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 09/02/2005

Interview with Derryn Hinch
3AW

Wednesday, 9 February 2005
5.00 pm

 

SUBJECTS: APEC 2007; tax reform; interest rates; leadership

HINCH:

Mr Costello good afternoon.

TREASURER:

Good to be with you Derryn and happy birthday.

HINCH:

Well thank you, thank you very much. I am only four years away from retirement, I am taking it easy.

TREASURER:

Did you get anything for your birthday?

HINCH:

Yes, I got some very nice (inaudible), yes, very nice. Also, I got Dancing with the Stars out of the way last night as well, that was my birthday present.

TREASURER:

I am told that you were the star of the show so congratulations.

HINCH:

Well thank you. Now, I have got three quick things, I know you have got only five minutes, APEC coming in 2007, that is a good coup for Australia, but does that make you think that John Howard is going to be still hanging around?

TREASURER:

Well look, that is not the issue here, the issue is it is a big conference, it is probably the biggest conference we have hosted in terms of influence, maybe not people, but in terms of influence and we have got to start preparing for it and the announcement was made today that we are well on our way.

HINCH:

Now Queensland made a big push for it didn’t they…

TREASURER:

Yes.

HINCH:

…but finally Sydney got it?

TREASURER:

Yes that is right. We wrote to the States and asked the States that were interested to put together packages. Queensland made a big push and New South Wales got it. Obviously as a Victorian I would have liked to have seen a big push come out of Victoria but…

HINCH:

But they are pre-occupied by the Commonwealth Games aren’t they?

TREASURER:

Well there is the Commonwealth Games. There is also the G-20 meeting of finance Ministers which is going to be held in 2006, the biggest meeting of Finance Ministers and Central Bank Governors from around the world and it would be really good to see if Victoria got interested in that too.

HINCH:

Now listen, you have got a ginger group, I mean you get control of the Senate on July 1, you have got a ginger group of your own people pushing GST is in, get it down, well established, trying to push that 47 per cent, 48 1/2 with Medicare is too high. Now I know you, I have heard you, I have seen interviews with you saying you have got to honour all of these, some election agreements, the Tsunami agreements and other things, and bushfire agreements, but can you see in the next four years the top rate coming down?

TREASURER:

Well the point I would make about the top rate, and the OECD made this point, by international standards that is about average. What we have been trying to do is not bring the rate down but push up the level…

HINCH:

And the threshold goes up to $81,000?

TREASURER:

…yes, to $80,000 on 1 July. That means that more that 90 per cent of Australians don’t pay that top rate.

HINCH:

But shouldn’t you be pushing, shouldn’t you be able to and you have done what, eight, nine Budgets, shouldn’t you be able to push the threshold up and pull the rate down at the same time a little bit?

TREASURER:

Well if you push, the degree to which you push the rate up is the degree to which fewer and fewer Australians actually pay it. And with the changes coming in on 1 July, as I said 90 per cent of Australians don’t pay it. And that is the way which we have been working.

HINCH:

But as a layman, if you get more cash at the top end out in the marketplace, isn’t that going to help small business? I mean you know, money is made to go around, it sounds quaint but wouldn’t that be fuelling the economy?

TREASURER:

Well look, I think that when you cut taxes and if people spend it, yes, it has a good economic effect. But you do have to bear in mind the different sectors that are affected by tax rates and you can’t just concentrate on one particular are to the exclusion of all others and I think the reform which we have coming in on 1 July - which has taken that threshold up to $80,000, which is making sure that 90 per cent of Australians don’t even pay it - is a good one. If you had capacity in future years to look at these issues of course we would, but that is what we are concentrating on for this year.

HINCH:

Now the interest rates, I know it became an election issue, but the bottom line is in fact unless you go crazy on inflation, you don’t set interest rates, the Reserve Bank does. It looks now from the warnings coming out they will go up in March or May, there is nothing you can do about that is there?

TREASURER:

Well the Reserve Bank sets interest rates by agreement with the Government and we give it the target and the target we have given it is an inflation target of 2 to 3 per cent and what we can contribute to it, should contribute to, is keeping inflation low because the extent at which you keep inflation low is the extent to which you will keep interest rates down. That is what I am focussed on at the moment. A low inflation rate, we have got it down to around two, if we can keep in the band of 2 to 3 per cent, then we will be meeting our objectives, if…

HINCH:

But the smell is there that they are going to increase it, they haven’t for eight months, after month after month, they haven’t so it has been very good for people, but it won’t shock you if in March or May it goes up a bit?

TREASURER:

…well Derryn look, you are right in this degree, interest rates are never the same level over decades. I mean interest rates do move around. We have been through a very unusual period, we have had 14 months where they haven’t moved but you know, I have been Treasurer for nine years and during that period they have varied considerably but have always been substantially lower than before this Government came to office, and you have got to bear that in mind. They are substantially lower than when Labor was in office and if we keep inflation down we will keep them at substantially lower levels.

HINCH:

Now I know you have got to go, one final question. We were watching very po-faced when you were told that John Howard wasn’t going to give you the keys to the Lodge last year, how do you keep it up?

TREASURER:

Well, it is a great honour to represent your electorate in the Federal Parliament…

HINCH:

Oh come on, come on, you are the Treasurer, you are the man in waiting, you have only got two, you said before, ‘I have only got two more Budgets in me,’ how do you just, how do you on your own you would say, ‘I am going to hang in there,’ is there a moment when you think, ‘stuff it?’

TREASURER:

Derryn, you know when I said I only had two more Budgets in me?

HINCH:

Mmm?

TREASURER:

That was about seven Budgets ago.

HINCH:

Yes but, I want to get inside your head here. You must start thinking to yourself, I deserve, the baton has been taking away from me.

TREASURER:

Well look, I am very focused on doing my job. I am working hard and I have got to keep working hard because the issues are so tricky and that is what I am focused on at the moment, particularly with a Budget coming up this May Derryn.

HINCH:

Did you ever think, and this is not a trick question this one, did you ever think you guys would get four on the trot?

TREASURER:

No, no I didn’t. I thought when we won one, that was a pretty good effort, I thought when we won two we were pretty lucky, I thought when we went three we were even luckier still and when we won four I thought that was pretty unbelievable.

HINCH:

What if John Howard wants to go five?

TREASURER:

Well we will just work at this term, we have just started this term, we have got three years to go.

HINCH:

Mr Treasurer thanks for your time.

TREASURER:

Thanks for your time Derryn, bye.