VIRGINIA TRIOLI, PRESENTER: Wayne Swan, thanks for joining us this evening.
WAYNE SWAN, FORMER TREASURER: Good evening.
VIRGINIA TRIOLI: Wayne Swan, in your long and deep and real experience about trying to dig an economy out of a hole, does today's Victorian announcement inflict a serious blow, if not sound a death knell, to the expected recovery of the national economy?
WAYNE SWAN: Well, I think it is a serious blow. We have got to suppress the infections but we've also got to make sure that we don't experience a deep recession well into next year and of course, that is already on the cards and with this outbreak now, that challenge gets even bigger.
But we shouldn't be deterred from meeting that challenge front on. Australia has met these challenges before and we can do it on this occasion. I mean we came through the global financial crisis in the best nick of any advanced economy in the world because we put in place overwhelming force to protect our economy and that is which is required right now.
VIRGINIA TRIOLI: To be fair, the Federal Government is right now considering exactly that, the fate of JobKeeper and JobSeeker.
WAYNE SWAN: They certainly are.
VIRGINIA TRIOLI: So they're in the middle of that but given the decision now in Victoria and this new lockdown, what sort of bearing should that have on their thinking about what happens with JobKeeper and JobSeeker? Does that, in your view, materially change what they might have been considering up until today?
WAYNE SWAN: I don't think it materially changes what they should do, because they should be continuing with elements of JobKeeper but they should be outlining a substantial pipeline of investment to carry us through the rest of this year and next year.
See, what we're facing, Virginia, is the biggest collapse in demand since the Great Depression. That's occurring globally and it's occurring in Australia and that collapse in demand just got worse in Victoria.
So we need to see from the Federal Government a pipeline of measures including a refined JobKeeper, changes for JobSeeker, but also investment which will provide a pipeline of work for employers and employees over the next 12 months and I'm not sure that is what we are going to see.
Look, full points to the Government in terms of the medical challenge, they've been up to the task so far. There's been some bungling of the JobKeeper issue but at least they were prepared to put in place stimulus, but now we need to go to the next stage because the uncertainty about what will happen post September is absolutely impacting on the economy and decisions in the economy right now.
The biggest collapse in demand since the Great Depression.
Australia is facing the biggest collapse in demand since the Great Depression. Here’s what Scott Morrison needs to do to get Australia through these tough times.Posted by Wayne Swan on Tuesday, July 7, 2020
VIRGINIA TRIOLI: So then, given all that, Wayne Swan, what did you make of Chris Richardson from Deloitte Access Economics when he said yesterday, and I'm quoting in here, "The recession may well have already passed its worst." And they're still forecasting economic growth to rebound from a 3 per cent contraction this calendar year to 4.7 per cent growth next year and then 4.4 per cent the year after that. Does that square with the way you are reading things?
WAYNE SWAN: I don't think it squares with the Reserve Bank statement today. The Reserve Bank statement makes it pretty clear that we've got a substantial challenge ahead of us.
Some measures have improved but as we have seen today in Victoria, things can change quickly.
I think we have got to assume that confidence levels in the economy are low, the health issues are going to impact substantially on the capacity of people to spend, they will save, they won't spend and when that happens, business doesn't invest and of course, unemployment goes through the roof.
If you look at the Reserve Bank statement today, they think we've got a long way to go, and to quote the Reserve Bank Governor, we should be doing whatever it takes.
VIRGINIA TRIOLI: Now the Federal Government anticipated about $29 billion in superannuation savings would be withdrawn over the next two years when it allowed people to get early access of it because of COVID-19 but already $25 billion has been accessed and the scheme is only at the halfway point. In your view, is that a good or a bad thing?
WAYNE SWAN: Well, I think it's the structure of our superannuation system and it has been put in place because the Federal Government hasn't been able to put in place the stimulus really required not just for now, but over the next year.
VIRGINIA TRIOLI: It is, however, just to jump in there, but it is however, one form of stimulus that people get access to that money and they will no doubt spend it straight away. So it is one form of that, Wayne Swan?
WAYNE SWAN: Yes, but they are cutting off their nose to spite their face and it's stealing from the future.
What we need is substantial stimulus, not just JobKeeper but also substantial investment across the economy, including in construction, including in infrastructure, and including in the services sector.
The Governor of the Reserve Bank was making the point prior to COVID-19 that the economy was weak and he was arguing the case then for a substantial increase in infrastructure spending. Well, that substantial increase there and in other areas is now very urgent and the extent to which people are drawing on their super savings shows you the extent to which there is distress in the community and the extent to which the Government has not been prepared to correctly stimulate our economy to avoid catastrophic levels of unemployment.
VIRGINIA TRIOLI: In your experience, are there substantial differences that we're confronting right now between the economic challenge of this situation and the GFC?
WAYNE SWAN: Well, there are differences in the cause. The GFC was caused by a financial meltdown. This has been caused by a medical problem but what it produces is the same effect - a very big drop in consumption and demand.
Sixty per cent of the economy is driven by consumption. If people don't have jobs, if people are fearful for the future, they won't have money to spend.
If businesses are not profitable, they don't employ people and in some circumstances they collapse.
Recessions scar an economy and sadly what they do is leave a long shadow for a long period of time because recessions attack the fabric of the economy, they attack relationships between employers and employees, between suppliers and consumers and so on.
You don't come out of very deep recessions quickly, which is why we need to do everything we possibly can to avoid the depth of the recession and to make it shorter.
VIRGINIA TRIOLI: I'll leave it there. Wayne Swan, thanks for joining us tonight.
WAYNE SWAN: Thank you.