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 03/10/2007

Doorstop Interview
Commonwealth Parliament Offices
70 Phillip Street, Sydney

Wednesday, 3 October 2007
12.30 pm

 

SUBJECTS: August Retail Trade figures, economic management, industrial relations, US-Australia relations, global markets

TREASURER:

Retail Trade figures released for August indicate that there is still a lot of consumer confidence in the economy, which is being underpinned by strong employment and people are seeing rising wages.  As a consequence of that, the economy continues to grow and it is being led by business investment.  And the welcome news from the trade figures out today are that we are seeing the volumes of exports in relation to mining and non-rural exports grow.  So I welcome the fact that the economy continues to grow, it grows in a sustainable way, supported by good strong business investment and underpinned by the lowest unemployment rate we have now had in more than 30 years.  Now, it doesn’t mean that there aren’t risks – there are risks.  There are big risks coming out of the international economy with oil prices and the instability in the United States, but we stand well placed with experienced management to cope with these challenges in the future. 

JOURNALIST:

So things are looking so well Treasurer, no problem with the other side taking over then?

TREASURER:

Well of course, when Labor was in government we weren’t in territory like this.  We didn’t have unemployment at 30 year lows, we didn’t have interest rates below 10 per cent, we didn’t have balanced budgets and we had $96 billion worth of debt.  So we have made great strides over the last 10 years or so, but the challenges are going to keep coming at us and we need strong economic management to deal with them. 

JOURNALIST:

Treasurer, (inaudible) an interest rate hike before the election?

TREASURER:

Well of course, we see today that there has been no movement in interest rates.  That is a result of the Reserve Bank carefully assessing the economy and inflation prospects.  Whilst we obviously have challenges to inflation, particularly coming out of oil prices, the recent figures showed that inflation is still within our band, considering the fact that we are now at a terms of trade peak.  And bear in mind what we are looking at is inflation over the course of a cycle.  And given the fact that we are at a terms of trade peak it is pleasing that inflation is still as contained as it is.  Now, let me say this: if we go backwards on industrial relations we will go backwards on inflation.  There is no doubt about that.  On previous terms of trade peaks like this, Australia has had double digit inflation.  That is because we didn’t have an industrial relations system as good as the one we have now moved to and that is why we have to keep industrial relations reform in this country.

JOURNALIST:

On the WorkChoices report, you labelled the authors union hacks.  It turns out that the Government funded half of that and they are now talking about suing you.  What, are you sorry that you made those comments and what is your response?

TREASURER:

The comment I made was that it was 50 per cent paid for by the New South Wales union movement which is fact.  And the New South Wales union movement is not independent and it is not neutral in this election.  The New South Wales union movement is affiliated to the ALP.  It has raised a huge war chest to campaign against the Coalition.  Every one of Labor’s candidates and members in this election will be a union member – 70 per cent of Labor’s front bench are union members and the trade union movement is not independent in this election.

JOURNALIST:

But you are not sorry for calling them union hacks?

TREASURER:

No, what I said was that 50 per cent of their funding was from the union movement.  Absolute fact.  Absolute truth. 

JOURNALIST:

On another issue, there is another report out today saying that Australians, the way we view the US – the United States – has come down about 30 per cent.  Does that concern you, that the way that people look at the way the US is being run?

TREASURER:

Look, I think Australians understand the importance of the alliance we have with the United States.  The United States is a country which has many of the same aspirations as us.  We have strong cultural exchanges, we have strong people-to-people links.  It is also the worlds greatest economic power and absolutely critical to the future of the globe.  And so people understand that the alliance we have with the United States is very important.  And they also understand that in an uncertain world you want to have strong friendships.  Now, that doesn’t mean that on all occasions all Australians will agree with everything that the US does.  But it is to underscore the fact that it is better to have the US as a friend and ally in a very uncertain world. 

JOURNALIST:

(inaudible) how pivotal will the CPI figures be in determining whether rates remain on hold or increase?

TREASURER:

Well the CPI will give us an indication of where inflation has been in this quarter just passed – the September quarter – it will tell us what happened in the September quarter.  Now, we know some of the things that would be feeding into inflation in that quarter will be food, because of the drought.  We know that oil prices have been high and that will affect the Consumer Price Index.  But the good news is that under our industrial relations system, you are not getting wages breakouts like we used to have and you are not seeing double digit inflation as we used to see when the terms of trade went up in the past.  So it will give us a good reading on where we went in the last quarter and it will also be a good guide as to the future way in which we need to run economic management. 

JOURNALIST:

Treasurer, that survey on the US alliance also says that Australians are more concerned about climate change than Islamic fundamentalism.  Has the Government misjudged the electorate?

TREASURER:

Well I think Australians are concerned about climate change, there is no doubt about that.  And it is important that the Government leads in this area as we are with our emissions trading system and our solar power plans and our hot water system grants and our photovoltaic grants for individual households so we need to lead.  We also need to keep the public safe.  Let’s not forget that 88 of our fellow Australians were killed by terrorists in Bali.  And the Australian public expects that its government will keep them safe from death and bombing by terrorists and we will.

JOURNALIST:

(inaudible)?

TREASURER:

I think what you are seeing in today’s Retail Trade figures is you are seeing a lot of consumer confidence – they are the figures for August.  They are solid and the consequence of that is that consumer demand will continue to add to economic growth, and economic growth at the moment is being led by business investments.  That is the good news.  Business in profitable, business is investing and we are lifting the capacity of the Australian economy. 

JOURNALIST:

Treasurer, has the worst of the sub-prime fallout passed?

TREASURER:

I don’t think so.  I think the sub-prime fallout has a way to go.  The level of default and the size at the moment in the United States means that there are still people holding a lot of risk.  And some of that will be in banks and other financial institutions.  The amounts are yet to be fully disclosed.  But I can say this: the Australian banks are profitable, well capitalised, we have done stress tests on the Australians banks and the Australian banks are in good condition.  It may well be that the fallout affects mortgage originators and we seen some of that already but the full allocation of liability around the globe has yet not been fully determined.  Last question.

JOURNALIST:

The Australian dollar went up on the back of the retail sales report and you mentioned just there exporters would be hurt by that.  Are you concerned that that will continue to be the case, that exporters will suffer in that?

TREASURER:

Well the Australian dollar is now at 18 year highs and nudging 90 cents against the US dollar.  Many Australians will think that is a good thing because if they travel overseas their dollar will buy more.  And it certainly means that imports are cheaper.  But from an exporters point of view that puts their prices up.  It doesn’t make life easier for them.  It certainly is another difficulty that our rural producers face – terrible drought and now a high exchange rate.  So this is a very mixed thing, a high exchange rate.  For some people it is good, for some people it is a real economic challenge. 

JOURNALIST:

Would the Government contemplate doing anything?

TREASURER:

No, the Government allows the exchange rate to freely trade in an open market.  Thank you.