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 05/11/2007

Interview with Leon Byner
5AA

Monday, 5 November 2007
9.35 am

 

SUBJECTS: Road & rail funding for South Australia, Trade Practices Act, ACCC, Republic, Economy, China

BYNER:

Peter, a whole myriad of issues to talk about. Let's start with road funding. The thing that will disappoint people in Adelaide today is that out of a $10 billion announcement, we didn't get a guernsey.

TREASURER:

Yes Leon. And I am announcing today $1.5 billion of road funding from the AusLink program for South Australia. This is South Australia's entitlement under AusLink. It will be in total $1.5 billion for integrated rail and road projects and amongst the projects that I will be announcing today will be more funding for the Dukes Highway - $80 million - for safety upgrades, widening of the Dukes Highway; $70 million for the Sturt Highway and $40 million for upgrading the Eyre Highway - it is about $190 million. And all of the projects will be outlined today and it is a massive investment in South Australia's road and rail infrastructure.

BYNER:

Is that part of the $10 billion that the Prime Minister spoke about on his super Sunday or is this over and above?

TREASURER:

The $10 billion was the amount allocated from our AusLink program. AusLink is our program to build road and rail in Australia. $10 billion was allocated from that for Queensland, New South Wales and Victoria. And I am announcing from that program today $1.5 billion will be allocated to South Australia.

BYNER:

Okay. What proportion of that is likely to be spent from the South Australian border towards Adelaide for upgrade?

TREASURER:

Well as I said, the Dukes Highway will be upgraded with $80 million for widening, overtaking lanes and reconstruction. The other regional roads that will be part of this program will be the Sturt Highway, Port Wakefield to Port Augusta, the Stuart Highway, the Eyre Highway and the Port Wakefield bypass.

BYNER:

Now you also mentioned in your announcement when you started of (inaudible). Are we talking here about rail system? What proportion would you be offering for rail?

TREASURER:

Well the AusLink program is really for roads which are important to our economy. They are not local roads, they are not State roads. The rail projects that we are going to fund are in the freight area such as grade separation of Goodwood and Torrens Junctions, Adelaide to Kalgoorlie, grade separation on the Stuart Highway. And we are also going to study the Adelaide Hills rail viability, something that Andrew Southcott has been very keen on.

BYNER:

This is what, to change the traffic direction through the Hills and put it somewhere else?

TREASURER:

Yes. It will examine the viability of current line versus alternative solutions including impacts on the Adelaide Hills.

BYNER:

And this money that you have announced now is to be spent over what period of time?

TREASURER:

It is to be spent under our AusLink 2 Program over 2009-2014.

BYNER:

So, you really have to divide it up annually or when the project is going to happen?

TREASURER:

Well these projects Leon, if you don't build a new road in a day or in a month. What you do, is you announce that you are going to fund it, then of course you have to draw the plans, there might be some land resumption some of these require, then you put out the tenders and then you start building. You can't do all of this construction just in a couple of months or a couple of years so what we do is we lay out our program, this is over 2009-2014, our AusLink program. And we nominate the projects, we put the money up. In some cases State Governments will have to come to the party with construction and all the rest of it. But it gives a long-term goal and plan for strategic road and rail.

BYNER:

All right. Before I go to our callers, if you have a question for Federal Treasurer, Peter Costello - 8223 0000. There are those who will say that if you have announced $10 billion that South Australia rightfully, being 8 per cent of the population approximately, should get 8 per cent of that.

TREASURER:

Well what would 8 per cent of $10 billion be?

BYNER:

Well, we will do the maths on that but it is more than...

TREASURER:

It wouldn't be more than $1.5 billion. $1.5 billion out of $10 billion to be 15 per cent, wouldn't it?

BYNER:

So are you saying that we are, therefore, doing better than we might reasonably expect?

TREASURER:

Well I don't want to go into who is doing better, Leon. Because the moment I say South Australia is doing better than other States I will have complaints from other States. But this is a very fair allocation and it is very fair to South Australia. These are the important projects that South Australians themselves would believe have to be funded and they will be. Now, the Commonwealth Government doesn't construct all roads throughout Australia. What we do is we lay out a plan for strategic roads which are important to the national economy. The States are then responsible for building state arterial roads and councils build the local roads. Now as part of our AusLink program this is very, very fair allocation and I think South Australia will welcome it very much.

BYNER:

8223 0000. Robert (inaudible) good morning.

CALLER:

Good morning Leon. Good morning Treasurer. I am actually ringing as a dairy farmer. I would be keen to get Wayne Swan's comment on this as well because I haven't heard anything from the Opposition. But I am very concerned about what is happening with the two major supermarkets and what I believe is unfair profiteering. At a time when we have got world record prices for commodities, we are only receiving about 43 cents farm gate for milk, we have got the wine industry now under attack from Coles and Woolworths, we have got the egg industry under attack, the pork and bacon industry and the list goes on, Treasurer. And I am wondering, whilst I appreciate what you have done for farmers with Exceptional Circumstances and other initiatives, we are just not hearing from the major parties, what you are going to do to address unfair profiteering at a time where consumers are paying massive amounts for food, it is affecting your good economic record when it comes to possible interest rate rises and at farm gate we are getting done over year in, year out by this duopoly. I am wondering whether you have looked at anti-trust laws from America and whether you can strengthen laws you already have by amendment so that we can actually get looked after for once and not done over.

BYNER:

Peter.

TREASURER:

Well, obviously we are always keeping the law under review, that is why we amended the law, I think two months ago when the Parliament was last sitting. I spoke to Leon about it. We amended the Trade Practices Act to stiffen laws against predatory pricing. These laws are now effective and they provide that where somebody has a substantial share in a market and engages in conduct for the purposes of lessening competition or wiping out competition or wiping out competitors, that will be a contravention of the Act. We have now increased the penalties under the Trade Practices Act so that you can be fined triple the amount of money that you make from any contravention. And let me make this point: we have just had the biggest, successful investigation and prosecution under the Trade Practices Act that Australia has ever seen in the issue of the cardboard cartel where $36 million of fines were imposed. And bear in mind, that is all highly relevant to the food industry because most food, somewhere between the farm and the market is packed in cardboard. So let me assure you that we have been very, very active in this area as has the regulator.

BYNER:

Well Peter, I think what Robert is saying is we have got a situation now where the grower is underfunded, can't even get subsistence in many cases and yet when you go to the shelf at the supermarket, you are paying the premium price. And there have been calls, and I am one them, supporting a code of practice from the paddock to the plate where we know exactly what is going on. Do you support that?

TREASURER:

Well I support anything which will tighten transparency but I would go much further than a code of practice. I have actually amended the law and made it a contravention of the law to engage in anti-competitive conduct. Now this passed, I think, two months ago and I have now funded the ACCC Leon, to the highest level ever in Australian history. It has shown that it could investigate cartel conduct in the packaging industry and I believe under these laws if there is any evidence or any contravention at all, it will investigate and the fines will be very severe.

BYNER:

Robert.

CALLER:

Yes well Treasurer, I wonder what your comments are when I listen. I came in from a 14 hour day milking the cows and listen to TV news the other night to see a chief economist saying that the major supermarkets and retailers are increasing their profit margin. Now at a time when consumers are paying higher prices for food because of the drought and export demand, and at a time when we are at enormous pressure, don't you think it is grossly unfair for those supermarkets to be increasing their profit margin over and above the wholesale costs for their imports?

TREASURER:

Well I would say to the economist that if the economist has evidence of collusion between the supermarket chains, you shouldn't be going on radio interviews, I will give him the number of Graeme Samuel. He should be going down there and giving the evidence. Now. Let's do something about it.

CALLER:

And Graeme Samuel has now got the teeth to be able to do that?

TREASURER:

Well not only have we amended the law as I said, but we have increased the penalties, we have funded the ACCC. You have just seen the biggest case in Australia's history.

BYNER:

So Peter, you are saying that your predatory pricing legislation will have an affect on this business of the farmer getting little and the customer paying (inaudible).

TREASURER:

If there is any collusion at all Leon, between major supermarket chains...

BYNER:

You don't have to collude. If you have only got one or two that rule the roost, you have got...

TREASURER:

No, no, no, no. If you have got two and everyone complains you have got two. That is what he is complaining about - the two major market leaders here. I would say to this economist, if he knows about this, you know, don't ring up Leon on the radio, I have got a regulator, I have funded him, he has got the laws, he has got the teeth, he has got the penalties, get on with it.

BYNER:

Hi Barbara.

CALLER:

Good morning. Peter, I would just like to ask you to comment on a Letter to the Editor in our RA magazine which says that of the $93 million worth of roads promised by the Howard Government prior to the 2004 election, only 4 per cent has been spent and now you have cut South Australia out of this promised Budget. Will we get anything spent on our roads?

TREASURER:

Well I have just said Barbara that the Government is setting aside $1.5 billion under our AusLink program for the strategic and important economic roads. $120 million for the Port Wakefield bypass, $80 million for the Dukes Highway, $70 million for the Sturt Highway...

BYNER:

Who makes that happen though? Now that you have announced it, who actually says, right, let's get in and do it?

TREASURER:

Well this is the point. The Commonwealth Government doesn't run a road construction authority. What we do is we allocate the money. Generally what happens is that the State Government road construction authority lets the contract. It can sometimes do it itself but generally speaking the contract is let by the road-construction authority in the State and we can't control the letting of those contracts. What we do is we fund them. And Barbara is quite right. There are occasions where I set aside the money and the road-construction authority either because it can't handle the work or for some other reason, delays on letting the tender. The Commonwealth Government doesn't actually run a road construction authority. What we do is we fund these things. That is a bit outside our control.

BYNER:

8223 0000. Treasurer Peter Costello, if you have a question, 8223 0000. Before we go to a break, how does it feel that if the Howard Government gets re-elected you will get to be the next Prime Minister? How do you feel about that?

TREASURER:

Well Leon, I have been in charge with managing the Australian economy now for a decade and it is probably the second most senior job in the country, it has taken every ounce of my work and I am used to being in government and I am used to doing the important things that people want and making tough decisions and people can judge me by my record.

BYNER:

So how do you feel about the fact that you are, if you win, set to (inaudible) and to take another step up the (inaudible)?

TREASURER:

Well the way I feel is that I am running in this election to continue to serve the Australian people. It has been an honour to do it and if I get the opportunity to serve them further it will be an honour to do so.

[Ad break]

BYNER:

(inaudible) Keith, good morning.

CALLER:

G'day Leon, g'day Peter. Peter, one of the most frustrating things for us so-called ‘punters' is that you guys never answer a direct question. The other day on the debate with Wayne Swan, you were asked to name three changes that would come about when you became Prime Minster. And you spoke for five minutes and didn't answer the question. And look, I have got another question too, why have you got a policy of no referendums on the death penalty but you do have one on the location of nuclear power plants? Let's have a referendum on one but not the other. And can you also tell us what the three changes would be when you become Prime Minister?

TREASURER:

Well, I take it, was it Keith?

BYNER:

Yeah.

TREASURER:

Keith, I take it you would like a referendum to reintroduce the death penalty, would you?

CALLER:

I'm unbiased on it, I am just talking about Government policy, why you chose to have a referendum on something like locating a nuclear power plant but you won't have one on the death penalty. I'm just interested.

TREASURER:

Well, Keith, let me say I don't think there is any need for a referendum on the death penalty because I don't think anyone is proposing at the moment or at all or ever to introduce capital punishment into Australia. The only reason why you would have a referendum is if you wanted to gather public support in relation to capital punishment and I'm not sure anybody is. That would be reason why you would be having a referendum.

BYNER:

Okay, let's clarify this. I guess there have been murmurings that there are some who would like a referendum on the republic. If the Howard Government is re-elected and through the term you get to be Prime Minister, would that be a matter of urgency or would that be something you wouldn't worry about too much?

TREASURER:

I think Australia will become a republic one day, when the public is ready for it and when the model preserves the best of our current Westminster parliamentary system. Now we had a vote in 1999, it was defeated. There is no point in saying, ‘oh, well, you voted against it, let's keep on having referendums until the public votes for it'. The public had a clear choice and they voted against it. I voted for it incidentally. The public voted against it. But I think when the public is ready and it might be five years, it might be 10 years, it might be 20 years, then the public will be ready to move on the issue and I don't think they should be rushed until they are ready to move.

BYNER:

Hi, Chris.

CALLER:

Hi, Leon. Treasurer, good morning.

TREASURER:

Good morning.

CALLER:

I would like to go back to the business about retail pricing of foodstuff. Leon's been talking about it for years I reckon, this business of, especially now with the drought (inaudible) going to pay more for this, more for that in a drought but when it gets down to the nitty gritty, the farmers are getting less. They are being squeezed by the big supermarkets and whoever and yet we are being asked to pay a fortune. When that was put to you, you appeared to miss the point. We really must have this transparency from farm gate to the plate.

TREASURER:

Well, if there is any collusion or any anti-competitive conduct by big supermarkets the law has been amended so that that can be investigated and they can be prosecuted. The fines have been increased.

BYNER:

I don't think this is about collusion. What it is about is a monopoly being able to dictate terms on its own references on what it wants without telling too many people except those who are directly affected who if they dare speak out, have got nowhere to market their products because you either deal with one or the other, or you are out of business. That's the point.

TREASURER:

Let me say, but that is also contrary to the law, you see, if a monopolist uses its power to punish or ban somebody or refuses to deal with them that's also against the law. You see, I'm going a step further. I think the caller is saying oh, look, we would like to know what is going on. I'm saying, yes, we'd like to know what is going on but we would also like to prosecute those who are doing it. Now, let me give you this example. You come out of the farm gate, right, you go down transport, you go into processing, distribution, retail, you know there are all these points along. We have just investigated at the distribution level a cartel for packaging, right, and we have taken a case against that and we've had the largest fines ever. Now, what I am saying is, if there are other people that are operating against farmers interests, we need to take more cases.

BYNER:

Okay, and by the way, it is likely that those who have been badly treated, if you like, the customers of this company as a result of the actions for which they have been fined, will take their own counsel and they sue, but I don't think we will be seeing any monies distributed back to the customer.

TREASURER:

Now, that's an interesting point. You are quite right, Leon, absolutely right. What's happened is that the fines have been imposed, now the people who were paying those higher than necessary prices for packaging may well sue, may well sue and say we were paying higher than necessary prices for packaging and there could be huge legal action. You are quite right. Whether that gets back to the consumer is another question.

BYNER:

Hi, Bill.

CALLER:

Yeah, hi Leon. Hello, Peter.

TREASURER:

Hi, Bill.

CALLER:

I'm really happy with how the country has gone but I am a little disappointed in the interest rates. And what I can't understand is, I've got a number of tenants that are locked into CPI increases and we've just done CPI for the last 12 months and it is back at 1.4 per cent. Why is it that it is only 1.4per cent but we're told that CPI is so high, that we are interfering with, or we are going to have a higher interest rate?

TREASURER:

Yes. It is a very good question, Bill. The Consumer Price Index is actually quite low, you are quite right about that.

CALLER:

Exactly. 3.3 for the previous 12 months.

TREASURER:

Yes, it is actually below 2 per cent. It is a very, very good question.

BYNER:

But food inflation though is well above that.

TREASURER:

It is above it.

BYNER:

Yeah.

TREASURER:

Food has gone up higher than 2 per cent. Not hugely above it but you are quite right, Leon, it is above it. That is because in a basket, the Consumer Price Index is basically a basket.

BYNER:

Which includes flights from New Zealand.

TREASURER:

Yeah, well includes fruit and vegetable, meat, milk, and then it will have electricity, water, transport, health, pharmaceuticals, manufactured goods.

BYNER:

For the purpose of what we're discussing today, is it accurate?

TREASURER:

And some things in that basket will be declining in price, some things in that basket will be going up in price and the basket overall, as Bill, I think it was Bill said, moved 2 per cent. Now, you see, that doesn't mean for everybody their prices move 2 per cent because it really depends on which goods in the basket you happen to be buying. It is a representative basket of a representative household throughout Australia. That's the whole idea. But consumer price inflation, as Bill said, is actually quite low in Australia.

BYNER:

The Galaxy Poll, I know I have got to let you go, but just quickly, the Galaxy Poll suggests that a lot of the public won't blame you for the interest rate increases and, in fact, only about 12 per cent would blame the Prime Minister for an increase. Have you got a comment on that?

TREASURER:

Bear in mind that the home mortgage interest rate at 8.3 per cent today is lower than at any period under the pervious Labor Government. We know under the previous Labor Government it peaked at 17 per cent. It never went as low as 8.3 per cent, not even when we were in recession did it go as low as 8.3 per cent.

BYNER:

The point I think that is being made by a lot people that you would agree with, that because the principles are much higher, the amount that you actually pay are a greater proportion of your pay than were the case.

TREASURER:

Well, see Leon, it's true that if interest rates are lower, people borrow more, that is quite true and they do that willingly because with their additional borrowings, you know, they like to buy a bigger house or whatever it is. That is absolutely true. But the point I am making about interest rates, at 8.3 per cent it is lower than it ever was under the Labor party even when Labor had the country in the worse recession in 60 years and you have got to bear this mind, Leon, that this home mortgage variable rate is on an economy which is now on its longest period of expansion ever, where we have more people in work than ever before and we've halved the unemployment rate. The fact that we can run the home mortgage interest rate around these levels on an unemployment rate of 4.2 per cent when we could never run it before on an unemployment rate of 10 per cent indicates how far we've come.

BYNER:

Do you still predict a financial tsunami or any danger to our economy from other forces offshore?

TREASURER:

Oh there are lots of dangers to our economy at the moment. We've got ...

BYNER:

Do you describe them in that way?

TREASURER:

Well, I'll come to them one by one. Here in the rest of the Australian economy, first of all, sub-prime crisis in the United States and the fall-out from that and the downturn of the United States economy. Secondly, oil prices are world records, all time world record oil prices. The third and this is the point I make, is that China is moving from a communist system to a market system. They have a lot of adjustment to do in China and to move from a communist system to a market system and there are going to be a lot of bumps along the way. One of the biggest is going to be if the Chinese decide to float their currency. When they float their currency, every other exchange rate in the world will realign and it will set off ripples, and that is what I've described, as a tsunami. The Chinese movement to a flexible exchange rate will set ripples off in exchange markets around the world.

BYNER:

Causing what?

TREASURER:

Massive realignment.

BYNER:

Which means?

TREASURER:

Which means that economies around the world will have to adjust.

BYNER:

Meaning?

TREASURER:

Meaning that it is going to be a pretty wild ride when it happens.

BYNER:

Okay. Treasurer, thanks for joining us today. Where are going from here?

TREASURER:

I am going to make a road announcement this morning about the wonderful road announcement for South Australia and also do some campaigning.

BYNER:

Alright. Peter Costello, thanks for joining us on 1395 Adelaide's 5AA.