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 03/03/2005

Interview with Louise Yaxley
ABC AM

Thursday, 3 March 2005
8.00 am

 

SUBJECTS: Economy, Interest Rates, The Bulletin

PRESENTER:

The Treasurer, Peter Costello is speaking here to Louise Yaxley.

TREASURER:

Well what Labor says of course is absolute nonsense. This Government has now delivered seven surplus Budgets and if anything the financial position has improved since the Budget up to the mid-year and you don’t have to just take my word for that, the Reserve Bank Governor was asked that very question and in his testimony he said when he goes around the world and speaks to other Central Bank Governors they tell him he is lucky to have a Government which is running surplus Budgets in a country like Australia when they are dealing with Budgets in deep deficit in Europe, Japan, England and the United States.

YAXLEY:

But what do you say to your colleagues? John Anderson calls it disappointing, Mr Truss argued against it, what will you say to them?

TREASURER:

The Bank makes its decisions after weighing carefully all of the economic evidence and I put that Bank on an independent basis and have given an inflation target so it is operating under arrangements which we put in place and I don’t walk away from that. The consequence of a 0.25 per cent interest rate rise would be a home variable mortgage interest rate of about 7.3 per cent. Under this Government home variable mortgage interest rates have varied between about 6 and 8. Under Labor they varied between 10.5 and 17. So, by any measure these are still low interest rates in Australia.

YAXLEY:

Because people are so highly geared is it likely though that 0.25 per cent feels much more?

TREASURER:

0.25 per cent is, what is it, $250 a year on $100,000. So, I think if you said to people would you prefer not to pay that addition they probably would say yes, but if you compare it to what they were paying the Labor Party they are saving $500 a month on where interest rates were when the Labor Party left office.

YAXLEY:

You say that the National Accounts showed no sign of inflationary pressure, are you saying Ian Macfarlane got it wrong?

TREASURER:

No, it is just a fact that the National Accounts do show no sign of inflationary pressure…

YAXLEY:

So why put up rates then?

TREASURER:

…I can’t dress it up any other way that is a fact, that is the finding of the Statistician. The Reserve Bank Governor in his own statement said that he saw inflation probably still being within the band by the end of next year so I don’t think the Bank sees inflationary pressures. Except to say this, that with unemployment at 30 year lows, if we award ourselves wage increases which are not backed by productivity you could have inflationary pressures emerge but so far they haven’t.

YAXLEY:

With 0.1 per cent growth in the December Quarter, before we get to June is it possible that we could slip into negative growth?

TREASURER:

Oh no, our forecast is for a continuing growing economy and obviously the economy has got quite a bit of strength behind it - consumer sentiment higher than it has ever been, business profitability at near all time records, the lowest unemployment in 30 years - this is an economy which has got some oomph.

YAXLEY:

In The Bulletin this week you don’t deny that it was your understanding that John Howard was only interested in two terms. What lead you to believe that?

TREASURER:

I think what I say that is various people have various suppositions as to what happened back then 10 years ago but none of them influence me.

YAXLEY:

Your supporters are quoted as saying that Australia Day next year is the deadline for the Prime Minister to retire, what do you say to people who say that?

TREASURER:

Well it is a free country, anyone can say what they want to say, I don’t control what people say, what I say myself obviously is that Australia has particular challenges at the moment which we are focused on dealing with and that is the focus of all of my efforts.

PRESENTER:

The Federal Treasurer, Peter Costello speaking there with Louise Yaxley.