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 04/05/2006

Interview with Neil Mitchell, 3AW

Thursday, 04 May 2006
8.30 am

SUBJECTS: Robert Doyle, interest rates, Budget

MITCHELL:

Federal Treasurer, Peter Costello, good morning.

TREASURER:

Good morning Neil.

MITCHELL:

Would you support a comeback by Jeff Kennett?

TREASURER:

Well, if Robert Doyle were to stand down then the Party will have to elect a new leader and that I imagine will be in the next couple of days. If Jeff Kennett has the numbers, he can run presumably and if Ted Baillieu has the numbers he can run and it is a matter for whoever has the confidence of their colleagues. Their colleagues make these decisions, they will make the decision as to which person they want. And, of course, whoever is elected the leader would have the full support of the whole organisation.

MITCHELL:

How can Jeff run if he is not in the Parliament?

TREASURER:

I think he probably could. You could become the leader and contest at the next election.

MITCHELL:

Would that be a good idea for the Liberal Party?

TREASURER:

It is up to the Liberal Party

MITCHELL:

What is your view?

TREASURER:

Well, Neil I don't get involved in State parliamentary party matters.

MITCHELL:

Oh come on. You knew Robert Doyle was going, didn't you?

TREASURER:

They are elected parliamentary members. They elect their own leader. At the federal level, the federal parliamentary party members decide their leader. The State MPs don't have any say in that and the Federal MPs don't have any say in the State position.

MITCHELL:

You have always been a strong supporter of Robert Doyle, when did you find out that he was going?

TREASURER:

Well, I have supported Robert as the leader because I thought it is important the whole organisation get behind him. Unfortunately, he had his detractors and there was a lot of briefing going on in the press; you only had to open the papers on a daily basis. So, if the detractors have succeeded in their aim then now is the time for them to put up their candidate. And their candidate will be elected and the consequence of that is that the whole organisation should get behind that candidate, whether it is Ted or whether it is Jeff or whether it is somebody else, we do not know.

MITCHELL:

Did you try to talk Robert Doyle out of stepping down?

TREASURER:

No, I most certainly didn't, Neil. It was not my decision. It is his decision. We do not even know what he is announcing by the way.

MITCHELL:

You are not suggesting that he is staying are you?

TREASURER:

No. I am just saying it is a little bit too premature to say what all the ins and outs of this are. But as far as I am concerned, this has always been my position, the State Leader of the Liberal Party is elected by the members of the State Liberal Party.

MITCHELL:

But you played a role in the election of Robert Doyle, did you not?

TREASURER:

No, I most definitely didn't. I could remember hearing the news when I was in Longreach, outback Queensland and it came like a bolt from the blue to me Neil. Those people who were on the bus with me in Longreach, outback Queensland will know that I dropped the phone in surprise.

MITCHELL:

Would you agree the Party is in some disarray here?

TREASURER:

Well, obviously when you see the material that is being briefed against Robert in the paper; when you see the material that is being briefed about the Party generally, obviously it is not going well.

MITCHELL:

So it is disloyalty within?

TREASURER:

Well, obviously it has been disunited. You only have to open up the paper to see that. And as a consequence of that it is now up to the State MPs to sort themselves out. They have got an election coming, there are people that want to get rid of the Bracks Government, it is their duty to give those people the opportunity to vote for an alternative Government and an alternative Premier, and they are going to have to decide who that person is going to be, knuckle down, get behind them and work very, very hard between now and November.

MITCHELL:

Are you aware of those approaches to Jeff Kennett to make a comeback?

TREASURER:

No.

MITCHELL:

Nobody has told you about them?

TREASURER:

No.

MITCHELL:

Do you believe them?

TREASURER:

Well look, Neil, we hear about potential political comebacks quite regularly but they very rarely happen.

MITCHELL:

But you know, I mean the profile of Jeff Kennett, would he be good for the Party or not?

TREASURER:

That is a matter for the State MPs.

MITCHELL:

What is your view?

TREASURER:

Well I won't express a view because it is their decision.

MITCHELL:

Do you what Robert Doyle is going to do now?

TREASURER:

Well as I understand he is going to make a statement today, but other than that no.

MITCHELL:

You obviously, if and when you change jobs in Canberra, you want a strong branch in Victoria don't you?

TREASURER:

Absolutely

MITCHELL:

How do you get that in this mess?

TREASURER:

this is not in the interest, let me make this point, it is not in the interest of the Liberal Party and it is not in the interest of Victoria. The Liberal Party needs a strong political presence with hard work and unity, if it is going to do well and the people of Victoria need a strong disciplined opposition to give them a chance to hold the Bracks Government accountable, that is what has to be done here and I hope that is what is on everybody's minds.

MITCHELL:

Do you believe there is any chance the Liberal Party can win the next election?

TREASURER:

Yes. There are, you go back to when Mr Bracks was elected back in 1999, everybody considered Jeff Kennett to be unassailable. I can remember the cartoon on the front page of the Herald Sun during that election and it had Mr Kennett up in the barricades of Parliament House firing a cannon on a tiny little Bracks walking up Bourke Street, yet Mr Bracks was successful, hardly known but he was successful in the 1999 election. He had only been a leader for a very short period of time, he had only come in after Mr Brumby had led the Labor Party to a defeat and he defeated Jeff Kennett at the height of Mr Kennett's power.

MITCHELL:

He had a bit more of a base to go from I would say.

TREASURER

Yes but people in Victoria ought to remember that event and with hard work and good policies, a unified team, it is a very competitive election.

MITCHELL:

You know that the analysis is that the Costello/ Kroger faction does involve itself in State politics. Did the Costello/ Kroger faction have anything to do with Robert Doyle's decision to go?

TREASURER:

Well, this talk about factions Neil, I speak for myself and people that I know that are involved in Federal politics, Federal Members and Senators, absolutely no involvement whatsoever.

MITCHELL:

Have you discussed it with Michael Kroger?

TREASURER:

No, I do not believe that Mr Kroger would be of any influence in this either, because he is not a Member of Parliament and the people who are engaged in this are the Members of Parliament. They make these decisions at the end of the day Neil. In a Parliamentary Party only the Members of Parliament vote, only the Members of Parliament can take a Leader out and only the Members of Parliament can elect a Leader and it is their decision today.

MITCHELL:

Well many of those Members of Parliament and Liberal Party who will be astounded to hear that there is no role to be played by the Costello/ Kroger forces.

TREASURER:

No role at all nor should there be. And nor would I do it. Can I tell you Neil, this may seem strange to you but with a Federal Budget on Tuesday, I'm locked in the Treasury and I have been for eight days, we had an interest rate rise yesterday and there are a few other things that I do concern myself with. I am in Canberra because I am doing the Budget and whilst I wish my colleagues in Victoria every success they have got an important decision to make, I've got enough to do in my day job.

MITCHELL:

Can we talk about that because the suggestion is today that we are at the top of an economic cycle, if we are, where are we going, down or along a plateau?

TREASURER:

Well I made the point yesterday that the world economy is very strong at the moment, and that is principally because of the rise in China and to some degree India. The rise of these two countries is pushing up commodity prices, oil in particular people know about that but also gas, coal, iron ore all the things that Australia sells so from our point of view our terms of trade, prices we are getting for our exports, are the best they have been in thirty years we are at a peak in the terms of trade.

MITCHELL:

Where do we go now?

TREASURER:

Now, you would expect that can't last forever and it never does so the terms of trade over the coming years would start to moderate and go back towards more historic levels, so they would still be strong but they are not going to be at the record levels that they currently are at.

MITCHELL:

What does that do to us?

TREASURER:

Well that means that the phenomenal prices that we are getting for our exports at the moment will moderate.

MITCHELL:

What does that do to us, the man on the street?

TREASURER:

What it means is that you do not have as much income flowing into the country from overseas. One of the good things by the way if there were a bit of a downturn in the global economy maybe it would take some of the peak off the price of oil. Correspondingly it would take some of the peak off the price of gas, coal, other alternative energy sources.

MITCHELL:

After the interest rate rise yesterday and the speculation is that there could be another one very soon do you agree with that?

TREASURER:

I never comment on future movement of interest rates.

MITCHELL:

Let's comment on the past one, are you pretty grumpy with the Reserve Bank?

TREASURER:

No

MITCHELL:

Are you saying it was justified?

TREASURER:

The Bank is an independent institution - I put it on its independent footing. I gave it complete independence so they can make its own decisions

MITCHELL:

They got it wrong did they?

TREASURER:

No, they looked at the material that was in front of it and they came to their conclusion which we note.

MITCHELL:

Do you agree with it?

TREASURER:

It is not up to me to agree or disagree Neil, because it is an independent decision.

MITCHELL:

That's an answer.

TREASURER:

No

MITCHELL:

Of course it is an independent decision but the decision is made you can hardly influence it, were they right or wrong?

TREASURER:

No but if the decision is made then I give my own commentary on it then people will say, oh well there are differences or whatever there are. What I will do is I will give the Government's view of the economy, I reserved that right when I gave the Bank independence. The Bank will take its view of the economy and it will make its decision, but I won't be commenting on their decision, nor would I expect them to comment on mine.

MITCHELL:

Do you accept the tax relief in the Budget has already gone because of the interest rate rise and the petrol prices?

TREASURER:

Neil it all depends what base you begin with. Let's take interests rates, you would expect the variable interest rate will move to 7 ½ per cent. Whilst I have been Treasurer they have been as low as 6 and as high as 10 ½ . Under the previous government they averaged 12 ¾ , that was the average. So compared to where you were under Labor, your interest rate 7 ½ is what 5 ¼ percentage points below the Labor average.

MITCHELL:

Yeah but that is history.

TREASURER:

This is the point I make. It all depends where you start from, people are massively in front

MITCHELL:

Start from this week's pay packet Mr Costello, in this week's pay packet we will be undermined by interest rates and petrol prices.

TREASURER:

Well that is my point I don't think you can start at any particular place, you have got to have a historical view about of all of this.

MITCHELL:

So when do you want to start, from the Keating era?

TREASURER:

Well I would start myself from the point at which mortgage interest rates became manageable in Australia which is the election of the Coalition Government.

MITCHELL:

Do you accept that on this week's pay packet any tax relief will be undermined by petrol prices and increases in interests rates?

TREASURER:

Can I say to you Neil there are a whole lot of different issues in there. Let me make this point. Some people do not have mortgages - those people will be front this week and some people have savings - they will be in front this week. Some people have small mortgages - they won't be affected and some people have very large mortgages and they will affected. Some people have fixed rates and some people don't pay the standard variable rate because as the Bank noted yesterday they have negotiated below it.

MITCHELL:

Isn't the bottom line, the average Australian

TREASURER:

Let me make this point. Having said all of that, if you are on a standard variable mortgage interest rate, when it moves up 25 basis points which is 0.25 of 1 per cent, yes of course it costs you more. I am very, very conscious of that, very conscious of that. The only thing I would say is a 7 ½ per cent rate you are still a long way in front of Labor's 12 ¾.

MITCHELL:

But you do accept it is hurting a lot of people?

TREASURER:

If you are on a standard variable rate and the interest rate goes up point-by-point, 0.25 per cent, your payments will go up and of course that means your budget position in relation to that is going to be tighter, of course it does.

MITCHELL:

Have you finished the Budget?

TREASURER:

No.

MITCHELL:

Still fiddling the handouts?

TREASURER:

Well we made some final decisions yesterday, we are running the numbers. It takes about 24 hours to do a number run. We have worked through the night.

MITCHELL:

So those decisions will be affected by the interest rate rise obviously?

TREASURER:

The interest rate rise won't affect that much in the Budget. As I said the Budget forecasts are principal ones, we work around growth, and I don't think this will affect economic growth that much.

MITCHELL:

Thank you very much for your time. What are the odds on Jeff Kennett coming back?

TREASURER:

I would not even dare to give them. Go to Centrebet and get an independent market (inaudible)

MITCHELL:

Be even better than a footy game where they change the result.

TREASURER:

They might change the result after the siren sounded.

MITCHELL:

Thank you for you time.

TREASURER:

Thank you.