The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 22/05/01

Transcript No. 2001/062

TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Reuters TV - Interview with Victoria Thieberger

Tuesday, 22 May 2001

8.35pm

 

SUBJECTS:  Budget

PRESENTER: 

Treasurer Costello thanks for joining us. With an election coming up this year can you assure financial markets that that surplus of $1.5 billion will remain intact?

TREASURER:

Well its the fifth consecutive surplus by an Australian Government and Ive been the Treasurer over that period. Weve paid down our debt, our debt to GDP ratio is now about 6 percent. The European average is about fifty percent. So weve got the credentials on the board. Five years of consecutive surpluses, very substantial pay down in debt and quite a strong position and in this budget weve already factored in about $5 billion worth of tax cuts.

PRESENTER:

The economy is still very soft at the moment. Youve got a forecast of recovery to three and a quarter percent. What are those expectations based on?

TREASURER:

I think well see a rebound in residential construction. As you know when we moved to the new tax system in 1 July last year it brought forward a lot of residential construction and conversely there was very little residential construction in the second half of the calendar year. Thats now picking up supported by lower interest rates and the government first home owners scheme so residential construction will come back to very strong levels. Were getting growth out of net exports. Weve had good export growth and consumer demand. I think three and a quarter percent growth forecast in 2001-2002 is eminently achievable.

PRESENTER:

You said that you do want Australia to become more competitive internationally. Doesnt that require cutting the top marginal tax rates?

TREASURER:

We cut income taxes on 1 July last year. You might recall we had a lot of difficulty with the Labor Party Senate in cutting marginal tax rates for higher income earners but we still managed to cut them. This budget we cut the company tax from thirty-four to thirty percent. We abolish Financial Institutions Duty. We take stamp duties off shares. This will be very good for Australia as a financial centre. Youll be able to trade shares in Australia without any stamp duties. You have to pay them at the moment. Theyll be abolished from 1 July. And weve also got some stimulatory measures in there for business in relation to motor vehicles. Theyll be able to get back all tax paid at an accelerated rate as from tonight which will I think be pro-investment for the business community generally.

PRESENTER:

So on the currency the budget is in surplus now, youve got an economic recovery forecast. The current account is down to about three percent of GDP. What will it take for the Australian dollar to reflect those good fundamentals.

TREASURER:

Well I think that the big story in markets recently has been the rise of the US dollar. Its probably come off a bit recently but if you look back over the last six months or year its been rising against most currencies in the world including the Euro. I think the Australian dollar has not been reflecting fundamentals, the fundamentals of low inflation, growth fundamentals, budget balanced, low debt, competitive tax regime and I think when it does reflect those fundamentals people will take into account the very real opportunities that there are in Australia at the moment.

PRESENTER:

Youve got this fiscal stimulus coming through. Youre already forecasting a recovery. Does that make more work for the Reserve Bank next year on interest rates?

TREASURER:

Well were forecasting inflation at two percent in the next year. I think thats a realistic forecast. We think the stimulation is going to be good for the economy. We think it can afford it. We found out in the late 1990s that we could run the economy at four percent on a two percent inflation rate. Were below that in our forecast so I think we can run it a three and a quarter on two percent and thats why I think the stimulation will be good for growth. But I dont see an inflation risk in the next financial year.

PRESENTER:

Will this budget be enough to win you the next election?

TREASURER:

Look this is a budget of good economic management. I think our government has a reputation as good economic managers. Growth has averaged about four percent in Australia since we were elected on a two percent inflation rate. Weve run five consecutive budget surpluses, weve reduced debt to GDP ratios by about five percent, weve cut capital gains and company taxes. So I think theyre pro-investment, I think theyre good for business and lets hope the Australian public feels the same way.

PRESENTER:

Peter Costello thank you for joining us.

TREASURER:

Thank you.

[ends]