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 11/07/2007

Interview with Ali Moore
7.30 Report

Wednesday, 11 July 2007

7.40 pm

 

SUBJECTS: Grocery prices, housing affordability, economic management, leadership

MOORE:

Treasurer, if we look at what Kevin Rudd announced today, why not give the ACCC monitoring power over grocery prices?

TREASURER:

Because prices are already being monitored.  The Australian Bureau of Statistics collects prices for food and groceries and publishes them on a website for every major capital city and has been doing it for decades.  It looks like Kevin Rudd is completely unaware of this.  He seems to think this is a new idea, but if you go onto the ABS's website, on a quarterly basis, you can find out, for every capital city, what the price was of milk, bread, baked beans, biscuits.  Kevin Rudd has announced that he wants to do something that has been going on for decades.

MOORE:

Treasurer, I did go onto the ABS website.  They publish two things: they publish the quarterly movements in the prices of various products and indeed they publish the average price over a quarter of particular products.  No information on where that product comes from, as in, which chain, and no more specific information than a quarterly average price.  If I'm trying to decide where to shop, how does that help me?

TREASURER:

Well, Kevin Rudd is not going to give you the daily price in every different retail outlet for every different item on an ACCC website.  What he is going to give you is he is going to give you the movement in prices.  Now, I went on to the ABS today, because Kevin Rudd said we need to know what the price of bread, biscuits and baked beans is.

So I went on to the ABS website today.  For bread, white loaf, sliced, 650 grams $3.20 Sydney, $3.23 in Melbourne.  He wants to know what the price of biscuits is, let me tell him.  Biscuits, dry, 250 grams $2.01 in Sydney, $2.00 in Melbourne.  He wants to know what baked beans are.  Baked beans in tomato sauce, 420 grams, $2.79 in Sydney, $1.76 actually in Brisbane.

MOORE:

Treasurer, to get to the point, my understanding is…

TREASURER:

That is the point.

MOORE:

…the plan is that they will be publishing the prices at the various retail outlets so that you will get an average, and over – I would imagine – a number of months, you would be able to say, ‘Well actually, Woolies has been cheaper with this or another chain has been cheaper with something else.’

TREASURER:

That you will get a quarterly average, which you can get today and have been able to get for decades.

MOORE:

But you can't get where it comes from, there is no information on the ABS website.

TREASURER:

Yes, but you won't get shop by shop from the ACCC either.  What you will get is you will get an average.  You know, this is Kevin Rudd at his ignorant best.  His big announcement today was he was going to get the ACCC to collect information which the ABS is already publishing. One…

MOORE:

He has also announced an inquiry into grocery prices.  Do you believe that there is anti-competitive conduct in the grocery game?

TREASURER:

Well, plainly there has been on occasion.  Because again, if he had done his work, he would have known that a Full Court of the Federal Court found in June of 2003, price fixing in relation to bread, prosecuted it and fined it.  If he had done his homework, he would have found out that the Federal Court imposed a $7 million penalty on Woolworths on the 22nd of December 2006, for giving effect to illegal anti-competitive agreements.  This is the whole point.  This is some revelation to him that some…

MOORE:

But Treasurer, some of those cases were run by…

TREASURER:

No, let me finish Ali.  This is some revelation to him that there has to be an inquiry into contraventions of the Act.  Let me tell you, the ACCC, funded better than ever before, has been prosecuting under the Act.  It is monitoring in the field all the time.  Where it has found illegal conduct, it has prosecuted and been successful.  Now, you can have another inquiry if you like.  Frankly, I'd rather have prosecutions.

MOORE:

But that said, a number of those prosecutions which you just mentioned were actually run by Alan Fels, who was the former head of the ACCC.  He for one says today that we do in fact need an inquiry into how much competition there is in the grocery market.  He sees merit.

TREASURER:

I don't think you need an inquiry.  What you need is much more substantive than that.  What you need is you need cases to be taken.  I don't want to have another inquiry, I want to take cases to the court and where there is illegal conduct, to have it prosecuted.  Now, the ACCC is resourced better than ever before in its history, better than ever before in its history.

It is monitoring prices right across the board.  One of the areas we have got it monitoring prices is in relation to fruit and vegetables, particularly in the Murray-Darling Basin where there was an allegation that the drought was being used as a cover for price rises.  It is monitoring as we speak.

The monitoring is not the hard part, the monitoring is going on.  The important thing is if the monitoring leads to evidence, then the evidence has got to be brought before a court of law.  Now, this is all apparently coming as a great revelation to Kevin Rudd.

MOORE:

Treasurer, let me move on because as you are well aware, we are going to run out of time here.  If grocery bills are hurting, then clearly also is the issue of housing affordability.  And you have set up a Federal-State audit of Government land to see what can be released.  As you say yourself, much of that land is going to be on the outskirts.  How many new homebuyers do you know who are prepared to move to the outskirts, often away from their jobs and away from entertainment and in many cases, away from other infrastructure like transport?

TREASURER:

Well, I know many because I campaign in marginal seats and the outer suburbs of the big cities all the time.  This is where your classic first home buyer with a couple of young kids does in fact move.  And by the way, not everybody commutes to the CBD.  You will find that people who live in the suburbs quite often commute to other areas or service centres or the like.

Now, getting new releases on the outskirts of the big cities is good for new home construction.  Of course, if you want to get more housing in the inner-city, it has got to be done with urban consolidation.  This is another area where I think our audit will be useful.  Are there areas where you can have urban consolidation where you can actually increase a supply in the inner-city?  Are there areas where you can do it in the outer suburbs?  But can I make this point: this is a supply problem.  If you increase demand, prices will go higher.  The only way to bring prices down is to increase supply.

MOORE:

On the related issue of interest rates, we saw at least one economist this week actually predicting that unemployment could end up with a three in front of it.  Now of course more people in jobs, more money in the economy, a higher risk of higher inflation.  Do you think we will get a pre-emptive interest rate rise next month by the Reserve Bank?

TREASURER:

Well, I've made it the practice over the last 11 years to never talk about future movements in interest rates for obvious reasons.  I don't want to move markets, and I think it would be wrong of me to assume that role myself.  But I will make this point – that inflation has decelerated.  We will shortly get the quarterly CPI figure.  The quarterly CPI figure will give us a good idea of where inflation was in the June quarter, then we will look out from that and we will see where we think inflation is going to be say, in 12 months time, which is what monetary policy works on.

MOORE:

And do you think it is going to be higher, substantially higher?

TREASURER:

Well, I actually think that the CPI will show a fall in inflation, but we will get those figures soon enough, and that will form the basis of informed decision making.

MOORE:

On that basis then you clearly don't see any need for an interest rate rise if you are predicting lower inflation.

TREASURER:

Well, we will have a look at what it is but the underlying inflation is now pretty much squarely where we want it.  It is between two and three per cent.  It has averaged 2½  per cent under this Government, down from the over five per cent it averaged under Labor – when grocery prices really were increasing incidentally.  But it has been pretty low over the last 10 years or so.

MOORE:

Unemployment with a three in front of it?  Do-able?

TREASURER:

Well, I think what you will see in the unemployment rate is I think you will see movements up and movements down from month to month.  But it is clearly trending down, and it has clearly trended down from five and its getting closer to four.

MOORE:

Mr Costello, we are almost out of time, but a very final question.  It is a year since the leadership deal between yourself and the Prime Minister became public.  John Howard has had a very good run in the past couple of weeks, but the polls are still fairly dismal.  If you were leader, would they be better?

TREASURER:

Well, as I said at the time, I will focus on doing what I can for the Australian public, and that is getting jobs, making sure that inflation is kept low and interest rates are kept low as well.

MOORE:

Would the polls be better if you were at the helm?

TREASURER:

Well, this is speculation, which is no point in entering into because I'm not.  I'm focused on being Treasurer.

MOORE:

Treasurer, thanks for your time.

TREASURER:

Thank you.