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

Doorstop Interview
Conrad Hotel, Brisbane

Tuesday, 31 July 2007
2.30 pm

SUBJECTS: APEC Finance Ministers’ Meeting, Federal payments to States, housing affordability, interest rates

TREASURER:

Well starting from tomorrow some of the most important economic decision makers in the world are coming to Coolum in Queensland for the APEC Finance Ministers’ Meeting and it is my privilege to chair this meeting.  We have chosen Queensland because it is such a wonderful part of Australia, to showcase Australia to important decision makers from around the world.  We will have most of the globe’s economy represented at this meeting.  We will have the senior leaders of the International Monetary Fund, the World Bank, the Asian Development Bank who will be here.  Our discussions will involve the global economy, where it is heading, what the challenges are.  We will be having discussions about climate change, how to cooperate on climate change and how to manage it in a way that continues economic growth and we will be looking at development issues, particularly in Asia, to make sure that those economies in Asia which are going through development to try to pull people our of poverty, and do it in a way which is successful and positive and basically increase living standards.  So I can’t think of a better place to be than Queensland for the APEC Finance Ministers’ Meeting and the meeting will be starting at Coolum tomorrow.

JOURNALIST:

In your view, what’s the single most important concrete initiative to come out of this week?

TREASURER:

I think an agreement on principles of climate change, how to manage climate change whilst keeping an economy growing and how to cooperate on those principles.  We have here represented in Queensland the world’s biggest emitters – China and the United States – and to have that discussion with them and to see if we can get agreement on principles for managing a carbon emissions and cooperation across the world’s major economies would be a really good step forward.

JOURNALIST:

What’s your response to Federal Labor’s plans to scrap tied grants?

TREASURER:

Well you see this shows that Kevin Rudd hasn’t thought carefully about economic policy.  At the moment the Commonwealth Government gives over $9 billion in health grants to the States on the condition that there are no charges at public hospitals.  If you abolish tied grants, State Governments can introduce charges at public hospitals. 
At the moment the Commonwealth Government gives billions of dollars to the States to help those with a disability.  If you abolish tied grants there is no guarantee that the disabled will ever get the benefit of those grants.  Abolishing tied grants will give State Governments the opportunity to move money out of health, out of disability, into their own pet projects that will leave those relying on the public hospital system worse off, parents with disabled children worse off and would lead in important respects to a worse education system.  So I can’t understand why you would do it.  And it just illustrates again that Labor and Kevin Rudd have not thought through economic policy.

JOURNALIST:

They don’t think it is going to end the blame game (inaudible)?

TREASURER:

Well this will start a whole round of State blame against Canberra.  If you untie for example healthcare grants the States can then introduce fees in public hospitals.  And who do you think they would blame for it?  If you said that they could spend disability money on union projects, for example, and they moved the money from disabled to unions and then they will blame Canberra that the disabled are doing worse.  This system, whereby money is given in return for achievable benchmarks builds accountability in to the system.  If you take those benchmarks out you take accountability out of the system.  You make the system far worse.  Again, Kevin Rudd, he hasn’t thought about economic policy, he doesn’t understand it, this is a classic undercooked failed idea.

JOURNALIST:

How come the states couldn’t manage the money themselves?  You are saying that they would be irresponsible with it?

TREASURER:

Well what we are saying is that money is given to the States to meet benchmarks, and you can hold them accountable.  For example, money given to the States for hospitals is given on the condition that they don’t introduce a fee for public hospitals.  If you say there are no conditions, then they are entirely free to take the money, and to introduce fees in public hospitals.  If you say there are no conditions, they are entirely free to take money for the disabled, spend it for example on something else but rather than on accommodation for the disabled.  That’s the whole point of this to get them away from accountable benchmarks.  There could only be one reason to get rid of accountability benchmarks.  Now I can imagine the States might be quite happy if there were no accountability benchmarks but I can’t see what is in it for the federal taxpayer or for the Australian citizen.

JOURNALIST:

Just in terms of housing (inaudible)?

TREASURER:

Well, house prices are higher than they have been before.  That is because there are more people in work who are able to enter the market and they are able to enter the market at higher prices.  Now, if you are in the market you generally consider that a good thing but there is a difficulty for first home buyers in entering the market because prices are higher than they have been in the past.  That is why it is important that we continue with the First Home Owners Scheme grants of $7,000 and that we do more on the supply side.

JOURNALIST:

So would that be a yes or a no?

TREASURER:

Well, most Australians, 70 per cent of Australians either own or are buying a home, which is as high as it has been.  So 70 per cent of Australians are participating in the home mortgage market.  It’s those people that want to enter it for the first time who need special assistance.  We have a First Home Owners Scheme, which is a grant of $7,000, and as I’ve said repeatedly it is important to do more on the supply side to make more housing available for those people.

JOURNALIST:

(inaudible)?

TREASURER:

Well, I have told you, for 70 per cent of Australians they are either buying or own their own home which is the historical average.  For people coming into the market for the first time it is important we have a First Home Owners Scheme and important that we do more on the supply side.

JOURNALIST:

Does economic data indicate that there ought to be an interest rate rise?

TREASURER:

I don’t comment on future movements in interest rates but…

JOURNALIST:

Would the Bank be justified in raising interest rates?

TREASURER:

I am not commenting on future movements in interest rates.  I haven’t for the last 11 years and I won’t be starting now.

JOURNALIST:

Well you have spoken about the CPI figures saying that they are within the range (inaudible)?

TREASURER:

No, it just demonstrated that the outcome is within the range, that is an unassailable fact.

JOURNALIST:

So there is no need for a rate rise?

TREASURER:

No, no, no, if the range that you’ve shooting for is 2 to 3 per cent, and the outcome is 2.1 per cent, it’s obviously within the range, that is the range of inflation that we are shooting for and the outcomes are consistent with the range that we are shooting for which is 2 to 3 per cent.

JOURNALIST:

Would you prefer a rise sooner rather than later (inaudible) the Federal Election?

TREASURER:

Well I don’t think I will be commenting on future movements in interest rates.

JOURNALIST:

Do you think it will be harder for the Howard Government to get re-elected if there was a rate rise?

TREASURER:

I think you are asking the same question in different ways.  Thank you very much.