Treasurer, congratulations you are back in the black, on track as you say, but was the pain worth the gain?

Look it’s a great thing to have Australia back paying its way. What that means is that we are now living within our means and that gives great opportunity for future young Australians. Future young Australians aren’t going to be burdened by this generation if this generation pays its way. And more than that, if we can reduce Labor’s debt that means people won’t have to pay taxes to service the mistakes of Keating and Beazley and Labor from previous decades. That means their taxes will be lower and their services will be better.

But we are looking ahead now, surely we are not blaming Labor any more. We are looking at an unemployment rate that you say is still only going to be seven and three quarter per cent, that’s as good as it’s going to get.

Well let me take the first point up. $80 billion of debt is Labor’s legacy. Now we turned around the Budget deficit, we put the Budget back in the black. Now we are going to start addressing Labor’s $80 billion of debt, right. Now in relation to unemployment, unemployment has now gone down below eight per cent, it’s the best it’s been for eight years. Now I think that’s good. I think most people in Australia will say they welcome that. This is the best unemployment rate we’ve had since Labor put Australia into recession.

It’s a lot worse than the one you aimed for though isn’t it?

Well, we are aiming….no it is precisely the outcome we forecast. We forecast eight per cent outcome by June. It is now 7.9, in fact, it is better, earlier. But having said that, unemployment in this country is still too high and we’ve got to continue to work to improve it. Now that’s going to involve hard yards too. Getting the Budget back, getting taxes down, getting business interest rates lower are a big part of that. Look, a small business today can get an overdraft loan of 7.7 per cent. Do you know that in 1989/90 they were paying 20.5? Now how could a small business create jobs in that kind of climate? Now with interest rates lower small business do get better opportunities and we’ve got to work on improving employment, yes.

Now you say Asia’s been the biggest shock since OPEC 25 years ago, just how much is that going to jeopardise your forecasts?

Well, we will not have the very very high rates of growth that we would have had if Asia, in the current year and next year, were growing in the way they’ve done in the last 25 years. But the great thing about strengthening the Australian economy is that we’ve been able to withstand the shock, and this is the biggest downturn in Asia in 25 years. Asia will not be an engine for our growth in the coming year, it will be a break on our growth. But, there are some positive signs, for example in Korea, and we as a Government have taken part in international efforts to try and stabilise those economies. Strong Asian economies are good for Australia. But, because we strengthened the Australian position, we will be the strong economy of Asia in this year.

But you are still predicting Japan, for example, trebling its growth and the East Asian countries doubling them, isn’t that rather bullish given the uncertainties there?

Well I think we are predicting Japan around the one’s, one per cent.

One and a quarter.

Well one and a quarter is not all that much. Probably better than nought in Japan but one and a quarter is not all that high. Look, you’ve got to make some assumptions about Asia. My assumptions are these. Japan subdued and subdued for the foreseeable future, Korea turning, Thailand turning, Indonesia still with great difficulty and that’s what’s been reflected in the assumptions.

Now the new spending. How do you answer the accusation basically that you are putting money back where you have already taken it away? You’re, sort of, applying the salve to people that you’ve already hurt like the elderly.

Well we point to the facts. The biggest increase in spending in this Budget is under the Australian Health Care Agreements. That’s for public hospitals bringing $30 billion over five years. Now that is a new agreement, new funding for the future five years. There is a proposal in this Budget for self-funded retired people to have access to health care cards, which they’ve never had before, so they can get subsidised pharmaceuticals. Now that’s a great thing. People that are in their retirement years being able to get pharmaceuticals. And these are strong, new, fair initiatives.

A quick final question. The current account deficit is likely to rise, you say, five and a quarter per cent. It’s still potentially heading towards Banana Republic territory is it?

Well things are significantly different since that ill advised comment was made and five and a quarter is not six and a half, but….and a one and a half per cent inflation rate is not an eight or a nine per cent inflation rate, as was the case in those days. But I’m glad you raised it because it is one of the reasons why we have to keep delivering good, sound policy. Anybody who thinks, well the Coalition has done the job, they’ve cleaned up the house, we can now go back to the waste of years passed, is not looking at the situation. We have to make sure we keep this good policy up because there will be challenges, particularly coming out of Asia and we need to strengthen Australia against them.

Treasurer, thanks for joining us.

Thank you.