Tanscript

of

 

THE HON PETER COSTELLO MP

 

FEDERAL MEMBER FOR HIGGINS

 

Interview with Steve Price

2UE

Thursday, 5 March 2009

9.10am

E & OE

SUBJECTS:      Economy

PRICE:

Let’s go to a man who presided over the management of the Australian economy through the latter half of the 90s and up until the defeat of the Howard Government in 2007, Peter Costello, good morning to you.

MR COSTELLO:

Good morning Steve.

PRICE:

Twelve Budgets, a lot of experience, now given Kevin Rudd’s description of us being in a global economic cyclone – would we be any better off if you were still running things?

MR COSTELLO:

I was very interested to hear Kevin Rudd say you should prepare for the cyclone, I agree with that, and of course that is the reason why we put the Budget into surplus and paid off all of the Federal Government’s debt.  And so Mr Rudd inherited a very, very good situation.  I think he has made a couple of mistakes since, the biggest of course was last year, he was talking about our problem not being recession but growing too fast.  He was saying the inflation genie was out of the bottle and he was arguing for higher interest rates.  Now Steve interest rates operate on a lag of 12 to 18 months.  So all of 2008 was wasted.  What Mr Rudd was doing was arguing for higher interest rates and in fact interest rates if anything should have been cut.

PRICE:

I don’t think he actually went out there and argued for higher interest rates.

MR COSTELLO:

Oh Steve when you go out and say: “oh inflation is out of control”, “we need to cut expenditure”, “the Reserve Bank’s got to be very careful about monetary policy”, believe me, you are arguing for higher interest rates.

PRICE:

So that was a cloaked message to the Reserve Bank?

MR COSTELLO:

Oh of course it was.  Everybody knew it was.  And as recently as September of last year they were still saying the problem in the Australian economy was inflation and that it was overheating.  That wasn’t the problem in the Australian economy.  The Australian economy last year was getting buffeted by international winds and it was beginning to turn down.  Kevin Rudd made the wrong call.  He wasn’t preparing for this cyclone he was actually worsening it.

PRICE:

He says that if you were still there, or if the Opposition was in Government, you would be letting the markets rip and not intervening.  What actually would you be doing?

MR COSTELLO:

Well Steve I don’t know where all this stuff comes from.  I put in place the prudential regulation of Australian financial institutions, set up a new body called the Australian Prudential Regulatory Authority, A-P-R-A, APRA.  And it was charged with making sure that Australia’s banks were prudentially managed.  Now everybody would tell you, even Mr Rudd would tell you that the Australian banks are in a better position than the banks of the United States, the United Kingdom, Japan, France, practically any other country you could name.

PRICE:

Well he actually says those failed banks there fall over.

MR COSTELLO:

Well he is saying to the Europeans and the Americans – you let your banks fall over.  And he could say that because he is quite confident the Australian banks won’t.  And the Australian banks are in a better position because of the regulation which I put in place – APRA.  So where he gets all this stuff about oh let the markets rip from, you know Steve sometimes I would just say to Kevin he talks so much, just think before you talk.  Think very carefully.  He is talk, talk, talk, talk, talk and I have heard him say this oh just let the market rip but I put in place the institution which has been regulating the Australian banks and has put us in a much stronger position.

 

PRICE:

Your side (inaudible) to be in favour of the $10 billion rescue package last year it now seems that that money has gone into bank accounts and not back into the economy.  In hindsight was that wrong to support that?

MR COSTELLO:

Well look I think that people are being very rational here Steve. 

PRICE:

Well Australians are pretty sensible.

MR COSTELLO:

They are pretty rational.  They know that unemployment is rising, people know that they could lose their jobs.  So when they get a cheque rather than go out and blow it they save it.  I think that is a very, very rational thing to do.  To pay off some of your bills, or pay off some of your mortgage, save it because we know we are going into a bad time.  And I think that was predictable.  The Government put out $10 billion before Christmas.  Most of it’s been saved.  I don’t criticise Australians for doing that.  I think it was very, very predictable.  Anybody who thought that if you sent them all a cheque they would go and blow it I think was whistling Dixie.  And by the way I am not sure if it would have been any better if they had gone and blown it.  It depends what you blow it on doesn’t it?

PRICE:

Well they might still spend it if they haven’t had to reduce credit card debt it may still (inaudible)?

MR COSTELLO:

I think there is a lot of evidence of what most people did Steve is use the money to pay off some credit cards.

PRICE:

Yes.

MR COSTELLO:

That is that they had already bought stuff and now they were using this money to pay for it.  So I actually think that is quite a rational thing.  I am not at all critical of them for doing that.

PRICE:

We have moved beyond that and we have got rescue package two.  Now you are in a position where you travel a lot.  You are with the IMF.  You go to the US frequently, you know they are having exactly the same debate in the US.  There is a new President Obama being accused of spreading money around and the Republicans saying it is irresponsible.  Same arguments different place.

 

 

MR COSTELLO:

Yes.  Well I think that’s right.  Again you see there is going to be a lot of cheques, this next package is going to involve a lot of cheques being sent out.  Again I think they are going to be saved and I think that is quite a rational thing.  They are going to insulate some houses.  Well you know it is all very well but a lot of these insulation bats are going to be bought from overseas.  That’s not going to be doing much for Australian jobs.  And I would be very critical of the quality of that spending.  If you think for a minute they were saying well here’s $42 billion.  Now $42 billion is a lot of money Steve, it is a lot of money.

PRICE:

Well I have started getting a lot of calls from small business saying they feel ignored by both the banks and by the Government.

MR COSTELLO:

They feel they have been ripped off.

PRICE:

Have they got a reasonable case?

MR COSTELLO:

Oh well I think small business, yes, if you really want more jobs helping small business is the best way of getting jobs by the way because small business creates most of the jobs.  But for $42 billion we won’t get a road, a railway, a dam, a bridge, a power plant, it is a lot of money with nothing to show for it.

PRICE:

Every time you raise that or a member of the Opposition now raises that I get an immediate call from someone saying well they didn’t do anything either when they were in office.

MR COSTELLO:

Well let me…

PRICE:

So you can’t point to one major infrastructure project you actually built?

MR COSTELLO:

The Alice Springs/Darwin Railway.

PRICE:

That’s the one Joe Hockey brings up every time.

MR COSTELLO:

The Western Sydney Orbital.  I put aside the money to duplicate the Hume Highway which hasn’t even been spent yet for major duplication of the Hume Highway.

PRICE:

I know it is no point in talking about history but in hindsight was it enough?  Was it enough then?

MR COSTELLO:

Well the problem that we actually had:- take the duplication of the Hume Highway, I set aside the money for it, it still hasn’t been spent.  The problem was getting the road construction authorities out there to actually build the stuff.  The money has been set aside, the money is there, it is just a question of getting the people, the state road construction authorities out to do it.

PRICE:

Well I think one of the problems is that no one trusts any of the state governments to handle the money properly. 

MR COSTELLO:

That’s right.

PRICE:

How would you write a cheque out to the New South Wales Labor Government?

MR COSTELLO:

Well that’s the point isn’t it?  That is precisely the point.  To sit around and say oh well the Commonwealth should have done more you can always argue that point but who was in control of the New South Wales Roads Authority and the New South Wales Railway Authority, who was in control of Sydney Water?  Who was in control?  I was always amazed by this argument that we had Carr and Iemma and the new guy…

PRICE:

Rees.

MR COSTELLO:

…Rees in New South Wales, apparently they had no responsibility for any of this.  I was always amazed by that argument.

PRICE:

We chased you this morning for this interview because of your experience.  I noticed the Prime Minister was again led into a criticism of the Opposition suggesting you were out there talking today to undermine Malcolm Turnbull.  I know you haven’t heard what the Prime Minister said.  Well here’s a little bit of that:

RUDD:

In the midst of a global economic crisis rather than the Liberals fighting on the question of jobs in the economy they are fighting only for one thing alone and that is the Liberal Party and who gets to run it.  This is a rolling civil war between Mr Turnbull and Mr Costello and inevitably Mr, the Liberals are going to go back to the past, to Mr Costello and WorkChoices.  That is what’s happening. 

PRICE:

I understand the Prime Minister is going to continue to run that line through the day.

MR COSTELLO:

Well I think Australians will say to themselves here he is:- he claims we are in the middle of a cyclone and what’s the most useful thing he can do?  Talk about the Liberal Party?  Do you think that’s very useful?

PRICE:

Is what he is saying right?

MR COSTELLO:

No of course not.  Here you have got a Prime Minister that inherited the best economy in the western world, everybody would agree with that, and we are now fourteen months into his Prime Ministership and we are in recession.  So what’s he talking about?  Is he talking about what he is going to do?  No, no, no, he just goes back to cheap political points and you know I really would ask the media to look at this quite carefully.  Are you going to let him off here?  The economy has gone into recession, people are losing their jobs and he says this is a cyclone and is he talking about what should be done?  I don’t think so.

PRICE:

Are they a bit obsessed with you?

MR COSTELLO:

Who?

PRICE:

The Government?

MR COSTELLO:

Oh I don’t know.

PRICE:

Kevin Rudd and Wayne Swan?

MR COSTELLO:

Well you make your own conclusions it sounds to me as if he is.

PRICE:

Worried about you but still being…

MR COSTELLO:

Well he does spend a lot of time showing interest in me.

PRICE:

And you’re only the backbencher from Higgins.

MR COSTELLO:

I know.

PRICE:

Thanks for your time.

MR COSTELLO:

Thanks Steve.