Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Cairns, 11 July 1997: transcript of doorstop [Forum Economic Ministers meeting, interest rates, gold]

TREASURER: Well today's Forum Economic Ministers Meeting's been very constructive, very successful. We've had a discussion about the need to get sustained budget arrangements in place in the South Pacific, we've had a discussion about foreign investment and this afternoon we'll be discussing trade issues, including tariffs and multilateral trade agreements. I think it's been a very fruitful meeting. It's given us the opportunity to assess progress in the region, to encourage economic development and I'm confident that there'll be a good outcome.

JOURNALIST: Have you made any headway, Treasurer, in convincing our neighbours to get more integrity into their budgets?

TREASURER: I think there's a general agreement that those countries that have the best institutions are getting the best budget outcomes. That is the mechanisms of auditors-general, parliamentary scrutiny, transparency are the mechanisms that are getting the best budget outcomes There are some countries that have made enormous strides, there are some countries that still have a long way to go. But I think we've got agreement that it's budget reform, it's institution-strengthening and it's the need to deliver balanced budgets that we should all be shooting for and, of course, we in Australia are doing that as well.

JOURNALIST: Is Australia instructing its neighbours how they should operate their budgets?

TREASURER:No, Australia never instructs. We are here as members at the Forum of a group of nations, w-e are discussing, mutual experiences and we are working towards getting, a common outlook and I think it's been very productive.

JOURNALIST: Has the question of aid come up at all?

TREASURER: This has not really been a discussion about aid. Of course, aid bears on many of the economies and it comes up in that sense but we have not been discussing the distribution or the levels of aid. What we've been discussing is the need for economic reform. There's a consensus on the need to get budget deficits down, to run steady monetary policies, to have structural reform and it's a consensus that we in Australia, of course, very much welcome.

JOURNALIST: Treasurer, I wonder if I could ask you how you respond to the comments of Don Argus this morning saying that conditions are now ripe, the conditions are there for, a further cut in official rates?

TREASURER: Well, as you know I don't speculate on future interest rate reductions. We had an interest rate reduction pretty recently and I think we're still to see some of the banks pass it on in full so we'd be happy if the banks pass that on in full to the standard mortgage before anybody starts calling for future action.

JOURNALIST: But it is a remark of some weight coming from the nation's biggest bank?

TREASURER: I don't think so. I think that the commercial banks, like the merchant banks, all make their assessment of market conditions. I think all of the banks will tell you that they didn't anticipate the most recent cut. They're quite honest about that. So the it that they take a view really is a personal view It doesn't mean much for the conduct of policy.

JOURNALIST: Would you, like the Prime Minister, like to see rates even lower?

TREASURER: Just to put what the Prime Minister said in context. That is, the Prime Minister was saying all businesses like low rates. That's true. All businesses do like low rates. But my point to you is not what's going to happen in the future, let's look at what's happening at the moment and what's happening in the markets. We have a lower interest rate climate.

JOURNALIST: The Prime Minister did say he'd like them lower himself.

TREASURER: Well maybe the Prime Minister's a home mortgage borrower.

JOURNALIST: What do today's housing figures point to, Treasurer? There was an 8.4% fall. What's that indicating?

TREASURER: Oh, I think that was around the market expectation. It'd gone up quite substantially in the month before. I think it's up over the year. To give you the accurate figure, 7%. The trend is pretty strong so what it will tell you is, although there's a bit of volatility in the series, over the year housing finance has been up. You would expect that. We've always said that throughout the course of 1997 we expect the housing market to turn up, that really what we had was an over-supply problem in the housing market and as supply and demand got back into an equilibrium you'd see the market pick up and these figures are consistent with that.

JOURNALIST: We'll see that pick up later this year?

TREASURER: I think we've said that it will pick up throughout the course of 1997 but you see what we don't want is we don't want more boom and bust. You had boom in 1994, you had a severe downturn as the demand and supply had to net back into equilibrium. What we're now seeing is we're getting over that. What we want is steady, sustainable growth in that housing side.

JOURNALIST: Treasurer, so are you suggesting regarding the comments of Mr Argus that you're quite happy with the current stance of monetary policy?

TREASURER: No, I'm not making any projections about where monetary polices is going. You know that because you fellows ask me on a daily basis. You know I ....Almost. You know I always ... I a]ways answer the same. You asked me . . . You asked me what Mr Argus's-view was. I know what Mr Argus' view is but it's a private view. It doesn't . . . It doesn't have any official status. It's the view of a banker but it's not the view of the monetary authorities.

JOURNALIST: Are you comfortable with gold prices where they are?

TREASURER: Well the gold price moves around quite a bit and I don't speculate on movements in relation to gold prices, either. But I think I said yesterday that the Australian gold industry is a good industry. It is a good industry and the Australian gold industry will always be a world competitive industry.

JOURNALIST: What do make then of the comments of George Savell from the Association of Mining that you caused the plunge in gold price after the RBA's sell-off.

TREASURER: Well if anybody said that, they must have had quite an excitable day.

JOURNALIST: Sorry, Treasurer, can I just ask you one more question about rates? What do you see as the major concerns that the monetary authorities are juggling with at the moment? Is it currency volatility?

TREASURER: Do you mean Australian monetary . . .?

JOURNALIST: Yes. Too rapid economic growth, unemployment? What's ...?

TREASURER: We've always been pretty up-front about how we run monetary policy in this country. We have an inflation target, monetary policy is directed towards the inflation target. Where we arc within the bounds of that target we are achieving our objectives. We've always believed, and in fact we've proven . . . We've proven that as you reduce budget deficits, you can get interest rate reductions. We're proven that and that's been one of the great achievements of the last 12 months.

- JOURNALIST: Treasurer, could I Just put one other comment that was made on the bold industry from Robert de Crespigny where he said that your remarks after the RBA sell-off supported and reinforced the international view that the RBA have lost confidence in gold. How do you respond to that?

TREASURER: Look, the RBA made a decision on gold which was prudent and in the national interest and the Governor has made it clear why the board took that decision and I think that the board took that decision for all the right national interest reasons. When you're dealing, with a thing like gold, you'll have . . . you'll have a thousand opinions - some good, some bad, some hanging off the wall and some that don't even deserve responding to. But you can't chase every view down every burrow. I don't intend to. The fact of the matter is the Reserve Bank of Australia made a prudent and good decision. The gold industry in Australia is a good industry with a good future and there ends the matter, really.

JOURNALIST: Is there a reason for investors to hold gold?

TREASURER: Well, you know, I'm not in the business of giving out free advice to investors. Thanks very much. I always charge for my advice. Last one.

JOURNALIST: Small gold miners say that it's not a good future for them, that they'll actually be driven to the wall.

TREASURER: Oh well, look, anybody can put their views out in Australia. I never heard anybody in Australia that hasn't had a reason to be opposed to one change of some kind or another. But the important thing is what are the substantive issues. And what are the substantive issues? The Reserve Bank took a prudent decision in the national interest. That is the substantive issue. The Governor of the Reserve Bank has explained it. It's there for all to see. I think it was a prudent decision as well. Now, people always object to change. They are entitled to and we always have an eye to their views but don't let that deflect you from the important decision here. Thanks very much.