SUBJECT/S: Global downturn
SANDY ALOISI: As we've heard there are grim warnings on the global economic outlook today with the World Bank warning of a downturn deeper than the 2008/2009 global financial crisis. While Australia has weathered recent international economic storms better than other countries, there are forecasts the expected global reversals will have an impact here. Macquarie Bank says unemployment will rise from the current 5.3 percent towards 6 percent.
To look at the predictions of hard times ahead, we're joined by the Acting Treasurer Bill Shorten and he's speaking to Marius Benson.
MARIUS BENSON: Bill Shorten, good morning.
BILL SHORTEN: Good morning Marius.
MARIUS BENSON: Now the World Bank's outlook is pretty grim. It says worse than the GFC and it says specifically commodity prices which are so important to the Australian export performance will be down. What does all that mean for Australia?
BILL SHORTEN: Well, as the Treasurer's said for some time now, the world economy's in a dangerous phase. It is true that 2011 was a difficult and disappointing year for the global economy and the outlook for 2012 looks even more challenging. So there is a tough year ahead of us in Australia, big challenges in the global economy which will inevitably impact on our economy and budget and in fact in the mid-year update which we did in December, we showed that a further $20 billion was going to be taken from Government revenues compared to the budget in the middle of last year.
But - and this is the big but - in the face of these major threats from the global economy, I believe that Australians should still be confident in our strong economic fundamentals. We do have solid growth. We do have contained inflation. We have relatively low unemployment compared to our European and North American friends and we do have very low Federal Government debt.
MARIUS BENSON: Is the Macquarie Bank right when it says the unemployment, which you describe as low there,
will rise towards 6 percent? Does that accord with your expectations?
BILL SHORTEN: Well I've got to release the December unemployment numbers later today. I suspect they will go up slightly. The - taking months [inaudible]. So I think there are - they're softening parts of the Australian economy. You don't need to be a Rhodes Scholar to form that conclusion. Again though, I mean in every job loss there's significant importance. There is something else going on longer than the short-term of the next 12 months. That is we're seeing a fundamental structural readjustment of the global economy moving from west to east.
You know, 1980 the centre of the world's economic activity was somewhere between London and New York. In the next twenty years, it'll be somewhere between India and China. And Australia in our children's generation, it is going to be the big story of this Century, the rise of the various Asian economies as being important and Australia is relatively well placed.
MARIUS BENSON: That's the big picture. The small picture or the shorter-term picture is also important as you look at the economic settings over the next six months the Government has been saying we are going to return to surplus. Is that under review that promised surplus?
BILL SHORTEN: No, our plan is to get into surplus. It is harder, it's clearly harder, but we have demonstrated in the last couple of years the fastest fiscal consolidation and you know, Marius, it's just elevated words to say we're heading back into the black at a faster rate than has ever happened before. I mean in 2008 we experienced a very difficult global financial crisis. We moved quickly and we've come through since then better than say the United States.
Did you know Marius that since 2008 the Australian economy's grown at 7 percent and the Americans are just getting back to where the size of their economy, what it was in 2008.
MARIUS BENSON: Can you say definitely Australia will be back in the black by May, the May budget?
BILL SHORTEN: I can definitely say that's our intention to get us back into the black by May, but of course the various developments in Europe are unwelcome and make life more difficult.
MARIUS BENSON: Can I ask you about another specific in the economic world today? Tony Abbott has confirmed the Opposition's plans to scrap $500 million in subsidies for the car industry. The Government has been critical of that in the past. You presumably remain critical?
BILL SHORTEN: Yes, I think there's no doubt that there's been a big economic argument, a spat, a civil war in the Liberal Party over this. The Liberals are at sixes and sevens about what to do. I mean just put the view some people say - oh, why bother making cars in Australia - and other people say - why manufacturer in Australia?
I would just remind some of the critics of manufacturing that whilst there's certainly been a big change from say 1960 where 30 in every 100 Australians worked in manufacturing, to 2011/12 where perhaps there's about 8.5 in every 100 Australians work in manufacturing.
We are the 14th largest economy in the world and we should still be a country that makes things here.
A car industry generates R&D, some of our largest dollar spenders on R&D are car companies or car component companies. They do generate apprentices and skills. One who uses a tradesman in the modern day knows they're getting older and we do need to have apprentices. There's also an important impact on small business.
There's a lot of tier one, tier two auto component suppliers and you can go to the outer suburbs of Melbourne and Adelaide and Sydney and there are car component companies who are making a reasonable living.
MARIUS BENSON: I'll leave it there, Bill Shorten, thank you very much.
BILL SHORTEN: Thanks very much.
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