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 18/11/06

Press Conference

Grand Hyatt Hotel, Melbourne

Saturday, 18 November 2006
3.25 pm

SUBJECTS: G-20, protests, energy, climate change, IMF, OPEC, Bono, global poverty, cartels, currency, Doha

TREASURER:

Well ladies and gentlemen the summit of the Group of Twenty here in Melbourne today has been very successful.  During the course of the morning, we have been looking at global economic prospects and they are very strong.  Growth is occurring in several parts of the world which has not been the case for a long time.  Growth is occurring in Japan, the European Union looks brighter, growth is continuing in the United States and what that means is that global growth prospects are strong.  That is good for all of our economies, it is good for jobs and it is good for rising living standards both for the developed and the developing world. 

And of course the emerging economies that are represented at the G-20 Summit, economies like India, China, Indonesia, are countries that want to share in economic growth so they can improve living standards, improve their health and education systems and offer a better quality of life. 

The events today have been very successful, the warmth of the discussion, the informal nature of it and the fact that we can have a meeting of 20 countries which between them represent about 90 per cent of global GDP and two-thirds of the world’s population, to bring together the developed and the developing world in the way that we have is really a great achievement. 

I am aware of course that there have been violent attempts by some groups to either break into the Summit or to otherwise disrupt the Summit.  Police estimate that the number of demonstrators is around about 1,000 – far less than the organisers predicted.  Unfortunately there is a hard-core militant and violent element amongst those protesters who have come organised for violence, who have been training for violence and unfortunately have chosen to engage in violence against property and against police.  They have been throwing balloons full of urine at police officers, throwing bottles, road signs, damaging vehicles and otherwise engaging in violence.  These are people that want to trash the streets of Melbourne and they want to trash the reputation of Australia.  We won’t stand for that.  Australia is a warm and generous-hearted country.  We welcome visitors and the Melbourne that its residents know is a warm and peaceful and engaging city.  These people do not represent Melbourne, they do not represent Australians and they will not be successful in their attempts to trash Australia and its reputation.  Questions.
 
JOURNALIST:

Treasurer, have you been surprised that a thousand protesters have been able to turn the CBD into a gridlock and make it very logistically difficult to get in or out, to make access quite difficult?

TREASURER:

It is unfortunate, who knows what motivates them.  Who knows why they try and engage in violence.  Who knows what misguided thoughts they have.  But certainly they don’t represent Australians, they don’t represent Victorians and they may be successful in getting footage around the world of a violent Melbourne but anyone who has been here including the Ministers and the Central Bankers know this is a welcoming place, this is a warm place.  And they won’t be put off by that violence.  Yes.

JOURNALIST:

Treasurer, what was the message of Mr Bernanke to the meeting?

TREASURER:

Mr Bernanke gave an assessment of the global economy as he saw it, what its prospects were, he gave an assessment of the United States economy, the issues that the United States is grappling with and he gave an assessment of where he saw things going.  It, as you would imagine from the Chairman of the Federal Reserve was a pretty good assessment and well worth hearing. 

JOURNALIST:

(inaudible)?

TREASURER:

Well as I said, one of the optimistic things about the global economy at the moment is that you have growth in America, Japan and Europe.  We haven’t had world growth on multiple engines for a while and of course the rise of China will continue to fuel global economic prospects for a long time to come. 

JOURNALIST:

Mr Costello, what was said about the risks to inflation at this mornings meeting?  And also, was there reflection upon the strength and survival of the commodities boom?

TREASURER:

We had a lunch today where we brought in private sector representatives from some of the major mining and energy companies of the world.  They gave their assessment.  Their assessment is that for some time global demand has outstripped supply, that in order to get new investment it takes a lot of time with the investments going in, but it is still not all on on-stream.  They gave an assessment that some commodity markets were already falling in price and as you know the oil market has reduced considerably since August.  Yes.

JOURNALIST:

Mr Costello, yesterday you talked about the energy freeway, what tangible results have you got out of the meeting rather than just discussion that the world is already moving on several fronts (inaudible)?

TREASURER:

I think in relation to energy markets there is a high degree of agreement on the need to promote investment, to increase supply, that by promoting investment and increasing supply energy should become more affordable not just in developed economies but in developing economies as well.  We have discussed the Extractive Industries Statement and the Joint Oil Information Statement, I think we have got a high degree of agreement between the countries who apply the principles in those, that will give information in relation to stocks and inventories, investment proposals, it will give more certainty to buyers and lead to more production from producers.  And at the end of the day that is likely to give the world more energy security and it is likely to give better prices. 

JOURNALIST:

Treasurer on the, just on the IMF, was there agreement that the quota reforms should be sped up firstly, and I was just wondering what your view is on the US suggestion that the IMF should revisit its foreign exchange survey.

TREASURER:

I am not quite sure about that later point so I will leave that aside.  In relation to IMF reform I think that there is a general view that the IMF has to become more representative of the world economy.  We are having a discussion about that later on, but I have very forcefully argued that the G-20 has to maintain momentum.  The reforms that have come out already were to a large degree because of momentum coming out of the G-20 forum.  If we keep that momentum going I think we can see continuing reform. 

JOURNALIST:

Treasurer…

TREASURER:

Yes.

JOURNALIST:

…(inaudible) did he talk about you know, where he saw the price of oil as going and would he given any assessment of the (inaudible) oil price right now?

TREASURER:

Dr Ali-Naimi gave us an assessment of the production which Saudi Arabia is engaging in, where he saw that production going and what proportion of global supply he thought that would represent.  But nobody has ventured to put a price on oil in future months, that is…

JOURNALIST:

(inaudible) production going then?

TREASURER:

Well he gave an assessment, I can’t give you the precise details but he gave an assessment of Saudi and OPEC plans in relation to oil production.  Yes.

JOURNALIST:

This lady must have been one of the lucky ones, most of us have actually been knocked back by international delegates today for any interviews.  Do you find that curious?

TREASURER:

Well it is a matter for them and I can’t speak for other countries. 

JOURNALIST:

But we are the host country, we are the host country, you would think we would have some access to them or they would be keen to talk to us about their participation.

TREASURER:

Well I am always keen to speak to the Australian press, maybe others aren’t so keen, maybe your reputation has preceded you.

JOURNALIST:

Mr Costello thank you, your brother has criticised you saying that you haven’t necessarily viewed global poverty with the necessary moral clarity.  Do you have a response to your brother that you might share with us?  And have you heard back from Bono as to whether or not he will meet you?

TREASURER:

Bono’s London agent has been in touch with us and we are trying to arrange a time.  As you know I won’t be out of the Summit until the end of Sunday but I indicated to him I would be very keen to see him on Monday if he is free and I think that is with his agent at the moment. 

JOURNALIST:

And with regards to your brother’s comments?

TREASURER:

I don’t think going into personal issues is appropriate.

JOURNALIST:

Well he has.

TREASURER:

Well I won’t.

JOURNALIST:

Treasurer, as a result of the, of what you have mentioned about energy securitisation around the world, do you think, this has been sort of a subject of yours, do you think it is going to result in cheaper petrol prices for Australians?

TREASURER:

Well I think if we get more investment in the oil market, I think if the production lifts as a result of that then you will see the production rise to meet the demand and you won’t see the mismatches that drove prices as high as they did in August.  I think it will lead to less volatility and over time you should get more competitive prices.  Now, prices, let me make this clear, they are going to move from week to week and month to month, year to year.  But over time if you have a more transparent market where people know what the stocks are, what the plans are, what the investment is, where they know what the demand is, what the stocks are, what the inventories are, what the (inaudible) is going to be, over time you will have a more competitive price than otherwise.  Yes.

JOURNALIST:

Treasurer, (inaudible) climate change this morning?

TREASURER:

Well we have had a long discussion about global energy markets and of course in the context of that there has been a lot of discussion about greenhouse emissions.  And there has been a discussion as to what would happen to prices under a carbon trading system, numbers of delegates have made the point that they believe that any trading system has got to be inclusive, that is it has got to include all of the countries with big emissions, I think that is the point that has been made on several occasions and as Finance Ministers we have to continue to monitor these developments to make sure that in relation to resources that resources are properly priced taking into account all relevant considerations including environmental considerations. 

JOURNALIST:

Mr Costello, has anyone raised the question of potential for cartels in the gas industry?

TREASURER:

I do not think anybody has proposed that we should have a cartel in the gas industry, I think people have made the point that cartel activity does not help global markets, so it has been raised in that sense but I do not think that anybody has raised the prospect of introducing new cartel activity, no.

JOURNALIST:

Has anybody raised their fears about potentials?

TREASURER:

I think a number of delegates have made the point that they believe that free markets without cartel activity would be better for investment, energy security and price.

JOURNALIST:

Nobody mentioned gas?

TREASURER:

Well, not that I can recall.  People have mentioned gas, but they have not mentioned gas in the sense of supporting the cartel in gas, if that is your question.

JOURNALIST:

Two questions, first on oil investment – do you think we need more investment in new refining capacity in Australia, and secondly on greenhouse gas emissions – did anyone say that they felt that developing countries should not be asked to reduce greenhouse gas emissions when they are in the development stage?

TREASURER:

I think that some of the developing countries feel that they are going through this process of industrialisation that that is going bring huge energy demands and they feel that emissions caps will make that energy more expensive, in fact, some say that emissions cap will hurt the poor.  Certainly a view that has been expressed by some developing economies.  Your other questions was on?

JOURNALIST:

On Australia’s refining capacity.

TREASURER:

No, no mention has been made of Australian refining capacity, but the point has been made that in the oil market it is not just investing in production, that there could well be bottlenecks in global refining capacity and it could well be a lack of global refining capacity that has had some influence on prices.

JOURNALIST:

Was there discussion about currency reform in China and Japan?

TREASURER:

Look, there has been a discussion of currency levels and there are some countries that feel that their  currency is a little high, but no country has said that they thought their currency was too low.  I do not think that anybody has volunteered to lift the value of their currency.  Who has not asked one?

JOURNALIST:

Going back to the OPEC (inaudible)?

TREASURER:

Yes, he gave an assessment of the global oil and oil production market and he gave the statistics that he thought Saudi would engage in and OPEC would engage in.  I do not have all of those statistics with me, and at a risk of misquoting them I will not even try. 

JOURNALIST:

Did any of the private sector mining company people give any outlook about how long they think the commodities boom will last and does that differ from your view?

TREASURER:

I think the view was that global demand is going to continue for some time, led particularly by China.  There is massive investment going on but they all made the point it takes a long time.  I think the point that was made today was nearly ten years from identifying a prospect to bringing it to production and so supply is going to lift but it is lifting on a timelag.  They did note, however, that some markets had already peaked and turned down.  Some commodities have turned down in price.  Now, they are turning down from a very high level.  So, I do not want you to get the view that we are going into a trough.  But, the general view is that we have got to a peak and the peak is going to be dealt with by increased supply.

JOURNALIST:

Mr Costello, was there a consensus among the central bankers about the state of global interest rates and what direction they might to be heading?

TREASURER:

Well, global interest rates have gone up.  That was noticed they have gone up different degrees in different countries.  But, as you know, I do not think any central banker worth their salt would tell you where they are going to go next.  Central Bankers are very Delphic about these things for obvious reasons.

JOURNALIST:

Even to one another?

TREASURER:

Especially to one another!

JOURNALIST:

Mr Costello, was anything said about the risks to inflation?

TREASURER:

Well, it was noted that rising minerals and energy prices have pushed up global inflation.  It was also noticed that some of them have now started to turn down, particularly in relation to oil, and so it was noted that those price pressures should diminish somewhat.

JOURNALIST:

(inaudible) Doha (inaudible)?

TREASURER:

Oh, the Doha round has been discussed and very strong agreement that we ought to do whatever we can to get that round up and running.  The Doha round is in the interests of all countries in the world, including developing countries.  Last question.

JOURNALIST:

When we were coming in we were confronted at the gates by people who asked us “Are you dirty capitalists?”

TREASURER:

Are you what?

JOURNALIST:

“Are you dirty capitalists?”

TREASURER:

And what was the answer?

JOURNALIST:

Are you capitalist pigs?

TREASURER:

Are you capitalist pigs they asked - and what was the answer?

JOURNALIST:

Well, I am asking you that question.

TREASURER:

It was your question – your answer.

JOURNALIST:

Okay, thanks very much.