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Meet The Press -

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MEET THE PRESS

INTERVIEW WITH TREASURER PETER COSTELLO.

May 1st 2005

DISCUSSIONS ABOUT JOHN HOWARD'S COMMENTS ABOUT HIS FUTURE, PETER COSTELLO'S INTENTUIONS, IVF
PROGRAM, THE FORTHCOMING BUDGET, RESERVE BANK, BUDGET SURPLUS.

MEET THE PRESS PRESENTER PAUL BONGIORNO: Hello and welcome to Meet The Press. Australia's longest
continuous serving Treasurer works on his 10th budget.

TREASURER PETER COSTELLO (EARLIER MEDIA APPEARANCE): Well, we're working hard. Working very, very
hard and a little under two weeks time all will be revealed.

PAUL BONGIORNO: But what does the future hold for Peter Costello himself? First, what the nation's
press is reporting this Sunday May 1. All the papers across the country are leading with the
fallout of the Prime Minister's leadership remarks in Athens and his damage control yesterday.

PRIME MINISTER JOHN HOWARD (EARLIER MEDIA APPEARANCE): Nothing has changed and any interpretation
that I've in some way shifted or hardened my position or thrown down gauntlets to people and so
forth, that is completely wrong, I have done no such thing.

PAUL BONGIORNO: Now it's war, according to the Adelaide 'Sunday Mail'. The 'Sun-Herald' in Sydney
has "Howard digs in, Costello blows up." In other news, the Sunday 'Age' reports, "We threw out an
Aussie." The Federal Government admits it's discovered other cases of Australian citizens wrongly
held in immigration detention with one even deported. No-one since federation has done more than 10
budgets in a row and just as the Treasurer is preparing to unveil the Government's latest economic
blueprint, remarks from the Prime Minister on leadership have overshadowed it. Welcome back to the
program, Treasurer.

PETER COSTELLO, TREASURER: Good to be with you Paul.

PAUL BONGIORNO: John Howard said he really hasn't changed his position and he's not throwing down
the gauntlet, how do you read those remarks?

PETER COSTELLO: Well, Paul, let me say at the outset you and I agreed several months ago that I'd
come on today and talk about the federal Budget which is next Tuesday.

PAUL BONGIORNO: That's true.

PETER COSTELLO: In due course we'll be doing that, I'm sure, but it's a free country and I've read
today's papers. I assumed you'd ask me about what is in today's papers. It is not something that I
sought, it wasn't something that I was expecting to happen, but you're entitled to ask your
questions and I'll answer them as best I can. John Howard gave an interview in Athens that was
reported in Saturday's 'Australian'. Yesterday he did a press conference to try and clarify what he
had meant by his Athens statement and as he said yesterday he said he wasn't throwing down the
gauntlet.

PAUL BONGIORNO: But any fair-minded reading of those remarks are that he's loving the job, he has
no plans for any other job and he can beat Kim Beazley at the next election.

PETER COSTELLO: Well, you know, I think it's a mistake, isn't it, to take anything for granted in
politics. Nobody should take for granted the outcome of any future election. I certainly don't.
Every election is close. The Labor Party could have won any of the last four elections and the
Labor Party could easily win future elections and it's a mistake to take anything for granted. And
all of us should remember that the Australian public don't appreciate being taken for granted. They
want to see us working. They know that the most important statement we have to deliver is next
Tuesday's Budget. That's what I'm focused on. They want to know what we're going to do now that
they've re-elected us. They're not asking about what's going to happen to the Government elected at
the next election. They want to know what this one is going to do. This one was only elected six
months ago and the Budget is the perfect opportunity for this Government to start laying down its
agenda.

PAUL BONGIORNO: Mr Howard seems to have had form on this trip. This is how he responded to the
election of a 78-year-old Pope the previous week.

JOHN HOWARD (April 21): I think patience is a great virtue, not only in politics and the church,
but also in personal life patience is a commendable virtue and something to be wholly praised.

PAUL BONGIORNO: Well, the journalists present clearly thought that that was a message for you. I
suppose I should ask up front, are you patient?

PETER COSTELLO: Well, Paul, as one, as such as one can be. This is, as you said, the 10th budget. I
don't think anybody else in the history of Australia has produced 10 budgets in a row, but can I
say I don't think it's about me. I don't think it's about my career. I don't think it's really
about anybody else's career.

PAUL BONGIORNO: But surely...

PETER COSTELLO: You know, what's important here, Paul, is we've been elected to do a job for the
Australian people. They want to keep their interest rates low and keep taxes as low as they can be.

PAUL BONGIORNO: Can I put it to you this way? Do you believe it is in the best interests of the
Government for a smooth transition of the leadership to another generation, if you like, some time
in this term?

PETER COSTELLO: Well, Paul, let me answer that this way. In 1995 - and I was the deputy leader of
the Liberal Party in 1995 - when John Howard was seeking to return to the Liberal Party leadership,
I thought it was in the interests of the party to have a smooth transition. And I did everything I
could as deputy leader to ensure there was a smooth transition, and there was a smooth transition.
It set the Liberal Party up for four election victories. In the preceding generation when there had
been rivalry between John Howard and Andrew Peacock we set ourselves up for, what was it - five
election losses, maybe four election loss. There is a very big message to the Liberal Party, I
think, which is where the leadership works together and where the leadership is properly organised
with the interests of the party and the interests of the members and where instability is avoided
and where people in good faith are able to deal with each other, that's when the Liberal Party is
successful.

PAUL BONGIORNO: So do I take it by that you are ruling out a challenge to John Howard in this term?

PETER COSTELLO: I'm just saying - and I am the Deputy Leader of the Liberal Party - I look to the
Liberal Party's interests. And I'm making the point that the Liberal Party has done this badly in
the past and it's done it well. And it's at its best when it does it well.

PAUL BONGIORNO: Well, Treasurer, the panel want to raise some of these leadership issues with you
later. But to the Budget, that I admit you came on the show to discuss when we planned it a few
weeks ago. We have an exclusive nation-wide IPSOS Mackay poll for Meet The Press. It asked, "Should
the Treasurer increase funding of services or reduce personal taxes in the Budget?" 44% want
reduced taxes. 40% want increased funding for public services and 10% think the Treasurer's got the
mix right. Well, that poll finds, at least, in my view, that tax cuts aren't an urgent priority for
this Budget. Do you agree with that?

PETER COSTELLO: It's an interesting poll because 40% one way, 40% the other way, 10% get it right.
You know what that poll tells me? It tells me that probably the balance has as much support as it
could possibly get. There is no overwhelming preponderance either way for a change. It's a very
interesting poll. Sometimes a poll where you have evenly divided, when you ask them whether they
want to go to the left or the right and they're evenly divided, that tells you you're going right
down the middle.

PAUL BONGIORNO: Coming up - more on leadership. And can the Treasurer deliver a budget surplus and
keep all the Government's election promises?

PAUL BONGIORNO: You're on Meet The Press with Treasurer Peter Costello. And welcome to the panel,
Michelle Grattan, the 'Age' and Glenn Milne, the 'Sunday Telegraph'. In 1999, Peter Costello was
quoted in the 'Financial Review', saying, "I've got another budget or two in me I suppose. I've
done four and my next one will be five. That makes me the second-longest serving since Harold
Holt."

GLENN MILNE, THE 'SUNDAY TELEGRAPH': Well, Treasurer Peter Costello, have you got another budget in
you after this one?

PETER COSTELLO: (Laughs) Well, I've proved to be much more of a long distance runner than I
thought, Glenn. I said that about five or six budgets ago and I'm still here.

GLENN MILNE: We know you're in for the long haul, but it can't go on forever, can it?

PETER COSTELLO: Look, Glenn, I'm focused totally on next Tuesday. There is a lot to be done. Next
Tuesday we will continue laying down our response to Australia's greatest challenge - the aging of
the population, the demographic date we have with destiny. And it will put down decisions, I hope,
to set up Australia for 10 and 20 and 30 and 40 years, long after all of us have gone and long
after today's newspapers have gone. That's what we're focusing on, Glenn. The big decisions, the
structural reforms for a generation.

GLENN MILNE: Is that what leadership is about at the present time, is it?

PETER COSTELLO: It's about our duty to the Australian people. We've just been elected. This is our
first budget. We were elected for this term. We weren't elected for the 2007 term. We were elected
for the 2004 term and this is the first budget. This is the first chance to lay down that agenda.

MICHELLE GRATTAN, THE 'AGE': Mr Costello, you were talking before about the importance of acting as
a team and having all these transitions smooth and so on. Why don't you just go to John Howard
tomorrow and say, "John, this is causing a lot of problems, what are your intentions?"

PETER COSTELLO: Well, look, he's made his position clear.

MICHELLE GRATTAN: What is that position, then, if it is so clear?

PETER COSTELLO: Well, he said it again yesterday. He has a formulation, you know what his
formulation is.

MICHELLE GRATTAN: Well, I would have thought the formulation...

GLENN MILNE: He didn't use that formulation in Athens, did he?

PETER COSTELLO: Well, that's, as you say, that's why the press got very excited again on Saturday.
But when he had the chance to speak again yesterday he reiterated his formulation.

MICHELLE GRATTAN: But, Mr Costello, this is nonsense. His formulation is lack of clarity, that is
the whole point.

PETER COSTELLO: Well, Michelle, you'll have to take that up with him.

MICHELLE GRATTAN: Why don't you take it up with him?

PETER COSTELLO: Well, I'm sorry, what I do with him will remain between him and me. If you think
his formulation doesn't suit you, Michelle, you take it up with him.

GLENN MILNE: Let's take this up with you, Peter Costello. I understand that Mr Howard has spoken to
you since those remarks in Athens. Did he seek to clarify his position with you?

PETER COSTELLO: Well, he indicated to me as we spoke yesterday, he indicated to me that his
position is as he said in his press conference, that is his private position and that is his public
position.

MICHELLE GRATTAN: Is he a bit apologetic over all this?

PETER COSTELLO: Look, again I don't speak for him. If, if, you know, I don't look into his soul and
I don't speak for him. The only thing I'd say is this. I don't think the events of the last 24
hours have helped the Government or the Liberal Party.

MICHELLE GRATTAN: And does he accept that?

PETER COSTELLO: Again, I don't speak for him.

MICHELLE GRATTAN: But surely you can give us some indication of his mood, whether he said, "Well,
look, I ran off at the mouth, I regret this"?

PETER COSTELLO: You know something, Michelle, I find being the Treasurer hard enough without being
a psychoanalyst. (All laugh)

GLENN MILNE: Well, here's a question for you then - do you believe him?

PETER COSTELLO: Look, I don't think the events of the last 24 hours were helpful. You've seen
today's papers. It is... Here am I, I am meeting a date I made two months ago to discuss the
Budget. We're not discussing much about the Budget. This is an issue that is overshadowing the
Budget as of today, so I don't think it was helpful.

MICHELLE GRATTAN: I think...

PETER COSTELLO: But the important thing is not to be distracted by that.

MICHELLE GRATTAN: I think in that earlier segment you did not rule out a challenge. Would you like
to clarify that point?

PETER COSTELLO: Michelle, I am not going into challenges or non-challenges, because these things
are the furthest thing from my mind. You're asking me and the press is speculating - what is going
to happen in 2007? Can I just remind you - the last election which was six months ago, was 2004. We
now have our first budget. To even raise the issues now of 2007 is to get a little bit ahead of
ourselves. I think we ought to go through the agenda that the Australian public elected us to do
and after we've gone through that agenda then we can start thinking about 2007.

GLENN MILNE: All right, let's talk about this budget, but again in the leadership contest. How did
you feel when you picked up the newspaper and you read from Athens that this is John Howard's 16th
budget, not your 10th?

PETER COSTELLO: (Laughs) Well, I was a little surprised. The history books will record how many
budgets people do and I don't think you'll see that recorded in the history books.

MICHELLE GRATTAN: Did he explain that, too?

PETER COSTELLO: Well, you'll have to ask him. The history books will record eventually how many
budgets were done by how many people.

MICHELLE GRATTAN: Would you rule out at any stage, if this tension continues, going to the
backbench, simply saying enough is enough?

PETER COSTELLO: Michelle, I'm focused on the Budget. I'll bring down the Budget and I will try and
put in place decisions for Australia. And I will defend those decisions, I will argue them up and
down this country. And that's... Anything else is pure hypothetical, pure speculation which frankly
I don't want to enter into. I think there's been enough speculation.

GLENN MILNE: Let me indulge myself with one more hypothetical. I've listened to Paul ask you a
question about ruling out a challenge. I've listened Michelle ask you a question about ruling out a
challenge. For a third time will you rule out any challenge to John Howard this term? Glenn, Glenn,
I... You know, you're obviously trying to look for a headline. You're a journalist, I don't
begrudge that, but if you try and write a headline out of what I've said you'd be wrong. The
headline that you ought to write out of what I said is, "Treasurer focuses on the issues at hand
and refuses to add to speculation on anything." That ought to be the headline, and let me get in
now, if anybody else puts another headline on Monday's papers, it's a misrepresentation.

MICHELLE GRATTAN: What sort of feedback have you been getting from the party over the last 24 hours
on all this? Are they worried? Are they agitated?

PETER COSTELLO: I think the party thinks we should get on with the job at hand, the Budget. That's
what the party thinks. The party thinks that we ought to get on with implementing the structural
changes that the public wants for the future. Those people that have rung me up to discuss those
issues, I have made that entirely clear to them.

PAUL BONGIORNO: Coming up - Malcolm Fraser told us life wasn't meant to be easy. But now is the
guiding principle - nothing in life is completely free. And funding election promises in the Budget
is the theme for our cartoon this week. Moir, in the 'Sydney Morning Herald' has John Howard
returning from his overseas trip to find Peter Costello putting election promises through the
shredder. The Prime Minister says, "Ah, preparing the Budget."

PAUL BONGIORNO: Welcome back. Just eight weeks ago the Finance Minister Nick Minchin gave this
undertaking.

FINANCE MINISTER, NICK MINCHIN (March 13): The fundamental undertaking of the Government, Michelle,
is to deliver on all of our promises. That is unqualified guarantee that we will do so and the
Budget is strong enough to enable us to do so.

PAUL BONGIORNO: Well, that raises another question for Michelle.

MICHELLE GRATTAN: Mr Costello, at the time that Nick Minchin was telling us that, you and he were
making an assault, preparing an assault, on the detail of the Medicare safety net which broke a
promise?

PETER COSTELLO: Well, Michelle, you make allegations as to how the internal workings of the
Government occur which I'll neither confirm nor deny. But I'll make this point. The Government will
have a Medicare safety net. No other Government in the history of Australia has had a Medicare
safety net. There wasn't one until 2003 when it was introduced for concession card holders at $500.
We sought to extend that to others at $500 and $1,000 thresholds and the Senate wouldn't enact it.
We were forced to acquiesce to the Senate's requirements and now we are implementing the policy
that we designed which we believe is sustainable and is responsible.

MICHELLE GRATTAN: So, are you saying that is not a broken promise?

PETER COSTELLO: I'm saying that our promise to have a Medicare safety net at 80% to pick up
out-of-pocket, out-of-hospital costs, will deliver to the Australian people in a way which they
have never had before and would not have been delivered if the Labor Party had won. And it will be
delivered.

GLENN MILNE: This debate about some capping IVF treatments, Treasurer, has it been worth the
political pain? This is a $7 million saving, I think, the AMA is saying, and it seems to have cost
you a lot already.

PETER COSTELLO: Can I say, Glenn, this has not been driven by cost cutting. This has not been
something that was put to the Department of Health and it was instructed to try and save money. I
want to make this point and I think it is very, very important. It is a question of ensuring that
those treatments that the taxpayer pays for are treatments that have a decent chance of success.
That's what it's about. A decent chance of success. I want to say, in this my view is we ought to
follow the medical opinion. Now here's the medical opinion that has been put to the Government. The
medical opinion to the Government is, after 42, your chances of success with IVF plummet. That
there is a 2% chance after 42 of a live birth. Now, you've got to ask yourself the question when
you get medical advice like that - should the taxpayer be subsidising treatment which have a 98%
failure rate? Now, the other thing that's been put before us, and I don't think this has got out
into the public debate before, is you can look around the world and you can see what other
countries do. I think in Britain they are now promising women one cycle on the National Health
System. In New Zealand the practice has been one cycle on the national health system, the United
States as you know, doesn't have a health system, so you have to do it under a private health
insurance.

MICHELLE GRATTAN: So, you're going to stick with this decision? Are you going to stick with it?

PETER COSTELLO: Well, this is the medical advice that's been put to the Government by the Health
Department through the Health Minister and I support them in their medical assessment - and I say
it again - that where the chances of success are very low - nobody is saying you can't do it - but
where the chances are very low, the taxpayer ought to direct the funding to where the chances are
higher. And the chances are higher with younger women.

GLENN MILNE: Treasurer, I've spoken to Dr David Molloy who is the Queensland President of the AMA
and also an IVF specialist. And he says you're actually going to endanger the lives of mothers and
unborn children. Because what some clinics will do is they will load women up in the earlier
treatments in a bid to add to maximise the chances of fertilisation and adding to the risk of
multiple births.

PETER COSTELLO: Well, nobody wants to risk women's health. Can I say this about IVF, I think it is
fantastic technology. I have no theological, moral objection. I think it's wonderful. I know
parents who've had it. More importantly, I know kids who were conceived out of it. Now, we want to
ensure that it is available to Australian women. The medical advice to us is three cycles a year is
optimal. If you're a younger woman, that would technically mean you could have maybe 30 cycles over
a lifetime. I don't know that anybody would do it. I said before, in Britain it is one. In New
Zealand it's one. Do you know under the Labor Party there was a limit of six? There was a limit of
six back in 1990. If the medical opinion comes to me and it says that the chances of success
outside those parameters are low I'll follow the medical opinion. If the medical opinion came to me
and said there has been an enormous breakthrough. Let's suppose there is an enormous breakthrough
that says that women have a 20, or 30 or 40% chance of successful treatment at the age of 50. Then
I'd be very happy, very happy to repeat that to the MBS, but it's a question of the medical opinion
here. I'm not a doctor, this is the advice out of the Health Department through the Health
Minister. I'm prepared to follow the medical advice.

PAUL BONGIORNO: Treasurer, both you and the Prime Minister have signalled that you want a
sustainable Budget that will deliver a Budget surplus. How difficult has that been and is it
necessary for you to have a significant Budget surplus to put downward pressure on interest rates
given the promises that you are also struggling to keep, it seems?

PETER COSTELLO: Well, I think it is important that we have a strong Budget surplus. I do think
that's important. It is very important that we deliver a surplus on Tuesday night. It would be
our... It would be a strong run of surpluses which would put our Budget in a stronger position than
any comparable Western country. Let me make this point...

GLENN MILNE: It would be an easier task, though, wouldn't it, Treasurer, without John Howard's
election spending spree which you now have got to find the money for?

PETER COSTELLO: Yeah, well, let me make this point. Is the US budget in surplus? No. Is Britain in
surplus? No. France in surplus? No. Germany in surplus? No. Japan in surplus? Almost alone of the
developed world, Australia balances its budget and that's something that I put in place. I put that
in place in 1996. Having put that in place I want to keep it in place because it's been a big part
of the success of the Australian economy compared to those economies over the last nine years.

MICHELLE GRATTAN: So you have this strong surplus and the Reserve Bank is again about to meet on
interest rates. What's your message to that meeting?

PETER COSTELLO: Well, I don't send messages to the Reserve Bank.

MICHELLE GRATTAN: You send them all the time, Treasurer.

PETER COSTELLO: Point two, as the senior economic person, minister, in Australia I have views on
the economy, yes, of course I do. I'm responsible for policy that's directed towards our
macro-economic objectives. What is my view - my view on the economy is, although we cannot be
complacent, inflation is moderate. We have unemployment at near 30-year lows and the inflation
figure that came out during the week was 2.4%. Now, if we're targeting our monetary policy at
inflation - and we are, under an agreement between me and the Governor of the Reserve Bank - the
important thing is to keep that inflation rate low.

PAUL BONGIORNO: Thank you very much for joining us today, Peter Costello. And thanks to our panel,
Michelle Grattan and Glenn Milne. Until next week, it's goodbye from Meet The Press.