them as it was, I think they’d accept it.
They’re not going to blame the world events on this government. What they will blame on this government is if this government doesn’t do everything possible to ensure that when something and if something does occur that we are in best shape to fireproof ourselves against some sort of economic downturn around the rest of the world.