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 13/04/07

Press Conference, Washington DC

Friday, 13 April 2007

11:30am
(Washington DC Time)

SUBJECTS:  Employment, IMF, Infrastructure, World Bank

JOURNALIST:

The Prime Minister says the budget is going to have a few surprises. Would you care to elaborate?

TREASURER:

Well, if I elaborated now they wouldn’t be surprises, would they?  But the important thing I think is to make sure that we keep focused on the economic challenges which lie in front of us. We have a number economic challenges at the moment in Australia. We have had a long period of economic expansion. Unemployment is low. We’ve got to make sure that inflation doesn’t get away from us. We’ve got to make sure that we get more people participating in the workforce, and we ought to try and see if we can get unemployment even lower. The fact that we’re at a 30-year low is great. Can we do better on the employment front because at the end of the day, getting more people in work and building the economy and making it stronger is going to give us all better prospects.

JOURNALIST:

What target would you set for unemployment over the term of the government, should the  Coalition be re-elected?

TREASURER:

Well, I’d to keep it at the historically low levels that we currently have. I think there are still a number of people that aren’t looking for work, and we ought to encourage them to do so. There are people who maybe have gone out of the workforce to have a family and want to come back, older workers who maybe have given up looking for jobs, who’ve got better opportunities and even some of the young people who aren’t in training who now have the opportunity to get into the workforce. To Australians, I would say this: there’s never been a better chance to get a job in the last 30 years, and now is the time to seek to re-enter the workforce.

JOURNALIST:

Regarding the IMF, they’re warning about inflationary pressures and the possibility of interest rates rising. What’s your prediction for that?

TREASURER:

Well, plainly there are a lot of price pressures in the world at the moment. Oil prices are high, that works back into the general economy, that puts up petrol prices, that puts up transport costs, transport costs put up prices in relation to goods and services, and you have to be vigilant about that. Inflation is now a problem around the world, and we in Australia are not immune from the world. But we’ve got to make sure that our economic settings are such as to minimize risks, and that takes a lot of experience and a lot of discipline, and that’s certainly a key consideration as we go into this year’s budget round.

JOURNALIST:

To what extent, Treasurer, is the capacity constraints adding to inflation in Australia?  Is that another level of inflationary concern if you like, in the Australian context?

TREASURER:

Well, the fact that we’ve got unemployment at 30-year lows, and in some areas, have significant labor shortages, that is we actually have more jobs going than people to fill them, could put pressure on wages, and this is why it’s very important, of course, that we have individual wage fixing. We don’t want to take increased wage outcomes in areas where there is a labour shortage and apply them across the whole economy. That would put pressure on the whole economy. In the past, when we’ve had low unemployment like this, we’ve seen wages breakout, we’ve seen inflation breakout. We know how that ends. That ends in recession. We don’t want to go there again. And having a better system of industrial relations is a big part of ensuring that we can continue the economy growing as it is without the old cycle of boom and bust which we saw in the past.

JOURNALIST:

How about the infrastructure constraints though on the economy as well, as an inflationary concern?

TREASURER:

We’ve had a lot of investment go into infrastructure, particularly in the mining industries, there has been a huge surge in infrastructure in recent years. I think there are still some areas where we could manage infrastructure better, particularly in relation to our major export ports.  But I think you’ll see that increased investment work its way out in increased export volume over the years ahead.

JOURNALIST:

The Opposition is saying that the Prime Minister is stuck in the past because he didn’t agree at the COAG meeting to the State premiers’ target of reducing greenhouse gas emissions and starting a carbon trading system. Why can’t Australia make that commitment about carbon trading, for example?

TREASURER:

Well, we’ve got a group which is looking at how an emissions system would work in Australia, and we’ll get that report shortly and consider it. You’ve got to make sure that any system that you’ve put in place is workable. You would want to know that it won’t cripple industries like the mining industry, and you’d want to be sure that it won’t tip the economy into a downward spiral. Nobody should be put in a position where they lose their job or lose their house or lose their business because of a miscue on bad policy. And that’s why you want to look very carefully at these policies before you introduce them. We’re doing that. We’ve got a good group which is looking at it, and we’ll receive that report shortly.

JOURNALIST:

Some critics may say that that’s putting jobs and economic prosperity ahead of the environment, for example.

TREASURER:

Well, nobody should be thrown out of work or lose their business or lose their home because of zealots or zealotry in relation to policy. Policies to protect the environment are important, but they should be evenly shared over the population as a whole. If you let the zealots loose in a way that takes people’s jobs or houses or businesses, then it’s a pretty heavy price for those people to pay. The important thing is to make sure that costs are fairly shared in the community for the environmental outcomes that we’re looking for.

JOURNALIST:

So, premiers are being zealots if they’re pursuing greenhouse caps and carbon trading schemes?

TREASURER:

In my experience premiers are great experts at advising other people on policy areas that the premiers have no responsibility for, but the premiers themselves, when they do have responsibility, like the Queensland hospital system or the New South Wales road system, or the Victorian train system, might be better to concentrate on those areas.

JOURNALIST:

The State premiers are saying that they’re prepared to introduce their own legislation to try to set up some sort of carbon trading scheme on a state-by-state basis. Could that succeed without a national scheme?

TREASURER:

Well, I think some of them have actually already introduced such a scheme - some of the states have. Obviously, if Australia is going to make any meaningful progress, you would want to have a scheme which has a national basis, where all of the states have harmonized rules. I think that’s a principle that we would all agree with. And, by the way, you also want to be able to go beyond that, where you could even move into regional systems or international systems. But I think that ought to be the objective in this area, rather than individual schemes that don’t properly relate to each other. If the states do that, I don’t think it would give a harmonized or a good outcome.

JOURNALIST:

Can you tell us a little bit about the meeting tomorrow, what your expectations are?

TREASURER:

Well, the meeting tomorrow will give us a chance to assess the global economy, the risks that are coming in relation to resources, in relation to inflation, in relation to global growth, the difficult areas of trade and whether or not the international trading order can be improved, whether or not we can get a breakthrough on the Doha Round for the benefit of all countries, and it’ll give us an opportunity to try and take action which will minimize risk on the international economy. That’s the key issue here, so that we don’t have adjustment that puts pressure on the global economy, individual countries, or indeed individuals.

JOURNALIST:

Treasurer, as far as the budget’s concerned, would you discount the possibility of further reductions in marginal tax rates?

TREASURER:

Look, my view is that the government ought to fund the services that are required for a decent lifestyle, and a decent social security system. We ought to fund proper health, we ought to fund proper education, we ought to balance our budget so that we don’t put undue pressure on interest rates, and after we’ve funded decent social services and after we’ve balanced our budget, if we can reduce the tax burden, we should work towards that. That is the principle I’ve followed in the past, that’s what I did last year, and in the years ahead, we’ll be working to the same principle.

JOURNALIST:

So you’re not discounting the possibility?

TREASURER:

I can’t either count it in or discount it. What I’ll tell you, I’ll tell you on budget night. I can’t tell you in advance, I’m afraid.  I’m just telling you what my thinking is: decent social services, decent health, decent education, a balanced budget, and continued progress towards reduction of the tax burden.

JOURNALIST:

Treasurer, the World Bank is shrouded in controversy this year because of the activities of the President, Paul Wolfowitz, and the pay for his romantic partner that he was involved in. He apologised yesterday for his behaviour. Do you accept that apology?

TREASURER:

I think the World Bank has to show leadership. I think it has to be very, very careful that it operates according to the highest standards, because a big part of its job is to require individual countries to clean up their act and conform to high standards, and so you would want to see a good example coming out of the World Bank.  And I would encourage the Executive Board and the Ethics Committee to make sure that they do set a good example.

JOURNALIST:

Should he resign?

TREASURER:

That’s a matter between him and the Executive Board, and I’m not going to enter into that at this stage.

JOURNALIST:

But you’re effectively a shareholder, aren’t you, in the World Bank?

TREASURER:

I’m not a member of the Executive Board, so I won’t have a vote in relation to that, but for those people that are on the Executive Board, I encourage them to ensure that they are clear in their own minds that the Bank is adhering to high standards.

Thank you.