Transcript: Interview on ABC News 24 Breakfast 19/1/12

19 January 2012

Please read or listen to the transcript of my interview on ABC News 24 Breakfast.

SUBJECT/S: economy, jobs figures, car industry

Bill Shorten interview on ABC News Breakfast

PAUL KENNEDY: On to another story now and the Federal Government has acknowledged the Australian economy will see a downturn this year.

MELISSA CLARKE:   The Acting Treasurer Bill Shorten has echoed the warnings from the World Bank about weakening growth and he joins us now.  Bill Shorten just how bad could it be for Australia if the global economy does - is to have this impact on growth that the World Bank and others are predicting?

BILL SHORTEN: Well we think that the global economy is a mixed bag.  In fact last December Treasurer Swan in the mid year economic forecasts said that we estimated that Europe would go into negative growth.  The World Bank has echoed this.  They've said that in Europe the problems aren't getting any better. This has some implications for Australia.  2011 was a difficult year.  2012 will be a challenging year.

MELISSA CLARKE:   But it's a little bit different this time because the World Bank isn't just saying that it's Europe that's going to be a problem they're also forecasting that growth rates in the developing world - the likes of India and Brazil and even in China which we rely on to help keep the Australian economy buoyant are going to take a little bit of hit as well.  So that makes it potentially even worse for Australia this time around.

BILL SHORTEN: It's difficult but when we talk about a lessening growth rate in China we mean something in the order that they'll still be growing by eight per cent.  That's a different problem from Europe which will be in the negative numbers altogether.  The big story of the next generation for us and our children is the move in economic activity from the west to the east - from Europe to Asia.

So there are problems.  It does affect the bank's ability to raise money overseas.  It certainly affects confidence if you're watching the nightly news and you see upheaval in Rome or in Athens.  But we also are relatively stronger than most of the western world.  We've got relatively low unemployment.  We've got contained inflation.  And our Commonwealth Government debt is far lower than our comparative western nations who we frequently measure ourselves against.

PAUL KENNEDY: So what do you need to watch closely now?  What does the Australian Government need to watch closely after a statement like that from the World Bank?  Is it policies in India or what exactly would you be looking for as a reaction to know how we're going to go?

BILL SHORTEN: Well first of all we have some economic levers which some of the other western nations don't have.  We have monetary policy - the cash rate is at four-point-two-five per cent.  This means we have four hundred and twenty-five basis points of movement.  Our exchange rate isn't in the same difficulties which some other nations are.  So we do have some levers which just don't exist elsewhere.

MELISSA CLARKE:   You don't have that fiscal lever anymore.

BILL SHORTEN:  Well I have to say that when it comes to fiscal policy our unemployment is still relatively low but our monetary policy is - we've got a range which other nations would be envious of.  Policymakers throughout European capitals wouldn't mind our numbers.

MELISSA CLARKE:   But the economy - the Australian economy got through the 2008 situation because of fiscal policy.  It was able to have stimulus spending more so than other countries couldn't have because we had a surplus at that time.  We don't have that surplus anymore although the government is committed to bring the budget back to surplus we don't have those reserves of cash that we did.  So are we in a weaker position facing a potential second round that could potentially be worse than 2008 if the World Bank and others are right?

BILL SHORTEN: Well, jobs is the most important issue for a Labor Government.  We certainly were able to stimulate the economy.  Of course I remember at the time the Opposition opposed that.  But we've also got monetary policy.  That is the ability for the Central Bank if it makes an assessment about the Australian economy to lower rates and we've still got that tool.

In addition you might notice that recently we've decided to keep supporting our car industry.  There's tens of thousands of jobs in that.  Now is not the time for the Opposition for instance when you've got clouds over Europe economically to start saying well we're just going to abandon the car industry and the jobs that go with it.

MELISSA CLARKE: But nonetheless the forecasts that are coming out now from economists say that the unemployment rate which is currently at five-point-three could go as high as six per cent.  You point to monetary policy but if all you've got is a reluctant RBA and they have been reluctant to drop interest rates too far because of the mining state it's a very blunt policy.  If that's all you've got it's going to be very difficult to stop the unemployment rate from rising up to potentially six per cent or more.

BILL SHORTEN: Well we haven't got to six per cent
yet.  I do agree with your analysis that there may be softening in the employment market.  But in North America and in Europe they're talking about double digit unemployment.  They're dealing with problems of a dimension we don't have.

So what I would say to viewers is that when they see the news in Europe that is the fault of perhaps their banking system and their governments not reigning in their debt.  That's not the case here.  We have - what we did in 2008 to protect jobs was not just stimulate the economy with the building education revolution - again something the Opposition opposed - but we also guaranteed our banks.  Our domestic banking system is strong.  I've got no doubt they were finding it hard in certain markets overseas to raise money.

But you know it's a difficult issue.  I don't want to say that everything is perfect because it's not.  But I'm not about to go out and scare everyone and ruin confidence because we are in a different place to Europe. We have been forecasting some of these very issues that the World Bank is talking about.  We've already been saying this if you look at our reports over the last few months.

PAUL KENNEDY: How much are you compromised or how much may you be compromised by your commitment to get back to surplus?

BILL SHORTEN: We are committed to getting back to surplus.  This is a - we are determined to get back to surplus.  We've engaged and again good news doesn't sell newspapers Paul but we've engaged in the fastest fiscal consolidation that we've ever seen in Australian history.

We're a government who we didn't have the massive surpluses of income coming in that our predecessors had.  We've made tough decisions about reigning back in payments.  We've been tackling a whole lot of issues.  We are doing relatively okay.  Our commitment to surplus is one of the reasons it's a goal - it's a determination which has been helping us.

MELISSA CLARKE:   The commitment to surplus is effectively denying yourself a tool to deal with a slowing global economy.  We talked about the fact that you're relying a lot on monetary policy as a tool well going into budget deficit to help stimulate growth through government spending is a tool you're effectively denying yourself.

BILL SHORTEN: Well we haven't in the past.  At this point in time we believe we have - I don't know what the sale is we call - we have enough room between us and the shore with monetary policy.  And also let's not forget the role our exchange rate plays.  Some of the other countries just don’t have the flexibility that our floating dollar gives us.  So there is room with our exchange rate as well.

I think the story for Australia in the short term is that 2011 was very difficult.  In the mid year economic statement we made in December we said we were twenty billion dollars less in revenue than we hoped to get.  So we're not hiding anything.  We did forecast that the Europeans would go into negative growth.  I'm a little more bullish about Asia perhaps than the World Bank.  When we talk about the reductions in some of their projected growth numbers we're not talking from a positive number to a negative number we're talking nines to eights.

MELISSA CLARKE: Now when it comes to the domestic banks so you said also that there are concerns there about their ability to borrow money but they're also laying off staff at the moment as we know.  There was a lot made by the government the fact that during the global financial crisis a lot of employers lowered hours rather than knocked employees off.  Should the banks be doing more to make sure they find ways to keep their staff on?

BILL SHORTEN: Well I notice that from the GFC onwards manufacturing shared jobs one of the things which has been of interest is that since November 2007 thirteen-and-a-half thousand jobs were added in financial services.  Banks are now looking aroundat their global operations and they're cutting back some of their numbers.  This is difficult.  Any loss of a job is difficult.

But the forecast we have is that in the next five years numbers in financial services will move ahead.  What we are doing to support jobs in financial services other than the very obvious act in 2008 to guarantee the banks is we're pushing to increase compulsory superannuation from nine per cent to twelve per cent.  Not only will this mean more people have money to retire but there's more money to manage.

PAUL KENNEDY:  Moving on to - I just want to get your take on rate cuts.  Do you think we'll have a few this year?  What's your take on it at the moment in January?

BILL SHORTEN: We've had two rate cuts of fifty basis
points.  We do leave decisions made by the Reserve Bank for the Reserve Bank.  If you ask me what I'd like as opposed to what I would advise the bank
to do what the bank does is its own business.  But if there is increasing uncertainty obviously one of the options for the Reserve Bank is to look at lowering rates further which may stimulate confidence.

MELISSA CLARKE:   Bill Shorten just finally before you go we have to ask you about poker machine reform.
Obviously there are also pokies in your electorate as well...


MELISSA CLARKE:   [Laughs]. So I'm sure you're hearing plenty about it.  Is it acceptable for the Federal Government to back away from a compromise, from what it had promised Andrew Wilkie that it would do - mandatory pre-commitment by 2014 - would it be acceptable to delay that either in time or in substance of what the reform proposal is?

BILL SHORTEN:  Well you mentioned my electorate in - there are two local government areas in my electorate.  In one of them if every person, man, woman and child is spending eight hundred dollars plus.  Now they're not all obviously spending that so it's a big issue.  Problem gambling is
a big issue.  Our Prime Minister is having negotiations - constructive negotiations with Andrew Wilkie.  This is a government who doesn't think that problem gambling is a fairytale - it's real.  We're engaging in constructive discussions with Mr Wilkie to ensure that we come up with the most effective package of reforms.

MELISSA CLARKE:   Is it acceptable to back away from what had been agreed be it in timeframe or substance of that reform that Andrew Wilkie put forward?

BILL SHORTEN: The analogy I'd use for negotiations - it's a bit like a football match. What you're asking me to do is at half time predict the outcome.  I think we should wait and see the outcome before declaring the score.

MELISSA CLARKE:   Alright. Bill Shorten as Acting Treasurer thanks very much for joining us.

BILL SHORTEN:  Thanks very much Melissa.