JOURNALIST:
The Federal Reserve in the United States kept interest rates unchanged this signals that the next move will most likely be down. What do you (inaudible) about that?
TREASURER:
The announcement by the Federal Reserve indicates that they have removed their bias towards tightening and possibly now have a bias towards loosening monetary policy, that is a bias towards reducing interest rates in the United States. This indicates that the Federal Reserve has some concerns about the US economy particularly in the light of the enormous volatility that you have seen on stockmarkets in the last week and really over the course of the year. You have seen a lot of people lose quite a bit of money in the United States and if that begins to affect their consumption, if it affects business confidence, an economy which was just coming out of recession could be affected and the indication by the Federal Reserve overnight indicates that it shares the concerns that many of us have had for a while that the United States economy is not emerging from recession as fast we would like, as fast as the world would have liked. And there could be a rocky period ahead in relation to the US economy and because of the US economy, to global growth.
JOURNALIST:
So do you think there will be a bigger knock on effect here than you might have hoped?
TREASURER:
The United States went through a recession. They had three negative quarters in 2001. They were beginning to emerge in 2002 and their forecasts were for growth to strengthen. The developments that you have seen in the last couple of weeks indicate that there is a bit of concern about that recovery, and if there is concern about the US recovery, that will lead to people downgrading their forecasts for global growth and that in turn would have an effect on Australia through exports. But having said that, I hasten to add, the Australian economy survived the US recession of 2001. It continued to grow. Australia is forecast to continue as the strongest growing economy amongst the developed nations of the world in 2002 and 2003. And these events are difficulties for us but our economy is strong and I believe the Australian economy will continue to grow through them.
JOURNALIST:
...are we strong enough to survive a double dip...?
TREASURER:
I would not start talking about a double dip US recession. They have had a recession in 2001. They began growing in 2002. What I would say, is that the recovery appears to be weak, weaker than people expected. At this stage, and it is obviously a matter of concern for the Federal Reserve, that is why it made the statement that it did overnight.
JOURNALIST:
Treasurer, Hugh Morgan from Western Mining was saying that share options for executives is an inefficient way of rewarding executives. Do you applaud his move?
TREASURER:
Look, I think public companies have got to think very carefully about options. I think an option fever swept the world during the bull run of the American economy. And every analyst on every street corner was saying options, options, options. And we now know that some of the options that were issued particularly in the United States may have been issued so that they could be dressed up on the balance sheet, not expensed, were being issued because it was a way of executives rewarding themselves with extraordinarily high remuneration and a number of those companies are now in trouble. And I think it is time to sit down and take some stock in relation to this and to say that sure we want executives to profit from running companies well but one of the ways to do that is to pay them rather than to try and disguise it through options. And we also know in Australia that when you do have these option incentive plans, sometimes the Chief Executive is still getting paid even when the company goes down. And there is no basis whatsoever for companies to be rewarding their Chief Executives at the time that the company is performing badly. So, I would say to the people that were yelling options, options, options all the way through the mid and late '90s, time to think again and I welcome the remarks that Mr Morgan has made.
JOURNALIST:
The kids at the School of the Air asked you, I will ask you again, would you like to be the Prime Minister?
TREASURER:
Well, it was a question that gets me into a lot of trouble. So I generally decline to, your kind invitation to answer that question.
JOURNALIST:
You said you would get back to Kyle, you said you would get back to him sometime. When do you think you will get back?
TREASURER:
Perhaps I will get back to him by next years birthday.
JOURNALIST:
You have done three functions here, do you get a sense country people like you or not?
TREASURER:
I think people, all Australians, have an easygoing attitude. They are concerned about the issues that are confronting their country. They like to talk about them. They are not hesitant about talking about them. I enjoy talking about them. I love being out in a part of Australia like this. I find it gives you a lot more energy than being in Canberra. I find that when you get outside Canberra, by and large, you have a wonderful reception from genuine people. And I often think that it is Canberra that is out of step rather than the rest of Australia that is out of step.
JOURNALIST:
But (inaudible) a lot of these functions are invite only?
TREASURER:
Oh, anyone can come to the Stockmans' Hall of Fame. Anybody can go on the long distance school and anybody can listen to the ABC radio and, you know, we go out and we meet people and their various walks of life. And we enjoy doing it.
JOURNALIST:
Mr Costello, Mr Costello. You challenged the Labor Party to release its research on Simon Crean. If they met that challenge would you release the Liberal Party research on you?
TREASURER:
Well, I have never been party to the Liberal Party's research, so I would be very interested to see it myself. I doubt that we actually go around polling particular individuals. But I think it is a measure of Labor's concern really isn't it, that they apparently or they claim to be researching these things. Leaking to selected journalists. I would have thought that the thing that the Labor Party is more likely to do than to be polling the Government would be polling its own people. And I would be very interested for them to leak their own polling on themselves to the media, very interested.
JOURNALIST:
(inaudible)
TREASURER:
Well, it is interesting isn't it. You would have to ask them why they are polling. I think one of reasons why they poll these things is, as you know, they try and politically oppose and dent people that are carrying Government policy. And they have had numbers of Shadow Treasurers try and dent our economic program since the time I have been the Treasurer of Australia and they have currently got another one trying his damnedest to do the job. We will see how he goes.
JOURNALIST:
Simon Crean says, you know, he has got some image problems but so have you. And he is admitting his own but claiming you have them as well. Do you think there is a bit each way?
TREASURER:
Look Simon, Simon Crean can talk about himself. I am very happy for him to do so. But I would not regard Simon Crean as an authority on me. He has got his own problems. He can deal with them. I won't advise him on how to do that.
JOURNALIST:
(inaudible) is there an argument to revisiting the issue of the zonal tax allowances (inaudible)?
TREASURER:
The thing about zonal tax allowances is that the boundaries were drawn a long time ago. And whenever you draw lines on a map you have got to put somebody on one side of the line in and somebody on one side of the line out. And whenever you redraw these lines, some people win and some people lose. And that is good if you happen to be a person that wins, bad if you happen to be a person that loses. I have never yet known a person who lost an allowance who was happy about doing it. And so yes, in an ideal world, you would draw these lines in a much clearer and plainer world but we don't live in such an ideal world. And I think you would get arguments either way. Now we are prepared to take submissions in relation to this. But the zonal allowances are not large sums. The much more important thing frankly as to how you help people from a tax point of view in rural and regional Australia is to reduce income taxes, to reduce capital gains taxes as we have, very substantially, particularly for people that are on farms, and to put in place cuts in fuel taxes which we also did by cutting the excise on long distance transport in relation to diesel. And now when you combine the outcome of all of those tax changes, they outweigh the zonal allowance by very significant sums. And I would actually prefer to be working on the overall tax system, reducing it for people in rural and regional Australia, than the question of the allowances which is a smaller issue. I am not saying that we are indifferent to it, but it is a smaller issue than the overall structure of the tax system. Let me put it this way, you have got a high income tax rate that people are paying and low allowance, you are not better off than having a low income tax rate. It doesn't make you better off. The important thing is to try and deal with the overall income tax, capital gains tax, diesel excise. Thanks.