Swan to Hockey: Stop talking down Australia's economy

Swan: 'Hockey is exaggerating budget deficits'

Australian Treasurer Joe Hockey is exaggerating future budget deficits so he can get out of election commitments in areas such as health, education and pensions, former deputy prime minister Wayne Swan told CNBC.

"I wish he would stop talking our economy down," Swan, the former deputy leader of the Labor Party from 2010 to 2013, and the Treasurer of Australia from 2007 to 2013, said on Friday.

A day earlier, Hockey told CNBC the current government has inherited budget deficits totaling $123 billion over the next four years and unless action is taken the budget would be in deficit for at least a decade. He estimates gross debt is headed towards $667 billion over the decade if it's not brought under control.

Australia Treasurer Wayne Swan
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According to a study by the Parliamentary Budget Office, government spending rose almost 50 percent faster than growth in the economy under the Labor government, even after excluding its stimulus spending.

Defending the Labor government's spending spree, Swan said that the actions taken following the 2008 global financial crisis were to avoid recession, strengthen the economy, and stop capital destruction.

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"We came through that in good nick, and since that time our Labor government put in place a fiscal consolidation strategy, which has been tight and implemented across all of our budgets," he said.

"In fact, we still are the envy of the world. An economy 15 percent larger than it was at the end of 2007, an employment rate with a '5' in front, net debt at 10 percent and a growth rate around trend," he said.

Australia's unemployment rate unexpectedly fell to 5.8 percent in March, from February's upwardly-revised 6.1 percent — the highest in more than a decade.

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Discussing the outlook for China, the country's top trading partner, Swan said concerns over a hard landing in the mainland economy are overblown.

"The fact is the Chinese are doing what the world has asked them to do, to rebalance their economy and make it more consumption focused and move away from investment," he said.

"Australian trade, even with a growth level of 7.5 percent, is still very strong. I think people lose sight of the fact that at 7 percent they are making the same contribution to the global economy that they were making six years ago – when Chinese growth was 10 percent," he added.

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China on Thursday released a batch of trade data that came in well below market expectations, throwing more doubt around the country's growth prospects.

Exports fell 6.6 percent on year in March, following an 18.1 percent slide in February, while imports fell 11.3 percent, their weakest performance in 13 months.

Following the data, Chinese Premier Li Keqiang, ruled out major stimulus to fight short-term dips in growth. He stressed that job creation was the government's policy priority, telling an investment forum on the southern island of Hainan that it did not matter if growth came in a little below the official 7.5 percent target.