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 Nicole Haack
Radio 5AA

Thursday, 3 March 2005
3.50 pm
(Adelaide time)

 

SUBJECTS: Economy, Interest Rates, Skills Shortages, Immigration

HAACK:

Welcome to the programme Treasurer.

TREASURER:

Good to be with you Nicole.

HAACK:

Did we need the rate rise? Was it necessary?

TREASURER:

Well, the Bank is an independent institution which by agreement has been given the right to move in the money markets in relation to interest rates, in order to keep inflation between 2 and 3 per cent – that is the charter that I have given it – and so where it thinks that this is warranted after reviewing all of the economic evidence it moves in the market accordingly. Having said that, inflation is low in Australia and it is certainly within that band at the moment.

HAACK:

So what impact do you believe the interest rate rise will bring?

TREASURER:

Well that is of 1 per cent so on $100,000 that is about $250 a year, that is you know, if you had a $200,000 mortgage it would be double that. If you had a $50,000 mortgage it would be half of that. So, it will be a cost to the people but you want to get it in perspective, it is 0.25 of 1 per cent.

HAACK:

The economists say that when we see one, a bit like cockroaches, we always see another.

TREASURER:

Not necessarily. It depends on the economy and it depends on the way in which it develops over future months and the important thing in the Australian economy at the moment is to keep interest rates consistently low, even at 7.3 per cent by historical standards is of course a very low interest rate. When the Government was elected, you recall, they were 10 per cent. So at 7.3, although it is higher than the 7.05, it is still by historical standards quite a low rate.

HAACK:

I think most Australians felt it was at election time that statements that were being made indicated that indeed your Government would be able to keep a lid on interest rate rises, we are not too far down the track, we have of course seen percentage rise, the Opposition saying that amounts to a breach of an election pledge.

TREASURER:

Well of course they are wrong and you would expect them to try and misrepresent the situation. The fact of the matter is that interest rates are low and much lower than they would be under the Labor Party. Interest rates under the current Government have varied between about 6 and 8 per cent. A couple of years ago they were at 8, today they are 7.3. Under the Labor Party they varied between 10 and 17 per cent. Let me say that again – 10 per cent and 17 per cent.

HAACK:

Oh we remember it.

TREASURER:

So, I think you have got to have a bit of a memory of the Labor Party not to let them get away with those kinds of statements.

HAACK:

You have indicated of course, and rightly so, that the economy is what is important as we move forward and that this (inaudible) might happen with interest rates, there is a suggestion that in fact we could be heading towards a recession. Any merit in that?

TREASURER:

No, and I am not even sure who made it but I don’t think it would be a person that had economic experience.

HAACK:

So you are very, very confident that that is not going to be the case anywhere in the near future?

TREASURER:

Well the Australian economy is a strong economy. We have got consumer confidence at all time records…

HAACK:

(inaudible).

TREASURER:

…we have got business confidence at record levels and we have got the lowest unemployment in 30 years. The problems in the Australian economy at the moment are that things are stronger than they have been for quite some time and you know, the Reserve Bank takes the view that they are even getting stronger so it is not serious to talk about the other possibilities.

HAACK:

What about your level of concern regarding yesterday’s figures? The release of the figures which show we only have 1.5 per cent growth for 2004 and in fact in the last three months to December it only amounted to 0.1 per cent?

TREASURER:

Well you get these rebalances of the economy all the time and at the moment what is going on is that the economy is rebalancing. What we were relying on for growth in the economy in recent years was strong spending and housing booms. Now, we want to see the housing market come off a bit and there is evidence that that is happening. The economy therefore has to rebalance back into exports and that is what is going on at the moment and provided the rebalancing takes place then that should give us a continuing basis for growth in future years.

HAACK:

On another issue that has been spoken about today and certainly flagged by the Government that there will be, likely there will be an increase in migrants, in skilled migrants in our intake which would put us up around the 140,000 mark, an increase of 20,000. We have certainly been talking a lot about this on the programme this afternoon and my concern is and the concerns of some of our listeners are that whilst we are doing that and that might plug an immediate need, what are we doing to ensure that we are providing adequate skills, education and training for the many people that we have here in Australia that are willing and able to take some of those jobs but are finding that the support is not there for them?

TREASURER:

That is a fair point and over the years the Government has been increasing apprenticeships. But we are worried now that some of the State education systems aren’t doing a good enough job in preparing kids for technical education so…

HAACK:

But that is an easy passing of the buck, isn’t it? I mean just pass it to the States…

TREASURER:

…well, no…

HAACK:

…and (inaudible) that it is their problem, I mean if the problem is there what is going to be done about it?

TREASURER:

…well that is what I was going to go on and say. Because the States have been letting the team down the Government has announced that the Australian Government will be stepping in and making up for the States shortfalls. The Australian Government is going to establish Australian Technical Colleges. The Australian Government has never done this before because it has always been a State responsibility but we can’t stand by and let the States continue to lag in this area so we have announced that we will be setting up 24 colleges throughout Australia run by the Australian Government, Australian Technical Colleges. And we announced during the election campaign, it is a most unusual thing, the Australian Government has never had to do this before, but the Australian Government will be stepping in and making up the shortfall. Now, it is important that the States don’t therefore say, ‘oh well we will get out of this business altogether and pull back.’ They have got to keep what they have got there and they should in fact be doing better but the Australian Government will make up the shortfall, we announced that during the election campaign and we are well on the way to implementing that.

HAACK:

Treasurer time is of (inaudible) there is so much more that we could talk about this afternoon, thank you for spending that time with us.

TREASURER:

Yes, great to be with you. Thank you very much Nicole.