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 26/10/2007

Interview with Virginia Trioli
702 ABC, Sydney

Friday, 26 October 2007

8.30 am

SUBJECTS: Afghanistan, Chinese economy, interest rates, Paul Keating, election, drugs in the AFL

TRIOLI:

Treasurer, good morning.

TREASURER:

Good morning, Virginia.

TRIOLI:

We have to steel ourselves for more Australian deaths in Afghanistan, don’t we?

TREASURER:

We do.Well, we do not want to have any more Australian deaths in Afghanistan, of course not.

TRIOLI:

But we have to steel ourselves for the reality.

TREASURER:

But the fighting is very intense and it has been dangerous for some time, and this is a terrible tragedy.Our heart goes out to the family of the trooper, to the SAS, to the Australian Defence Forces.It’s a very difficult time for them.But the fighting is very intense and it has been for a while.There hasn’t been much reporting of it back here in Australia because it is in such a remote location but the situation is extremely dangerous, and the fighting is intense.

TRIOLI:

Do we have in the Australian Government’s view enough of an international force, a large enough international contingent, including us, to both get the job done and to keep all the troops safe?

TREASURER:

Well, the Australian troops are at the really front line in Afghanistan.The SAS are Australia’s crack elite troops and they are at the front end, they are there to protect reconstruction forces, to engage the Taliban, to break up rebel strongholds.We have allies there from NATO and, of course, we are working with the Dutch.But the Australians are doing the heavy lifting and they really are at the front end of the plane.

TRIOLI:

If there are other NATO forces helping us doing the heavy lifting, would that help?

TREASURER:

Well, we appreciate all of the contributions that come from NATO but this is one of those cases where the Australians are the frontline troops. We are actually at the pointy end of the battle here.

TRIOLI:

And that is something we just have to accept?

TREASURER:

Well that means the risk of casualties is high.We’ve had two in quite a recent period of time.We’ve had many other incidents.We’ve had other people who have been wounded and I am afraid that with a resurgent Taliban the battle is not going to get easier.

TRIOLI:

You’ve said that this huge Chinese growth can’t continue and we can expect a huge tsunami of instability.This is part of your continuing argument against the Reserve Bank lifting interest rates.We have of course an independent Reserve Bank.It is their job to decide.Why do you bother with this continuing argument?They have to make up their own minds.

TREASURER:

It has got nothing to do with the Reserve Bank or its meeting.

TRIOLI:

You can seriously argue that in the context of an election campaign?

TREASURER:

This is an observation about the global economy, looking out over the horizon and the point I made yesterday when I was asked about Chinese growth is that I think Chinese growth will continue.It will go in fits and starts.It won’t be even growth.It has a long way to go.But the Chinese at some point will have to make a decision on their exchange rate.At the moment it is fixed, and most people would say it is well below what a market would value it at.And the day they make the decision, the day they decide to float their currency, you will get a huge reversal of financial flows around the globe which will affect all exchange rates.That is why I compare it to a tsunami.You will have the seismic centre but it will repercussions and waves right around the globe and even in the lead up to those sorts of discussions, you are going to have a lot of volatility as you are currently seeing on exchange markets at the moment.

TRIOLI:

But then that would have to be considered that this global situation, the waves of effect on a country like America, like Australia as well has then got to be considered in the context of what the Reserve Bank Board might decide to do.That’s something they are going to consider as well, yes?

TREASURER:

This is not something that is going to happen in the next couple of weeks, this is something that could happen in a year’s time or it could happen in five years time.That is what I am talking about.But you are seeing a lot of volatility in international financial markets at the moment.Virginia, I think during the period I’ve been Treasurer, the Australian dollar has been as low as 47 cents against the US dollar, and I think now it is around 90 cents, that’s double over recent years. Andyou see it in financial markets where you have the US sub-prime that sends ripples right throughout the global economy which we are currently seeing.Now, with the shape of the world changing, with the emergence of China, the possibility that China will come into a more democratic framework, that it will get more flexibility in its economy, this will be good for the world overall but there is going to be a lot of dislocation along the way.

TRIOLI:

Treasurer, if rates go up, if interest rates go up, it’s your fault isn’t it?

TREASURER:

Virginia, let me put my record on the table.Interest rates today are lower than they were when I became Treasurer.Under the previous Government they averaged 12¾ per cent and under me they averaged a bit above seven - five percentage points lower.They are lower today than when I became Treasurer, and that is after 2.2 million new jobs have been created in Australia.The fact that we can have lower interest rates after we have halved the unemployment rate shows you how far we have come.

TRIOLI:

Yes, but that’s not quite my question.My question was that if rates go up, it would be your fault?

TREASURER:

Well, my answer is, my record on interest rates is to have lower interest rates whilst creating the lowest unemployment in 30 years.Virginia, people wouldn’t have thought this possible, to actually have lower home mortgage interest rates, notwithstanding the fact that we’ve taken the unemployment rate down from eight point something to four point something.It wouldn’t have been possible in Australia ten years ago.And the only way it could be done was by balancing the Budget, and paying off debt, reforming the docks, improving industrial relations and getting a better monetary policy.All of the things we have done.

TRIOLI:

So you don’t accept responsibility if that happens for those five interest rate rises?In order to get clarity here, the flip of the argument, if we were talking here about a Labor Government and you were on the shadow benches, you would be looking at Wayne Swan and saying ‘it’s your fault, you can’t keep interest rates low, they are going up’, so…

TREASURER:

No, no, no, I look at Wayne Swan and I say, interest rates were in fact much higher under Wayne Swan and the Labor Party.

TRIOLI:

So the argument is don’t complain they’re going up but …

TREASURER:

No, no, no.The argument is that the Labor Party had interest rates at 12¾ per cent on average and under me they have been at seven point something.That’s five percentage points lower.

TRIOLI:

So they go up five times but we still have to be thankful that they are lower?

TREASURER:

Well, hang on, they’ve come down.The point I am making here Virginia is that they have come down many more times than they have gone up.

TRIOLI:

But they have gone up, Treasurer, and they may go up again.

TREASURER:

No, the point is they have come down many more times than they have gone up.They are lower than when I became Treasurer and we have created 2.2 million more jobs.

TRIOLI:

So, don’t worry, be happy.

TREASURER:

No.Be very wary of the guys who had them at 12¾ per cent on average and a peak of seventeen.I don’t think you have ever seen a 17 per cent interest rate under me.

TRIOLI:

Yesterday, Paul Keating described you as ‘lying in a hammock for ten years’ and said that you were ‘the laziest, the most indolent, the most unimaginative Treasurer in post-war history’.Are you offended?

TREASURER:

I love seeing Paul Keating out on the media.And I would say: Paul, keep it going, remind people of what it is like under a Labor Government.And you saw all of the old vitriol coming out and it reminds people of a million unemployed, 17 per cent interest rates, a budget deficit of $10 billion, Commonwealth debt at $96 billion.And I just say to people: if Kevin Rudd gets back, Paul Keating will be across your TV screen every night.

TRIOLI:

So you think it plays very well for the Coalition Government and against the interests of the Labor Party to have Paul Keating out there?

TREASURER:

Well it reminds people of what Labor is like.You know, people will have forgotten Paul Keating – a million unemployed, 17 per cent interest rates, $10 billion budget deficit and $96 billion of debt which we have now paid off – and you know, when you see Paul Keating and you see all of the vitriol and all of the insults and all of the lionising of the trade union movement, just remember what Labor is like.

TRIOLI:

Well we have actually got some support in his (inaudible) for bringing the trade union movement back into the economic argument and speaking there (inaudible) of history and of record.He says, and the former Reserve Bank Governor, Bernie Fraser agrees with him, that it was his Government and the unions that got (inaudible) to contain inflation and said the ACTU was essential to that and Bernie Fraser agrees.Now that is not the imagine of the tattooed, scary ogres that the Coalition describes.They are apparently the founders of the economic success that you now claim and Bernie Fraser agrees.

TREASURER:

Well I think Mr Keating had a policy to bring inflation down which was to put the economy into recession.You recall he said we had to have a recession.‘This is the recession we had to have’, Paul Keating said.And that was the way he had of controlling inflation.Now, you can bring inflation down with a recession but he put a million people out of work, destroyed businesses, destroyed kids opportunities.Can I say that the task of economic policy is not to have a recession.The task of economic policy is to avoid a recession.That has been our policy.That is why there are more Australians in work than ever before, 2.2 million more Australians in work than when the Government was elected.

TRIOLI:

So Bernie Fraser is wrong?You dispute (inaudible).

TREASURER:

Well I didn’t see what Bernie Fraser said, but…

TRIOLI:

Oh Treasurer, I am sure you saw what Bernie Fraser said…

TREASURER:

No, no, I haven’t, but…

TRIOLI:

Would you like me to read it to you?

TREASURER:

I am telling you…

TRIOLI:

(inaudible) Bernie Fraser…

TREASURER:

Okay, sure.Okay.

TRIOLI:

Let’s get it on the record.‘It is absolutely true that the unions and the Government got on board and we were the only country in the world to (inaudible) where the unions supported a central bank inflation target.’That is a pretty responsible thing for unions to do, isn’t it?

TREASURER:

Well, I don’t know what Bernie is talking about there because Bernie never had an agreement with the Government.

TRIOLI:

He is speaking there about the Accord.

TREASURER:

Yes, yes. Bernie is a supporter of the Accord, everybody knows Bernie is a supporter of the Accord.What I did as Treasurer, is I entered into an agreement with the Reserve Bank Governor for inflation targeting and central bank independence.Now, the union movement has never entered into any agreement with the Governor of the Bank, this is quite a different policy.Bernie is saying there that he liked the trade union movement, he liked the Accord.Bernie was always a supporter of the Accord.I think if you look at the achievements of the Accord, by today’s standards they do not look very good at all.The great achievement of the Accord was to depress real wages.That was its task.And in fact, you will recall under the Labor Government real wages fell.We have taken the view that the important thing is to increase real wages in a sustainable way and under us they have increased 20 per cent.Now take your pick.Do you think it is better to depress the wages or to increase them?I think it is better to increase them as long as you do it in a sustainable way.

TRIOLI:

It is a quarter to nine on 702 ABC Sydney and the Treasurer, Peter Costello is with me this morning.

Treasurer, you must be disappointed and perhaps even a little shocked that a set of $34 billion tax cuts earned nary a flicker in the polls, no bounce at all.Do you fear the electorate has just stopped listening and is a six week campaign for you now potentially dangerous in that respect?They have heard what they need to hear so far and have made up their minds (inaudible).

TREASURER:

You see, our tax plan is actually designed to build a stronger economy.And that is why it has been brought down.It has been carefully thought out…

TRIOLI:

Yes, but my question goes to the response to your tax plan.

TREASURER:

Yes, but you are saying, oh well, these tax plans are designed for polling.

TRIOLI:

No, no, just that you would like to see some happier response to it.

TREASURER:

No, no.What I would like to see is I would like to see a plan to build Australia’s economy and this is the plan.And I would say to people: who else has got a plan to build Australia’s economy?Now you say, oh well, you must bring it down to the polls.I actually bring it down to…

TRIOLI:

No, no, I didn’t say that Treasurer.It was more that you would like to see an appreciation because you are trying to get re-elected.

TREASURER:

But I bring these plans down to build Australia’s economy.It is the only plan going.And it is a plan to modernise our tax system.And you know, I will be explaining that plan to people.There is no other plan going in this election.There is only one economic plan and it is mine.Now, the Opposition could have said well that plan is no good and brought down their own, but they came out and they said, we like your plan so much we will ‘me too’ it.

TRIOLI:

Well if (inaudible) seem to like your plan so much (inaudible).

TREASURER:

Well I don’t know about that.I don’t think the population is going for anybody else’s plan.I haven’t heard anybody else argue one.You see Virginia, we are in a different world here.Unemployment is at 4.2 per cent.We have had the longest period of growth in Australian history.We are no longer coping with a million unemployed.Now the task is to make sure we have got work for everyone who wants a job.And now we need a plan to build a strong economy stronger.And if we do that then we can afford all of the social services that Australians want and demand.But you have got to do it by having a plan for the economy.

TRIOLI:

Let’s talk about the electoral response to both sides of the political argument at the moment.I wonder why you did the silly grin and staring down of Kevin Rudd during the election debate on Sunday night.Do you really think voters appreciate that kind of behaviour?

TREASURER:

Well look, again I couldn’t even see Kevin Rudd.

TRIOLI:

Oh, so you say you weren’t doing that?

TREASURER:

No, of course not.I couldn’t even see him.

TRIOLI:

It is the footage that (inaudible)?

TREASURER:

No, I don’t think so, Virginia.

TRIOLI:

So did you, you…

TREASURER:

I didn’t watch what you are referring to.I don’t think so.

TRIOLI:

All right.What is the…

TREASURER:

I don’t think…

TRIOLI:

…flash at the view of you looking rather amused.

TREASURER:

You might have seen me smiling.There is no offence in smiling, Virginia.

TRIOLI:

Well the observers on the floor who said that you were doing (inaudible).

TREASURER:

I don’t think so.I don’t think so.

TRIOLI:

Okay, well you are debating the shadow Treasurer next week.Do you think the worm will like you more than it likes the Prime Minister?You said you are not afraid of the worm and you don’t mind if it is used.

TREASURER:

You know, the thing about the worm Virginia, is it just depends entirely on who they have got in the audience.Fifty people, if you have 50 people who are disposed to Kevin Rudd, the worm will be disposed to Kevin Rudd.If you have got 50 people who are disposed to John Howard, the worm will be disposed to John Howard.And the worm isn’t an independent intelligent being that makes decisions on political events.The worm is just a function of the 50 people who you have got in the studio.So that is why you know, the press and the media gets all excited about the worm as if the worm has an independent life.The worm is just a function of whoever the network put in the studio.

TRIOLI:

Well a big discussion was about the response to those people who were in the studio.But you seem to be implying there, and I will try and clarify this you seem to be implying that maybe the audience was stacked.Is that what you are suggesting?

TREASURER:

I am not saying it is stacked.I am just saying the worm is a function of whoever was there.I am not sure how they got people there.But to say that because a worm preferred somebody over another person is just to say that the 50 people that they got in the studio that night preferred that person over another person.I don’t think there was any great science in those 50 people.

TRIOLI:

Treasurer, if John Howard leads this government to oblivion after his party asked him to leave, then how should his political legacy be recorded?

TREASURER:

Well, you wouldn’t expect me to answer a question like that with an assumption like that, Virginia.

TRIOLI:

I thought I would give it a try.How confident are you feeling?

TREASURER:

It is an open election.This is an election that could be won by either Labor or the Coalition.

TRIOLI:

Do you think you could come back at this stage?

TREASURER:

It is an open election, oh yes.There is four weeks to go and on polling day I think it is still an open result.Oh yes, I do.

TRIOLI:

And you think people are still listening?That six weeks is not going to tire them out, exhaust them or bore them senseless, Treasurer?

TREASURER:

Look, you know, I admit that for much of the population they switch off politics.I admit that and I am not going to pretend it is the most sexy business going around.But…

TRIOLI:

Is that a comment on your own (inaudible) Treasurer?

TREASURER:

But for much of the public they will be thinking about the horses or the beach or you know, for a lot of that period.But I would say this: an election will determine where our country goes over the next three years.It will determine who will manage Australia’s trillion dollar economy, who will be responsible for jobs and it is worth thinking about very carefully because it is your future.

TRIOLI:

And probably on one of the most important issues of the day.Should Ben Cousins get a job back with the West Coast Eagles?

TREASURER:

Look, I don’t want to talk about an individual case because you know, I don’t know all of the circumstances in any individual case.But I will make this general point, that I don’t think the AFL has been tough enough with its drug testing regime.They have had some obvious problems.As I understand it they are going to review their drug testing guidelines and I think they ought to get tougher.

TRIOLI:

Good to see you again Treasurer.Thanks very much.

TREASURER:

Thanks Virginia.