TREASURER:
We have seen developments in the international economy overnight which underscore the risk that there is at the moment in global financial markets. We have seen the US Federal Reserve cut interest rates by half a per cent, citing weakness in the American economy and the global credit crunch. And we have also seen in the UK depositors trying to take money out of financial institutions because they are worried about the fallout from the US sub-prime housing market collapse.
The important thing to bear in mind is that here in Australia we have a very well regulated financial system. We are not immune from international developments, of course they affect us. But our banking sector is highly profitable, well capitalised, our economy is strong and our Budget is in much better condition that America. Rather than running Budget deficits, we have got the Australian Budget in surplus and we have now repaid all Labor debt in net terms.
There will be consequences in Australia from this global uncertainty. For some of the mortgage originators it means that they will have more difficulty raising money and they will raise it at higher prices and they will pass on those prices to borrowers. But we are actively monitoring the situation. We have good prudential and regulatory arrangements and above all, a strong economy with strong economic policy. And it is very important that we keep that economic policy in place at a time when we see the winds of international instability lapping at countries around the world.
JOURNALIST:
Should the movements in the United States have any effect on official interest rates settings in this country?
TREASURER:
Well you see the United States has cut interest rates because its economy is weakening and I welcome that. To cut interest rates when your economy is weakening gives the chance for the economy to pick up a bit. And we don’t want to see the US go into recession, we don’t want to see a global recession. The Australian economy of course is stronger than the US. When the US went into recession in 2000-2001, we continued to grow. We have managed to avoid previous US recessions. But it puts us pretty much one-off in the world that we have had such a long period of economic growth when Japan and America and other countries have been going into recession – and it takes a lot of tough management.
JOURNALIST:
Does the Fed’s decision give enough confidence back to markets, do you think?
TREASURER:
Well I think it is a welcome decision given the weakness of the United States. It is a welcome decision given the instability in international financial markets that is stemming from the United States and I hope it is a confidence building measure in the United States for US economic growth.
JOURNALIST:
Treasurer, the Governor Glenn Stevens said yesterday it was to be expected that banks would pass on higher funding costs to borrowers. Do you agree?
TREASURER:
No, not to housing borrowers. There is no reason whatsoever for the major banks to lift rates to housing borrowers. The Australian banks are highly profitable and well capitalised. There has been no movement in official interest rates. It is true that for those institutions that borrow a lot of money in the United States the costs have gone up. This applies to mortgage originators and they will be charging some of their customers higher rates. But the Australian banks with strong deposits, strong profitability and strong capital in a very strong economy have no reason whatsoever in the light of this to move housing borrowing costs up.
JOURNALIST:
What about for non-bank lenders?
TREASURER:
Well as I said in relation to mortgage originators, particularly those that borrow a lot of their money in the United States and are now paying more to borrow that money, then you will see some of them and some of them have already moved their lending rates. But they are in quite a different position to the Australian banks.
JOURNALIST:
What about the shareholders of banks, don’t the banks have a duty to maximise profits for their shareholders?
TREASURER:
Well I think the shareholders in banks have done pretty well in recent years.
JOURNALIST:
Treasurer, the benchmark stock index and the currency are both up 2 per cent this morning, what do you think the outlook is for them?
TREASURER:
For the economy generally?
JOURNALIST:
For currency and the benchmark stock index.
TREASURER:
Well I am not going to give a indication of where I expect stock prices or the currency to go.
JOURNALIST:
Treasurer on housing, is there a case for increasing the First Home Owners Grant?
TREASURER:
Well this is the Government that introduced the $7,000 First Home Owners Grant, it has been of enormous assistance to Australians. I think about a million Australians have been able to take it and it has helped all of those families get into a new home. Now, if you were to increase it, you have got to bear in mind that that would probably increase prices as well. From the moment you put more money into people’s hands and they can afford to buy more, then they generally bid up the price. So you have got to be very careful about this. It has been a very, very good policy and it is one that we are pleased to have been able to introduce for young and first home buyers.
JOURNALIST:
How is your Commonwealth land audit going? Have you found much land that you can release and can you put a timeframe on that?
TREASURER:
Yes, we have identified a lot of Commonwealth that can be released and we will be consulting local communities before we make announcements as to what to do with it. I would urge some of the States to also respond. Some States have responded with land which they believe can be released – not all of them – and I would urge those States that we are still waiting to hear from to come into the audit and let’s see if we can do something for young homebuyers.
JOURNALIST:
Which States are holding out?
TREASURER:
Well I don’t want to go through them one by one.
JOURNALIST:
When might we see the Commonwealth response to the housing issue?
TREASURER:
Well we are as we speak, identifying land that can be released which will give more people the opportunity to get into the market and to buy first homes. We are calling on State Governments to reduce stamp duties, which of course bid up the price of first homes, and we are also calling on State Governments to reduce their taxes. I think in New South Wales, $160,000 of a new block is tax. And you are asking a first home buyer therefore to pay $160,000 of tax before they even get round to paying for the price of the house.
JOURNALIST:
But can we expect a housing announcement from the Federal Government before the election?
TREASURER:
Well the Federal Government’s…
JOURNALIST:
Before the campaign?
TREASURER:
…housing announcements include land release, tax reform to reduce stamp duties and development costs, the First Home Owners Scheme and making sure that people who want to buy houses have jobs. If you don’t have a job you won’t be able to buy a house.
JOURNALIST:
Treasurer, former Deputy Prime Minister, John Anderson said last night that Treasury had been obstructionist with respect to the Auslink Programme. Is he correct?
TREASURER:
I didn’t see what he said and I would like to have a very careful look. But I would make this point: that the Auslink Programme is the largest investment in infrastructure that Australia has ever had. The first five years I think $15 billion, the next five years $22-$23 billion. This is an enormous sum of money of investment in road and rail. I have been very pleased to have been a part of it.
JOURNALIST:
Backbenchers yesterday were suggesting that the Coalition should have a major tax initiative as part of the election campaign. Do you see some merit in that? Do you have any thoughts on that?
TREASURER:
Look, I think it is important we keep tax as low as we possibly can, consistent with a balanced Budget and a growing economy and the provision of important services. We have cut tax for the last four or five years in a row and we have significantly reduced the tax burden. But we have got to aim to keep Australia as one of the low tax economies of the developed world. This is where I want our country to be – with balanced Budgets, lean in Government, generous in services and low in taxing. This is my vision for the future of Australia and its economy. That is where we are heading, never lose sight of the goal, keep working towards it.
JOURNALIST:
Did you welcome Kevin Rudd this morning when he said that he would have something to say on tax before the election? Do you welcome that announcement?
TREASURER:
Mr Rudd is calling for the election to be announced every day. Now, if he wants the election and he is finished his tax policy why doesn’t he release it? I will tell you why: because he doesn’t want it to be under scrutiny, that’s why. He doesn’t want it to be released and costed under the Charter of Budget Honesty. He’s hiding. Kevin Rudd is hiding from the Australian people on the policy which affects their hip pocket more than any other. And if Kevin Rudd really has got a tax policy, let the public in on the secret. Don’t have these silly announcements as we got from Peter Garrett yesterday, let’s have a substantive announcement, let the public in on the secret. I say to Mr Rudd, if your policy is any good you have got nothing to hide – put it out there.
JOURNALIST:
Do we expect to see a Government tax policy in the election, different to what was seen in the Budget with the $31 billion worth of tax cuts over four years?
TREASURER:
In May I announced I think it was $36 billion wasn’t it, certainly over $30, $31 and a half – okay I stand corrected. In May I announced over $30 billion of tax cuts which we legislated to take effect on 1 July this year and there is still a second instalment to come on 1 July next year. And don’t forget on 1 July this year we abolished all tax on superannuation payments for those over 60 out of a taxed fund. Again, this is a policy that was opposed by the Labor Party for about 12 months. Only the Coalition had the policy and we going to deliver on it.
JOURNALIST:
(inaudible) Morris Iemma’s decision on Keno in the NSW clubs, your distaste for gambling addictions has been known for many years? What would you say (inaudible)?
TREASURER:
Look, Australia has the highest number of poker machines per head of population than any country in the world and we have a big problem with problem gambling and you have got to know this: that a large part of the income that poker machine operators take comes from problem gamblers. This is what our Productivity Commission found. It is not just a case of people having a bit of fun, a large part of the profits from poker machines comes from problem gamblers. That is, people who are addicted. That is, people who can’t afford to put their money into those machines. Now, you would have thought to yourself, don’t we have enough poker machines in this country without extending Keno to all of these clubs? What are these Labor governments thinking of, having flooded Australia with poker machines, we are now going to double up with Keno competitions? There has got to be an end to this. At the end of the day they are looking at gambling revenues of course, but you have got to remember there are human tragedies at the end of this. The people that are paying all of these taxes in some cases are people with gambling addictions and gambling problems. And you might be taking more tax out of them at a State level, but we have got to pick them up and look after them after they have lost their houses and their income and overall it is benefiting nobody.
JOURNALIST:
So do you welcome what Peter Holmes a Court and Russell Crowe are doing at Souths in Sydney, taking the pokies out of the club?
TREASURER:
I reckon what Russell Crowe and Peter Holmes a Court are doing is fantastic, I think what they have announced is fantastic and all credit to them, I hope the club goes from strength to strength. We have got enough poker machines in Australia. We don’t need any more. We don’t need Keno in every club. What we have got to do is we have got to address the problems of problem gambling. I called the Productivity Commission inquiry into this in the early 2000s, we have put an agenda out there, to deal with problem gaming and to help people with addictions and I ask the State Governments to follow through on that agenda.
JOURNALIST:
Treasurer, will we see the Mid-Year Budget Review bought forward before the election?
TREASURER:
I am hearing you in stereo, one and two and then we will finish.
JOURNALIST:
Treasurer, do you expect the Prime Minister to consult you about the election timing, given your new role in the joint leadership of the Government?
TREASURER:
Well, we have conversations about it and we had one as recently as yesterday.
JOURNALIST:
Have you made up your collective mind?
TREASURER:
But at the end of the day when we are ready to tell somebody something we will tell them.
JOURNALIST:
Does that mean the decision has been made?
TREASURER:
No.
JOURNALIST:
Treasurer, will we be seeing the Mid-Year Budget Review brought forward before the election?
TREASURER:
Well, we will either have the Mid-Year Budget Review or we will have the Pre-Election Fiscal Outlook, it amounts to the same thing, and it will be out there before the election.
JOURNALIST:
Were you giving Kevin Rudd ‘the bird’ yesterday in Question Time?
TREASURER:
I don’t even know what ‘the bird’ is.
JOURNALIST:
Well, scratching your forehead with your middle index finger, is that how you normally scratch your head?
TREASURER:
Yes, I normally scratch my head with my fingers. Strange as that might sound to the Australian Press Gallery, I don’t rub it up against sandpaper, I don’t bang it on concrete, strange as that may sound to the Australian Press Gallery. I know you are all news hounds, I know you are all news hounds, I know you are on to a big story here.
JOURNALIST:
Mr Costello, on the future (inaudible)?
TREASURER:
Last question. I don’t know how you can top that, I thought someone was going to ask me about the Greenspan book. Was that your question? No.
JOURNALIST:
Keeping the economy strong under the Coalition, so should you become leader post-election, is there anyone who could measure up to you as Treasurer?
TREASURER:
Well, I don’t know. Look, I think I will get the Greenspan book and I will see what his views on Wayne Swan were in the book, and I think that will make interesting reading. Thanks.