Peter Martin Economics correspondent
July 3, 2013
'Calling it as I see it': Chris Bowen. Photo: Alex Ellinghausen
Treasurer Chris Bowen has recast Labor's economic message, warning of an uncertain outlook that will require "careful management".
A week after the former prime minister Julia Gillard insisted the economy was "growing, stable and strong", Mr Bowen said commodity prices were starting to slide and mining investment was turning down.
"Demand for resources is starting to moderate, partly due to China's economic transition and transformation that it is dealing with," he told his first full press conference as Treasurer.
"Since the 2013-14 budget we have seen the price of iron ore fall by around 15 per cent and the price of gold fall by around 21 per cent.
"We are seeing a transition from the investment phase of the mining boom to the production phase. The investment and construction phases were very labour intensive, soaking up workers throughout the economy.
"The production phase will be very different.
"Managing the transition and dealing with the decline in our terms of trade will require very careful management in the coming months and years."
The Reserve Bank was on standby to cut interest rates again if needed.
''The Reserve Bank still has considerable room to move if they feel the need in coming months," he said. "If we see that the economy needs more support because global growth becomes less stable or other factors change, the bank does have the capacity for further changes into the future."
Mr Bowen made his remarks after the Reserve Bank left its cash rate on hold for the second consecutive month, confirming in a statement released after the meeting that the inflation outlook "may provide some scope for further easing should that be required".
Asked whether he was reframing Labor's economic message now that the leadership had changed, he said he was "calling it as I see it".
"I have been Treasurer now for a few days and as I see it, the Australian economy is resilient and the Australian economy has grown well, due in large part to this government's strong economic management. But as I see it there is a transition to manage.
"You will forgive me for saying it is this government that has the skills and experience to provide that economic management. The opposition has a different approach."
Each of Mr Bowen's references to strong growth were in the past tense, in contrast to former prime minister Ms Gillard who told the Committee for the Economic Development of Australia last Monday the economy remained strong.
Asked whether he thought the budget promise of a small surplus in 2015-16 was still achievable, Mr Bowen said he stood by the budget forecasts.
However he said the economy had to be managed "prudently", which meant the budget had to be turned around "without embarking on the massive wholesale cuts to jobs and services which Mr Abbott advocates''.
"Managing large transitions is what Labor governments do," he said.
"It is what Hawke and Keating did in the 1980s and 1990s, it is what the Rudd government did in the global financial crisis more successfully than any other advanced economy."
The new Labor leadership's relationship with business was good. Speaking after a meeting with Prime Minister Kevin Rudd, the president of the Business Council, Tony Shepherd, said it had been an "opportunity to press the reset button".
HSBC chief economist Paul Bloxham said Mr Bowen's remarks represented a "distinct change of rhetoric" from the former treasurer Wayne Swan and Ms Gillard.
"The Gillard/Swan combination stressed potential of the economy, the Rudd/Bowen combination is stressing the risks," he said.
"Both approaches are appropriate, but the new team is choosing a different emphasis."
EmoticonEmoticon