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 08/05/2006

Doorstop Interview
Ministerial Entrance
Parliament House, Canberra

Monday, 8 May 2006
11.45 am

SUBJECTS: Budget, Retail Trade figures, Solomon Islands, Beaconsfield rescue

TREASURER:

Tomorrow night we are going to bring down a statement which will be aimed squarely at the future – future investment, future opportunities for Australia, future economic growth, future for families – so that families can plan with certainty and families will be as always the centre, the front and the centre of our consideration. Now, we have come a long way over the last 10 years, we have taken Australia to a position where the Government is now debt free. And that gives us the opportunity for the first time to throw forward and to make decisions for the future – future opportunities, future investment, future economic growth – so that families know how to plan for the future and families can do that with certainty. Children in those families are our most important asset and they are the people that we have in mind as we frame this Budget against a difficult backdrop but one that will be very squarely focussed on Australia and its opportunities.

JOURNALIST:

Will there be scope for tax cuts?

TREASURER:

You will have to wait and see what we do in the Budget tomorrow, but…

JOURNALIST:

Are you ruling them out?

TREASURER:

…you will have to wait and see what we do in the Budget tomorrow but the point I have always made is that first of all what we try and do is we fund our services, decent health and aged care services, we fund defence and security, we try and balance the Budget and have a strong bottom line, which is important for keeping interest rates low, and then if we can reduce taxes as we did in 2003, 2004, 2005, we will try and do that.

JOURNALIST:

Mr Costello, some economists have warned that the revenue from the commodities boom provides a once in a generation opportunity to do some nation building and the Government is in danger of squandering this opportunity, how do you respond to these claims?

TREASURER:

Well, it is amazing, isn’t it, that people can report their attitude to something they haven’t yet seen.

JOURNALIST:

Mr Costello, is there room for tax cuts without spooking the Reserve Bank?

TREASURER:

Look, the important thing is that we have a strong bottom line, we want a Budget that will be in surplus. We have produced eight surplus Budgets over the last nine Budgets and this has put Australia is a stronger position than practically any other country in the world but we can’t say well, just because we have produced eight surplus Budgets we don’t need to produce a ninth – we do – we have got to keep the bottom line strong, that is a big part of keeping interest rates low in Australia.

JOURNALIST:

But what does strong mean in this context?

TREASURER:

Strong.

JOURNALIST:

Will tax cuts put any undue pressure on inflation, Mr Costello?

TREASURER:

The important thing is to have a strong bottom line. If we have a Budget in surplus, what that means is that the Government is not borrowing, the Government is not driving up interest rates, it means that the Government is saving. Now, when you compare that with America for example, where the Government is borrowing hundreds of billions of dollars or Britain, or other countries that we like to compare ourselves with, it means that the Australian Government is doing its bit and probably doing more than practically any other government is the world.

JOURNALIST:

Are unofficial forecasts of a $17 billion surplus in the ballpark?

TREASURER:

Well, I hope you remember all of these forecasts because I see that they all get reported the day before the Budget and the day after you seem to have lost interest in them but you ought to actually, you know, have your little scorecard and see how accurate these forecasts were – you seem to lose interest in them the next day.

JOURNALIST:

Will we lose interest in this one?

TREASURER:

I have lost interest in it before it was made.

JOURNALIST:

(Inaudible) next financial year…

TREASURER:

Pardon?

JOURNALIST:

If the surplus falls next financial year compared to this financial year, most people would say that means that the fiscal policy is (inaudible) stimulate the economy at a time when the Bank wishes to exert some contractionary forces on the economy, what do you say about the appropriate stance of fiscal policy given what the Bank is doing with interest rates?

TREASURER:

Well, the appropriate stance for fiscal policy is to run a surplus and there seems to be an attitude in Australia now well, so what, it is a surplus, can I say to you, how many western governments are running surplus budgets? Not the Americans, not the British, not the Japanese, none of the Europeans. You know, the fact that we run surplus budgets puts us almost in a league of our own and we have got to stay there and we will stay there.

JOURNALIST:

Mr Costello, do you think the revenue is sustainable? There is a huge surge in both company and personal income tax revenue, do you think that can be sustained over the forward estimate period?

TREASURER:

Well, I have said on numbers of occasions, have I not, that you wouldn’t expect record commodity prices to last forever. I think you recall the last time I said that, so I have been the voice of reason and caution here.

JOURNALIST:

So the revenue is not sustainable?

TREASURER:

Well…

JOURNALIST:

Within the Government?

TREASURER:

…within the press.

JOURNALIST:

Within the Government though?

TREASURER:

Within the press, you know, I have been making this point over and over and over again and I notice some economists said it and some of your papers grabbed hold of it as if it was a divine illumination.

JOURNALIST:

Do all income earners deserve tax cuts?

TREASURER:

Look, the important thing is that we keep our tax base as low as is consistent with a balanced Budget, good fiscal policy, proper funding for health, education, aged care, the defence of the country and national security.

JOURNALIST:

What do you make of today’s retail sales figures?

TREASURER:

Well, I think they were a little softer than was expected but it shows that the economy is still ticking along but not ticking along in any unsustainable way.

JOURNALIST:

(Inaudible)?

TREASURER:

Sorry, sorry, here and then there, I am sorry.

JOURNALIST:

Is retail going to get worse with higher interest rates and higher petrol prices?

TREASURER:

Well, consumption is a little weaker in Australia than it has been for some years. And that is actually a welcome thing. I thought that consumption 2 or 3 years ago was growing at unsustainable rates, I think it is growing now at a much more sustainable rate.

JOURNALIST:

(Inaudible) we spend so much in terms of aid funding to the Solomon, what was your reaction when the new Police Minister was appointed and he was still behind bars?

TREASURER:

Look, the only thing I will say about the Solomon Island’s is that Australia has through the RAMSI, through its aid programme invested an enormous amount in the Solomon Islands and not just the Solomon Islands but the Pacific generally, we do that to help them but we also do it because it is in our interests. We don’t want failed states in our region. Now plainly, this is going to take longer than we had hoped but we have to see this process through because we do not want a failed state which could become prey to money laundering, organised crime, terrorism and worse. So, we will be there and we will be ensuring that Australia’s aid not only helps the people of the Solomons but also helps the region of which Australia is a part.

JOURNALIST:

Treasurer, what will the Budget do for young childless couples saving up for a first home and for a first child?

TREASURER:

Well, for young couples of course who are saving up for a family of course we have introduced a baby bonus which on 1 July will go to $4,000 and that covers the period over which the mother would ordinarily be out of work and the additional costs. And of course for those couples our general economic policy is devoted towards getting them jobs, keeping interest rates affordable, improving transport systems, giving them a great health system, ensuring that the nation is secure and defended. So, for young people, couples starting off, maybe looking at buying a home there is another thing Mr Bongiorno that you and I never profited from – there is a first homeowners scheme that now operates, of $7,000 for young people – so obviously when you are starting out in life times are tough but a first homeowners scheme, a baby bonus, the lowest unemployment in 30 years, interest rates which are substantially lower than previous generations, all of these things go to giving them a start on the ladder of life.

JOURNALIST:

There is always a surprise in your Budgets, if by chance the Budget coincides with the rescue, would you be able to get the front page of the moment?

TREASURER:

I am not, it is a good question, Matt, but look it is a serious business the rescue in Beaconsfield, we hope that they are rescued alive, that they are rescued as soon as can be done safely and I think the whole of Australia wishes them well and the rescue teams well.

JOURNALIST:

Mr Costello, will the Budget mean that fiscal policy and monetary policy are pushing in opposite directions?

TREASURER:

No.

JOURNALIST:

Mr Costello, John Wood won a Gold Logie last night after 10 years of trying, do you (inaudible) inspiration out of that?

TREASURER:

You know what I am going to do, I am going to hand out Logies to trying reporters – the Best Question of the Day, Phil Coorey, Gold Logie. Thank you very much.