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Transcript No. 31

Hon Peter Costello MP

John Metaxas, CNN Business Asia

Friday, May 26, 1998

New York

SUBJECTS: Exports, Indonesia, Jakarta, Budget, Australian economy


Jakarta’s turmoil has dried up nearly all of Australia’s exports to Indonesia

in the last two years. Canberra officials say that Indonesia counts for

4 per cent of exports and Jakarta is Australia’s ninth largest export

market. But despite the worrisome numbers Canberra is forging ahead with a healthy economy

and a balanced budget for the first time in years.

Joining me now is the man behind that budget, Australia’s Treasurer, Peter


Welcome to CNN.


Thanks very much.


Why is it that Australia has largely remained unscathed given all the financial turmoil

surrounding you?


Well our growth has been effected to some degree. We have revised our growth down to

about 3 per cent and it would have been higher if it hadn’t been for Asia.

Australia is in a different position. I think that a big part of the Asian problem has

been financial instability, lack of regulation in the financial sector, corporate

governance problems and these are areas where Australia has been very strong.

The second thing is, that we have taken great steps to strengthen our economy over the

last couple of years. We’ve moved our budgets back into balance, we’ve got

inflation under control and we’ve got a diversified export base which has given us a

lot of strength as we’ve seen in the region this instability.


How difficult was that process of achieving a budgetary surplus and historically how

much of an aberration or inline with your history is it?


Well this is the first budget surplus – true underlying surplus – we have had

for the last eight years. So it’s something that we have not been strong on in

relation to our own budgets. But, not only are we in surplus now we are projecting

surpluses for the foreseeable future.

Having the budget back into surplus gives us another opportunity – it gives us the

opportunity to start reducing government debt. When our government was elected, two years

ago, we set ourselves a goal of getting government debt down from 20 per cent of GDP

to 10 per cent by the year 2000/2001. We will easily achieve that and with an

ambitious privatisation program we could take it down as low as 1-1 per cent

by 2000/2001.


I understand that it was just one company, one privatisation that went a long way

towards balancing the budget – the telephone company.


Well we don’t actually use privatisation proceeds on the budget. We balance our

budgets out of recurrent revenues and recurrent expenditures.

What we have done with our privatisation program is that as we begin to privatise

assets we reduce government debt. It was the Australian national telecommunication

carrier, Telstra, that we sold one third of – really for service reasons, to improve

services and reduce costs – but as we begin to privatise that further, we’ll

reduce debt further. We could get to a situation where debt would be as low as 1 per

cent of GDP.


Which by world standards is miniscule.


By world standards it would be one of the strongest certainly if you compare it to the

US, North America or Europe. This would be an extraordinarily strong position for the

Australian economy.


Now many of the Asian nations are watching what’s going on in Indonesia. How

likely are you to be effected if there is continued instability there?


Well, Indonesia is close to Australia, it’s a country that we have strong ties

with. We want to see a stable Indonesia, we want to see a government which has public

support and which can attend to the economic restructuring which is needed. We think that

the IMF programs, as they have been negotiated, are the best hope for Indonesia. That the

Indonesian authorities best chance to stabilise the economy is to continue to deliver on

those programs and to engage in the restructuring which will give international

confidence. I think this is a very important point in Indonesia that it is a question of

displaying confidence to the world and the best chance is those programs.


Alright, Peter Costello, Treasurer of Australia, thank you very much for joining us



Terrific, thanks very much.