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 Steve Price
2UE

Thursday, 8 November 2007

3.15 pm

 

SUBJECTS: Economic management, interest rates, October Labour Force figures, climate change

PRICE:

Thanks for your time.

TREASURER:

Thanks Steve, good to be with you.

PRICE:

Have you stoked up the economy too much with tax cuts? Is that why the Reserve Bank keeps jacking up our interest rates?

TREASURER:

No. The important thing about tax cuts, I have always felt Steve, is if you cut tax, you do put money back into people's pockets and it does help them with price rises, including mortgage repayment increases. So I think it is actually important to put money back into people's pockets. The situation at the moment is that the economy has been through a long period of growth, we have the lowest unemployment since 1974. Because unemployment is so low and employers are in some places competing with each other to get employees, that is putting upward pressure on wages and of course, you have got some international factors which are also adding to inflation like oil rises. Looking at all of that the judgement is that inflation is getting a little higher than should be the case and that is why the Reserve Bank moved interest rates yesterday.

PRICE:

Most people out there hear all of that economic theory though and I know you didn't hear all of my opening comments, you just came on the line, but for people out there who now need to find you know, an extra $15 a week on their mortgage, sixth rise, we might get another one before Christmas, all of that stuff doesn't mean much to them. They keep hearing from yourself and the Prime Minister the economy has never been as good but they don't feel that.

TREASURER:

Well I acknowledge that this will cause hardship for people who have got mortgages. And as I said yesterday, I don't like it, they won't like it. I don't think it does any home buyer any good. But the reason why we try and keep inflation low is if we don't keep inflation low sooner or later the economy will go into recession. And when the economy goes into recession people lose their jobs and that is when people are under even greater mortgage stress. If you have got no job and no income you can't afford to pay anything on your home mortgage.

PRICE:

You said sorry, yesterday, I am sorry that people pay more on their mortgages, it is not something I enjoy and I know they won't enjoy it. I take it from that you have a mortgage?

TREASURER:

Yes.

PRICE:

You do?

TREASURER:

Yes.

PRICE:

The Prime Minister today, he has denied apologising for the latest interest rate rise but he says, he said he said sorry but it is not an apology. Why would he say that?

TREASURER:

Well look, I hate getting into these arguments of when is an apology and apology and when is it not. We go through this rigmarole all the time in relation to Aboriginal reconciliation. I can only speak for myself, Steve. I don't like it, I don't think home buyers like it, I am sorry that home buyers will have higher repayments. But the important thing is how we are going to manage the economy going forward and I think with the price pressures that are in the economy at the moment, with oil prices at all time records - it has just gone through US $100 a barrel, drought is putting pressure on food prices. The important thing is to make sure that we manage it in the future and this is why I say to people it is important we have an experienced team with policies that have been born of experience. And I just don't think the Australian economy could survive an inexperienced economic management team with bad policy. And I think if you look at the home mortgage interest rate now, which is at 8½ per cent, you saw where it can go - it went to 17 per cent under the previous Labor Government - and if management is not properly done in this country you will see big risks.

PRICE:

Let's deal with the banks. The NAB have already out their rate up which always amuses me given that when rates were going down in the 11 years that you have been in office they never actually pulled them down quickly. They have whacked it up already, the NAB and we have Ralph Norris the boss of the Commonwealth Bank - who by the way earned $6.6 million last year - he said that it is none of your business, the Treasurer's business if the banks want to put it up more than a quarter of a per cent, have they got any reason to do that?

TREASURER:

No. And it is my business because I represent the Australian electorate and the official cash rate has been moved by the Reserve Bank 0.25 per cent. 0.25 of 1 per cent. Now I accept that the banks are therefore entitled to move mortgage rates by 0.25 of 1 per cent. I do not accept for a moment that they could move them by 0.3 or 0.4 or 0.5 or by anything more than 0.25 per cent. There is no reason to do so and any bank that tries to do that, I think will be rightly condemned for using this as an opportunity to increase its margin. Now none of these banks are in financial trouble, we know that Steve. They are all making very large profits...

PRICE:

Well Mr Norris, by the way, the $6.6 million salary, he is the lowest paid of the four big bankers. But can you stop them?

TREASURER:

I was going to say there are few bankers that are getting more than $6 million a year too.

PRICE:

Correct.

TREASURER:

Their share price is very, very strong and there is no reason for them to move more than that and...

PRICE:

But other than public shaming, is there anything you can do to them?

TREASURER:

Well I don't think, look I am making it clear that I won't accept it and the Government won't accept it, and the most important thing is the public won't accept it. And any bank that tries to do it I think will lose customers and I don't think any of the banks will try and do it.

PRICE:

Unemployment rate up a little bit today but I noticed full-time employment was actually up by 70,600 jobs, there are now 7.59 million Australians working full-time. The fall seems to have come in part-time employment, is that right?

TREASURER:

Yes, that is right. Interestingly enough the total number of jobs went up by around 13,000 in the month of October. But if you look behind the figures there was an increase in full-time jobs of 70,000 and a decrease in part-time jobs of around 56,000. So there could be some part-time people moving to full-time jobs or people who are offering full-time jobs to replace part-time jobs. The astounding figure in today's announcement Steve, was that in the last year there have been 280,000 new jobs created in Australia - just think about that for a moment - 280,000 new jobs created in Australia and 98 per cent of them were full-time. 98 per cent of them. So it is not just that there is jobs growth, it is that there is full-time jobs growth. There are a lot of people that said, oh well, under industrial relations changes you will only get part-time or you will only get casual work. In fact, that is not the case. The generation of jobs is actually full-time jobs and we have an unemployment rate which is now the lowest in 33 years and this is encouraging more and more people to join the workforce which is a good thing.

PRICE:

Interesting that gap now that has opened up between WA, Queensland and the bigger states of Victoria and New South Wales - 4. 6 per cent unemployment here, 3.6 in Western Australia.

TREASURER:

Well Western Australia of course is profiting from the mining industry much more than the other States. It is extremely profitable at the moment because of the price of mining commodities. And as a consequence of that a lot of people are actually going west and getting jobs in the mines and that has...

PRICE:

It shows the State Governments here and in Victoria have got a bit of work to do.

TREASURER:

I think that is right. You know, for most of federal history Steve, New South Wales and Victoria were the big states. Let's not forget by the way, that Victoria at least, in fact, it is (inaudible) mining state. That is what really got Victoria going in the 1850s with gold rushes at Ballarat and Bendigo. So Victoria was a mining state. For most of the 20th century Victoria and New South Wales carried the national economy. I think what you are starting to see now is the emergence of Western Australia and Queensland and they are both profiting from the fact that they have strong mining industries just as other States profited in the past. Tassie was a bit of a mining state for a while too, by the way. So these things come and these things go but it means that the States that aren't profiting from strong mining industries at the moment have to make sure they concentrate on other things.

PRICE:

Just finally, Peter Garrett today in the debate with Malcolm Turnbull called you a climate change sceptic and criticised you for not mentioning the topic - those two words climate change - in any of your ten Budgets.

TREASURER:

Well Peter knows that that is not the case and you know, no doubt somebody in the Labor Party has said to Peter he has been having a bad week, go out and attack Costello and try and get your Labor credentials polished up a bit. But let me say, we have funded more measures to deal with climate change than most people would have imagined. We have now got $3.5 billion going into measures like solar power, going into measures like low emissions technology, rebates for photovoltaic cells on people's homes and for hot water systems. We have got the most ambitious emissions trading scheme in the world and you know, these are all matters I worked on funding so I think Peter has missed the mark a bit.

PRICE:

Appreciate your time, thank you very much.

TREASURER:

Good on you Steve.