27 January 2009
Interview with Alexandra Kirk, ABC Radio, AM Program
Subjects: World Economic Forum in Davos, domestic economic stimulus, $4 billion Australian Business Investment Partnership
ALEXANDRA KIRK: Mr Crean, good morning.
SIMON CREAN: Good morning, Alex.
ALEXANDRA KIRK: The Davos Summit is the next big opportunity for the world to determine how bad the recession will get and what's needed to end it. What are leaders trying to achieve this week?
SIMON CREAN: I think what they're trying to do is to not just get the stocktake (coughs), excuse me Alex, but to also get the coordinated approach in the way forward. There are many different stimulus packages being announced, planned by various countries, but one has to add the multiplier effect to those fiscal stimulus packages. There's not much point spending all the money domestically unless you're also going to multiply that by which world growth can grow, and the best way to encourage world growth to grow, of course, is to free up the trade flows, to conclude the Doha round. Because world trade grows much faster than world output. So I think there are things that need to be done, not just on the listening front but the coordination front.
ALEXANDRA KIRK: The Federal Government is looking at another economic stimulus package. The Prime Minister and Treasurer have opted to stay home to focus on that. Does it need to fit in with all the other rescue packages around the globe or can Australia afford to do its own thing?
SIMON CREAN: Well, no, each country's going to have to do its own things - we have different economies. Australia's fortunate in that it has a very diversified economy, it's better placed than most other economies in the world. It's not immune from what happens in the rest of the world because we have to trade so much with the rest of the world. But, we are in a position in which our banking sector is in pretty sound shape compared to the rest of the world. We've not only had strong growth, we're predicted to continue to have growth, positive growth, albeit slower. What is important though Alex is that we have to open those trade flows. Because for us as a nation, 21 million people, we can't just produce for ourselves, we have to produce the trade with the rest of the world, we have to become competitive, the lower dollar makes us competitive. There is still growth in Asia and China, again, slower than was originally forecast, but it’s there. Australia's challenge is to get some market share in that…
ALEXANDRA KIRK: And more tax cuts.
SIMON CREAN: …And because we…
ALEXANDRA KIRK: And more tax cuts, bringing forward tax cuts, particularly for the lower income earners, part of the next rescue package?
SIMON CREAN: Well, tax cuts are one of the series of options that one would look at to stimulate domestic activity. What are the pillars of economic growth within an economy? They're consumption, of course tax cuts influence that. There's business investment and a number of decisions have been taken that encourage that. There's government expenditure, which is the capital works programs and we have to make sure that there's not too much lead times in those but that they are also productive works, that they enhance our competitiveness and our productiveness and the fourth limb of course if net exports. Our ability to trade with the rest of the world.
ALEXANDRA KIRK: The Government is setting up a special safety net banking fund for the construction industry to protect tens of thousands of jobs. That's being criticised by the banks. Is there a danger that it will prop up unviable ventures?
SIMON CREAN: No, there's no danger in that because it has to signed off by not just the Government but all four banks. This is not propping up unviables, this is ensuring that the viables don't fail for want of being able to attract the foreign capital. And the foreign capital is in short supply because the foreign banks are in much worse shape than ours. But this is another example of where when the market fails and it's not the Australian market, it's international markets essentially that could fail us, then the Government has to step in to pick up and plug the failure. This is a sensible partnership, a partnership between the Government and the security that it can offer, the guarantees and the banks. And I would have thought that in the constructions sector, Alex, because it is such a big driver of job activity, this is an important area to focus on. Simply saying, "Leave it to the market," as Malcolm Turnbull would suggest, is a nonsense proposition in the current circumstances. Whether its market failure there is a requirement, in our view, for government to act decisively, solidly and constructively, but on sound principles.
ALEXANDRA KIRK: Simon Crean, thanks very much for joining AM.
SIMON CREAN: Thank you, Alex.
[ENDS]
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