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 06/11/2007

Interview with Chris Uhlmann
ABC AM Programme

Tuesday, 6 November 2007
8.10 am

 

SUBJECTS: Interest rates, inflation, industrial relations

UHLMANN:

Peter Costello, good morning.

TREASURER:

Good morning, Chris.

UHLMANN:

Now doesn’t it follow that if you claim credit for low interest rates then you must accept blame when they rise?

TREASURER:

Well, Chris, interest rates today are lower than when our Government was elected and that’s not withstanding 2.2 million more jobs that have been created so bear this in mind, during the previous Government, the previous Labor Government, the home mortgage interest rate was never, never as low as the current rate and that was even when we were in the worst recession in 60 years.Now when you are managing an economy through growth, the first thing is to keep it growing to get more people in work.And as your economy strengthens, ordinarily, you would have to have measures to prevent inflation breaking out.But to think that you can have interest rates still lower when unemployment is at 4.2 per cent than when it was in double figures is really, shows you how far the economy has come.

UHLMANN:

But that Government never, never promised to keep interest rates low and you did.They have gone up five times.Is that your fault and would a sixth be your fault too?

TREASURER:

Well, Mr Keating never promised to keep interest rates low?

UHLMANN:

I don’t recall a promise from them, do you?

TREASURER:

Back in those days of course Labor used to boast that sort of 10 per cent was low, and it was compared to 17 per cent.Mr Keating didn’t set out to have a high interest rate policy, that was a result of failure, Chris.

UHLMANN:

That was a long time ago, Treasurer.Can we concentrate on your record and five rate rises.Is that your fault?Would the sixth be your fault?

TREASURER:

Well, I think during the period that I’ve been Treasurer there have been 19 interest rate cuts and 15 rises of 25 basis points, so there have been more cuts than rises and unemployment through that period has fallen from over 8 per cent to 4.2 per cent and 2.2 [million] more jobs have been created, so when you are looking at an economy, Chris, you’ve got to say well, what’s been happening in the economy, this has been continuous growth and 2.2 million jobs and yet interest rates are still lower than they were when the Government was elected.

UHLMANN:

How much control do you actually have over the rise and fall of interest rates, Treasurer?

TREASURER:

Well, interest rates are influenced by many factors.They will be influenced by international factors, oil prices will have a significant influence.They will be influenced by food prices, drought is a factor there.But where the Government of course has most influence is in its budget policy and in its structural policy.Now in budget policy of course Labor used to run big budget deficits and high government debt.We’ve paid off government debt and we’ve had more surpluses than ever before…

UHLMANN:

And if we look at your policy, you’ve had your foot on the fiscal policy accelerator while the Reserve Bank has had its foot on the monetary policy brake, so is it any wonder that the economy is blowing smoke to paraphrase Chris Richardson?

TREASURER:

Well, Chris, as Treasurer I’ve presided over more surplus budgets than anybody else in Australian history and bear this in mind, before I became Treasurer, there were no budget surpluses.When Labor was in office we were running deficits, we had $96 billion worth of debt.Now, it is all very well for Mr Rudd to say he’s an economic conservative and Julia Gillard’s even an economic conservative now and who knows what Wayne Swan is.These people weren’t economic conservatives when the budget was in deficit and Australia had $96 billion worth of debt.That was my job to fix the debt and deficit.They seem to think it’s their job to inherit the results.Now, let me ask this question, does Kevin Rudd have any policy at all which would meet the importance of keeping inflation down…?

UHLMANN:

…Do you?

TREASURER:

…No.

UHLMANN:

Do you, Treasurer?

TREASURER:

…policy, I’ll come to mine in a moment.In fact, his policy on industrial relations would heighten inflationary pressures in the Australian economy.Our policy in relation to industrial relations which has prevented pattern bargaining and award wage movements from profitable to unprofitable industries has made it possible to contain inflationary wage rises.Kevin Rudd’s policy will heighten inflationary wage prices and will make the situation…

UHLMANN:

Most people in the system now are on enterprise bargains, Treasurer.Only five per cent of the community is on AWA’s, so really there would not be much change.

TREASURER:

But the section that’s on AWA’s is a really important section.If you can get rid of…

UHLMANN:

Five per cent makes all the difference.

TREASURER:

If you get rid of AWA’s in the mining industry at a time like now and you go back to awards and you take wage settlements out of the mining industry and across to manufacturing or services or transport or anywhere else, you will get what has happened in this economy previously, you will get wage inflation that will feed into general inflation and ultimately into interest rates.Rudd’s policy is the worst possible thing you could do in this economy at the moment.

UHLMANN:

Do you think that people actually believe that, Treasurer?Do you think now that after having watched these interest rate rises that people think now that it doesn’t really matter who’s in charge?

TREASURER:

Well, the OECD believes it.The IMF believes it.All reputable economists believe it.

UHLMANN:

They’re opposed to Labor coming into Government?

TREASURER:

Well, they all make the point that to grow the Australian economy in a flexible way and keep inflation down, you need more flexible industrial relations system.I don’t think there is any doubt about that.Kevin Rudd, if he thought about it, might believe it but of course he’s so deeply in hock to the ACTU, he can’t afford to believe it.

UHLMANN:

Treasurer, we’ll have to leave it there.Thank you.

TREASURER:

Thanks, Chris.