Australia may use surplus to push growth
Updated
Australia's Finance Minister Lindsay Tanner says the Government's latest response puts Australia in a good position to weather what he says is a new and more damaging stage of the world financial crisis.
The commonwealth is now looking at using some of the Budget surplus to stimulate economic activity but Mr Tanner won't say if the Government is willing to send the Budget into deficit to do that.
Presenter: Alexandra Kirk
Speaker: Lindsay Tanner, Australian Finance Minister
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LINDSAY TANNER: I believe that we have every reason to hope that the carnage that we've seen on international markets and its reflection in Australian markets in the latter part of last week will cease in the very near future; but I can't make a prediction of that kind.
ALEXANDRA KIRK: The Government's safeguarding people's bank deposits and loans used by Australian banks to raise capital overseas. What about self-funded retirees, especially with the prospect of further interest rate cuts?
LINDSAY TANNER: One of the levers that is available to us, of course, is fiscal stimulus is the capacity to increase government spending in order to ensure that economic activity continues to occur at reasonable levels in order to push back against the impact of the financial crisis that is already being seen in economic activity and is already having an effect on people's living standards and their circumstances.
All these things are under consideration and the options remain on the table for making use of the budget surplus to assist people and to keep economic activity going. That is what you have surpluses for - as insurance when things turn difficult, in order to draw on to have an effect to help people and to keep the economy ticking over.
ALEXANDRA KIRK: And what sectors of the economy would you consider pump priming?
LINDSAY TANNER: Oh, I can't comment on anything further about the possibilities here. There is a wide range of options that are open to the Government. There are a number of levers that are available to government when you have got very difficult economic circumstances such as you've got. But the question of whether that will be used and if so, in what way is still under consideration.
ALEXANDRA KIRK: Labor's promise is to keep the budget in surplus over the economic cycle. Could if go into deficit soon?
LINDSAY TANNER: I'm not going to speculate on where the budget might head in the current circumstances, Alex, because we have got very, very unusual and difficult circumstances internationally. We don't know yet what will happen in the global economy.
The IMF is predicting recession in the United States and likelihood of recession in Europe. All of those things do impact on Australia. We are much better positioned than almost any other developed nation to ride out the impact of these things; but we are not immune from them.
ALEXANDRA KIRK: Are you willing to send the budget into deficit if that is what is needed to minimise the effect of the global downturn and prevent a recession here?
LINDSAY TANNER: I'm not going to speculate on where things might head and I am remaining optimistic that these circumstances internationally will correct themselves or be corrected by the initiatives taken by the various major governments and their central banks in the very near future. But clearly we can't assume anything about where these things will head.
We've just got to be ready to use the weapons available to the Government to assist Australians and to ensure that the Australian economy remains in good health.
ALEXANDRA KIRK: Are you preparing to spend some of the budget surplus soon?
LINDSAY TANNER: That option remains open to us. The possibility that we will take action to increase spending to keep economic activity ticking over and to ensure that growth continues and that we will do that sooner rather than later is an option that is open to us.
We are considering all of these possibilities right now and considering exactly what form any assistance or any additional spending would take right at this stage.
ALEXANDRA KIRK: The Prime Minister has now guaranteed that the Government will help pensioners next year but isn't there a good case to do something sooner? The Australian Institute for example points out that increasing the pension is a very effective way to stimulate the economy; more effective than say a reduction in interest rates.
LINDSAY TANNER: Well, I'm not going to speculate on what the possible target for any assistance via spending some of the surplus in order to keep economic activity moving, Alex. There is a wide variety of possibilities available to the Government. All of these things will be under consideration and already are under active consideration.
