BURNS:
News today that the Australian dollar has cracked the US90c barrier – it’s currently trading, I think at something like a 23 year high. The question is: what does it mean for the Australian economy and how does the Federal Treasurer, Member for Higgins, feel about it. Peter Costello, good afternoon.
TREASURER:
Good afternoon Lindy.
BURNS:
It’s nice to have you along. Is this because our dollar is strong or the US dollar is weak or is it combination of the two?
TREASURER:
It is a bit of both. The US economy is weakening and the US dollar is weakening. But the Australian dollar is strong, not just against the US dollar but against other currencies as well. The Australian dollar went through US90c today and that is the highest since 1984, and we only floated the currency of course in 1983. So, it was abnormally high in 83/84 and so this really represents a record level for the Australian currency, particularly when you take it into account against other currencies as well on what we call a trade weighted index. So, this is a very high level…
BURNS:
Are you comfortable with it?
TREASURER:
Well, see it’s a very mixed thing. Travellers will say this is good because the Australian dollar is worth more than really it has been in living memory and that means they get value when they go overseas. But, rather than Australians travelling overseas we would like foreigners travelling here and foreigners travelling here want their currency to be strong against the Australian dollar. With a high Australian dollar our imports are cheaper but what we would really like is our exports to be more competitive. So, from an economic point of view this does bring difficulties and it makes things tougher for our exporters and to that degree is a constraint on growth.
BURNS:
And what about interest rates which, of course, would be the last thing you would want heading into an election?
TREASURER:
Sure…
BURNS:
It is going to put pressure on it?
TREASURER:
Well, it’s a bit mixed you see. One of the good things about having a strong currency is that it is shielding us to some degree against oil price rises, so oil and petrol would be higher if the currency was not as strong as it currently is. But, all things considered, a strong currency, whilst tourists like it is not all that good for your economy and it is not particularly good for your exports and to be in this range, which is the highest we have been in 23 years, brings with it a lot of problems.
BURNS:
And potentially higher, that seems to be the indication, that we could be on parity?
TREASURER;
Well, the US currency is weak, as I said. The Australian economy would be one of the stronger economies in the world. People are looking at Australia, they’re saying ‘you’ve got good growth’. A lot of people want to invest in Australia, that is bringing money in. When money comes into the country the exchange rate goes up and it has risen quite considerably over recent months and you have to take all of these things into account.
BURNS:
So what is your perception of this – is it because there has been good management of the economy, is the economy in such good shape that the dollar is showing the (inaudible) and downsides, as you have mentioned? Or how much is it to do with luck, that the commodity boom in fact is almost outside your and my control?
TREASURER:
You know, it’s not something I think that necessarily reflects a economy, the exchange rate. I can remember back in 2001 the Australian dollar was at 48c – about half of what it is now – a lot of people said ‘oh, that’s a reflection on how bad the Australian economy was at the time’. As it turned out it was quite a good thing – at that point having a low dollar it helped our exporters, it helped us come through the 2001 global recession. And now it is almost double what it was in 2001 – does that reflect growth in the economy? Well, growth in the economy is about the same.
BURNS:
But does it reflect a perception then, internationally, of our economy?
TREASURER:
It reflects the fact that a lot of people want to invest in Australia and money is coming into Australia as a consequence and that pushes the currency up. Conversely, back in 2001, we weren’t seen as an attractive investment proposition, so that is part of it. But you have also got to bear in mind when you are looking at currencies there is always two things in the equation – there is the Aussie dollar and in this case the US dollar. Part of it is the US economy is weakening and people don’t see the United States as a good investment opportunity. So, people don’t want to put money so much in the United States - it’s dollar weakens, people want to put money in Australia, its dollar strengthens: measuring one against the other you get this huge increase.
BURNS:
Peter Costello is my guest in the studio here at 774 ABC Melbourne, you’re with Lindy Burns. Last Friday’s programme, which I must say I wasn’t presenting but I heard a bit of it, there was an extensive discussion of the difficulties the young people are facing with families and mortgages. That follows on George Megalogenis’ piece in The Australian that revealed that despite the Baby Bonus and Federal boost to childcare, young mum’s seem to be returning to work sooner than ever after giving birth. And, given what you have said in the past, I can’t imagine that you are particularly comfortable with that return - are you?
TREASURER:
So do some women want to return to work soon because they’re career-oriented women and they want to make sure they don’t lose anytime in their career – and if that is their choice…
BURNS:
But what people are saying is that they have to go back because of the financial pressures on their family.
TREASURER:
For other people, if people felt that this was something they were being forced into, no, I wouldn’t be happy with that. We try and assist families with our Baby Bonus, as you know, with childcare rebates and with Family Tax Benefits which are payments to families per child for most Australian families to ease them through that difficult time. But, as you and I know, most women these days do return to work at some point after they have had children. They might return part-time at the beginning, that seems to be the trend, do a couple of days a week, and once the kids are off to school maybe do a bit more. And, for women who have been highly educated and want to pursue a career it might even be sooner.
BURNS:
I’m just wondering though how much of it is because of the housing market and, you know what it is like in Melbourne, we have both seen what is has done over the past two years, even 12 months, and it is following a similar pattern across the country. Will there be anything in this election campaign that the Government will be doing to try to make housing more affordable?
TREASURER:
Well, I think we can do two things – one is we can get more houses built, and that is going to mean more available supply, I think that is very important. The second of course, for those who want to rent is I think we have got to get more rental accommodation, we are having a look at the moment at whether we can spend the billions of dollars we have for rental housing better – get more stock for that money. And we are also having a look at how you actually get more houses constructed for those that want to buy, particularly in newer areas…
BURNS:
But, does something like removing the tax break on investment properties, could that come into this – you know, the whole negative gearing thing?
TREASURER:
If you were to get rid of negative gearing I think what would happen is you would get less investors in housing – and the consequence of that is rents would go up and I don’t think that would be good because rents are pretty tight at the moment.
BURNS:
They are pretty tight at the moment. I think you ask anybody who might be listening right now, who is trying to rent a place. There were some stories last week that the Hillsong Church was bringing influence to bear on the outcome of Australian Idol, I am sure you read that like I did. But today there are reports that you met with the rather controversial Catch the Fire Minister in August, what did you talk about? Are you mates?
TREASURER:
Well I have spoken to him on a number of occasions because I reckon he got a very bad deal when he was he prosecuted under the Victorian legislation, vilification legislation. And he appealed against that.
BURNS:
He was found guilty initially though…
TREASURER:
He was found to have contravened the Act but when he appealed the Court of Appeals said that he hadn’t contravened the Act at all and, you know, I thought, he got a pretty rough deal frankly. Whatever you think of someone’s religious views, I don’t think we will improve our society by sending people out to collect evidence on preachers; that is what happened in that case.
The Equal Opportunity Commission sensibly, sent some people out and said, “Go out and listen to this man’s sermons and see if you can get offended”. And lo and behold they did get offended.
BURNS:
But some of his social views that were expressed at the time did anger quite a few people.
TREASURER:
You’ve got to be very careful as to what he said and what the media reported him as saying. But why did the whole case come up, not because he got on the TV and insulted somebody but because a couple of people were sent down to collect evidence on him. Now if you think the Government is going to improve religious relations by sending people out to collect evidence on rival preachers and then prosecuting them, good luck, but I don’t, I don’t think that will improve relations between religions. I think there is a great case for understanding and tolerance but sending people down to collect evidence and prosecuting, I don’t think is the way to go about it.
BURNS:
So was that the reason for the meeting in August was to express those views?
TREASURER:
The reason was that I’ve taken a great interest in the case. I supported the Appeal. The Appeal was successful and that is how I got to know him.
BURNS:
Why don’t we have fixed terms in this country?
TREASURER:
Because it is not in the Constitution.
BURNS:
But we could do something about that if we held a referendum, couldn’t we?
TREASURER:
We could if we held a referendum, if the people voted to change the Constitution.
BURNS:
Do you think people are frustrated? Surely those, everyone I talk to just wants to have the election.
TREASURER:
Probably right but whenever they are asked these things in a referendum they generally vote against the proposal.
BURNS:
When was that held? There was one…
TREASURER:
There was a referendum in 1988, I think, for four year terms. Now, admittedly it is a long time ago, but it was defeated.
BURNS:
It was defeated. I am just wondering if people would have a different view now. We might take some calls on this throughout the afternoon.
TREASURER:
They might. I think a lot of people would say why not have Federal elections every four years? And that is what happens at the State level of course, they are every four years. They are three years at the Federal level.
BURNS:
Do you think it should be longer?
TREASURER:
I think there is a case for a four year term but when you have a referendum and you say to people, would you like to extend the term from three to four, the majority generally says, ‘No, we want our politicians to be held accountable more often, not less often’. That is generally why the referendum goes down.
BURNS:
Do you know when the date is?
TREASURER:
I don’t think it has been decided.
BURNS:
No, you can’t be serious.
TREASURER:
I can be.
BURNS:
It hasn’t been decided as yet. So what it sounds like it to me that you are tossing up, you and the Prime Minister are tossing up a couple of dates.
TREASURER:
Yes, I think once it is decided it will be announced but I don’t think it has been decided.
BURNS:
Is Higgins still a safe seat?
TREASURER:
I don’t think there is anything such a safe seat anymore.
BURNS:
Are you worried about this election?
TREASURER:
I am campaigning very hard, yes, very hard indeed.
BURNS:
I don’t mean just necessarily at a seat level, but nationally.
TREASURER:
Well I am campaigning hard at a seat level, I can assure you of that, and I will be campaigning hard at national level.
BURNS:
And the Prime Minister is in Tasmania today.
TREASURER:
I was out in the shopping centres on Saturday as I was the Saturday before as I will be this Saturday and in the local schools, and campaigning very hard.
BURNS:
Is this the hardest election you think you will have to fight?
TREASURER:
It will be a hard one. It will be a very hard one.
BURNS:
Harder than Essendon’s chances next season?
TREASURER:
They will be very hard too. They will be very hard, next season.
BURNS:
What do you think of Matthew Knights?
TREASURER:
I don’t really know Matthew Knights. He’s been the reserves coach or the coach of the Bendigo Bombers for some years. I haven’t really come across him. He has got a big ask. We finished down the ladder this year. We’ve had some champions retire. We’ve got James Hird retiring and how do you make up for James Hird? He’s a one in a generation footballer. So I think it will be a big ask.
BURNS:
Treasurer, thank you for coming in.
TREASURER:
Thank you very much, Lindy.