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Treasurer discusses the economy; interest rates; Ansett; petrol prices; and APEC.



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TRANSCRIPT of

HON. PETER COSTELLO MP Treasurer

Interview with Steve Price 3AW

Thursday, 4 October 2001 5.05pm

 

SUBJECTS: Economy, interest rates, Ansett, petrol prices, APEC.

PRICE:

Joining us on the line first up though is Treasurer, Peter Costello. Thanks for your time.

COSTELLO:

Thanks very much Steve.

PRICE:

Are you looking forward to an election?

COSTELLO:

Oh look, it is something that, you know, if you are involved in politics that comes around every three years. It is a tough period, you have got to work incredibly hard. It is like sitting for final exams, I guess. But, you know, that is what politics is all about.

PRICE:

Does it still cause a slow-down in the economy as it used to? Do people stop spending because they are worried and concerned about who might get re-elected or not elected?

COSTELLO:

Yes, it looks as if, particularly with advertisers, they pull off on their advertising with an election coming up. That people aren't ready to make big buying decisions, and it does always cause a bit of a slow-down in the economy, yes, and I think that that's occurring now. There are so many other things, of course, that are impacting on that, like the terrorist attacks, but all the evidence that is coming back to me, and I spoke to some of the newspapers again today, they say that advertising is down. People are waiting until the election is out of the way before they get on with their Christmas advertising.

PRICE:

Is that an argument for fixed terms, and are you a proponent of fixed terms?

COSTELLO:

I think if you had fixed terms you would still have this, Steve. As the fixed term came up people would slacken off in relation to advertising. It is one of the prices of democracy, if you like, you won't get away it. If you are going to hold an election you are going to have a bit of a slow-down when the election is on.

PRICE:

Kim Beazley says a vote for John Howard is a vote for you. Do you think he sees that as a plus for Labor?

COSTELLO:

I think, well, look, the obvious problem for Kim Beazley is this, that a vote for Kim Beazley is a vote for Kim Beazley. That is his problem and there is no getting away from it. And I, you know, I have just watched this sort of false argument that has been going on in the last 24 hours. If I were Beazley I'd actually go out and try and explain to the people why I was better than Howard. But he seems to have given that up already.

PRICE:

Well, he does have a point that John Howard has to, that he will think about his future sometime during the next term. He's not said he will step down, he said he is in his mid-sixties and he would think about it. I guess any man in his mid sixties thinks, well, it might be a nice time to retire. Kim Beazley seems to be saying to us, that will give you Peter Costello.

COSTELLO:

Well, he says a lot of things, but I don't take many of them very seriously. Look, if I were Beazley and I really believed I could be Prime Minister, I would be out there saying here is my policy, make me Prime Minister. But, if you don't have any policy, and you are not viewed as a credible leader, you have got to say something, obviously, and that is what he has been saying in the last 24 hours. I don't think it is particularly biting.

PRICE:

Interest rate cut yesterday. Normal circumstances with that see a further acceleration of real estate market. But it does seem that there is some caution after September 11?

COSTELLO:

It will be interesting to see how the auctions go on the weekend. The fact is that interest rates are now the lowest they have been for thirty years, so, people are still buying because interest rates are so low. We've got a First Home Owners Scheme which is out there for people who are buying new homes, and people who are buying their first home, even if it is an established home. So, housing affordability is very good and it is being supported by the First Home Owners Scheme, low interest rates, and you have seen the market move in Melbourne. If we get to a stage where people are frightened out of the market and stop buying then you would expect prices to go down, but they are going up at the moment. So, it is a very good time for sellers too.

PRICE:

It is good news for home buyers, and it is very good news for people paying off their homes. It is not so

good for self-funded retirees, though, is it? Do you think they might still turn on you during an election?

COSTELLO:

Well...

PRICE:

I mean if you paid off your house and you are living on the interests from your investments.

COSTELLO:

Sure.

PRICE:

My parents, in their seventies, last weekend said, well, you might be happy, but we're not exactly delighted.

COSTELLO:

Well, low interest rates are good for an economy, because most people are borrowers, they are good for home owners, they are good for businesses which create jobs. If you were somebody who was living off interest you may not welcome it. But I find with most self-funded retirees these days, they are not really living off the interest on bank accounts. I don't know if that is your parents, but, there are not people who say, well, I have got money in the bank, you know, I'll wait for the interest and I'll live off the interest. They tend these days to be living off shares, or dividends, or superannuation, and if you are living off superannuation or living off shares, then low interest rates do actually come round to help you because low interest rates are good for the companies in which you are investing. So, you can look at it and say, oh well, look, you know, if I had my money in the bank I might be getting, sort of, 2 per cent instead of 3 per cent, or 3 per cent instead of 4 per cent. But you find with most of those people that they don't tend to have their primary source of income as being interest on bank accounts anymore.

PRICE:

We are still 2 per cent higher than the US, are we really that better off?

COSTELLO:

Our economy is growing stronger than the United States, yes. The United States economy has stopped, and is probably contracting. And that was the case before the terrorist attacks. And our economy is still growing, and this year it has been growing at about 3 per cent, which is quite a decent clip. And stronger than the United States, and stronger than Japan, and stronger than Europe. But, we don't want to get too over-confident. We don't want to say, look, you know, the world is, you know, turning to recession and Australia is strong. Look, the fact that the world is turning to recession will affect Australia. I have always said that. It will mean that our economy won't be as strong as it otherwise would have been. But, the good thing from our point of view is we go in to this global down-turn with an economy which is still growing. We have paid off $60 billion of Labor's debt now, we have balanced the budget from the last four years, we have reformed our taxation system, we have got no taxes on exports which is helping us in a slowing world economy, and we are in a better position than we would have been otherwise, but we have still got to take our chances out there in a very difficult world environment.

PRICE:

People who have lost their jobs at Ansett, Coles Myer, Daimaru, people in the tourism industry now at risk of losing their jobs because of the downturn of tourism. They're not going to be saying the economy is too strong.

TREASURER:

No, I don't think they will be saying the economy's too strong. And I've got a lot of sympathy for employees at Ansett. Ansett is a good example of how ordinary employees are dependent on company managers, and if your company manager lets you down everybody suffers and I'm sure that is what happened in Ansett. And now there is a bit of an investigation going on as to whether the company directors and company managers are liable under the law and that should be encouraged. But it is an example of how employees suffer if their managers don't run good companies. We've all got an interest in companies being run well, Steve.

PRICE:

They all vote those people.

TREASURER:

Even down at 3AW.

PRICE:

Yes.

TREASURER:

Which I am sure you run very well.

PRICE:

Thank you. They all vote, those people. They're not going to blame you if you believe the Morgan poll, they are blaming management at Ansett and management at Air New Zealand.

TREASURER:

Sure.

PRICE:

So you don't think you'll find any backlash from those....?

TREASURER:

Well, as you say, if you look at the polls the employees of Ansett know this wasn't a Government owned airline, the Government wasn't running it, the Treasurer wasn't on the board of directors, the Treasurer wasn't the company manager. And what happened at Ansett is the people that were the company directors and the company managers allowed the company to get into trouble, and they are, if you like, the victims of bad management. And the only thing you can do in a situation like that is you know that,

well, if those managers are found to have been in breach of the law, and I say `if' because they are entitled to a fair hearing, then they will be found to be liable.

PRICE:

The heat's gone out of petrol prices. It is not talked about any more. People go to the pumps, and I think I was filling up today at 85.9 it might have been unleaded. Do you expect petrol prices to come back as an election issue?

TREASURER:

Well, petrol was a real worry for people when it was up around about a dollar. Now you can remember about the beginning of this year really, it was up about a dollar a litre in Melbourne. And as the price has come off it has dissipated as an issue. And if you actually look at the oil price, and the key determinant of the petrol price is the oil price, it takes a while to flow through. Somebody will say to you, oh the oil price was down on the international markets why haven't we seen it at the bowser? Well you've got to remember this, that it is coming out of the Middle East, that is the price today, it has to be refined, it has got to be shipped to Australia, it has got to come through the distribution system, it has got to get to the petrol station. But if you actually look at the price today, which is indicative of where prices should be say in a month or two, or maybe two or three months, the oil price is actually even down on where it was, so that is actually good news in relation to petrol prices. You ought to expect with an oil price where it is now, in two or three months time that the news would be a bit better.

PRICE:

APEC October 20, I think it is, 21 in China. Will you and the Prime Minister still go?

TREASURER:

I go to the APEC Finance Ministers meeting, this is a meeting of all the Treasurers of the United States and Japan and Asia, all the countries in APEC. And I was at that meeting in Shanghai about three weeks ago, we were up there for the weekend.

PRICE:

So you don't go to the Leaders meeting on the 20 th?

TREASURER:

But that was the weekend, I think it was the second weekend of the finals because I missed the Essendon v Richmond game because I was in China for the weekend.

PRICE:

Didn't miss much.

TREASURER:

It wasn't that bad, Steve.

PRICE:

Thank you, move on.

TREASURER:

It was better than last week's result.

PRICE:

Correct.

TREASURER:

And so what you tend to do in the lead up to an APEC Leaders meeting is the Trade Ministers all meet, then the Finance Ministers all meet and then the Leaders meet. And the Leaders will be, Australia's Leader is Prime Minister John Howard, President Bush from America and President Xiang Zemin....

PRICE:

So John Howard will still go?

TREASURER:

I think he will. He indicated he is very keen to go even if we are in an election period. It is an important forum for us, you get the world's two largest economies which are America and Japan, the world's most populous nation which is China, and you have Australia there with a seat at the table.

PRICE:

So you'd expect George Bush to be there even given the current situation?

TREASURER:

Apparently he is quite keen to go, yes.

PRICE:

Do you expect the election to be on the 10 th of November?

TREASURER:

It could be, yes.

PRICE:

Finally,...

TREASURER:

I don't call it, that is up to the Prime Minister, but it could be if he were to call it this weekend.

PRICE:

Finally, Joe Misiti, Mark Mercuri, Damien Hardwick are all on the trade table. Are you happy with that?

TREASURER:

No, because I think they have been great players and they would be a big loss. And I hope that this is all part of a negotiation process.

PRICE:

That's harder than choosing Cabinet, to try and work out who you are going to keep in.

TREASURER:

Well, the good thing about choosing a Cabinet is that we are all paid the same, Steve, so you don't have the salary cap problems.

PRICE:

I might point out a hell of a lot less than any of them.

TREASURER:

Well, that is right, you don't pay Cabinet Ministers nearly as much as you pay a half forward flanker for an AFL team, so it is easier to fit them into a salary cap. You don't have to sort of negotiate individually with them and get them under a salary cap, they are all on a limited amount and as long as you have the same number you can always fit them into your team.

PRICE:

Correct. Thank you for your time.

TREASURER:

Thanks very much Steve.