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 12/10/06

Doorstop Interview

Senate Courtyard
Parliament House, Canberra

Thursday, 12 October 2006
11.45 am

SUBJECTS: Labour Force figures, drought, economy

TREASURER:

Well there is good news for Australia today.  In the month of September there were 31,000 new jobs created and in fact 36,000 new full-time jobs created.  Our unemployment rate is at 4.8 per cent and this is the 37th consecutive month of unemployment below 6 per cent.  What we have seen in Australia over the last year is we have seen more than a quarter of a million new jobs created and that is more that a quarter of a million Australians who are in work at this time that weren’t in work this time last year.  The other good news is that we now have a record number of Australians who are participating in the workforce.  So more people than ever are looking for work and more people than ever are finding it.  Unemployment is at 4.8 per cent and we saw in the month just passed, 31,000 new jobs added throughout the month. 

Now this shows that with strong economic growth, it shows that with good industrial relations reform, we are getting good jobs results and notwithstanding the difficulties that our economy faces at the moment, that is good news for all Australians. 
 
JOURNALIST:

Treasurer, experts have foreshadowed a tough time for our farmers with the coming summer, how is the Government preparing to address this issue?  Are you offering any further assistance?

TREASURER:
Well we had a one in a hundred year drought back in 2002 and many of the farmers that were affected by that still haven’t come out of it.  And we are now in a situation where essentially the crop right through the wheatbelt, because of the absence of rain, will not be delivered.  And what that means is that we are facing up to another year of terrible drought and it is going to be a hot summer.  And in terms of farm production, farm production fell, fell markedly in the last quarter and we could be looking at a recession in terms of farm production.  That is, farm production going backwards.  Now the Australian Government has put more than $1 billion already into farm relief and we stand ready to continue that for all farmers that need income support.

JOURNALIST:

So, it is important then Treasurer at present that perhaps more can be done to help regional communities, clearly the Government has to look at offering further assistance?

TREASURER:

No, what the Government does is for every farmer than is affected by drought in an area where Exceptional Circumstances apply, we offer income support.  It is the Newstart Allowance and in addition to that we offer interest rate subsidies, we have already paid out over $1 billion to the rural sector and we stand ready to continue those payments and the taxpayers of Australia offer a helping hand to the farmers of Australia. 

JOURNALIST:

Treasurer, (inaudible) skills shortage adding to inflation pressures in the economy?

TREASURER:

The inflation pressures in the economy are principally coming out of increased petrol prices and also we saw the cyclone effects on fruit and vegetables.  So the inflation pressures in the Australian economy are mostly related to external events.  And the good news is, I believe, that petrol will not be contributing additional increases in the next quarter. 

JOURNALIST:

Treasurer in the Melbourne’s Age newspaper today you have described it as the worst drought ever, do you truly believe that and do other experts share your point of view?

TREASURER:

Well as I said, in 2002 we had the worst drought in 100 years and many people are not yet out of it. And I have also said that with the rainfall deficiency extending through the month of September and worsening in key states such as Western Australia, South Australia, Queensland and New South Wales, the situation is worsening and for most of the wheat belt we will not be getting a crop. And for the June quarter we had a severe drop in farm production. So whichever way you look at it this is a very serious situation. This is shaping up to be the worst drought that Australia has experienced.
 
JOURNALIST:

Joe Hockey said yesterday in Question Time that there wasn’t a skills crisis in Australia, do you agree with him?

TREASURER:

I think what Joe said is that we shouldn’t be afraid of low unemployment.  There are people that say just because unemployment is low this is a problem. Let me tell you, low unemployment is a problem that I would like to have.  High unemployment is a problem that I would not like to have, and we have been trying for 30 years to get to this situation, where unemployment is at 4.8 per cent, where there are more jobs than people. This has been our object for decades. Now that we have arrived, people want to say this is a problem, this is a problem. This is a problem I would like to have. 

JOURNALIST:

But doesn’t it show that the economy is powering along and therefore there are inflationary pressures there?

TREASURER:

Well you see Paul, you can always get a negative slant on things.  When unemployment is low that must mean the economy is too strong.  Really? When unemployment is low that must mean we have actually arrived at the destination we have been working towards for three decades, that’s what I say.  Now you can find a cloud in every silver lining if you want to, but we have been trying to get here, we are here. Let’s not call this a problem, unless you want to call it a problem that we’d like to have. This is the object. 

JOURNALIST:

The RBA Governor last night Treasurer suggested that with such strong jobs growth and such slow output growth there is a conundrum here and that one of the possible explanations for that contradiction is the complete collapse in productivity growth, so isn’t there some bad news lurking somewhere in this outcome?

TREASURER:

Well I am sure you will do your best to find it, I’m sure you will do your best to find it.  I think what he was saying is that there is a conundrum and what that tells us it that the figures somewhere or another don’t all marry up and we need to look very carefully over future months to make sure that we get a clearer picture.

JOURNALIST:

Would the Reserve Bank Governor have known this figure last night when you said interest rates are more likely to go up than down?

TREASURER:

No.

JOURNALIST:

Don’t the figures today indicate the economy is going a little faster than…

TREASURER:

By the way the Reserve Bank Governor doesn’t get any advance on ABS statistics, if that is your question, no he does not.

JOURNALIST:

Do you?

TREASURER:

Well I only answer for him.

JOURNALIST:

Treasurer, do the jobs figures today suggest that economy is growing a little faster than the National Accounts figures may have indicated for the last quarter?

TREASURER:

Look Labour Force figures are actually lagging indicators, so this is probably giving you a picture of an economy three months ago.  When we look at other indicators, such as housing starts and commodity prices, rainfall, they are future indicators. I actually believe that the price cycle has probably peaked in terms of commodity.  I actually think that rural production is going through a shocking time so I would actually anticipate a little bit of cooling in future months. 

JOURNALIST:

Have we reached full employment (inaudible)?

TREASURER:

When I first became Treasurer it was thought that full employment in Australia was 7 per cent, and that was the OECD’s view, then we took it down to 6, then we took it down to 5 and now it has gone down to 4.8.  So what did that tell us? Our ambitions weren’t great enough and so we have got to think about where our ambitions can take us in the future.

JOURNALIST:

Can it go below 4.8 then?

TREASURER:

As I said we have just got to wait and see what happens.  Thank you.