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 13/08/2007

Doorstop Interview
Senate Courtyard,

Parliament House, Canberra

Monday, 13 August 2007
3.45 pm

SUBJECTS: Housing affordability, inflation, Wayne Swan’s donation to political opponents, same sex legislation

TREASURER:

The Commonwealth spends about $5 billion over five years for public housing and that is the construction of public housing.  And the Commonwealth spends about $2 billion a year on rental assistance and that is to provide funds for people who are renting to assist them in paying their rent.

So over the next five year period that would be about $15 billion which the Commonwealth will spend on rental assistance.  And I make that point just to put in to perspective that Labor’s announcement today is not even a drop in the ocean.  Labor says it is going to introduce new tax breaks for property developers which they figure will apply to about 3,000 houses in the next year and after five years about 50,000.  But it is not a drop in the ocean.  In fact, over the next five years something like 750,000 new dwellings will be constructed in Australia.  So if you reckon you can get developers to build 50,000 it is about one-fifteenth of the housing stock which will be affected over the next five years.

In addition to that, the tax breaks to the property developers which Labor announced today are very inefficient.  What they say is by giving a tax break of $8,000 a year – which would amount to about $150 a week – you might get a cut in a rental of $80 if someone was paying $400 a week; you might get a cut of $60 if they were paying $300 a week.  In other words, for every $2 of tax break for a developer a person in a rent might get $1 of benefit or for every $3 of tax breaks to a developer, a person might get a benefit of $1. 

So it is terribly inefficient and as a tax matter delivers principally the benefits to developers, not to renters.  And for some reason Labor has chosen to give tax breaks to developers rather than assistance to renters.  And the tax break will be worth two or three times in the hands of the developer of any benefit which a renter might get.

But the pool of renters that would get a benefit would be very small as I said.  Only about a fifteenth of the stock of new houses to be constructed over the next five years would be affected.  And of course many renters are already in existing stock where they would get no benefit at all.

So for a tiny effect, this is a wasteful proposal which is principally designed to deliver bigger benefits to property developers than it is to renters. 

JOURNALIST:

What would you do Mr Costello, to increase supply?

TREASURER:

Well of course again, let me make this point.  Let’s suppose you were affecting 5,000 or 10,000 dwellings with this proposal, you have still go to find the land to build them on.  If you don’t have new land released you wouldn’t even be able to build those 5,000 or 10,000.  What you have got to do really, is you have got to get land release.  And I have written to all of the States – some of the States have been quite cooperative in this audit – identifying new land that could be used for construction and when that audit is completed which I expect to be at the end of this month, then we will look at the parcels which have been identified and see what can be done to get them on to the market. 

JOURNALIST:

Mr Howard seemed to think it was a good idea this morning, what has changed?

TREASURER:

Well Mr Howard said whatever we can do to help renters we ought to look at and when you look at this you find it is not really helping renters, it is helping property developers.  Now, if you think property developers deserve three times the benefit that a renter would get you would be attracted to this.  With rent assistance of course, every dollar that the taxpayer puts up ends up with a renter, to help the renter.  It is one for one.  On investment tax breaks, it is going to be two for one or three for one. 

JOURNALIST:

Do you see anything, any benefit though in Labor’s suggestion that this is specifically tailored to get low cost rental housing built (inaudible)?

TREASURER:

I see a lot of practical problems and I don’t think it has been thought through.  I was surprised that the announcement was as flimsy as it was and I haven’t see the profile of the expenses.  But I did hear Tanya Plibersek say on AM this morning, only $3000 in the first year and I think $11,000 in the second year.  So it looks to me as if it has been back-ended.

JOURNALIST:

But what would you do specifically to encourage greater developments on low-cost housing?

TREASURER:

Well we will use our $5 billion to get more houses constructed.  The Commonwealth is paying $5 billion over the next five years.  Up until now all of that money has gone to States.  We have announced one of the things that we are going to look at and in principle do will be make some of those monies available to the private sector because we think they might be able to construct faster and cheaper than some of the State Governments.  And that is $5 billion over five years. 

JOURNALIST:

So do you rule out any sort of matching policy from the Government to what Labor has proposed?

TREASURER:

I think the Government initiatives would be much more detailed and much better directed than Labor.  This is very weak and very inefficient. 

JOURNALIST:

Barnaby Joyce wants first home loans to be tax deductible, would you consider that?

TREASURER:

Well I think if you just increase demand without affecting supply all you will get is you will get prices rising.  That is the weakness of those proposals. 

JOURNALIST:

Do you think inflation will reach 3 per cent by the end of the year?

TREASURER:

I think that inflation on our forecasts will be – underlying inflation – will be within our band, which is 2 to 3 per cent.  And bear this in mind, our band is 2 to 3 per cent over the course of the cycle.  You would have to say that the cycle is at its high point now.  And for it to still be within the band is quite exceptional at that high point.  Because when I framed the objective, the objective was to keep it 2 to 3 per cent over the course of the cycle.  You would expect at times of weakness it will be below and at times of strength above, and that target is to average.  But to still be within in the band at the high point of a cycle shows how much low inflation is entrenched. 

JOURNALIST:

So there is no cause for alarm if it goes above the band at the moment?

TREASURER:

Oh no, the inflation rate has been above 3 per cent during the course of my Treasurership.  Yes it has, of course it has.  And that is because you get quarterly movements and extraneous factors that take it there.  And that is why we have set it as an average.  And when we introduced the GST I think for a couple of quarters it was up about 6.

JOURNALIST:

So how worried should homebuyers…

TREASURER:

And you have been very silly to say with a tax inspired change because it went outside 3, you should do everything to bring it down.  And what we said, what we said then was that there were tax changes and one-off factors that would push it, I think out to six from memory, but the important thing is when you take out all of the one-offs and you look at the average that would keep it between 2 and 3 per cent.

JOURNALIST:

(inaudible)?

TREASURER:

Pardon?

JOURNALIST:

Would another interest rise be warranted?

TREASURER:

At what point?

JOURNALIST:

Well, if it stays at this high point (inaudible)?

TREASURER:

Look, I am not going to talk about future movements in monetary policy but I will talk about the target, which is a target I set, which was consumer inflation of 2 to 3 per cent over the course of the cycle. 

JOURNALIST:

So it wouldn’t (inaudible)?

TREASURER:

Well I am just explaining to you the target which I set. 

JOURNALIST:

Do you think there is going to be a great deal of interest in those inflation figures, I think at the end of October particularly if we are thinking about a November election and is there going to be more interest than ever in that inflation rate occurring?

TREASURER:

I think there is always a lot of interest in inflation.  Surprisingly enough I find there is more interest in inflation these days when it is low than when it used to be high.  Bear in mind the average, the average, through the course of the 80s was over 5 per cent and there were times in the 80s when it was much higher than 5.  But you see I think what has changed is that economic policy has improved so much that an inflation, I think it has averaged 2.5 per cent, so people now get excited as to whether it is closer to 2 or whether it is closer to 3.  I mean the important thing is that it is in our band of 2 to 3 and it’s not where it used to be above 5.

JOURNALIST:

So you have set your own bar too high?

TREASURER:

No, I have set the bar and the bar is 2 to 3 over the course of the cycle and the good news is we have been bang on in it.

JOURNALIST:

If the Reserve does feel the need to hike after that October CPI figure in November there would be no reason why it shouldn’t, if say there was an election campaign on at the time?

TREASURER:

I am not speculating on movements in monetary policy.

JOURNALIST:

(Inaudible) Swan, the Labor Party should look at this (inaudible) brown paper bag affair?

TREASURER:

Well you see, I am no expert on ALP rules and it wasn’t until Greg Rudd was forced to leave the Labor Party that I realised that any Labor member - any member, not a member of Parliament - apparently any Labor member who donates to another political party must be expelled.  Let me say, I have no objection to Greg Rudd donating to the Liberal Party, I think it is a good thing and I don’t think he should be expelled, I think he should be entitled to donate to whoever he wants to donate, and certainly as a member of the Liberal Party I am never going to regard that as a crime.  But when that came up apparently it transpired that there are Labor Party rules that say if you give to another political party you must be expelled and Kevin Rudd’s brother was therefore forced out of the Labor Party.  Well, I ask this question: how did Wayne Swan give money to the Australian Democrats?  And why isn’t the rule being enforced against Wayne Swan?

JOURNALIST:

Wasn’t there an AFP investigation that basically said there was no evidence against him?

TREASURER:

No, there was an AFP investigation which found that he had donated to the Democrats and the AFP was looking at the law, but this is ALP rules.  The ALP has its own rules that say if you give to another political party you must be expelled.  Now Greg Rudd has been expelled, could somebody please explain why Wayne Swan wasn’t expelled?

JOURNALIST:

He’s resigned.

TREASURER:

Pardon?  Or resign, he could resign.

JOURNALIST:

Greg Rudd resigned.

TREASURER:

Greg Rudd resigned; Greg Rudd resigned because he accepted that he was up for expulsion under the ALP rules.  Well, I won’t be choosy.  If Wayne Swan chooses to resign I will accept that as the rules being enforced.

JOURNALIST:

You have got three MPs in Queensland who are under investigation, if any of them get charged will they be flung out straight away?

TREASURER:

Well…..

JOURNALIST:

Kevin Larkins was, you called for him to be thrown out because he was charged with something, if your three in Queensland get charged with anything should they be thrown out straight away?

TREASURER:

Well let’s see how the enquiry concludes because I read in the paper that there might be a development.  I don’t know, I have no knowledge.  Let’s see.

JOURNALIST:

Mr Costello, did you an your supporters meet with John Howard’s camp yesterday to demand a (inaudible) transition to your leadership?

TREASURER:

No.

JOURNALIST:

No meeting at all?

TREASURER:

No.

JOURNALIST:

No discussion about (inaudible) put forward to talk about (inaudible) in the coming months?

TREASURER:

No.  Would you like to tell me who was allegedly there?

JOURNALIST:

Don’t you want to be leader?

TREASURER:

Perhaps I wasn’t invited.

JOURNALIST:

Do you still want to be leader, Mr Costello, do you want to be leader?

JOURNALIST:

What do you think about the polls?  Are you on the way back?

TREASURER:

Look the polls will come and the polls will go and I don’t read a lot into the fortnightly movement in the polls, the only thing that I focus on is doing my job and making sure that Australians can find work.

JOURNALIST:

Could the Government do a better job of selling itself, has it been failing in selling its achievements?

TREASURER:

Look I just think the Government has got to focus on what it is there for: help people find work, keep their houses, make businesses profitable so that they can give jobs, educate our young people and look after our old; that is what we have got to focus on.

JOURNALIST:

Mr Costello, do you agree….

TREASURER:

Last question.

JOURNALIST:

Same sex couples, do you agree that the partners of (inaudible) the same entitlements as if they were heterosexual couples?

TREASURER:

Look I think the Government has made a lot of moves in this area, particularly in the area of superannuation, which is something I have pushed; the rights of people in co-dependent relations to superannuation entitlements, and I think that was a very good reform.  Thank you.