FAINE:
Peter Costello, good morning to you.
TREASURER:
Good morning Jon and Happy Birthday.
FAINE:
Thank you.
TREASURER:
And can I give you a piece of birthday cake.
FAINE:
Oh thank you, we gave you that piece of cake. Is there something symbolic in you giving it back to me?
TREASURER:
I’m sharing.
FAINE:
This is the new, kinder Peter Costello.
TREASURER:
That’s right. Happy Birthday, have a good day. And you share a birthday with Kevin Rudd.
FAINE:
Apparently. I only learned this the other day. But there is no significance to that is there?
TREASURER:
I hope not, Jon.
FAINE:
Well we will see. Enough of the frivolity. Thank you for the tip off – when is the election being called?
TREASURER:
I don’t know.
FAINE:
Well you clearly do from yesterday’s slip of the tongue.
TREASURER:
No, the Parliament doesn’t go back for another three weeks.
FAINE:
If at all.
TREASURER:
So, it could well have been the last day yesterday. If we go back in October of course there will be another sitting.
FAINE:
Do you know when the election is to be called?
TREASURER:
It hasn’t been decided. No, nobody knows.
FAINE:
Has the Prime Minister consulted you?
TREASURER:
Of course.
FAINE:
You’re the new team, it’s the dual candidacy now with Peter Costello and John Howard isn’t it.
TREASURER:
Well of course we have consulted over this, yes but it hasn’t been decided and when it is decided it will be called sometime this year it will either be I would think in October, November or December - early December. The Parliament rose yesterday – could well have been the last Question Time, if we go back in October of course there will be another one.
FAINE:
Then why did you say this is the last Question Time and then quickly correct yourself?
TREASURER:
Because it could well be the last Question Time.
FAINE:
No, no. You said this is the last Question Time.
TREASURER:
And then I realised it could well not be so I said it could well be the last one. Well it could be.
FAINE:
The slip of the tongues is there for us all to observe. If you are not involved in planning the election campaign then the veneer of team work disappears. So you will tell us you are involved, in which case why not tell us to what extent you are involved?
TREASURER:
Well I did, because I said that of course we have discussed this and it hasn’t been decided.
FAINE:
Is it all set to roll on Sunday? Is that what is going to happen?
TREASURER:
Jon I wouldn’t try and work yourself up into a lather for Sunday. As I said yesterday, if the election is called for later this year we may not go back in October. On the other hand we will if it is not called by October so I don’t think it is any point in getting too worked up about it. You will know by October.
FAINE:
You have clashed with the Governor of the Reserve Bank about the prospect of another rise in interest rates, the Reserve Bank meeting in October is not going to do it but November will/could. You would want to go to the polls before another rise in interest rates wouldn’t you, Peter Costello?
TREASURER:
Well, you are making an assumption there Jon.
FAINE:
I am, that is right.
TREASURER:
And, I am in the position where I can’t actually talk about what is going to happen in relation to interest rates but you would have observed that the international economy at the moment is very unstable. It is unstable because there is a full blown housing crisis going on in the United States and there is mortgage default going on at a very wide scale. The consequence of that is that the US Federal Reserve recently cut interest rates by a very substantial amount to try and stop the US sliding into recession. This is the world’s largest economy. If the world’s largest economy goes into recession it will have an effect on the globe, including Australia. And we have already seeing some of the effects of that.
FAINE:
Yep.
TREASURER:
You are seeing the effects of liquidity dry up, interest rates as between financial institutions rising in a very uncertain world. Now, what that means is it is going to take quite a lot of management in this country in relation to interest rates, in relation to the international economic environment.
FAINE:
Yep.
TREASURER:
And, I wouldn’t think that there are any great certainties in this economic climate. But we will be managing the Australian economy to keep it strong as we have in the past.
FAINE:
What difference would a Peter Costello government make instead of a John Howard government? What would you do that is different to what John Howard does?
TREASURER:
Well, Jon I don’t emphasise differences and you will understand why I don’t emphasise differences but the important thing…
FAINE:
Well I don’t see…no, no. In fact the current predicament of the Liberal Party in the polls you may want to emphasis the difference.
TREASURER:
Well, I don’t and as I said I don’t. But let me tell you the things I think we really need to do in this country. The first thing I’d name is we have to fix the water crisis. This is now very serious. We have a situation where our capital cities are running out of water and I think we should have a desalinisation plant for every capital city in Australia. I think we should have a national approach to the Murray Darling Basin. I think we should save water and reuse it better and I think we should make sure that some of the uses to which we put water which are wasteful uses are not continued.
FAINE:
Such as?
TREASURER:
Some of the uses particularly in relation to agriculture are not going to highest value.
FAINE:
Which ones?
TREASURER:
…and, in a properly functioning market system you could make sure it goes to highest value….
FAINE:
Which ones?
TREASURER:
I am not talking about those ones in Victoria incidentally.
FAINE:
Are you talking about cotton?
TREASURER:
I am talking about some of the flood irrigation practices where I think we haven’t properly charged for the water that is being used.
FAINE:
Are you talking about rice?
TREASURER:
If you did charge for the water that was being used, people would still be entitled to it but in a properly functioning market the water would go to higher uses.
FAINE:
Well, let’s talk in terms that the listeners can understand. Are you talking about cotton, are you talking about rice?
TREASURER:
I am not singling out a particular industry.
FAINE:
Well you might as well because you are talking around it, let’s talk.
TREASURER:
No, no. I am saying there are some practices and some farms where it is not being done efficiently and if you have a proper functioning market then you can’t afford inefficient use of water.
FAINE:
Cotton?
TREASURER:
It could be various crops, Jon.
FAINE:
Well which ones?
TREASURER:
Well, different people farm with different efficiency. There are some people that farm some crops very efficiently and others that do it very badly. And if you are not properly charging for your water you could well be allocating to the bad farmers and the bad techniques rather than the good ones. Let me give you a second example. A lot of our irrigation canals or infrastructure here in Victoria leak. We are taking water out of river systems and putting them in leaky canals. Now, we ought to be fixing those canals and making sure that we don’t get evaporation and wastage. This is probably the driest continent in the world and we have to get better at using water.
FAINE:
Who would pay for desalination plants in capital cities?
TREASURER:
Well I think this is part of making sure that the cities have proper water resources. This has, as you know, been traditionally a State Government area. You know that.
FAINE:
Western Australia has got them, Victoria is planning one and the PPP.
TREASURER:
Well, Western Australia already has one. I have paid tribute to the Western Australian Government. They’re in fact building their second one. Victoria doesn’t have one; Adelaide, which is probably the most water starved city in Australia doesn’t have one, it relies on the Murray River. Now the whole of the Middle East by the way at the moment is running off desalination. All of those emirates in the Middle East. Desalination is a proven technology to produce water. You may have a problem with the power source.
FAINE:
Energy intense.
TREASURER:
But it is proven technology and I think it is something that Australia will have to embrace.
FAINE:
So you’re now a climate change convert?
TREASURER:
Well, I think we also have to address the climate change which is going on around us. I think that is very important at the moment.
FAINE:
Are you a convert now?
TREASURER:
Well Jon, that sort of implies, a convert sort of implies that I haven’t always been interested in this issue, which I have. So I am…
FAINE:
But the Howard Government’s policies have been characterised by climate change sceptics.
TREASURER:
Which I have. Rather than a convert, I would say consistent believer.
FAINE:
So have you pressured the Prime Minister over this?
TREASURER:
Look, it is not my role to emphasis clashes.
FAINE:
No, it is mine, that is why I am asking.
TREASURER:
Well that is why I am telling you, I am not biting. The important thing I think, is that we get on with practical measures to address climate change. Now, I think this can be done at the international level, the national level and it can be done at the local level. One of the things that we are doing for example, is we are offering rebates for solar panels on houses. So individual houses can get into the response to climate change as much as the State, the nation and indeed the international community.
FAINE:
The Prime Minister confirmed on the 7.30 Report with Kerry O’Brien, what is it – 10 days ago now – that sometime, perhaps, probably he suspects in due course, and he couched it in various levels of equivocation, he would retire during the next term and he would expect to handover to Peter Costello as the next Prime Minister. So all of these questions about points of difference between you and John Howard are suddenly much more important. It is quite a reasonable thing, if not a necessary thing, for us to find out where you differ from John Howard on things like climate change, water, the war in Iraq and a great long list of issues. Those are proper lines of inquiry now, Peter Costello. We want to know what difference it would be if you were in charge instead of him.
TREASURER:
Of course, the media are entitled to ask any question they like…
FAINE:
No, the public want to know.
TREASURER:
…and the pubic is entitled to ask any questions they like. And the way I see it is in most organisations and companies by the way, they have succession plans. This is considered good management. If you have got somebody standing down from the ANZ Bank…
FAINE:
John Macfarlane.
TREASURER:
…then they nominate who is going to take over…
FAINE:
And it is handled professionally.
TREASURER:
…it is done seamlessly, it is handled professionally…
FAINE:
It hasn’t been like that in the Parliamentary Liberal Party, has it?
TREASURER:
Hasn’t it always been like that in politics. Hasn’t been like that in the Liberal Party. Hasn’t been like that in the Labor Party.
FAINE:
Is that what you have said to John Howard? That it should be handled like a bank?
TREASURER:
And the important thing is that it should be done in a seamless way so that the country, which is more important than a business, has a succession plan. And I think it is very, very important that you emphasise both the continuity (inaudible) and the way in which you can develop long-range plans. You see Jon, I am in politics for the long-term. I am going to be around for a long while. I want to be around to fix the water problem. I want to be around to address climate change. I want to be around to invest in our higher education. I want to be around to make sure that we bring more people into the labour market and we keep our taxes low. I want to be around to see all of these things done. And it might take five years, it might take 10 years. Some of these things that we’ll set up it will take 20 and 30 years but I want to talk about them now.
FAINE:
A quarter to nine on 774 ABC Melbourne, Jon Faine with you with Peter Costello, my guest in the studio. Why do you trust John Howard this time when he says he will hand over to you?
TREASURER:
Look, John Howard and I have worked together in the Cabinet for the best part of decade, probably more. And I think some of the things we have achieved together are things that all Australians would recognise as being positive for our country.
FAINE:
Why do you trust him on the succession plan this time, when he has dudded you time and time before?
TREASURER:
Getting unemployment down, for example. And we will continue to work on all of these issues and I want to be there to broaden out from the economic issues into climate change, into water, into education and also what I call bringing marginalised people into the mainstream of Australian society. I think we can do this now, Jon. I think we…
FAINE:
You are not answering my question, Peter Costello. I am happy to talk about people marginalised and the question there is, it is through your policies and management that they have become marginalised – I will come back to that – but why do you trust…
TREASURER:
I think people are more interested in, Jon…
FAINE:
…John Howard this time when he has dudded you so many times before?
TREASURER:
Jon, I think people are more interested in where we want to take the country and I want to talk about…
FAINE:
But what is the answer to the question about trust and the…
TREASURER:
Well I have already given you the answer…
FAINE:
No you haven’t, you avoided it.
TREASURER:
We have worked together, no, no, no, I am sorry. We have worked together in a very, very fruitful way and we will continue to do so…
FAINE:
We have creative tension, we have seen that, he has publically anointed you this time.
TREASURER:
…here is where we will go on to address what I believe to be the great issues of our age and our day. Now…
FAINE:
Have you got a written agreement this time?
TREASURER:
You can get locked down Jon, in the nitty-gritty of today or you can lift your eyes and see the vision.
FAINE:
We will do both, in fact. They are not…
TREASURER:
I want to lift my eyes and see the vision.
FAINE:
Have you got a written agreement with him this time?
TREASURER:
I think you are asking silly questions.
FAINE:
Well I don’t think so and the public want to know because there is three candidates at this election. There is John Howard and Kevin Rudd and Peter Costello.
TREASURER:
Well Jon, the answer to your question is, having worked very successfully over the last 10 years, having put together a plan for this election and having the intention to see through that vision for the next five and 10 and 15 years, I think we can do something exciting for Australia.
FAINE:
All right, that is a non-answer but I will move on. If you want more social inclusion, you have been the Treasurer for the last 11 years. If there is some social exclusion, it is because of your policies, isn’t it?
TREASURER:
I don’t think so. When I became Treasurer, of course unemployment was very high and during the period I have been Treasurer 2.2 million Australians have found work. That is, they have come into the mainstream of Australian society. Now, having got unemployment down – and some people tell you Jon, that we actually have more jobs going in some parts of Australia than we have people.
FAINE:
Labour shortages, no doubt.
TREASURER:
Labour shortages. Having got unemployment down, now I think we can actually bring a whole group of marginalised people into the mainstream of Australian society. Let me tell you what I am talking about. There are people who may have bi-polar problems, for example, who have been assessed as being eligible for the disability pension, many of whom were put on a disability pension at the age of 20 where they stay for 40 years until we bring them off and give them the age pension. And that is their life. Forty years on the disability pension with the reward at 65 of an age pension. I think now in a society where we have a strong economy, you can bring many of those people in to the economic mainstream…
FAINE:
How?
TREASURER:
We have the medical capacity for treatment, we have the capacity through our Centrelink programme for management to help them overcome problems and we have the capacity to give them a job. And to give them a job which gives them a stake in our society. I think we can do that with a lot of groups which have been marginalised.
FAINE:
So the $17 billion surplus that you have underestimated consistently, you are going to use to give money to pensioners and people who are out of the workforce?
TREASURER:
To draw into economic mainstream people who have medical conditions that we can now treat. People who for example have been excluded because of their family’s circumstances. People who haven’t been given a chance. One of the things about a strong economy is you can give people a go and give them a chance. And that is what I want to see us do in Australia. Give people a go and give them a chance in the years which lie ahead.
FAINE:
It is a slogan but what does it actually mean? What does that translate to policy?
TREASURER:
What it means is better health facilities which are funded out of a strong economy, giving people the opportunity to get a job which again is another feature of a stronger economy and building training and education which again can be funded out of a stronger economy. But I make this point: if you don’t have a strong economy you can’t so anything. You can’t do a thing.
FAINE:
Yep.
TREASURER:
And if you don’t have people in work and you don’t have the revenues, you won’t have a health system. Having worked so hard to get those things going, now we can go the step forward.
FAINE:
You have announced tax cuts Budget after Budget and you have brought tax rates down. Are there going to be more tax cuts as part of your platform for the next election?
TREASURER:
Well over the longer term this should be our aim: to have Australia as one of the low tax economies of the developed world.
FAINE:
But you are over-taxing us now. That is what the $17 billion surplus means, doesn’t it?
TREASURER:
Well Jon, we are towards the lower end of the tax scale amongst the developed economies of the world. We are amongst the low ones but I think it should be our aim to stay there and to keep the tax burden lower.
FAINE:
If you want de-sal plants, if you want recycling, if you want better irrigation so you solve the water crisis then you wouldn’t cut tax, would you? Because that tax pool is your capital for investment.
TREASURER:
I would say this: if you can run a strong economy, you can keep taxes low and you can invest.
FAINE:
You can’t spend it twice.
TREASURER:
You can’t spend it twice, no. But Jon, if you and I had a bigger cake we could both have a bigger slice.
FAINE:
Yes well, there is another slice there for you because you gave me yours, there is one coming back (inaudible)…
TREASURER:
Okay, okay. If we have got a tiny little cake, we are going to have a small slice. If we can have an Australian economy which is a bigger cake, we can invest and we can keep taxes low. If we have a bad economy, we can’t do either. That is it. We will go back to where we were – 17 per cent interest rates, 11 per cent unemployment, no investment – but after 10 years of economic management, 2.2 million more people in work, we can invest and we can lower tax.
FAINE:
But we have got higher records of household indebtedness than ever before. We have got the worst level of household affordability, house buying affordability that we have ever had, we have got today – it has just emerged in today’s newspapers – record credit card debt, now $41 billion on credit cards in Australia, Peter Costello - $41 billion – and Australians owe 161.3 per cent of their annual disposable income in the three months to June 30th. The first time it has ever gone over 160 per cent. Unprecedented levels of debt. And yet you are trying to tell the people who are listening to you today that they have never had it so good again.
TREASURER:
Well let me make the first point: I think people have to be careful with credit cards and I don’t want to for a moment understate that. But Jon, when you are looking at borrowings you have got to look at assets. Because you generally borrow either to buy an asset – your house – or you borrow against an asset which is your house. When you actually look at levels of debt you have to compare it with level of assets. And I think levels of assets in Australia is something like $5 trillion. And what that means is in net terms, the Australian public still has many multiples in assets than what it holds in debt.
FAINE:
The only problem with that explanation is the people with the debt aren’t the people with the assets.
TREASURER:
No, no, quite wrong. Now, this is a very important point because the RBA – the Reserve Bank of Australia – did a survey on this and in fact it found that the people who are holding the higher mortgage debt are the people who have the most valuable houses. That is, that one of the reasons why overall debt levels are high is that the people that are doing the borrowing are doing it for very, very large assets. And this is why we have got something like $6 in assets for every $1 of debt. Because those people who can afford it are actually leading the borrowing. That is the way they make money. And it is quite wrong to say, ‘oh well, borrowing is all being done down at the low end of the scale,’ in fact, the big borrowing is going on at the top end of the scale.
FAINE:
And people are terribly anxious about the housing market stalling because if the increase in values in the housing market somehow stalls as it is in New South Wales, you can have negative growth. But I want to get away from the economy because we always get stuck on the economy and you keep saying Peter Costello, that you will flesh out some broader vision in the socially inclusive Australia that you want is always dangled in front of us but we are not really sure what shape it has got. Just before we leave the economy, who would be Treasurer, if you are Prime Minister?
TREASURER:
Well I am not going into all of those things…
FAINE:
But we have to know because we are being asked to vote for you and John Howard as a sort of team, tag team in the wrestling and we want to know who you will tag when you go in as the Prime Minister.
TREASURER:
I can tell you who is won’t be. It won’t be Wayne Swan.
FAINE:
No, but who would it be?
TREASURER:
Well that is the best news you have heard all day, I think.
FAINE:
Well we will let the Labor Party deal with their problems on that front. But who would it be if you are the Prime Minister?
TREASURER:
Jon, numbers of my colleagues are very talented people and I am sure that in a Coalition of talented Ministers in the future, there are people who can (inaudible).
FAINE:
But we don’t know. So we are asked to vote for you as the future Prime Minister but we don’t know who your team is.
TREASURER:
Well you would be asked…
FAINE:
Even though the Prime Minister acknowledges the importance of showing us who the team is because he is acknowledging that you are the heir-apparent.
TREASURER:
Yes, you will be asked to vote at this election for me to continue to manage the Australian economy.
FAINE:
All right, a few other quick things. Are you going to reignite the republic debate about which you were passionately involved when we had the Constitutional Convention?
TREASURER:
Look, I think at some time in the future we will return to this issue. I think…
FAINE:
Under your Prime Ministership?
TREASURER:
Well, let’s not get too carried away with ourselves.
FAINE:
Well no, we are not. We are looking at a clear path.
TREASURER:
Yes, I think at some time in the future, we will reignite – well not reignite – at some time in the future we will revisit this issue…
FAINE:
Peter Costello as Prime Minister will look again at the…
TREASURER:
There is a genuine view in the community that this is something that we will evolve to. But frankly, I think it can only be done when you have more agreement upon the method of electing a President.
FAINE:
Would you look at that again?
TREASURER:
Until you get that agreement, there is no point in actually putting it before the Australian people. Now, I have made my views clear on that…
FAINE:
Would you as Prime Minister start that process again?
TREASURER:
Well let’s see how the debate evolves and let’s see if we can make progress in relation to common understanding.
FAINE:
Why are you so reluctant to say that me, Peter Costello, as Prime Minister will do this, that or the other? What is wrong with that?
TREASURER:
Because we, let me tell you. We had a referendum in 1999. It was defeated. You have got to listen to the Australian people and if you turned around and said to them, well we didn’t like that vote, we will have another one, people will say: ‘well what was the point of the vote?’ I think Australia will evolve in that direction. It will evolve in that direction when you have more agreement in relation to the method of selecting a President. Obviously I want to be a part of that but I don’t think you can rush the Australian people.
FAINE:
The other capital, ‘R’, Reconciliation. You marched on the Reconciliation March along St Kilda Road after the Harbour Bridge Walk. Will you reignite a Reconciliation process?
TREASURER:
I think we should hold out the hand of reconciliation between Aboriginal and non-Aboriginal Australia. I think the public wants it. I think they want to feel that those of us who are doing well, who are part of this prosperous society can reach and hold the hand of those that have been marginalised in Aboriginal communities. I think both white Australia and I think Aboriginal Australia wants to do that. And I want to be part of that. I have been part of it in the past, I want to build it in the future.
FAINE:
You have passed me a press release as this interview commenced about Skilled Stadium at Kardinia Park getting an upgrade. There has been some conjecture about this, what can you tell us?
TREASURER:
The Australian Government is going to provide $14 million for the re-development of Skilled Stadium to improve the facilities there and make it a first-class football venue.
FAINE:
Kardinia Park, known through other channels as Kardinia Park if people were wondering.
TREASURER:
Yes, otherwise known as the Cattery, that is what you can call it, the Cattery. The home of the Geelong Football Club. This is a very important announcement for Geelong, very important I think for the re-development of that as a sports stadium. And the Australian Government wants to help that with a $14 million grant so this can get underway and so that the Cattery, Kardinia Park whatever you like to call it, Skilled Stadium, can become a modern football venue.
FAINE:
What is really an issue here in the marginal seat of Corangamite held by Stewart McArthur who is surprisingly is going around again, this is an attempt to boost his stocks in the Geelong marginal seat of Corangamite, isn’t it?
TREASURER:
Well I think it is an attempt to actually improve Kardinia Park.
FAINE:
Pork barrelling for Stewart McArthur.
TREASURER:
Stewart, by the way, has been a great proponent of this and I should give credit to him for it but at the end of the day it is the Geelong Football Club and their supporters who will benefit from that and I see one of them sitting out there at the moment, he is just about to come in and talk to you – Ted Baillieu.
FAINE:
Ted Baillieu is because he is our footy tipster for this morning, he is passionate about the Geelong Football Club. And we had Steve Bracks who is also a passionate Geelong supporter doing the footy tips a week or two ago and we of course, as always at the ABC we are very balanced and we have Ted Baillieu doing the footy tips today.
TREASURER:
Well if you are going to be balanced, perhaps you could have an Essendon supporter in here doing tips, one day.
FAINE:
Who is going to win?
TREASURER:
Geelong.
FAINE:
Tonight?
TREASURER:
Yes.
FAINE:
And next week?
TREASURER:
Geelong. I am backing them all the way.
FAINE:
Peter Costello thank you for coming in today.
TREASURER:
Thanks Jon.
FAINE:
Whatever happens, good luck…
TREASURER:
Thank you.
FAINE:
…in the campaign that may or may not start this weekend.