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 04/10/06

Zinc, Federation Square
Melbourne

Wednesday, 4 October 2006
10:00am

SUBJECTS: Interest rates; oil prices; workforce participation; superannuation; building approvals; Solomon Islands; Managed Investment Schemes; Telstra

JOURNALIST:

(inaudible) this morning’s rates decision?

TREASURER:

Well, I think as you look at the Australian economy you see an economy which is growing solidly with economic growth being led principally by business investment, that is good for the future. We have had price pressures in odd areas such as fruit but that will wash through the system and we see the oil price thankfully beginning to subside a little.  Now all of that is consistent with moderate on-going inflation and I am sure these are matters that are all on the minds of policy makers. 

JOURNALIST:

The stabilising of the oil price could see growth exceed the budget forecast?

TREASURER:

Well look, if oil prices come down that is good for the Australian economy. It is good because it means that the price pressures will abate, that keeps our inflation low, and it means that consumers will have a bit more spending power in their pockets.  So, I welcome the fact that the oil price has come down, you have seen the change at the bowser, I don’t want to tempt fate and say that this is in any way permanent but I welcome it and I hope it continues.

JOURNALIST:

You mentioned inside that increased female participation, there was extra capacity in the economy, how much further can the economy grow or what is (inaudible) at the moment?

TREASURER:

Well after a very long period, the longest period of economic growth, continuous economic growth in Australia’s history, we have now got unemployment at 30 year lows.  To boost capacity in this country we need to encourage a higher proportion of people to engage in the workforce.  Those areas where I think we can get higher engagement would be amongst women, it would be amongst older Australians who have in the past retired, say between 55 and 65, we want to encourage them to maintain their connection with the workforce and there are other groups too that traditionally haven’t engaged as highly as we would like and that is a question of ensuring that we encourage people with incentives to come into the workforce and also that we are carefully targeting welfare, because some people have taken welfare as an alternative to getting into the workforce.

JOURNALIST:

Mr Costello you mentioned somewhere the work the RBA has done on savings (inaudible) it was about a month ago or so, you said that there was a need or pressures to change the way that we measured wealth. Do we need a new index, do we need a new way of measuring this?

TREASURER:

Well, some of the traditional measures leave out the fact that Australia has an extraordinary amount of savings and superannuation and in the stock market - as I said earlier about $900 billion in superannuation and when you  take into account equities and managed investments, about $1 trillion of savings.  Now, some of the measures don’t take that into account.  When you take that into account Australia actually emerges as quite a relatively high saving country and I think it is important to look at the overall position of households including all of their savings, a large proportion of which are now superannuation. 

JOURNALIST:

You still had a bit of a challenge to the Opposition there on superannuation. 

TREASURER:

Well we are still waiting for Mr Beazley to announce whether or not he supports the Budget superannuation changes.  He hasn’t announced a policy yet.  We are about to legislate them, we will be introducing legislation this year, they are to take effect on 1 July next year and Mr Beazley still can’t make up his mind.  Now it is very important that he makes up his mind and supports it because these are the biggest changes in superannuation we have ever had in Australia. They are designed to encourage saving and we need them to go through the Parliament and we need to get the confidence of the public that once implemented they will be kept.  And so Mr Beazley has to announce a policy and it has to be that he will support these measures and keep them if he is elected.

JOURNALIST:

What would be the consequence if the Opposition doesn’t support the changes?

TREASURER:

If the Opposition can’t make up its mind, if it doesn’t support the changes, if we don’t have support on both sides of the Parliament for a change - which is the biggest change and it is going to last 30 and 40 years - then people won’t have the confidence to save in superannuation that they need.  This is a confidence thing here. And that is why Mr Beazley has got to make a decision and announce a policy and get behind them to engender confidence from the Australian public. 

JOURNALIST:

Do you have any concerns about the slide in the building approvals from yesterday?

TREASURER:

The housing market has come off the peaks that it had around the turn of the decade and that is actually a welcome thing.  The housing market was getting too hot, we have seen a period of stability and I think that the building approvals data were consistent with that. 

JOURNALIST:

On a different topic, how disappointed are you with Australia’s stand off with the Solomons?

TREASURER:

Well look, the Australian Government wants to bring to trial somebody who is accused of very serious charges.  And we are seeking to extradite that person and the country where he is, is cooperating, that’s PNG.  Now, such a person should not be able to claim some kind of immunity or legal technicality and no other country should assist such a person in doing so when there are grave charges that need to be heard in a court of law.  And other countries should be assisting as Papua New Guinea is.  

JOURNALIST:

The Government is considering changes to Managed Investment Schemes involving plantation forests.  Didn’t they provide too much of a tax lurk for high income earners?

TREASURER:

The Government has had discussions with the industry about Managed Investment Schemes. We have got to balance forest plantations against the orderly operation of a tax system and those discussions are continuing. We are seeking a balanced outcome here, particularly an outcome which will ensure that forest plantations have proper investment but that that is not done at misallocation of resources throughout the whole economy.

 JOURNALIST:

Treasurer will you be applying for any Telstra shares when the T3 prospectus comes out on Monday?

TREASURER:

I am not sure that I am entitled to.  There are rules in relation to all of this sort of thing and I am not sure that I am entitled to apply to buy shares in government floats regrettably. 

JOURNALIST:

But what about, has there been a truce put in place between the Government and the Telstra executives and the Board?

TREASURER:

You see, I wasn’t even aware there was a war so how you put in place a truce if there hasn’t been a war is a bit beyond me. 

JOURNALIST:

But is it they, I mean there was a rocky path in the lead up to the, into this float.

TREASURER:

No, the Government nominated somebody as a director. Telstra had something to say about that, and this person, Mr Cousins, will be elected as a director.  This is a normal corporation. In corporations, shareholders elect directors, chief executives can’t elect their own directors and that would occur to me as a basic principle.  Now, to me that is such a basic principle that it is impossible to have a war about that.  Okay, thanks.