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 21/07/2005

Doorstop Interview

Coen, Cape York

Friday, 22 July 2005
11.30 am

SUBJECTS: Chinese Currency, London Bombings, Aboriginal Issues, US Economy

JOURNALIST:

What is your reaction over the Chinese currency revaluation?

TREASURER:

We welcome the fact that the Chinese have taken the first cautious steps towards putting more flexibility in their exchange rate. The revaluation of the renminbi should be helpful in relation to global trading flows. That is, China has been running a trade surplus with much of the world and as the renminbi revalues you would expect that to be a mechanism to balance some of those trade flows. It is too early to say yet whether this is the precursor to a float but we welcome, cautiously welcome, the move the Chinese announced overnight for a revaluation and we believe that as China becomes more integrated in the world financial system that increasingly it will move to a more flexible exchange rate mechanism.

JOURNALIST:

What does it mean to Australian consumers and Australian manufacturers (inaudible)?

TREASURER:

Well it is a 2.1 per cent variation so you don’t want to overstate the effect of that. But a 2.1 per cent variation would make Chinese imports more expensive in Australia but conversely it would help Australian exports. Now it is only 2 per cent so we don’t want to overstate the effects but if this is the beginning of a move towards a more flexible exchange rate that will draw China into the world financial system on a more sustainable basis, then we welcome it.

JOURNALIST:

Can we put more pressure on Beijing through the negotiations on the FTA? Is there any correlation?

TREASURER:

Look, the important thing I think for China is to make sure that they build a mature financial system domestically, which they will need if they are going to handle a floating exchange rate. You just can’t all of a sudden take off all of the controls and expect the financial system to be able to withstand robust shocks. Now they are developing that kind of financial system and as they get more sophisticated I believe they will be able to have more flexibility on their exchange rate. But that is something that is probably going to happen over the months or years that lie ahead. So we would welcome this as a step, but it is only a small step and we would expect that over coming months or years that there will be further movements.

JOURNALIST:

(inaudible) overnight (inaudible) government (inaudible)?

TREASURER:

I think the focus here in Australia is going to have to be on the intelligence. You can’t guard every railway station, every bus, every ferry, every road, 24 hours, 7 days a week and still have a public transport system that works. So the focus is going to have to be intelligence. Who are the people who are prone to their literature? Who are the people that incite them? Breaking up their networks earlier, pulling them in for questioning, making sure that their communications are known about and of course I think it is also a big responsibility on religious leaders to dissociate themselves from extreme teachings and making clear that it is a perversion of religion, not true religion, and make it clear to anybody that might be taken in by a terrorist teacher that they are being given false lies, false propaganda.

JOURNALIST:

What is your impression (inaudible) talking about last night?

TREASURER:

I think there are a lot of positive things going on, income management, I think it is positive, computer education, I think it’s positive. I think there are a lot of positive programmes and I think the message is when people take responsibility, when they’re partnered with those that can provide skills, good achievable progress can be made. That is what I’d draw out of it.

JOURNALIST:

(inaudible)?

TREASURER:

Well the US economy, which went through a recession in 2000/2001, (inaudible) recover and that’s a welcome thing. As the US economy recovers then that will provide export markets for a whole lot of countries around the world and that should underpin global growth. There are a couple of dark clouds out on the horizon for global growth, the oil price is an obvious one. But where you see a sustainable recovery starting to come through in the United States that is good for the globe and what is good for the globe is good for the Australian economy. So let’s not overstate things but it is a sign that growth should continue and that prospects, notwithstanding those challenges, remain firm.