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 11/03/07

Interview with Laurie Oakes
Sunday

Sunday, 11 March 2007

SUBJECTS: Economy, Intergenerational Report, Budget, Kevin Rudds judgment

OAKES:

Mr Costello, welcome to the programme.

TREASURER:

Thank you very much, Laurie.

OAKES:

A colleague here has reminded me that today is the 11th anniversary of your swearing in as Treasurer, but I'm not sure if congratulations are in order, it must seem like a life sentence.

TREASURER:

Well, Australia is in a much better position today than it was in 1996.  Our unemployment rate has come down from about 8½ to 4½ per cent, mortgage interest rates, which were at 10½ are around 8, we have put two million people back to work, our Budget which was in deep deficit is now balanced, and we have paid off $96 million worth of debt.  So over 11 years, there are some of the things that we have managed to achieve.

OAKES:

But I notice that the Prime Minister's former Chief of Staff and top adviser, Arthur Sinodinos said the other night that those facts, the great save of the economy, doesn't guarantee you an election win.

TREASURER:

Well I think as the period of expansion continues, there are a lot of people that forget what it was like under the Labor Party.  There is a lot of younger people who, when you remind them or when you tell them that interest rates used to be 17 per cent, they say ‘oh, it couldn't be possible, you must be making it up’, and memories dim and memories fade and it does make it harder to explain to people that our economic position cannot be taken for granted.  We didn’t get here by luck, we got here through a lot of hard work, and what was hard won can be easily lost, and that is the point that I keep making over and over and over again.

OAKES:

Is that your biggest risk at the election, that people are blasé about the economy now?

TREASURER:

I think the risk at the election is, if people think, well the economy is in such a good state, that even Kevin Rudd could manage it.  That would be a monumental mistake and don't forget it is just not Kevin Rudd, it is all of those people behind him.  It's the Julia Gillards and the Wayne Swans.  If Kevin Rudd became Prime Minister, I wouldn't be around to manage things, and Downer wouldn't be around to manage things and there is the team you would have, you would have Rudd and Swan and Gillard and Kelvin Thomson.  That's what you would be looking at.

OAKES:

Back in 1996, of course, you had had less experience in Parliament than Kevin Rudd has got now.  He had had experience in government and you had had none and if you had mentioned Alexander Downer then people would have laughed nervously.

TREASURER:

Yes but you see, we were always prepared to argue for right and tough economic policy, and even when the Labor Government did something unpopular which we thought was right, we supported it.  We nailed our credentials to the wall.  Mr Rudd, as you know, has opposed every step of the way what has got us to where we are now and he would now have you believe of course, that he was always in favour of it.  And you can't have it both ways.  Once the light starts shining on Mr Rudd, he is going to get caught with the two facedness on policy.

OAKES:

Well, let's talk about the economy first.  The Cabinet's Expenditure Review Committee held its first meeting during the week signalling the start of the budget process, what kind of a budget are we looking at?

TREASURER:

It is a difficult economy to manage at the moment because one part of the economy is in deep recession, that is agricultural production, it is down 22 per cent, there is another part of the economy which has strong prices, that is mining and we are getting wage and price pressures out of that part.  The world economy is facing rising interest rates.  Interest rates went up in Europe over the weekend and last week in New Zealand.  So you have got to manage one part of the economy which is in deep trouble, another part which is strong, a global environment of rising interest rates and to be frank with you, Laurie, it is going to take a lot of management to try and pitch this budget right for the economic times.

OAKES:

Is the ageing of the population still a central problem for you?

TREASURER:

The central long-term problem for the Australian economy is that our population is ageing.  The baby boomers, that huge bulge in population is now working through our society and it means over the next 10 and 20 years, the proportion of people who are in retirement to the proportion of people who are in the workforce, is going to increase and this will be a real challenge to living standards in our country.  Now, I brought down an Intergenerational Report in 2002, to alert the public to the nature of this challenge.  Next month I'm going to produce the second Intergenerational Report Australia has had.  It is going to be a five-yearly update of where we have come from 2002 to 2007.  It will show this is still a massive problem, but the good news is, in small ways, we have begun to prepare for it.  We have a lot further to go, a lot further to go, but our Intergenerational Report will show that in order to meet the great challenge of the next 30 or 40 years, we have got to continue on with those measures.

OAKES:

So what, we need more measures to encourage superannuation, is that the key thing?

TREASURER:

We have got to encourage people to remain in the workforce longer and we are showing progress there, superannuation has been a big part of that.  It would help longer term, if we could lift our fertility rate.  We are showing progress in relation to that.  The biggest challenge is going to be to pay for medical services over the next 20 and 30 years, and we have got to make sure that our focus on medical care is for good sustainable state-of-the-art technology, based in a way which we can afford into the future.

OAKES:

Now, how ruthless will the Expenditure Review Committee, the razor gang, be in wielding the razor?  Are you going to clampdown hard on Ministers' election year wish-lists?

TREASURER:

Well, outside of those things that we will build for the future and prepare Australia for the great demographic challenges, outside of those things, because that is our number one priority at the moment, it is going to be very tough, very tough.  The only room is inside those areas which will build towards the great meeting, the great challenge of the next couple of decades.

OAKES:

Are you concerned that if the Budget loosens the purse strings the Reserve Bank will see that as increasing the need for interest rate increases?

TREASURER:

Well we have got to be careful, Laurie.  Because as I said, interest rates are rising around the world, we have just seen them go up in Europe, we have seen them go up in New Zealand, we have got to be careful that…

OAKES:

(inaudible) see them go up here as well.

TREASURER:

Well not last week.  We have got to be very careful that the increased prices we are getting for mining products, with the demand for construction we have got going in mining sites, doesn't put pressure on wages that comes back and bites the whole economy.  We have got to make sure...

OAKES:

Do you need a cautious Budget to do that as well?

TREASURER:

We have got to make sure that price pressures in profitable areas of the economy don't come through the whole economy because they will push up inflation, and you know what happens if inflation goes up, you will have a monetary policy response so we have got to keep inflation low in this country and a better system of industrial relations is absolutely critical to doing that.

OAKES:

It has been suggested that you will have to keep the purse strings tight in this Budget, not allow too many things like tax cuts and benefit increases until closer to the election in order to keep the Reserve Bank off your back.

TREASURER:

Well it is not a question of timing and events, it is a question of making sure you get these settings are right.  You are dealing with a $1 trillion economy, you are dealing with a budget which is over $200 billion, so your margin for error is pretty small here and if you do get out by one or two per cent, you are now talking about billions and billions and billions of dollars.  I must say to you Laurie, it doesn't get any easier, the only thing that happens is the numbers get bigger.

OAKES:

So a tough Budget?

TREASURER:

Yes.  It will be finely tuned to a difficult economic situation to make sure that we continue growth, continue jobs, continue to make sure that Australia is on path to meet the great challenges of future decades.

OAKES:

All right, on to the events of the last week or so, because of your parliamentary skills you have become the Government's chief hitman, the bloke who goes out and tries to demolish Kevin Rudd on things like the Brian Burke dinner.  Now, you do it brilliantly, everyone agrees with that but, are you concerned that because you have to do this job it affects the way voters see you?

TREASURER:

Well I think it is important that we keep the scrutiny on Mr Rudd, and I think all of the members of the Government will do that because we have now moved through a different phase.  The phase, at the beginning of this year, was, you know, nice Mr Rudd, you know, wants to be Prime Minister, and he got a good run from the media, you know.  The phase we have moved into now is, nice Mr Rudd, may in fact be put in control of the Australian nation, and the economy and who is behind Mr Nice, Mr Rudd and what is his judgment like?  And that is where you have got to have the scrutiny come on him, you know, this is a big job that he is going for now.  He is not just running around as a Shadow Foreign Affairs spokesman, it is a big job he is going for and if he wants to be Prime Minister the people of Australia have to know what his judgment is like.  And I think, the most important thing that comes out of all his dealings with Brian Burke and it wasn't just one dinner by the way, it was a lot more than that.

OAKES:

The luncheon as well.

TREASURER:

He has, there is a lunch, there is a breakfast, there is a dinner, there is another event being organised when he begins to pull out and what this tells you is that Mr Rudd's judgment failed him.  Now his judgment can fail him when he is running for Leader of the Opposition, it doesn't matter much but if he became Prime Minister and his judgment fails, the country suffers.  That is why you need to know about these things.

OAKES:

Well I have had leaked to me some Labor Party research, they did some focus group work in Queensland and South Australia last week in the wake of the Burke affair, and they found looking at you, that your likeability is down quite a lot as the pollsters say, and your negatives are up.  Now, are you worried that you could come to be regarded the way Paul Keating is, is that something you…?

TREASURER:

Well, I think it is very unfair to compare me to Paul Keating.

OAKES:

Unfair to who?

TREASURER:

Well, I am very glad that he came out again last week.  It was very interesting wasn't it, Rudd's in trouble, so who does the Labor Party trot out, Paul Keating.  Now, you know, really, you have got to ask yourself this question, Laurie, if he got into trouble as Prime Minister, who would they be trotting out from behind the screen?  You know, talk about a blast from the past.  Mr Keating was out there trying to help Mr Rudd last week, couldn't happen if Mr Rudd became Prime Minister, he wouldn't want it to happen, and I thought it was an early foretaste of what we might see if Mr Rudd ever achieved his life ambition.

OAKES:

But don't the punters hate this kind of personal stuff, wouldn't they prefer it if the Government was, they got back to running the country instead of hurling mud at Kevin Rudd and others?  For example, Alexander Downer this morning has described Kelvin Thomson as a grub.  People don't like that, do they?

TREASURER:

Well you know, you talk about hurling mud at Mr Rudd, right.  Now, I think, as Alexander Downer said this morning, nobody has hurled more mud in the Parliament than Kevin Rudd.  The public may not have been switched on to it, but you go back and you see what he said about Downer and Howard.  He has regularly called them liars, a pretty strong allegation to make.  Now, it is unbelievable to me that a bloke who has hurled so much abuse, the moment he had the first whiff of scrutiny, wants to say 'oh, it's all terribly unfair'.  Now, Mr Rudd's got to make up his mind if he is going to run around the place hurling character assessments at Howard and Downer and the rest of us, he can't actually turn around and say nobody can give a character assessment of him.  He is going for the top job after all.

OAKES:

Final question, Kelvin Thomson's resigned from the frontbench, is that enough, and do you accept what he did was just a stupid mistake?

TREASURER:

Well, you know, again this comes back to Kevin Rudd's judgment, doesn't it?  Of all the people that he could have made first law officer of the Crown, he chose a bloke who had given a reference to drug fugitive Tony Mokbel.

OAKES:

He didn't know that...

TREASURER:

Well, it is an interesting reference, isn't it, Laurie, because Kelvin Thomson said his last eight years of unblemished record, in the interview, clearly Kelvin or his office knew there were blemishes.  They didn't say he had an unblemished character, they said his 'recent' unblemished record.  They knew there was something up there Laurie, and the interesting thing to know would be who brought Tony Mokbel to Kelvin Thomson, and why was Tony Mokbel brought to Kelvin Thomson.

OAKES:

Mr Costello, we thank you.

TREASURER:

Thank you very much.