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 30/07/2007

Interview with Kieran Gilbert
Sky News, Agenda

Monday, 30 July 2007
4.15 pm

SUBJECTS: APEC Finance Minister’s Meeting, financial markets, housing, Haneef

TREASURER:

Well the APEC Finance Ministers brings together Ministers from the very significant economies of the world such as the US, Japan, China, ASEAN, Russia and it gives us an opportunity to look at the global outlook.  One of the major items for discussion will be energy security.  How do developing countries such as China, secure the energy which they will need to drive their growth for the decades which lie ahead.  We are also putting on the agenda climate change, and we will be discussing how we can get cooperation through the Asia Pacific to reduce emissions and hopefully to put more impetus behind the AP6 initiative which Australia has to bring together big emitters of the world in cooperation to reduce carbon emissions. 

So this will be a very significant discussion of the world economy, energy, climate change and all of those key economic issues which will shape the decades to come.

GILBERT:

Will this meeting lay the groundwork for a possible Sydney declaration when it comes to climate change when the Leaders’ Summit takes place in September?

TREASURER:

Sure, the meeting will report back to the Leaders on all of our discussions including global economic prospects, structural reform but also in relation to energy security and climate change.  So it will be very much laying the groundwork and doing a bit more of the economic detail so that the Leaders can pick up the agenda.

GILBERT:

And Treasurer, in terms of those attending, the US Treasury Secretary Henry Paulson is apparently not attending, did that suggest that the US is not as committed as it should be to this APEC Summit?

TREASURER:

No, Hank Paulson is coming out later on for a programme around the time of the Leaders’ Summit.  But we have got the new President of the World Bank coming out – Bob Zoellick – representatives of the Asian Development Bank, the IMF and in fact compared to other APEC Finance Ministers meetings, this is extremely high level from ministerial involvement and I think it will be a very significant meeting.

GILBERT:

Treasurer, before we move on to domestic politics, there has been some instability in the global stock market, I would like to get your response to that, are you concerned by it?

TREASURER:

Well, obviously I am concerned about the level of default in the sub-prime lending market in the United States.  This is now creating problems for the lenders, problems for the borrowers of such magnitude that it is now creating some problems for the lenders.  And this is worrying global equity markets.  I think we are going to go through a period of turbulence, you have seen global equity markets come off around the world and it is going to be a period of some instability.  We in Australia are at a situation where our stock market has been very, very strong and so even when you see a correction it is still at a very high level.  Our fundamentals are very strong in Australia.  I am sure that we can weather global instability but it is just putting a big unknown out there as far as economic management goes in the months ahead.

GILBERT:

Back to the domestic situation at the moment.  Kevin Rudd has announced a $500 million fund to help first home buyers particularly through grants to local governments to reduce the infrastructure costs and the development costs.  You would surely welcome that sort of initiative to help those trying to enter the market?

TREASURER:

Well I welcome the fact that Mr Rudd has now discovered that one of the big reasons for the cost of new housing is State and local government charges.  Now, of course if State and local government were to cut those charges you could make it far more affordable.  What Mr Rudd has said is he has suddenly discovered that these are a big part of the cost and he wants to get Federal taxpayers to pay State Government taxes.  And what he is proposing to do is to give to the local councils and the State Governments $500 million worth of federal taxes to help pay some of their state taxes.  It would be better if they reduced those state taxes in the first place.

Can I say however, he has got his numbers wrong because there are about 150,000 new homes released every year in Australia, $500 million over five years will lead to a cost reduction of about $645 a home.  So, even if the amount were passed on in full, the saving on a $300,000 home would be about $645.  It is not a large amount and I don’t think he has thought about how to make sure it is passed on in full.  But the good thing is, although he hasn’t thought through carefully what to do, he is finally acknowledging that State Government and local government taxes are a big reason for the expense in new homes and new lots.

GILBERT:

It is obviously going to be a fairly popular message though.  Has Kevin Rudd pre-empted you on another major policy area?

TREASURER:

Well, if you had full pass through it would mean that the home could be $645 cheaper on a $300,000 home.  But he hasn’t even thought about full pass through.  So although he needs a lot more work and although he hasn’t quite got his sums right, the good thing is he is finally acknowledging that Labor State Governments are pushing up the prices.  It would be much more direct rather than paying those taxes and charges if he could actually get the Labor State Governments to cut them in the first place.  That would be a much more direct way of helping the first home buyer.

GILBERT:

Isn’t the Government planning its own major new policy on housing affordability in the run-up to the election?  Hasn’t he pre-empted you once again on a very sensitive matter?

TREASURER:

No, I think on the contrary.  I think he has pre-empted himself.  He has made a rushed announcement which he hasn’t thought through.  If all you do is you cut or you pay part of the State Government taxes and charges which he is proposing to do, and they cut their price to the developer, the developer will still sell at what the market will bear.  He doesn’t have and he hasn’t thought about a pass through mechanism and as I said, he has got his numbers wrong.  He seems to think there are 50,000 new home buyers in Australia, 150,000, and if you were to give a benefit to each and every one of them, $500 million over 5 years is going to give them about $645.

GILBERT:

Do you concede that there is a housing crisis, housing affordability crisis in Australia at the moment?

TREASURER:

House prices are higher than they have been and they are higher than they have been because more people are in work and more people are able to afford to borrow to purchase more expensive housing.

GILBERT:

So is there a crisis, Treasurer?

TREASURER:

Well, no.  The crisis is when the market collapses.  That is when you have a crisis.  We had a crisis in 1990 when Labor engineered a collapse in prices by putting interest rates at 17 per cent.  That is a crisis.  Where you have record numbers of people joining the market and you have steady prices, in fact prices that are going up for the 70 per cent of Australians who own or are buying a home, that is not a crisis, that is the kind of outcome they would want to see.

GILBERT:

Mr Costello, on another matter, the Haneef case, as a lawyer, are you comfortable with the way this issue has been handled and particularly by the Immigration Minister, Kevin Andrews?  Initially he cancelled the mans visa on character grounds, now he is happy for him to leave.  It does seem incongruous, are you satisfied that he has handled this matter appropriately?

TREASURER:

Well, Mr Andrews made his decision after carefully looking at the material before him and that material lead him to conclude that on character grounds the visa should be withdrawn.  Now, as I understand it, Minister Andrews is still seeking advice on whether he can release the material that he relied upon to make his decision.  And if he does then everybody will have the material.  They will be able to form their own conclusion, I think that is the proper way of going.

GILBERT:

Mr Andrews says he is more suspicious now that Haneef has left the country voluntarily.  That does seem quite an absurd statement given that if someone is innocent or guilty through that sort of ordeal, surely the first thing they would want to do is leave the country?

TREASURER:

Well look, I don’t think Mr Andrews decision turns on whether he left the country or not.  I think it turns on the material that was given to him by the Federal Police and until we see that material, we don’t know the full story.  And he has said he is prepared to release it which is a good thing.

GILBERT:

And just finally Treasurer, we have seen in Victoria today the successful handover from Steve Bracks to John Brumby, everyone is wanting to know what Peter Costello is thinking when he looks at that sort of successful leadership transition, what are you thinking?

TREASURER:

Well look, I think Mr Bracks did a job to the best of his ability.  He has now decided to move on.  Mr Brumby has an opportunity which he probably didn’t expect.  I hope that he uses it to change policy where policy failed under Mr Bracks.  I would nominate two areas, one is that Victoria should come into the national water scheme.  Mr Bracks didn’t do that, there is no pride at stake now and I think Victoria should come in.  The second is of course, it does give him the opportunity to honour Labor’s promise to have no tolls on the East-link freeway and I would urge him to reconsider that broken promise of the Labor Party as well.

GILBERT:

But does it give you cause to reflect on what might have been at the Federal Liberal Party level?

TREASURER:

I have got no time for reflection, I am too focused on the job at hand, Kieran.

GILBERT:

Enjoy Coolum, thanks Treasurer.

TREASURER:

Thank you.