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 08/11/2007

Interview with Fran Kelly
ABC Radio National

Thursday, 8 November 2007
7.40 am

SUBJECTS: RBA decision on interest rates

KELLY:

Treasurer, welcome to Breakfast.

TREASURER:

Thanks very much, Fran.

KELLY:

Now, the Prime Minister says sorry for this rate rise, you are sorry too. Why? What is there to apologise for?

TREASURER:

Well because it will make budgets tighter for families and nobody looks forward to that. I know that for many families this will be very, very tight and difficult and I don't like that, they don't like that and I don't think it is in anybody's interest and for that I am sorry.

KELLY:

Sorry implies some responsibility though. Do you accept responsibility for this rate rise?

TREASURER:

Well Fran, the point I made yesterday is that home mortgage interest rates will go to around 8½ per cent. This of course is lower than when the Government was elected and lower than at any time during the Labor Government. Lower even than when Labor had the country in recession and unemployment in double digits. Now the issue that we are facing in the Australian economy at the moment is not weakness but strength. The economy is growing strongly, unemployment is very low, oil prices are high. And managing an economy in a position of strength takes considerable experience and policy and that is why we have laid down our plan for the future, a plan for a better tax system, for 100 technical schools to build capacity in the Australian economy and to manage a period of strong growth whilst keeping unemployment low.

KELLY:

So you don't take responsibility for it?

TREASURER:

Well we will take responsibility for keeping unemployment low and managing this strong growth in the Australian economy. And I listened very carefully to Mr Rudd all day yesterday. He would have been preparing for this day for weeks if not months, and he didn't have a single policy prescription. Sure there was lots of political spin, but when he was actually asked what would he do to manage inflation, he didn't have a single policy prescription. Now, he might say: ‘oh well, I will put more into education' and over the long term, education...

KELLY:

Well he does say that.

TREASURER:

Yes well, over the long term education is a very good thing, that is why we have been putting more into it. That by the way, is why we now have in the last four years 540,000 apprentices that have completed their training compared to 30,000 under Labor. So there is a lot of money going into apprenticeships. But when Mr Rudd was asked about technical colleges, which undoubtedly is a way of boosting people into trades, he plans to abolish technical colleges. Now I can't see for the life of me, why, when you wanted to build skills in this country and why you want to get more people into apprenticeships you would be abolishing technical colleges.

KELLY:

Okay, well whatever you have been doing over the past three years, it hasn't turned into lower rates - rates have been going up. Your slogan is ‘Go For Growth' in this election campaign. Given the Reserve Bank is clearly putting on the economic brakes, it doesn't want growth ratcheting up, will you now change that slogan?

TREASURER:

No, no, we have to continue growing the Australian economy because although unemployment is at 30 year lows, there are still people who can't find work and it is our aim to get every Australian who wants to work into work. Now if we were to turn around now and say, as Labor did when they brought on the recession, that well, we can't mange low unemployment, we will put the country into recession - which is what Labor did the last time they were in government - you would be consigning millions of people to unemployment.

KELLY:

But the Reserve Bank is talking about moderation now. You are still talking about ‘Go For Growth.' I noticed the PM didn't give his press conference yesterday in front of the usual ‘Go For Growth' slogan, was that backdrop deliberately out of camera shot because it was at odds with the message from the Bank?

TREASURER:

No, we have to continue to go for growth to get more people in work. And what we have to avoid, is we have to avoid a recession which was the Labor prescription the last time unemployment got below 6 per cent. Now it is lower than that now, it is now nearly 4 per cent and we have to continue to provide opportunities for Australians but it is going to take management. It is harder to manage an economy with low unemployment and keep inflation low. That is why it is very, very important to have the policies like we have in relation to tax, like we have in relation to industrial relations, like we have in relation to technical colleges, like we have in relation to skills vouchers to manage all of these things. And inflation today, I remind you, which is 2 to 3 per cent, is still half the rate that it was under the Labor Party even though the Labor Party put Australia into the worst recession in 60 years.

KELLY:

Now the trick there as you say is to manage the economy, manage the growth. Yesterday you didn't deny telling Melbourne radio presenter Jon Faine off air, some months ago: ‘there will not be a rate rise in November, take it from me.' Now I guess there is only two explanations for that: either you misread the economy and your capacity to mange the economy or you thought you could stare down the Reserve Bank.

TREASURER:

No, the explanation for that is that Jon had a long interview with me and I refer you to the transcript.

KELLY:

So what? You...

TREASURER:

You can go and read the transcript.

KELLY:

...take it from me, there will not be a rate rise in November, you got it wrong.

TREASURER:

Fran, Fran. Don't you worry about questions he asked me, they are all on the transcript. You ask me your questions.

KELLY:

All right, I will indeed. Your TV ad last night pointed out repeatedly that interest rates hit 17 per cent under Bob Hawke, the same ad showed that they were, the ad in fact starts off: interest rates higher under the Whitlam Labor Government, higher under the Hawke Labor Government, higher under the Keating Labor Government. There is a government in the middle there that wasn't featured in your ad - it is the Fraser Government, the Liberal Government, when rates hit 22 per cent. Why isn't that mentioned?

TREASURER:

Well can I make the point, because Kevin Rudd falsely says this all the time - that home rates hit 22 per cent under the Fraser Government - that is false.

KELLY:

They didn't hit that?

TREASURER:

No, they didn't.

KELLY:

What did they hit?

TREASURER:

The highest they were ever was 13½ per cent. I released that yesterday.

KELLY:

You still left it out of the ad.

TREASURER:

No, but can I just come, Fran you see, Kevin Rudd has got you repeating that falsehood and it is false and he knows it is false. The all-time home mortgage interest rate world record king, was Paul Keating and the Labor Party at 17 per cent. And let's never walk away from that. And really, Mr Rudd, he slides around on these figures and he puts them out there, he gets journalists repeating them but they are not right and that is why I put that graph out there yesterday. Now...

KELLY:

Even in that graph that you put out, the rates under the, in the period of the Fraser Liberal Government were significantly higher than at some point in the Hawke Government.

TREASURER:

Well the all-time record is Paul Keating and the Hawke Government.

KELLY:

Sure, but that is not in your ad.

TREASURER:

Okay well, that is what I say - the all-time record for home mortgage interest rates is Paul Keating and the Labor Party. I heard Mr Rudd yesterday talking about all of the wonderful things ‘we', he said ‘we' had done in government in the early ‘90s. The thing he left out that ‘he' or ‘we' had done in government in the early ‘90s was put interest rates at 17 per cent and put a million people out of work. But let's leave all of that aside. You have got a record here, I have been the Treasurer for the last 11 years, you can judge us on our record compared to previous Australian Governments. Even at 8.5 per cent the home mortgage interest rate is lower than at any period - at any period - under the 13 year Labor Government. And this is quite extraordinary really, it is lower today than it was when the country was in the worst recession in 60 years. Now I said earlier, it is harder to manage inflation when you are heading towards full employment. You would have expected that interest rates would be extremely low during a recession. The fact that they were actually higher than they are now in a recession indicates how far we have come in Australia.

KELLY:

Treasurer you said yesterday and this is really the key of your, the message from you and the Prime Minister is that the risk of Labor is very real. The Australian economy is delicately poised. In 2004 your message was don't risk a Labor Government with an ‘L' plate leader, Mark Latham. In 2001 you said you couldn't trust Labor with national security. Would it ever be safe to vote Labor?

TREASURER:

Well it wouldn't be safe to vote Labor whilst it is being led by Kevin Rudd...

KELLY:

Or Kim Beazley or Mark Latham.

TREASURER:

...with the policies that he had. See, Kevin Rudd's pitch in this election is: oh well, you can trust me to implement Liberal Party policy. You can trust me to balance the Budget. You can trust me to keep debt under control. You can trust me in relation to implementing the pension pledge. All through this election he has been running this line, you can trust me to put in place Liberal Party policy. But our point is this: that Kevin Rudd never supported these policies when it was tough to do so. He has arrived after the event, he wants to claim credit but he doesn't really have the strength to do it when it counts and that is why you can't trust Kevin Rudd to implement our policies. If our policies have to be implemented: balanced budgets, no debt, competitive tax system, the people to trust to implement them are us, not Kevin Rudd.

KELLY:

If the people trust you, if they elect you, you will ultimately take over as Prime Minister sometime in the next couple of years. And there is persistent rumours that people are suggesting that the numbers have been going for a challenge very soon after that election. But if you take over, people have asked you what your brand of difference will be. You have talked about policy continuity. If you are going to keep all of John Howard's policies, why not just keep John Howard?

TREASURER:

Well John Howard of course, has been somebody who has led Australia through a very strong period. And somebody who if we are elected will continue to do so...

KELLY:

And when you take over there will not be any noticeable difference on key policies? On Iraq? On the Republic? On reconciliation?

TREASURER:

...and has great experience and has been part of a team with me. And you know, we were the people who were implementing these policies when Kevin Rudd was describing himself as a Christian Socialist by the way, before he saw the light and decided he would like to endorse Liberal Party policy. Now as you can imagine, in any Cabinet there are always differences of views and you know on some issues John Howard and I have had difference nuances. But let me tell you in relation to the direction of the country - strong prosperous, secure with full employment, the opportunity to have a competitive tax system, 100 technical schools, a first-class training system - there will be absolute continuity.

KELLY:

Treasurer, thanks very much for joining us on Breakfast.

TREASURER:

Thank you Fran.