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 12/07/2007

Press Conference
Treasury Place, Melbourne

Thursday, 12 July 2007

12 noon

 

SUBJECTS: June Labour Force figures, global economic conditions, election candidates, grocery prices, petrol inquiry, housing affordability, Paul Keating, Australian dollar

TREASURER:

The good news is that in the month of June, employment continued growing.  It grew by 2,500 people, which was slower growth than in previous months, but we have been expecting a little bit of a correction in the market and to lock in that gain that we had in the months of April and May is very welcome.  In the months of April and May the economy was creating jobs at the rate of 1,000 a day and to lock in that growth in the month of June, although the growth was slower than April and May, is a very welcome thing. 

The unemployment rate at 4.3 per cent is the longest period that we have been below 6 per cent since we have started collecting statistics.  It is the 47th consecutive month below 6 per cent and the 16th consecutive month below 5 per cent.  In the last year in Australia 284,000 new jobs were created and that is really telling you that for young people, the opportunity of getting into the workforce has never been better.  And the opportunities that are coming out of a growing economy mean that we have more Australians in work than ever before and unemployment at 33 year lows. 

The important thing is that we don’t waste this opportunity.  Now that we have got unemployment as low as this, that we don’t waste this opportunity to continue growing the economy and to go on to a situation where every Australian who wants to work, can work, can find work and has opportunity.

And it is very important that we don’t rest now.  There is no time now to start going back to the bad old industrial relations systems that created high unemployment in this country.  There is no time now to give away the reform mandate.  We have to continue the reform mandate in the Australian economy if we want to lock in low unemployment, and we want to lock it in consistent with low inflation. 

The good news is that notwithstanding 33 year lows in unemployment, inflation remains constrained.  And if we can continue to grow our economy and keep inflation constrained then we will have more opportunities for more Australians in a stronger economy. 

JOURNALIST:

What do you think this will mean when the Reserve Bank looks at interest rates at the end of the month?

TREASURER:

Well, we will get the Consumer Price Index figures at the end of the month which will show us where inflation has been through the month of June.  We know from the figures, through the quarter to June I should say, we know from the figures that we have seen for the March quarter that inflation was decelerating which is good news.  We will get an update on that for the June quarter towards the end of this month and that will give us the most up-to-date read on inflation.  My own belief is that inflation remains constrained and consistent with our target.

JOURNALIST:

Are you concerned that we have seen the best of the unemployment?

TREASURER:

Look, unemployment is at 4.3 per cent.  When I became Treasurer, it was double that.  Twice as many people in Australia, proportionately, unemployed.  So we have halved the unemployment rate.  Can we do better than halving the unemployment rate?  Well, let’s go on and let’s see what we can do.

JOURNALIST:

Treasurer, there are reports that iron ore prices could go up by as much as another 25 per cent next year, also reports that the world economy, the US economy, good employment numbers, world economy gathering strength.  Do you expect the Australian economy to be carried forward by the commodities, continuing commodities boom into 2008 and beyond?

TREASURER:

What carries the Australian economy of course is service, retail, wholesale, construction – this is where most Australians are employed – and that is the largest proportion of our economy.  Our mining exports are important to our export performance and whereas prices have been stronger in recent years, as you have heard me mention on a number of occasions, volumes are yet to pick up.  There is evidence that volumes are picking up.  And I think the prospects for increased export volumes over the next year or two are quite good.  I think that there is still quite a deal of demand coming out of China.  I think there are some concerns about the US economy at the moment, particularly with the housing slump that you have got in the United States and the possibility that many loans will be written off, particularly in the sub-prime market.  But I think China is still strong, Japan is picking up, there is a bit of a recovery going on in Europe and the consequence of that is I think global economic prospects, notwithstanding a bit of weakness in the United States, will be quite good in the year ahead. 

JOURNALIST:

Just following on that from question Treasurer, how much of a concern would it be if the Australian dollar continued to rise and say, hit 90 US cents as some people are predicting?

TREASURER:

Well this is the strongest Australian dollar that we have seen in around 18 years.  And this is an Australian dollar which as against the US is much higher than the average.  Now, a lot of Australians will say to you that is good because when they go overseas it is buying more.  But, the flipside of that is that it is making it a bit tougher for our exporters.  And for manufacturing exporters which are already under intense competition, a high Australian dollar is a difficultly.  I acknowledge that.  It is one of the difficulties that comes from the current economic time.  So, we acknowledge the difficulties that they have but as you know, it is not our policy to fix the rate of the Australian dollar, it is to allow it float in the market.  And it has risen against the US dollar, partly for Australian reasons, but partly because the US dollar is weak at the moment and I think there is a lot of US dollar weakness on the currency markets.

JOURNALIST:

As a long time political campaigner, are you surprised that the Prime Minister didn’t know the name of the Liberal candidate in Tasmania this morning?

TREASURER:

Oh look, when you are campaigning in different seats around Australia at a non-stop level, there are days when you are not even sure what town you are in.

JOURNALIST:

Do you know the name of the Liberal candidate for Franklin?

TREASURER:

I do it turns out.

JOURNALIST:

And who would that be?

TREASURER:

Vanessa Goodwin. 

JOURNALIST:

(inaudible). 

TREASURER:

Goodwin, which I hope she is going to find a good-win. 

JOURNALIST:

Treasurer, do you have any…

TREASURER:

In Franklin.

JOURNALIST:

Do you have any concerns about the level of competition in the supermarket industry in Australia and the potential influence of a competitive environment on pricing?

TREASURER:

Look, I think the price competition that is going on in supermarkets at the moment is quite intense.  And anybody who understands what is happening in the market at the moment knows that there has been an intense price battle that is going on as various players are competing for market share.  Highly intense.  Now, that doesn’t mean that from time to time there are competitors who engage in bad practice.  And where that bad practice occurs it is the job of the Competition Commission to prosecute.  And it is up to the courts whether or not to convict.  And in this market there have been a number of prosecutions.  There was one in relation to bread and there was one in relation to liquor.  And the ACCC took action.  Very heavy fines were imposed and people who had previously engaged in that conduct didn’t go back there.  But you do find in particular areas, particular locations, from time to time, particular executives might engage in a contravention of the Act and when you find it, you prosecute it and you deal with it.  But overall, if you understand what is going on in the market you know that there is intense competition going on in the overall supermarket market in Australia.

JOURNALIST:

Why is it good for you to have an inquiry into petrol pricing competition but not for Kevin Rudd to have an inquiry into food prices?

TREASURER:

Because, you see Mr Rudd doesn’t understand the Trade Practices Act.  In relation to petrol, what this is going to be is a legal inquiry where executives will be cross-examined in the witness box, whether or not, in relation to a particular period of time, when the Australian price varied from the Singapore price there was any fixing going on in the market.  And what’s more, it is going to involve calling the motoring organisations, the chief executives of the motoring organisations – who have said they have evidence – to give the opportunity to get into the witness box and to give their evidence.  That is a very specific legal inquiry.  Mr Rudd doesn’t understand that.  And what Mr Rudd said he was going to do was he was going to monitor prices.  That’s what he was going to do yesterday, until it was pointed out this has been going on for 70 years.  And then he tried to amend that to say that he would have an inquiry but it is not the formal inquiry of the ACCC.  He still hasn’t worked out what it is going to be.  And the only thing I say to Mr Rudd is this: you have got to do your homework.  You have got to understand these things, Mr Rudd.  You can’t have a different policy on a different day.  Running an economy is a serious business.  And you have got to think about it and make sure what you do is consistent with good economic outcomes.

JOURNALIST:

Just on housing affordability, are you concerned that the latest figures that too many Australians are mortgaged to the hilt?

TREASURER:

Well, you have got to look at the totality of the housing market.  In the housing market are many people who are first home buyers.  And I think the first home buyers would find that prices are very high.  And I think for the first home buyers it is important that we continue with our First Home Owners Scheme grant, that we do whatever we can to boost supply in the areas where you find first home buyers so that first home buyers can get access to supply. 

Also in the market, of course, are a lot of people who have had one, two or more houses.  There are a lot of investors who actually gear up their income.  And so it should be no surprise to you that some people pay a lot of their income in mortgage payments – they are trying to do that.  They have aimed to do that because they are investors.  You know, the first thing that an investor in the market does is they do gear up their payments to their income.  And so there is that component when we look at these figures.  The third component you get is we are noticing that there are people particularly in the 45-55, 45-65 age group who have taken a conscious decision not to pay off mortgages because they want to use some of those funds to invest, say, in superannuation or the equities market.  Again, a very conscious decision by some of those people.  So, again I would say, these things require a broad look and a broad understanding.  And you have to be careful not to draw simplistic conclusions from what is quite a complicated market.

JOURNALIST:

But that would be cold comfort for first home buyers though, wouldn’t it, that the group of people that feel locked out of the market by high prices?

TREASURER:

Well as I said, for first home buyers, prices are high.  That is why we have the First Home Owners Scheme grant, which has now gone to close to a million Australians.  It is quite extraordinary really, that is a very large proportion of home buyers have now had access to the First Home Owners Scheme.  I also think for first home buyers, what we have got to do is increase supply.  And the first home owners, generally speaking are people that are buying new releases or if they are buying in inner cities, generally buying flats or units.  When you first enter the housing market you don’t generally enter at the top of it.  That is where you finish.  You enter either in the estates or generally speaking in a flat or a unit.  I think for people who want to enter the first home market in estates, we need new land release and for people who want to enter more at the level of the flat or the unit, it is going to be urban consolidation. 

JOURNALIST:

Treasurer, Paul Keating’s remarks about the Prime Minister as a nationalist not a patriot.  What do you think of those remarks?

TREASURER:

It is very interesting I think.  As Kevin Rudd gets closer to the election we are going to hear a lot more from Paul Keating because there is no doubt that Paul Keating would be a very strong influence if Kevin Rudd got back.  Paul Keating sniffs the opportunity to return to the political fray under a Federal Labor Government.  And so I welcome the fact that Paul Keating is now out because he is going to be quite an influential player, with all of the views and all of the bitterness that he has, if Kevin Rudd gets back into power.  You are seeing the authentic voice of the Labor Party in the form of Paul Keating coming out as he sniffs the opportunity to return to the political stage. 

JOURNALIST:

Would you describe John Howard as a patriot or a nationalist?

TREASURER:

Both.

JOURNALIST:

(inaudible) context of Mr Keating?

TREASURER:

Well, I think John Howard is a patriot and I think he is a nationalist.  And to be frank with you, other than in the mind of Paul Keating, very few people would see it to be an insult to be a patriot and a nationalist.  A patriot is somebody who is loyal to their country and a nationalist is someone who is proud of their country.  Anything wrong with that?

JOURNALIST:

Treasurer, just getting back to the (inaudible)…

TREASURER:

Except in the mind of Paul Keating.  But you are going to see a lot more of Paul Keating.  Paul Keating is coming out now because he is sniffing the breeze, he is sniffing the opportunity to return to a position of influence in Australia.  And you are going to see all of the bile, all of the bitterness, all of the division, and remember all of the unemployment, all of the interest rates, all of the budget deficits, all of the debt.  That is authentic Labor.  That is Rudd-Keating Labor.  And you are beginning to see it again. 

JOURNALIST:

But there is something wrong with it in the context of totalitarian regime which I think is how Mr Keating was referring to (inaudible). 

TREASURER:

Who knows what goes through his mind? 

JOURNALIST:

Paul Keating also saw the need to emphasise that he was not referring to Howard as a Hitler, what do you think about that story?

 TREASURER:

Yes, well, that is the oldest trick in the book, isn’t it?  To go out there and to try and make the inference and to say, of course, it is not the inference I am making.  That is the oldest trick in the book. 

JOURNALIST:

Treasurer, just going back to the dollar again, it actually, it has hit a 20 year high on a trade weighted basis, do you see it strengthening to the stage where there is going to be a need for intervention?

TREASURER:

We don’t intervene in relation to the currency.  We have a free floating currency.  We let the market determine those matters. 

JOURNALIST:

Have you been made aware of a security scare in Tasmania this morning that a man – I don’t think it was Paul Keating – apparently came into the airport wielding a gun looking for the Prime Minister? 

TREASURER:

I don’t have any briefing on that, I am sorry.  Okay thank you.