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 30/07/2006

Doorstop Interview

Melbourne Museum, Carlton

Sunday, 30 July 2006
12.00 noon

SUBJECTS: Mortgages, interest rates, book launch, financial literacy, economy

JOURNALIST:

Mr Costello the possibility that Australian’s may be able to take out 50 year mortgages very shortly – your response to that?

TREASURER:

I think people would have to look very carefully at that. Whilst it is true that your monthly payments may be lower, the fact is you will be paying them for longer. And it is possible that it could suit some people but I would urge people to approach them with great caution, to look at the costs over the life of the loan and to make sure they take into account those extra years when they will be paying both repayments and interest.

JOURNALIST:

Isn’t it true though that it might be the only way that some people can afford to buy a home?

TREASURER:

Look it is possible that it could suit some people but you would have to look at it very carefully. The fact of the matter is that you will be paying interest and capital for a lot longer and over the life of your loan could be paying more. So I would urge great caution and I would urge people to look at them very carefully.

JOURNALIST:

A product that is more palatable in a rising interest rate market though perhaps?

TREASURER:

In a situation where you have got an infinite number of people with different financial needs and at different stages of their life there will be different products that will suit different people - for some people short-term loans, for some people longer-term loans. But I would say to people approach with caution a 40 or a 50 year loan. It may be that it can give you an advantage but you have got to take into account you will be paying repayments a lot longer and could pay more over the life of the loan.

JOURNALIST:

Do you see a case for an interest rate rise?

TREASURER:

I never comment on future movements in interest rates.

JOURNALIST:

You were saying during your speech inside that inside every MP there is an ambition to be Prime Minister. How badly does your ambition want to get out?

TREASURER:

I think every Member of Parliament that is elected wants to do the best that they can. I think every Member of Parliament would see their Ministerial capacity, just as every cricketer would dream of making a hundred, and every AFL footballer would dream of winning a premiership, and every journalist dreams of being a novelist. And today we have found a journalist who became a novelist and it was a wonderful occasion to be here to launch her book.

JOURNALIST:

Do you expect the Prime Minister…

JOURNALIST:

Treasurer I understand that tonight you are launching a national advertising campaign just encouraging Australians, showing Australians how to manage their finances better?

TREASURER:

We have been working at improving what we call financial literacy and that is trying to encourage people to understand different financial products including superannuation which is one of the major investments that people will make and we want people to be literate about their own financial prospects and their savings and their investments and we have launched a programme of financial literacy to improve that. And I would encourage people to look at it very carefully. Australia has the largest proportion of share-owners in the world. We have the greatest spread of superannuation – we now have $1 trillion of superannuation savings in this country. That is a very big investment and we are about to make superannuation even more attractive so I say to people, have a look at this programme, have a look at the things that you ought to be considering when you engage in investment because an informed market is going to be a better market, people are going to look after their savings much better.

JOURNALIST:

Isn’t the timing unfortunate considering forecast interest rate rises?

TREASURER:

The timing for financial literacy has always been with us and it is a great time to do it at a time when we have $1 trillion of money in superannuation when we are making superannuation more attractive is an ideal time to encourage people to look at their savings, to look at these products and to be able to assess their relative benefits.

JOURNALIST:

What is your advice to people to cope with the interest rate rises?

TREASURER:

Well my advice in relation to the financial literacy campaign is to look at the campaign, taken an interest in your superannuation. Superannuation is going to get a lot more attractive, be able to compare products because you can now choose between different superannuation funds and get involved in your own investments.

JOURNALIST:

Wayne Swan says bananas are just a convenient excuse for rises in inflation and it has been sort of going that way for the past, since the last election. What is your response to that?

TREASURER:

Well everybody knows that the price of bananas has increased three-fold because of the cyclone – Cyclone Larry in North Queensland. This hasn’t got anything to do with domestic factors. The cyclone wiped out Australia’s banana crop. One of the unfortunate consequences of that is that the price of bananas has gone up. Now many people will substitute out and buy other fruit because bananas are so expensive. But bananas are a part of our consumer price index, they show up in our Consumer Price Index, the won’t be as high as they are for years, in fact in months when the banana crop recovers the price will return to more normal levels.

JOURNALIST:

Would you expect deflation then will you?

TREASURER:

No at that point you would expect that the price of bananas in the basket will cut the Consumer Price Index just as the price of bananas in the basket increased in the last quarter.

JOURNALIST:

What is your response though to Wayne Swan’s suggestion that inflation has been running high since the last election and that the Government has done nothing about it?

TREASURER:

ALP spokesmen for opportunistic reasons will always make cheap political points. But if the ALP are suggesting that somehow the Government is responsible for a cyclone, that somehow a Government can stop a cyclone let them detail their anti-cyclone policy.

JOURNALIST:

Data released from the US on Friday says that the economy of that country is slowing. Is that something that the Reserve Bank should take into account on Wednesday?

TREASURER:

It is important to take all factors into account when you are assessing the condition of the Australian economy – that will be our domestic growth, our domestic prospects and it will be international factors – international factors which are buffeting Australia at the moment are record oil prices, you need to take into account the effect that they will have on our economy. But they are not just buffeting the Australian economy they are buffeting every economy in the world including the United States. That could be one reason why growth in the United States is slowing. This is a very difficult time for economic management – you have got war in Lebanon, you have got an establishing democracy in Iraq, you have got instability in Iran, you have got the rise of China, you have got world record oil prices, the effect that that has in relation to petrol and the effect that it will have on the global economy generally. Now when you take all of these factors into account these are fine judgements that require experienced economic management. The experienced economic management that we need is not just for today or for the next month but for the years which lie ahead.

Thank you.