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Swan rejects fiscal 'stupidity' warning

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CANBERRA, Dec 5 AAP

December 05 2012, 09:02AM

Federal Treasurer Wayne Swan has rejected warnings by a former Reserve Bank governor that fiscal policy is going in the wrong direction.

Bernie Fraser says that Australia is suffering from the "stupidity of government" looking for a budget surplus while monetary policy was going the other way.

"It's just plain dumb," he told The Australian Financial Review on Wednesday.

Mr Swan was dismissive of Mr Fraser's warnings.

"No, I don't believe he is correct," he told ABC Television.

The truth was that Australia had solid growth, unemployment was low, there was a strong investment pipeline and the government had given the Reserve Bank room to move on interest rates, the treasurer said.

"That's a reasonably healthy combination."

Mr Swan flagged a moderation in the latest growth data, due for release at 11.30am (AEDT) on Wednesday.

"I wouldn't be surprised if growth had come off (in the September quarter)."

Economists are forecasting growth of 0.6 per cent in the quarter for an annual rate of 3.1 per cent.

That will be a considerable slowdown from the 3.7 per cent rate recorded in the 12 months to June.