12 May 2015
Transcript - #2015097, 2015

Bloomberg interview, Canberra

JOURNALIST:

Well, first of all the Budget shows that Australia’s debt trajectory is forecasted around 18 per cent of GDP from about 3 per cent in 2010.  Does this cause you some concern that the rating agencies might put the AAA rating on watch?

TREASURER:

Not at all; because we have a good growth trajectory and importantly we are seeing the rebalance in the Australian economy from mining construction to mining production being carefully managed. The non-mining side of the economy, which is 90 per cent of the Australian economy, is getting a lift out of this Budget, and importantly, we’re seeing enormous opportunities for new growth in exports into Asia.

JOURNALIST:

Has the production been carefully managed though that we’ve seen an iron ore glut? That doesn’t sound like careful production management of iron ore.

TREASURER:

Well, it’s not so much about the careful production of iron ore. We’ve never relied on any one particular item to carry Australia. What we have is a very diversified economy, 70 per cent of our economy is services and yet it represents only 17 per cent of our exports. So, with the fastest growing region in the world on our doorstep, we’ve got massive growth potential.

JOURNALIST:

Just sticking with iron-ore for a moment, you said last month that the price could drop to $35 a tonne, the forecast in today’s Budget for $48 in the coming year, does that mean that the worst of this commodity’s fall is over?

TREASURER:

Well, we hope the worst of the iron-ore fall is over. Today, it’s $58 a tonne. If it recovers that’s well and good. When I’m putting together a Budget I have to make assumptions. I’ve been conservative in the past. I’ve been reasonably conservative now.

JOURNALIST:

Well, the Budget forecast is non-mining investment will grow by 4 per cent, but the RBA is saying it’s flat. Why are you so optimistic?

TREASURER:

Well, because we can see great growth potential in a range of different non-mining areas, particularly in advanced manufacturing and with a lower Australian dollar we are going to see manufacturing exports improve obviously. We can also see great opportunity for expansion in services sectors, particularly demand of education services, tourism services, but of course health and financial services as well out of Asia.

JOURNALIST:

One X-factor that seems to be missing in Australia at the moment is confidence for business and consumer. What’s this Budget going to do to revive what the RBA Governor Glen Stevens calls the ‘Animal Spirits’, not just amongst small business, but big business as well.

TREASURER:

Well, if small business lifts and we have two million of them employing almost half of the workforce in Australia; if we can lift small business, it’s going to flow through to the rest of the economy. We are giving small business $5 billion in tax cuts. But in particular, they can have 100 per cent tax deductibility on any single item they buy up to $20,000. From 7.30 tonight that’s a big stimulant for small business to get out there and have a go.

JOURNALIST:

Well China cut rates this week; steel inventories have dropped; the iron-ore price is on the rise; does that mean China’s coming to the rescue here - to boost the government’s coffers again?

TREASURER:

No, because we’ve being conservative as you said in relation to our expectations on the iron ore price.

JOURNALIST:

Ok well just finally, do you think this Budget is going to shore up the Prime Minister’s leadership, and give the government the clear air it needs heading into an election?

TREASURER:

Look, this is about doing what is right for Australia. Australia’s very best days are ahead of it. We’re making sure that we don’t miss that opportunity.

JOURNALIST:

But a no surprises Budget, got to be good politically?

TREASURER:

Well, it’s not about politics, it’s about outcomes. Ultimately you will be judged on the outcomes you can deliver. That’s what we’re focused on, we’re focused on outcomes.

JOURNALIST:

Thanks very much.

TREASURER:

Thank you.