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 21/04/2006

Interview with Liam Bartlett
6PR, Perth

Friday, 21 April 2006
8.30 am (Perth time)

SUBJECTS: Debt free day, Budget, industry

BARTLETT:

First up this morning, it appears we have paid off the mortgage. Federal Treasurer Peter Costello has declared today Debt free day. Australia joins only six other OECD countries Norway, Finland, Korea, Sweden, the Czech Republic and New Zealand as being debt free. Treasurer good morning.

TREASURER:

Good morning Liam, good to be with you.

BARTLETT:

That is an odd ball sort of club when you look at the line up, isn't it?

TREASURER:

Well, it has been a long struggle. We had $96 billion of debt in 1996 and over the last 10 years we have been gradually paying it off and today, as best we can tell, is debt free day. There are other countries in the world who have managed to do this, for different reasons for example Norway used its North Sea oil revenues to eliminate its Government debt. But it is a pretty select group and if you compare us to countries like Britain and America which have huge Government debts we are in a much stronger financial position.

BARTLETT:

Funnily enough I do not feel any richer. What does it mean in monetary terms for the average Australian?

TREASURER:

What it means is this we had to raise $8 billion of taxes per annum to pay our interest and now we have paid off the debt we are going to save ourselves $8 billion of taxes per year.

BARTLETT:

What about the enormous levels of foreign debt owed by Australian companies Treasurer? You know, the month after month of trade deficit. Are you concerned about that?

TREASURER:

Well, I do not think we can be complacent about that, but you have got to bear in mind that, when you are looking at foreign debt, it is all private sector borrowings, the taxpayer does not owe a single dollar, that is all private sector borrowings, and mostly it is the Australian banks that borrow overseas. The Australian banks are in very, very sound financial positions and we keep an eye on them and I can assure you that even though they do borrow overseas they are in very sound positions and no reason to worry for a moment about any of them.

BARTLETT:

How healthy though are our levels of foreign debt? When we talk about those other OECD countries, how do we stack up there?

TREASURER:

Well, as I said, as healthy as it can be, given the fact that it is all private. The taxpayer of Australia does not owe one dollar of foreign debt. Because they do not owe one dollar, we are a debt free day. The shareholders of banks and the banks themselves borrow overseas, but, as you have seen, what they mostly do is they borrow overseas, they lend in Australia, they are making very, very large profits, and their borrowings are not of concern in a financial sense at all.

BARTLETT:

And given that we have all this black ink now, I take it you will definitely take the knife to marginal tax rates?

TREASURER:

Well, we definitely will be cutting taxes again on the 1 st of July, because we have already legislated that, but

BARTLETT:

That was not what I meant, you know that.

TREASURER:

but, as I have also said, if we can manage to have proper investments in health, we have got to manage our defence and our terrorism responses, and keep our Budget in the black. We should continue to work on cutting taxes as we have for the last 3 years.

BARTLETT:

Wait for the Budget. I suppose that is what you are saying?

TREASURER:

Well, you do not even have to wait for the Budget because as I said we have got one legislated tax cut coming on the 1 st of July anyway.

BARTLETT:

But you know there has been all this hooing and haaing around the place, especially among industry groups and business leaders, about whether or not you are going to cut the top marginal rate or in fact go for the lower tax free threshold approach in the Budget.

TREASURER:

Well, various people have various views. They put them forward, that is a healthy debate. I do not mind that in the slightest. But at the end of the day we have got to do what is right for the country and we have got to bear in mind middle income earners and people that are raising families and they are always our priorities.

BARTLETT:

Treasurer, I have seen some comments you have made about the resources boom, especially relevant for us here in the West.

TREASURER:

Yes.

BARTLETT:

Do you think it has a limited life span?

TREASURER:

Look, the resources boom is being led principally by China, demand coming out of China, and to some degree India. I think the economic growth of China is going to continue for a long time and that is why I believe the demand is going to be strong for a long time. But, we cannot afford to kid ourselves here. We are not the only country in the world that produces iron ore or coal or LNG. We have competitors around the world. All of those competitors around the world are busily investing, trying to boost their supply and trying to get into the Chinese market. So, whilst I think there is going to be strong demand for a long time, other countries like us will be moving to meet that supply and when the supply is boosted you will see some of the extraordinary high prices come back, in my view. Now, when will they come back? I think prices will be very good this year, possibly next year, but as other countries come online, then prices will start returning to more normative levels.

BARTLETT:

So what are you saying then, between the lines, are you telling investors to go easy on the markets?

TREASURER:

I do not give investment advice, it is the last thing I will try and do. But I am just saying the extraordinary resources boom that we are seeing at the moment will not last forever.

BARTLETT:

And Treasurer I noticed those comments and I am sure you did from the Prime Minister yesterday that he is not planning to step down soon. He is not going anywhere fast. How do you feel about that?

TREASURER:

I do not comment on these things Liam. You know the press has a lot of fun, they have a lot of speculation. I find if I comment on these things it is mostly misunderstood so I do not enter that at all.

BARTLETT:

You just do not go there.

TREASURER:

Do not go there Liam, I just do not go there.

BARTLETT:

There is nothing wrong with being a perennial bridesmaid as long as you are a good one.

TREASURER:

Well, there is nothing wrong with devoting yourself to creating an economy which produces jobs, profitable businesses, low inflation, low interest rates and the elimination of debt. That is what I actually do devote myself to.

BARTLETT:

And fair enough. But if you are sticking around and he is certainly sticking around, he is like the Energizer bunny, he is not going anywhere is he?

TREASURER:

Well as I said Liam, I do not go there.

BARTLETT:

So this might not be your last Budget?

TREASURER:

I do not go there either Liam. I was asked about seven budgets ago whether it was my last and I am still here, so I do not go there.

BARTLETT:

Well thanks very much for being here this morning.

TREASURER:

Good to be with you over there Liam. It is a great pleasure.

BARTLETT:

Nice to talk to you.

TREASURER:

Bye.