Friday, November 21, 2008
Tim Colebatch: Just say it
Michelle Grattan: It's not a dirty word
TREASURER Wayne Swan says he has no plans to borrow in order to invest, despite an assurance from the Reserve Bank that it would be okay to do so.
The Bank's comments came in a speech to a Melbourne business audience Wednesday in which the Governor Glenn Stevens said it would be "potentially destabilising" for governments to pull back from worthwhile investments merely because of concern about their budgets.
Mr Swan said while the Governor's remarks were "balanced," in the current circumstances his government had no need to borrow in order to fund investment.
The May Budget allocated more than $20 billion to new Building Australia Fund to invest in roads, railways, ports and broadband, $11 billion to an Education Investment Fund, and $10 billion to a Health and Hospitals Fund.
Pressed as to whether it was acceptable to go into deficit, the Treasurer said that he would not speculate.
Asked whether it was acceptable to go into deficit in any circumstances..
..he replied that he believed in "surpluses over the cycle".
"We have been absolutely consistent in that. And we don’t believe that in the current circumstances it is necessary to borrow to invest. I simply couldn’t be any clearer than that," the Treasurer said.
The Opposition leader Malcolm Turnbull found himself in apparent agreement, telling journalists in Perth that was "not going to get into a hypothetical" about a deficit.
"What I am saying is that starting where we are today, looking forward to growth next year at 2%, a competent government should be able to manage our economy so that we maintain a surplus and at the same time maintain economic growth."
"I’m not going to give Kevin Rudd a leave pass to spend all of the savings of 11 and a half years of strong Coalition government. If he wants to run up a deficit let him make the case for it. Let him make the case for blowing away the savings of 11 and a half years of competent management."
Asked five questions about a deficit at his Canberra press conference the Treasurer declined to once use the word.
"There are underlying strengths in the Australian economy, but of course great impacts from the global financial crisis. As we watch what’s going on around the world it gets tougher and tougher, no doubt about that," Mr Swan said.
The May Budget surplus forecast of $22 billion has been whittled down to $5.4 billion as a result of the government's economic stimulus program and deteriorating tax revenues.
In another development the Reserve Bank revealed yesterday that it has spent a record sum buying Australian dollars in order to keep the foreign exchange market working. The Bank bought 3.15 billion Australian dollars in October, about 10% of its entire official reserves, valued at the time at $36 billion.
It is understood have since bought less as stability returned to the market.