Well obviously there’s been a lot of interest in the Australian dollar over recent weeks and there’s been quite a deal of speculation in relation to its levels and quite a lot of that is based on commentary which is not well based. The important thing about the Australian dollar and the Australian economy are the fundamentals and it’s the fundamentals which are going to determine the overall levels of the dollar over the long term as people put aside ill-informed commentary. The facts are that the Australian economy is growing above 4 per cent, that the inflation rate in Australia is around about 1 per cent, that the Budget is in surplus and the Government has a plan to keep the Budget in surplus for the foreseeable future, as far out as we make forward estimates over four years, building to surpluses of 2 per cent of GDP. And the Australian Commonwealth Government debt to GDP levels, which are now below 20 per cent will fall to 10 per cent, or when the Government completes its privatisation of Telstra, 1 per cent, 1 per cent of the economy.

Now put that into international context, you’ve got the US at something like 40 per cent and Europe higher. Now there’s also been a lot of commentary about exports in the March quarter. Exports in the March quarter actually fell by about 2.2 per cent but nearly 60 per cent of this was as a result of rural commodities, principally the fact that the Australian Wheat Board held back on sales as prices were negotiated, and the Wheat Board has now entered into contracts, and a lot of those stocks are now moving in the June, and will continue to move, in the September quarters. A lot of the commentary has also taken a very mechanistic view of Asia. Whilst it’s true that merchandise exports to Indonesia, Malaysia, Philippines, Thailand fell about 30 per cent in the year to April of 1998, exports to the US and the UK and Germany rose about 40 per cent. So you’re seeing a very significant diversification in relation to Australian exports. We’ve also seen this in relation to services. Whilst tourist services were down in relation to Asia, tourist services have been considerably up in other markets, with increases in relation to the US and Europe, in particular the US, with arrivals going up 27 per cent to April.

So I think a clinical look at the National Accounts for March which showed a strong growth and low inflation economy, a careful look at the export story in Australia will show whilst there will of course be an effect from Asia and we have marked down growth accordingly, significant diversification going on in relation to the Australian economy and I think an understanding of, and a focus on, the fundamentals, is the important thing to have in mind when looking at short term movements in relation to the currency.

Why’s our dollar below 60 cents if all this is true?

Well as I said in relation to the dollar, I think that there’s been a great deal of short term activity which has not been based on the fundamentals, I think practically every observer has said that. But in the short term you can do that kind of thing, but in the longer period people look at fundamentals and as you look at fundamentals you’ll see a very solid and positive story.

Are you saying that our dollar’s undervalued?

I’ve never, I’ve always observed the practice of not commenting on levels of the dollar, I don’t think I ever have, and I’m not going to start now. But you read the commentary and I think the commentary is all pretty unanimous as to where its current level is.

Treasurer do you support the Reserve Bank’s intervention?

Look the Reserve Bank is charged by us as an independent bank, with the conduct of monetary policy and responsibilities in relation to the currency, and the Reserve Bank has the full backing of the Australian Government and it’s probably able to make its assessment like a lot of other people.

How damaging would an interest rate rise be for the economy Treasurer?

Well look in relation to interest rates, I think as I’ve always said to you and I continue to say to you, I’ve never given a forward indication in relation to interest rates, never given an indication when they go up, when they go down. We charge an independent Reserve Bank with responsibility in relation to interest rates. I think the Governor of the Reserve Bank had some comments to make late last week, I believe it was, in relation to that, and I refer you to his comments.

If the Bank were to increase interest rates would they have you full confidence still?

Well you’re asking me hypothetical questions about the conduct of monetary policy which is something I don’t engage in.

So the value of the Australian dollar is now below 60 cents, do you think that reflects a true value of the Aussie dollar?

Well I think if you look at the commentators, the commentators have a pretty near unanimous view on that particular issue. I’m not giving out my own values, but I would point you to the commentary and the commentary I think which has stepped back a bit and looked past the short term speculative activity, sees a pretty good economic story.

Is there a level that more drastic action would need to be taken?

I’m not commenting on future courses of action.

Why have you felt the need to come out and talk about how strong the economy is today?

Mainly because 20 or 30 of you asked me to and I thought it was easier to kill you all in one shot. Thanks.