SPEERS:
First though let’s go to the Treasurer who joins us from his office in Melbourne. Mr Costello thanks for joining us.
TREASURER:
Thank you.
SPEERS:
I want to get to your meetings at the IMF in Singapore shortly, but first can I ask you about the figures released during the week (inaudible) the birth rate. Now, we have seen the birth rate hit its highest level in some 35 years last year and you have been urging couples to have one for Mum, one for Dad and one for the country for some time. Are you claiming credit for this baby boom?
TREASURER:
Well I welcome it, I think it is a good thing and I have been encouraging a lift in the birth rate. Our policies have been directed towards helping families and the good news is we seem to have arrested the decline. Now, whether or not this is a permanent tick up we won’t know for some time but we have arrested the decline. I welcome the fact that we now have more babies being born in Australia than in any time in the last 35 years.
SPEERS:
Well I did note during the week there were some figures released showing that compared to 10 years ago when the Howard Government came to power, there are more parents now losing more than 50 per cent of their income when Mum does a bit more work for example, when they do a bit of overtime, when you talk about effective marginal tax rates, there are more parents losing that income.
TREASURER:
Well that is because more parents have that income. The way in which you have just portrayed it, and it was portrayed in some media, is a total statistical quirk. Because more parents are receiving family allowances you can say more parents are subject to the phase out but if they weren’t receiving it in the first place they wouldn’t be receiving the phase out. And in fact the only reason there are more people subject to the phase out is because more people are receiving it. That is more people have increased incomes and it shows the ability to pluck a dark cloud out of a silver lining really to say that just because more people are receiving more help more people are subject to the phase out as well.
SPEERS:
Well no apologies for that obviously, can I get to your meetings in Singapore. The International Monetary Fund has taken the steps towards significant reform and essentially given a number of countries including China a fair bit more clout on the way the IMF works. Now, what will this mean for our region and what will it mean for Australia?
TREASURER:
Well Australia has been at the forefront of moves to reform the International Monetary Fund and I pay tribute to the Managing Director and all of the countries involved. But Australia gave a lot of momentum to this, we put forward a proposal, we gathered support for it in the Group of 20 developing and developed economies which we Chair and it was really good actually to see the IMF adopt the reform proposal in its recent meeting in Singapore. It is two-stage proposal, the first has been implemented, we have to go and we have to do the second stage. But what it means is that the IMF will become more representative and more representative of the countries in our region. Countries like China, countries like Korea and I think this is important because up until now the IMF has been more reflective of the global economy as it stood when the IMF was formed at the end of the Second World War and it hasn’t adapted to the fact that the globe is now changing and growth is moving more to our region. We are seeing the emergence of new economic powers such as China and India, we have seen the emergence of Korea and these countries have to be properly reflected in global governance in relation to the world economy.
SPEERS:
Well talking about the economies of the region, are you concerned about the military coup in Thailand, that was of course where the Asian Financial Crisis originated from, there have been claims there is corruption against the ousted Prime Minister. Will it undermine confidence in the Asian economic region?
TREASURER:
Well I don’t think it is good for the region. The region wants to shows itself to the world as a stable political region which is a good bet for foreign investment. It came through the very difficult Asian Financial Crisis in 1997 when there was a flood of capital and some of the countries in the region have just been getting back on their feet again in terms of attracting capital. So, to have a coup is not good for the region and it is not good for outside views as to stability. Having said that, the good news is that it all seems to be calm, it looks like Thailand will be moving to an election and it looks like the disruption will be minimised. But I can’t avoid the fact, it was not good for the region, it does not give it a good reputation in terms of risk for investors and the sooner Thailand returns to an elected democracy the better.
SPEERS:
Well there is a lot more confidence in the region I suppose to back in the Asian Financial Crisis largely because of the threat of China. From spending a bit of time in the region what sort of view do you have on how long we can expect the boom in China to continue?
TREASURER:
Well I think the Chinese growth will continue for years yet. I don’t think I see any signs that it is running to an end. You have still got massive migration from the inland to the coast, you have got massive development from agriculture to industrialisation, you have got the emergence from socialism to free markets, all of these things are positive for economic growth. The Chinese authorities will have to be careful that they manage that process because you wouldn’t want to get a big disruption which could throw it all into reverse. But I think they have skilfully managed it so far, they are improving their financial systems, we look forward to more liberalisation in relation to their currency and I think bringing China into the global trading system as a market oriented economy will be one of the great developments of our lifetimes.
SPEERS:
Well if indeed that boom does continue for years to come that will obviously be good news for Australia with our resources sector enjoying the benefits of that. Will you foresee therefore inflation remaining a little higher than average in Australia for a while (inaudible)?
TREASURER:
Well I think demand will continue in China but what’s going to change of course is that global supply will pick up. We have got something like $30 billion of investment going into the mining industry in this country and there are other countries that are doing the same and global supply will pick up. The consequence of that is that although the demand will continue because supply picks up you will expect prices to come off somewhat. I have always said that, I have always said that you won’t get super prices forever. And I think as we are even seeing in relation to world oil markets with prices coming off a little you are going to see that in relation to other energy and other commodity prices.
SPEERS:
Well speaking of that fall in the world oil price, do you think the airlines and other industries should be passing that on now?
TREASURER:
Oh well I think those airlines that said they had to have surcharges because the oil price was going up should now be saying well they can take off their surcharges because it is coming down again. And I wouldn’t expect airlines to hold temporary surcharges which were put in place in relation to temporary conditions to hold those surcharges once those conditions have passed.
SPEERS:
Well Treasurer can I ask you just finally while you were away, no doubt you wouldn’t (inaudible), there has been an ongoing debate over Australian values here in Australia, Ted Baillieu the Victorian Liberal Leader says it is wrong to single out Muslims for any criticism when we talk about Australian values and whether people are integrating or not. Is he right?
TREASURER:
Well, we start from the proposition that we ask all Australians to become part of the Australian family and that involves supporting what Australia stands for, being able to speak English which is the official and the only official language of Australia, we ask all Australians to do that, we ask all Australian’s to do that regardless of race, we ask all Australian’s to do that regardless of religion and we ask the Muslim community just like any other community to embrace those values and to embrace our language.
SPEERS:
And have sections of the Muslim community been guilty of not doing that?
TREASURER:
I think that integration has been harder in sections of the Muslim community. You have got to be very careful here because there are sections of the Muslim community that have integrated extremely well, you think of the Turkish migrants for example now marching on Anzac Day, what better integration can you get than that? There have been sections that have not integrated as well and we want those sections to develop capacity in English and to support the values that Australia stands for.
SPEERS:
Okay, Treasurer Peter Costello we appreciate your time, thank you for joining us.
TREASURER:
Thank you very much David.