INTERVIEW WITH ROSS GREENWOOD, 2GB Sydney

ROSS GREENWOOD: Chris Bowen is one of the key Ministers in the Government. The Minister for Financial Services, Superannuation and Corporate Law joins us now. Hello, Chris.

CHRIS BOWEN: Evening, Ross. How are you?

GREENWOOD: Very well, thank you. How’s the campaign going so far?

BOWEN: Well, it’s early days, Ross. A long way to go yet and the Prime Minister’s campaigning very well and people respond well to her, but there is a long way to go in this race yet.

GREENWOOD: Now, one of the big issues, quite clearly, is today the Opposition, the Coalition, coming out with suggestions of additional Budget savings worth $1.2 billion. Is this the right attitude, because quite clearly inside your own Budget and the economic statement that came out just before the election was called, it does really focus more not necessarily on savings but it really focuses very much on revenue raising? Is this the right and most certain way to run a Budget?

BOWEN: Well, you always need to have a balance between the two and we’ve had a very rigorous process in government of doing that. We’ve had about $82 billion worth of savings over our three Budgets, but what’s important is the quality of the changes you make. And there are some things that the Opposition have done today which, frankly, concern me greatly. For example, cutting $400 million out of the state infrastructure fund. When the Liberals were in office, they got a lot of warnings that we weren’t spending enough money on infrastructure, and we have spent more money on infrastructure, and today they want to rip a big amount of money - $400 million – out of spending on roads and rail and infrastructure.

GREENWOOD: But $400 million in the total spend in infrastructure, which runs into tens of billions of dollars, is not really a whole bunch, is it?

BOWEN: Well, but it’s in terms of the increase. They want to take that out and it’s important infrastructure in terms of local communities and that does worry me.

And they’re taking $300 million out of the Global Carbon Capture Initiative, for example. Now, people might say, ‘What’s that got to do with me? That’s okay.’ But if you think climate change is a significant issue, then taking money out of that, which is where Australia’s making an international contribution to finding ways of storing carbon, that’s a step backwards. So these further cuts today, on a number of levels, do concern us.

GREENWOOD: It’s fair to say that the big issue over the first couple of days of the election was very much about Tony Abbott, industrial relations, WorkChoices and also Fair Work Australia. One thing that we were overwhelmed with last night here on this program was really the feeling from business that the pendulum was swinging too far the other way, that any suggestion that really there should be no change whatsoever to Fair Work Australia was not, if you like, a true reflection of the way the industrial relations policy should work in this country.

BOWEN: Well, look, we think we’ve got the balance right there, Ross. I know some people would disagree with that. We abolished WorkChoices; we make no apologies for that because the pendulum went far too far against fair arrangements in the workplace. But we did bring in a balanced set of arrangements: we have the Unfair Dismissal Code, for example, which we think puts a fair balance in terms of the relationship between employers and their employees. There’ll be people calling for change; we understand that. But we think that the current industrial relations settings are the right ones.

I know Tony Abbott’s saying he’s walked away from that, that he won’t make changes. Well, he’s believed in a WorkChoices-type arrangement all his working life and if he is really stepping away from that, it’s a big step because John Howard didn’t give any indication he was going to introduce WorkChoices in 2004 but he did, and I think people have a right to be sceptical about the Liberal Party’s approach on it this time.

GREENWOOD: But is it not also fair to say that when you were in opposition, you repeatedly – and also other Ministers around you – repeated that you would not change superannuation arrangements in any way, shape or form in your first term of government and yet you have made wholesale changes to the superannuation industry during this period of time, including the Cooper Review and including the far-reaching reforms that you have made to actually cap the amount that people can put into superannuation as well? Your organisation, and even when you came into government, you said that there would be no changes to superannuation in your first term.

BOWEN: Well, the changes, there’s two points, Ross: the changes we’re bringing into superannuation are very positive, boosting people’s retirement incomes.

GREENWOOD: Well, you could argue that changes to Fair Work Australia might be positive as well.

BOWEN: But, and my second point is, we’re seeking a mandate for this election. We’ve put through no legislative change; nine to 12, our Cooper Review response, our Future of Financial Advice reforms will all be legislated after the election, so we’re saying to people very clearly – and you’re right, Ross, to point this out – you vote Labor, you will get the increase in the superannuation from nine to 12.

You vote Liberals, the Liberals get in, you won’t. That won’t happen; Tony Abbott opposes that. If the Labor Party’s returned, we will abolish commissions, but the Liberal Party won’t. So there is a stark difference in superannuation here, but what we’ve done is outlined our plans, but we need to be re-elected for those plans to come into force. So we’re seeking a mandate for those changes and we’re being upfront about it before the election, and saying this is what we want to do if we’re re-elected.

GREENWOOD: One other point: you’ve been around this game long enough to know this, and that is if you go back to the last recession Australia had, part of that was obviously because interest rates went very high to 17 per cent. The Reserve Bank did all of the heavy lifting in terms of trying to slow the economy down, mainly because at that time the Labor Government really did not cut its Budget hard enough, fast enough, to actually be able to rein in interest rates.

Would you agree with the premise that if governments do not cut their Budgets and cut them hard enough, fast enough, that ultimately interest rates end up having to be higher?

BOWEN: Well, it depends on the circumstances, Ross. If you have an economy which is booming and then you find that the Reserve Bank wants to bring that back under control by high interest rates, that’s one set of circumstances. We’re in the situation now, as the Reserve Bank minutes showed today, that public sector investment is falling and the Reserve Bank expects private sector investment to take up some of the slack. What does that mean? It means we designed the stimulus, we stepped in when the world economy went into recession and we had a stimulus package, but we designed it to wind down as the economy recovered. So things like the First Home Owners Boost and the upfront tax deductions for capital expenditure are finished. That part of the stimulus is over and of course the payments to families, they happened, and we did that so we could get the money into the economy very quickly. That’s all passed through and 91 per cent of the construction under the stimulus has either started or is complete.

So we have designed it to wind down and I noticed the Nobel Prize-winning economist, Joseph Stiglitz, today praising the Federal Government’s stimulus package and saying it’s one of the best designed in the world, partly for that reason, because we got the money out there when we needed to. We did what we had to do when the economy was under real threat, and as a result, the number of jobs lost around the world is 17 million; since we’ve come to office, there’s been 450,000 jobs created because we did that stimulus early when we needed to. But we designed it so it would wind down and as the economy would recover, our money would be coming out of the system. So our stimulus is actually withdrawing money from the economy, because when you compare it to the amount of money that we had in previously, it will have a contractionary impact over the next financial year.

GREENWOOD: And the final thing, I guess, is that the Budget that you have put out that actually forecasts Australia coming into surplus does have very generous forecasts, not just for growth, but also for private investment as well. The assumption from Treasury, and therefore the Government, is that there will be a very strong uplift in their investment. Given right now, what we’re seeing out of places such as Hungary, out of the United States with weak growth there as well, are you still confident that those Budget forecasts can be met over the course of the next three years?

BOWEN: Yes. The Treasury, when doing these things, takes a conservative approach. They don’t look at it and say, ‘Well, what’s the best possible outcome we can get here?’ and make their forecasts based on that. They make their forecast based on their best estimate. It’s always an inexact science, Ross, as you know, and it’s impossible to get it right 100 per cent of the time. But it’s the Treasury, not Wayne Swan, not Lindsay Tanner, not Chris Bowen, the Treasury’s best estimate of what’s going to happen in the economy. And sometimes they get criticised for that.

I remember at the last Budget, the Budget before this one was just brought down, Joe Hockey out there saying, ‘The Treasury’s being wildly optimistic and they can never meet these figures, and these figures will never be delivered’, and of course they were more than delivered. If anything, the Treasury was too pessimistic, not too optimistic. So Mr Hockey needs to be careful about criticising the Treasury forecasters because they analyse all the figures, all the international trends, all the domestic indicators, and they make their best estimate and we base our figures on that.

GREENWOOD: Chris Bowen is the Minister, of course, for Financial Services, Superannuation and Corporate Law. We appreciate your time here on Money News tonight.

BOWEN: It’s always good to talk to you, Ross.

GREENWOOD: It’s always good to talk with Chris Bowen, of course, as well.  

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