THOMPSON:
Mr Costello good morning to you.
TREASURER:
Good morning Peter.
THOMPSON:
If I can just deal first of all, of where the tax cuts came from. Were they your idea?
TREASURER:
Well look, the way in which we approached this Budget, Peter, is we had to fund the war in Iraq. We had to fund very extensive drought assistance, about $740 million. We had to increase Australia's security in the wake of Bali and we wanted to keep our Budget in surplus. And when we were able to do all of those things we could have had a larger surplus and paid down some more of Labor's debt, but we have paid off $63 billion of Labor debt. So I thought that the better thing to do would be to return some of that to the taxpayer and so that is what we do - $2.4 billion is returned to the taxpayer, and that is the way it was done.
THOMPSON:
So, because you are more across these things than anyone else you are the sole architect of those drivers are you?
TREASURER:
Well, yes, I am doing the constant updates, and I am writing the Budget, yes I am, yes that is my responsibility for better or for worse.
THOMPSON:
I don't understand how this process works only I know it is very intense. I mean, when do you get, in fact, the figures before you that says, yes, there is room for a tax cut. Did that happen in the last few weeks?
TREASURER:
Well, we start doing the Budget in November so I have been working on this for 6 months, and back in November, obviously, we hadn't committed troops to Iraq. We committed troops in January, from memory, and so you obviously just have a running account. You have just got to take into account things as they happen. Back in November we did not know how long the drought would go. So, you have really got constant updates as to what is happening. You have got to make key assumptions about what is going to happen in terms of word growth, oil prices and all of these things. And as the picture became clearer and as I became confident that we could fund the war in Iraq it became possible I think to keep the Budget in surplus and make a small return to the taxpayers and that is what we have done.
THOMPSON:
I know the Prime Minister said months ago that if there was surplus money he would prefer to return it by way of tax cuts. I mean, when was it clear to you, when were you able to actually say we can go that way?
TREASURER:
Well, you have got to make various assumptions. The critical thing I think is as the war came to an end in Iraq and that enabled us to try and get some kind of fix on defence spending because obviously if the war had gone longer that would have been something that we would have to take into account. But paying for the war, and that is about $750 million, and the drought it's about $750 million, defence build-up of about $2 billion over 5 years. We were still in surplus and normally what we do with surpluses of course is we repay Labor debt. Well, we have re-paid $63 billion of Labor debt and we are now getting the interest savings so I thought it was responsible to return some money in the way of tax cuts.
THOMPSON:
And you hinted last night that you spoke to Mr Howard just whilst he was abroad, saying we can do this, so, as recently as a week ago?
TREASURER:
Well, as recently as a week ago, yes, I was alerting him on the final shape of the Budget, yes.
THOMPSON:
Can we focus on growth for a moment. Australia has done very well in recent years but the forecast is the growth will be down to 3.25 per cent this year, off from 4 per cent last year. How can unemployment stay steady at 6 per cent in those circumstances? I mean it is also, there is a real sense there that the unemployment market is very difficult at the moment, or the employment market I should say.
TREASURER:
Well, in this financial year we think the, this is 2002-03, we think growth will be around 3 per cent and a little stronger in the next financial year, 3 ¼ . So about what we are experiencing now and that is enough growth to meet new people coming into the work force and people who are coming in for the first time. But it wouldn't bring your unemployment rate down. So it means that you will have new jobs being created. It means that during the course of the year you will have more people in work on a 3 ¼ per cent growth, but as you say it is a little lower than we got used to in the late 1990's with 4 per cent growth. 4 per cent growth you generally have your unemployment rate falling.
THOMPSON:
Look, the, and I know these days in that Budget presentation at half past seven on Budget night there is much less said about the economy generally and much more focus on programmes. But one other thing which I don't think you mentioned last night was the Current Account Deficit which, I mean there used to be a time when these things were given a lot of attention in the public domain. Because our dollar is going up and because of our general trade situation being not so good it has gone from 3 per cent 2 years to well over 5 per cent, 5.75 this year just finishing, 5.25 next year. There used to be a time when people were very worried by that, are we to be worried now?
TREASURER:
Well, let me say I would always like a lower Current Account Deficit than a higher one, so I am not for a moment saying I like high Current Account Deficits. But the times when we were really concerned about this in the late eighties, early nineties, the Current Account Deficit was generally above six and at least in the early 1990's the Government was borrowing large sums of money. We are in a different situation now. The Government is not borrowing money, in fact the Government is actually re-paying, the Government is putting money back into the system. The borrowing that is going on is all in the private sector and all at their risk. If they feel that by borrowing, and it is mainly banks that are borrowing these days, they can make money and it is a good investment. That does not worry us nearly as much as if it is the Government that is borrowing and spending it on expense programmes. So it is the quality of your Current Account, it is the dimension of it. But having said all of those things, the lower the better, and what would, make our Current Account Deficit lower? Well, if the economies of the world were stronger, if the United States were to recover our export markets would recover. I don't think the Current Account in the 5 per cent range as it currently is, is so much a feature of what is happening in Australia as so much a feature as to what is happening with our trading partners.
THOMPSON:
Just listening to what other political party leaders have been saying in recent days, it is quite clear that the education reforms and the Medicare reforms were in for a bollocking in the Senate. You already have double dissolution triggers, in a sense this Budget, I mean most of the commentators today are saying this Budget sets up the possibility of an election?
TREASURER:
Well, look, it is up to the Senate isn't it. We announce a Budget and back in the old days Budgets used to be enacted by the Senate. That was the theory of democratic government. You have had a Labor Party which has decided just to oppose everything they can, as a tactic. But I do not think it is doing them any good Peter, I really don't. I think they would be better if they said that they will take a positive attitude, now it is up to Mr Crean what he does, but I don't think the opposition at-all-costs tactic is a good one for them.
THOMPSON:
Thanks very much for taking time this morning, I know you're busy.
TREASURER:
It's great to be with you.