Transcript

of

THE HON PETER COSTELLO MP

FEDERAL MEMBER FOR HIGGINS

Interview with Alan Jones

2GB

7.16am

E & OE

SUBJECTS:      Economy

JONES:

Peter Costello, good morning.

MR COSTELLO:

Good morning Alan.  Good to be with you.

JONES:

Thank you.  I don’t know whether you have read the Editorial in The Australian newspaper but it ends by saying about the next election:

“…the victor will be the Party Leader who has the foresight and pragmatism to break free of the current shadow boxing over industrial relations and other economic issues and embrace the policies that the times demand… in the coming campaign voters will ask themselves Peter Costello’s question from the last one – who can best be trusted to manage a trillion-dollar economy?”

Did the public, the electorate answer that question satisfactorily last time?

MR COSTELLO:

Well we accept the verdict.  The voters cast their verdict and the Government changed.  But I think as you look back now you can see that the economy was presenting major risks – risks which we were warning about at the time of 2007 and risks which Mr Rudd did not understand.  And when Mr Rudd was elected in 2007 he thought that the problem of the Australian economy was that it was overheating and it had to be slowed down.  He thought that measures had to be taken to try and dampen business and of course that is what he spent the first year, or nearly the first year, certainly up until September of 2008 doing.  It was the wrong call.  What the economy needed to do is it needed to ‘Go for Growth’.  What we needed to do is we needed to have a better monetary policy, better interest rates, what we needed to do is we needed to get on with those measures which would build confidence.  And unfortunately as we now go into 2009 we go into 2009 in a weaker state than we should have been because the Government made the wrong calls all the way through 2008.

JONES:

Now the consequences of that, and I am just wondering, can you concede that on your side of politics when the Federal Government has decided to put the Budget into deficit, and I will come to that in a moment, but they are talking of figures in excess of $50 billion and having to go to the capital markets for loans of up to $200 billion.  It could be the issue of economic management requires a more widespread debate.  Are we getting that debate?

MR COSTELLO:

It certainly does require a widespread debate.  There is no doubt about it Alan.  And where you are in a situation where people are losing their jobs, where you are in a situation where the Government is borrowing money at a rate we haven’t seen, then Alan we ought to be debating it.  This is people’s lives here.  This is our country’s future.  Now I was Treasurer for over a decade.  During that period I paid off $100 billion worth of debt.  It took a lot of effort.  It took a long time.  Do you know that the Rudd Labor Government has just turned around and re-borrowed that.  Just re-borrowed it in a year.  It took us 10 years to pay off the last $100 billion of Labor debt and it has taken them one year to re-borrow it again.  Now let me ask this question – when is it going to be paid off?  When is that debt going to be paid off?

JONES:

That is worth a debate isn’t it?

MR COSTELLO:

Well I heard Mr Tanner the Finance Minister say yesterday he is lying in bed at night worrying about debt.  Well he is apparently not worrying about it so much as to not borrow it.  Maybe he should have been worrying about it a little bit more.  Maybe he should have had a sleepless night before he went out and borrowed it.

JONES:

You would have noticed in the last couple of days I think there has been some interesting developments in Europe.  European officials are now opening up on this question of stimulus.  Now the US as you know are saying that they will press for additional economic stimulus measures to be taken at the Group 20 Summit Meeting in London next month.  Last Monday that’s of this week Finance Ministers from 16 countries sharing the Euro rejected that US call for bigger economic stimulus efforts.  Now in other words there is now European united view on what the Australian Government is doing at the moment.  Indeed, can I just put this to you, central bankers of Group 10 industrialised countries – that is Britain, France, Germany, Japan and so on – meeting at the Bank for International Settlements in Switzerland said the worst of the crisis may be over.  Now whether that’s the case or not, too bad if that’s the case and we’re saddled with the debt consequences of going too early with too much.

MR COSTELLO:

Exactly right Alan.  Look when the economy starts growing again then we’re still going to have all of these debts and these debts will have to be serviced.  You will have to pay interest on them and one day hopefully you will have to try and pay them back.  And when you are paying interest on them the Government will have to tax you.  It will be taxing people to pay the interest bills and eventually taxing people to repay the capital, if we have a Government that gets into office and has the guts to try and do that.  Now people are going to be paying for this and they have got to understand that the cheques that are going out now are borrowed money.  The Government is borrowing money to send cheques to people and asking them to spend it.  Now that’s nice if you’re getting a cheque.  No one is going to turn back a cheque are they.  But remember this it is borrowed money.

JONES:

I’ll take it from you later.

MR COSTELLO:

You will be paying for it.  You will be paying…

JONES:

But it hasn’t started though.  I mean there’s an education revolution, there is about to be an increase in aged pension, there is a disability package they haven’t yet addressed, the university sector is calling for $6 billion over four years extra money to be poured into them, there are tax cuts to come from July 1, there is likely to be increased unemployment which will have to be funded, so called taxpayer funded maternity leave and the Government promised at that last election to lift Defence spending in real terms by 3 per cent a year up to 2019.  How much debt can we wear around our necks?

MR COSTELLO:

Well the Government has asked the Parliament to authorise it to borrow $200 billion – two hundred thousand million dollars – that’s what it has asked for, that is what it is talking about at the moment.  But I have got to say to you Alan that the rate that they’re spending money that will be going up.  It’s a joke isn’t it.  We’re going into a Budget.  Every now and then you see a little story in the paper about how Mr Tanner is going to be really tough on spending.  He has just spent $52 billion since the last Budget – $52 billion.  So you run around here and try and save a million here or half a million there you have also authorised an additional $52 billion since the last election.

JONES:

Now let me ask a question about that.  I mean without getting too complicated and speaking in lingo that everyone can understand – the argument is that there is a problem on the demand side.  That is that you and I and everyone out there aren’t buying so we will chuck money at people so they will go in and say we want this, we are going to buy that we are going to buy this.  Do you as a former Treasurer think that it was the supply side we should have been addressing that is reduce the costs to business, cut back payroll tax, cut back company tax and give the productive side of the economy a big kick along?

MR COSTELLO:

Well you will never get more jobs in an economy if you tie down business.  At the end of the day business has got to create the products or the services which require people, employees, to make or deliver.  And so you will never get jobs in an economy if you tie down business.  You have got to give business a go if you want jobs to be created.

JONES:

It is hard to have a profitable employee without a profitable employer.

MR COSTELLO:

Well you can’t have an employee without an employer.

JONES:

See businesses tell me Peter Costello that falling sales for them are less of a problem than the unavailability of credit. 

MR COSTELLO:

Well you see this is again where I think the Government has poorly thought out its position.  Now Kevin Rudd as you will recall said he sent out cheques before Christmas and said spend, spend, spend.  Now a lot of people know that spending and borrowing was part of the reason why this financial crisis was brought upon us.  And so they are thinking to themselves well look a lot of people are spending money they didn’t have and borrowing too much…

JONES:

To solve debt by going into more debt.

MR COSTELLO:

And then somebody says well the answer to that problem, the answer to the problem of people spending and borrowing too much is to spend more and borrow more.  That is what they are saying.  The answer to the problem of spending too much and borrowing too much is to spend more and borrow more.  And people are thinking to themselves well this doesn’t really sound very persuasive and so when those cheques went out before Christmas do you know what people did?  They saved them all.  And why wouldn’t you save them?  Why wouldn’t you save them if you thought the economy was going to turn down, you thought your job was at risk, why wouldn’t you pay off some debt, pay off your credit card, save the money rather than say well here’s a cheque I will go out and I will spend it. 

JONES:

Let’s go back to this, on this thing jobs because we always are beaten by time and I know my listeners could listen to this thesis that you are presenting for some time, but just a couple of things briefly the Fair Work Bill which is the new industrial relations legislation, you’re saying that small business needs to be shielded from unfair dismissal claims.  There are problems that many are writing to me about, about increased power of the union movement, should this legislation be rejected in the Senate?

MR COSTELLO:

Well this legislation in the form that it is should not be passed because what it does is it allows unions to go into work places where they don’t have members, it allows them to get records including records of non union members, that this information will be of course used by unions to try and advance membership, to try and advance disputes, to try and advance their power in the workforce, small business won’t like that.  Small business will be afraid.  Now there is nothing that’s going to make small business more terrified than the knock of union officials on their door demanding records even where there aren’t members and even where people don’t want them to come in and this is why that kind of union power…

JONES:

What about the small business, I have got restauranteurs writing to me talking about what’s going to happen now with penalty rates.  That 80-90 per cent of their business they say is done on the weekend which is when people travel and when penalty rates apply and now they are telling me that the loading on casual wages is going to be raised by 25 per cent.  Penalty rates will apply for every hour worked after 7pm and every hour at weekends, I mean these outfits will go broke. 

MR COSTELLO:

Well small business is feeling under enormous pressure.  Look business confidence is as bad as it’s ever been, that is, business confidence is now as low as it’s been in previous recessions and lower.  And consumer confidence is at very, very poor levels.  People are worried about the state of the economy.  They are worried about what is going to be happening next.  They know that people are going to be losing jobs.  And what the Government should be doing is it should be actually following policies which will give business confidence, particularly small business confidence, because if small business doesn’t have confidence, if they can’t create jobs more and more people are going to be out of work.

JONES:

Well on that business then, on that business just before we go then, and one final question.  Why are we trying to be hairy chested and lead the rest of the world in reducing carbon emissions in that environment?  Should that legislation also be rejected in the Senate?

MR COSTELLO:

Well there is no reason why that scheme, that flawed scheme, has to be put in place with the urgency that the Government says.  That scheme is going to drive up costs for business, and if costs are driven up for business then Australia will not be the place where they will be seeking to expand.  There will be businesses that will build plants in other countries where they are not subject to similar schemes in order to reduce their costs and the jobs will go to those other countries rather than the Australians who deserve them.

JONES:

Thank you for your time and thank you for talking with us.

MR COSTELLO:

Thank you very much Alan.

JONES:

Peter Costello the former Treasurer.