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

Doorstop Interview
Joe Hockey's campaign office
Crows Nest

Friday, 26 October 2007

11 am

SUBJECTS: Global financial markets, economic management, interest rates, Paul Keating, election, Joe Hockey, environment

JOURNALIST:

Treasurer, the tsunami comment, the Prime Minister doesn't seem that keen on that as an analogy. Have you (inaudible)?

TREASURER:

You have got to bear in mind at the moment that you have huge trade flows going around the world, in particular from China to the United States. And as the Chinese economy develops you will at some point see a readjustment and a realignment on world exchange rates. What we know in world financial markets is that a movement in one place creates ripples all through the world. We saw it with the sub-prime fallout in the United States, we saw it with changes to the Shanghai stock exchange recently. We will see it as China emerges and moves more towards a more market economy. And this will take quite a deal of global readjustment and it will change the shape of the global economy as it occurs.

JOURNALIST:

Mr Costello, what sort of time frame are you talking about? 18 months, 2 years, 3 years.

TREASURER:

Well, I think at some point the Chinese will free their exchange rate. It could happen in a matter of years, it could take longer. It has been a sore point on the relationship between the US and China for some time but it is something that over the medium term will require great adjustment. And even in the interim as we work towards that you will see adjustments going on. You have seen them going on all at the moment in relation to the exchange rate. When I was Treasurer in Australia, the exchange rate has been as low as 47 cents against the US dollar, it is now near 90. Nearly double. These are massive adjustments that are going on in the global economy and they will continue.

JOURNALIST:

And do you see an end to the Chinese resources boom as a result of this?

TREASURER:

Well I think what you will see is you will see strong growth in China followed by corrections. There will be setbacks. They will have to adjust their economy, they will have to deal with their exchange rate. I think the Chinese economy will continue to grow but it won't grow in a controlled and even way. It will grow with fits and starts and there will be great global realignment as that process takes place.

JOURNALIST:

Are you saying this is a recession we have to have?

TREASURER:

No I don't believe we should have recessions. Labor called a recession. Paul Keating called a recession in 1990 because he couldn't control inflation. The reason why we have got more Australians in work now than ever before is that our Government, through careful and steady management over 11 years has kept the Australian economy out of recession. One of the few countries in the world that has not gone into recession over the last 11 years.

JOURNALIST:

(inaudible) Treasurer...?

TREASURER:

What's that?

JOURNALIST:

Would Labor manage us towards a recession again given their (inaudible), is that what you are saying?

TREASURER:

Well Labor has neither the experience nor the policy nor the plan. Labor has no experience in economic management. They have no policy and they have no plan. They have no plan for economic management. Now you saw the plan I laid down on the first day of the election campaign to make Australia's tax system more competitive and to build our economy. It took Labor five days to copy 91½ per cent of it and the 8½ per cent they didn't copy they got wrong.

JOURNALIST:

What is your advice to the Reserve Bank Board as it sits down to adjust the interest rate or not adjust it?

TREASURER:

Well the Bank has an inflation target. It is a target that has been set between me and the Governor and the Bank works to its target.

JOURNALIST:

Is the interpretation of that target (inaudible) at the moment? Is there too much emphasis on the headline CPI rather than the underlying?

TREASURER:

Well there is no doubt what the target is, it is in the published document. The target is 2 to 3 per cent consumer price inflation over the course of the cycle. And in fact, that is what we have delivered. We have delivered 2½ per cent over 11 years.

JOURNALIST:

Where do you think the (inaudible)?

TREASURER:

I think Australians today will have got a reminder of what Labor was like when they saw Paul Keating out with all of his insults and venom. They will be reminded of 17 per cent home mortgage interest rates, one million unemployed, Labor putting the country into recession. And they ought to be concerned that if Paul Keating now feels emboldened enough to come out before the election, imagine what he is going to be like if Kevin Rudd were elected. Not only Keating, not only Combet, but Joe Macdonald, Kevin Reynolds. Every Australian should look at that chilling footage where you saw those unionists proclaiming that under Kevin Rudd - they will be back.

JOURNALIST:

Treasurer, did you hear Tony Abbott on 2UE this morning claiming that there is a place for strike, that hospitals are under-funded and that some people are tired of John Howard?

TREASURER:

No I wasn't listening to 2UE this morning, I am afraid. I was doing my own radio programme.

JOURNALIST:

Mr Costello, is Bernie Fraser a socialist?

TREASURER:

Bernie Fraser is somebody who has been a Treasury Secretary, he is somebody who has been at the Reserve Bank and he is somebody who has worked for union super funds. His career speaks for itself.

JOURNALIST:

Treasurer, when you became Treasurer, were you under the impression there was a convention that rules the Reserve Bank out of an election campaign?

TREASURER:

Look, the monetary policy that is practiced in Australia is the policy that I have put in place in 1996 with Ian Macfarlane. I renewed it when I reappointed Ian Macfarlane and I renewed it when I appointed Glenn Stevens. It is in an agreement between me and the Governor. The documents are published, they are transparent, you have only got to read them to know what they mean and that is the policy that we practice in Australia.

JOURNALIST:

Mr Costello, there has been a boom in betting on the election. What do you feel about the increase in betting on elections and particularly by people with inside knowledge?

TREASURER:

Well I have a feeling that is a curly question there. Your next question is going to tell me who these insiders are, is it?

JOURNALIST:

No, not at all. Your position on gambling is that...

TREASURER:

Oh well no, I don't bet on elections. The best advice I ever had was from Wilson Tuckey who is the largest race horse owner in Parliament. He said: ‘only bet on animals, never bet on humans. Animals are more honest'.

JOURNALIST:

Mr Costello, we haven't seen much of you in the campaign so far even though it was supposed to be the team with (inaudible) and John Howard. Is this the beginning of your Peter Costello campaign?

TREASURER:

I announced the plan for Australia's economic future on the first day of the campaign; I campaigned with the Prime Minister the next day. I have been through three states since then. And I call tell you, I am working very, very hard and you will continue to see me working very hard over the next 30 days.

JOURNALIST:

Mr Costello, when you are Prime Minister, a couple of years into the next term which you probably will be, any thoughts on who will be the Treasurer at that point? Is it the man standing behind you?

TREASURER:

Well let me say this. Joe Hockey is a very fine Minister and a very fine Member. Joe has worked with me on, early in his Ministerial career and he has gone on to greatness since. And whatever role Joe has in the future Parliament I am sure it is going to be a major one on behalf of the people of North Sydney.

JOURNALIST:

In your campaign, do you detect a degree of tiredness in the community for the Prime Minister who has been there for a long time?

TREASURER:

No. What I detect as I campaign around Australia is that people are concerned about who is going to manage a $1 trillion economy and I detect a lot of concern that 70 per cent of the Ministers in a Rudd Government would be ex-union officials. That is what I detect. Last question.

JOURNALIST:

Mr Costello, you are in an electorate which is, probably likes, you know, low taxation rates and stuff like that, but we are hearing that people care about the environment, about IR. Is that surprising to you?

TREASURER:

No I think it is important to address all issues. Can I say this about the environment. The Government has a programme to move towards the most comprehensive emissions trading scheme in the world. We have instituted rebates for solar electricity, for solar hot water tanks. That we are helping all schools in Australia to build water tanks, that we are dealing with low emissions new energy sources. But I will make this point: we couldn't have invested the record amounts that we are now investing in environmental measures if our economy wasn't strong. If our Budget was still in massive deficit, if we were still carrying $96 billion a year, if we were paying $8½ billion in interest payments, we wouldn't be investing in climate change measures. It is because we have done the economic work that we can now address these other things as well. Thank you.