Transcript 

of

THE HON PETER COSTELLO MP

FEDERAL MEMBER FOR HIGGINS

Interview with Alan Jones

2GB

7.15am

E & OE

SUBJECTS:     

JONES:

Peter Costello good morning.

MR COSTELLO:

Good morning Alan.

JONES:

Thank you for your time today.  It is very instructive to be able to talk to you.  You cautioned that an economic meltdown was on the horizon.

MR COSTELLO:

Yes, the sub-prime crisis began when the Howard Government, the Coalition Government was still in office.  It was plain that there was going to be enormous fallout from that and plain that the US would lead the world downward.  And I made speeches in Parliament about that and of course on the media about that at the time.  And the reason I was doing that was two-fold.  One was to warn about the importance of strong economic management with the upcoming election.  The other of course was to make sure that Australia determined to try and grow its economy to have a pro-growth strategy at the end of 2007 into 2008.  As you said in your editorial the Reserve Bank of course was actually trying to tighten the screws and was at that stage actually trying to dampen economic growth.  So was Mr Rudd, Mr Swan and the Labor Party right through the latter part of 2007 and a good part of 2008.

JONES:

This was all this stuff about the inflation genie out of the bottle.  Was this, did you see it, I mean is that while this was going on was this just a political game to discredit you and Mr Howard but at the end of the day we have suffered for all those interest rates going up?

MR COSTELLO:

It was a political ploy by the Labor Party to try and say that the Howard Government and I as Treasurer should have been dampening down the economy.  We actually thought it was necessary to build the economy and “Go for Growth”.  That was our slogan you might remember in the election.  So for political reasons Rudd and the Labor Party began saying oh the economy was out of control, it was growing too fast and of course what we therefore needed was interest rate rises.  Now today there is going to be an interest rate cut just as there has been through the latter part of last year but can I remind you Alan that at the beginning of 2008 and the end of 2007 the Reserve Bank was increasing interest rates and they were being cheered on by Kevin Rudd and Wayne Swan and Kevin Rudd and Wayne Swan as recently as last year were saying Australia’s problem was that our economy was growing too fast and had to be slowed down.

JONES:

Now we’ve got this little essay by Kevin Rudd forget the jargon basically arguing the way the economy has been run over the last any number of years has to be stood on its head or Mr Rudd’s words “capitalism has got to be saved from itself.  There’s a role for the state as regulator and as a funder and provider of public goods”.  Are we going backwards or forwards?

MR COSTELLO:

Oh look this is a massive distraction.  Here we are Mr Rudd had told us the economy is growing too fast and it had to be slowed down.  He was wrong.  We are now in a situation where as everybody can see the economy is slowing dramatically, people are losing their jobs.  So rather than put his hand up and say well “I have called it wrong”, He has now gone out and written some article to say “its not my fault, no, no, no, no.  The neo-liberal conspiracy around the world has created this problem.  And what we need is we need a good dose of socialism or social democracy” or whatever he wants to call it.  This is a massive distraction.  An absolutely massive distraction Alan.  Look you ought to ask Kevin Rudd this, which socialist country does he admire or which socialist or social democratic country was in a better position than Australia at the end of 2007?  Australia was in a position where we had no debt, the government had no debt, our Budget had a $20 billion surplus, we had no financial institution at risk, all of our banks are now rated in the top credit rating in the world.  We have had no bank failure.  Mr Rudd has inherited a situation which was the strongest of any of the developed economies in the world so that when there was an economic downturn we went into it stronger than Britain, than the United States, than Japan, than France, than Germany.  Now we are facing these consequences the Budget is sliding into deficit and you will never guess what the problem is – a neo-liberal conspiracy.

JONES:

Let me just make one point there as you have been speaking because we are getting headlines everywhere about the IMF saying that it’s endorsing deficit financing of the order of 2 per cent of GDP.  What we are not told is that same IMF report said there are not many countries in a similar position to Australia.  That the responsible fiscal policy over the last 10 or 15 years has left Australia in a very strong position.  Elsewhere Ray Brooks the head of the IMF’s Asia Pacific Department said Australia because of low government debt was better placed than most countries to bolster economic activity.  He said Australia’s banks were amongst less than a dozen worldwide with a AA rating.  He said we had little exposure to sub-prime lending and even after there should be some rise in defaults the banks will take a hit on profits but their capital would be resilient.  He said we don’t see the prospect of a sizeable jump in mortgage defaults.  If you have got mortgage interest rates falling quickly its unlikely that households will be in any stress.  He said the Australian housing market was expected to continue to show resilience.  Why do we constantly get these headlines and this rhetoric of doom and gloom that has frightened the tripe out of Australians?

MR COSTELLO:

Well it’s all political Alan.  When Mr Rudd was elected he inherited an economy where there was no government debt, where there was a $20 billion surplus, where the economy was growing, our unemployment was at 30 year lows – that’s what he inherited right.  Now things have gone pear-shaped since and so Mr Rudd has been searching around for various explanations.  The latest explanation of course is that there is some, as he calls it, neo-liberal conspiracy whatever that means.  Nobody knows what that means. It’s all designed to say well it’s not the governments fault we are only managing the place it’s not our fault.

JONES:

Well let’s come to back to this point I mean you are in constant contact with the business world and you talk to these people because you knew them for a million years as Treasurer I asked Wayne Swan on January 19 whether foreign banks were departing the scene.  He said no the banks are not at this stage having problems accessing what’s called term finance internationally.  Many of the banks just prior to Christmas were very successful he said in their fund raising activities overseas.  Why then do we need a Rudd Bank to prop up commercial construction?

MR COSTELLO:

Well Alan it seems to me as if this is a government which is unnerved.  It’s unnerved because it has called the economy wrong, it didn’t see this coming, it was administering the wrong medicine.  And so what we get is we get these grand announcements almost on a weekly basis that we will spend $10 billion before Christmas, we’ll set up a bank to try and prop up the property sector. 

JONES:

Well it is billions of dollars of taxpayer’s money.

MR COSTELLO:

We’ll insulate houses, we have lost $115 billion.  The thing that worries me in all of this is that it is quite plain now that this government is rattled and that it doesn’t have a good grip on the situation.  Right now you have just pointed to another one. “There is no problem with foreign banks departing the situation” we are told one month and then a month or two later we have to set up $4 billion including taxpayers funds to actually make up the loans that foreign banks are taking out.  Well which was it?  Were they leaving or weren’t they? Please tell us which one is right, which is the answer.

JONES:

And then of course in this climate Julia Gillard says she wants the Industrial Relations Legislation passed in this session of the Parliament.  Business are talking to me large and small about the damage this will do.  Should there be amendments in the upper house to prevent the excesses of this Bill becoming law?

MR COSTELLO:

Well see this is another contradiction of Mr Rudd and the Government.  On the one hand they are saying things are so bad we will insulate everybody’s houses.  Things are so bad here’s $10 billion we want them to spend it before Christmas.  Things are apparently not bad enough to ensure that businesses have a proper industrial relations system that won’t cost jobs.

JONES:

They’re not that bad.

MR COSTELLO:

No, no, they’re not that bad.  A little bit of ideology there as business says quite rightly it will cost political jobs but we will go along with that little bit of ideology.  When you actually come to find out what’s going wrong here is it’s some grand neo-liberal conspiracy.

JONES:

He told us it was epochal turning point.

MR COSTELLO:

Yes I know.  Sometimes you wonder whether he has slipped into speaking in Mandarin. 

JONES:

And then we have got the emissions trading scheme I mean people are saying what’s this going to do?

MR COSTELLO:

Well of course the emissions trading scheme as we know is designed to increase energy prices.  You might think again that if things were so terrible that we were insulating houses and things were so terrible that we’re spending $10 billion tying to prop up the retail figures in the December quarter that we wouldn’t be looking at increasing energy prices in the current situation but apparently not.

JONES:

Well just before you go what are the public therefore to make of a government which suddenly says that we will do all of this, we will sort it out, social democracy is going to have to prevent liberal capitalism from cannibalising itself and we need the State to move in to solve the problems.  What should the public be thinking?

MR COSTELLO:

Well I think the public should look at the record in New South Wales for the last 20 years of how the state has managed transport, water, how the state has managed its budget and ask itself with that record of success would we like the state to start managing the private sector too.

JONES:

Good to talk to you.  Are you staying?  Are you going to contest the next election?

MR COSTELLO:

I am here in Parliament today.

JONES:

Are you going to contest the next election?

MR COSTELLO:

I am right here broadcasting and when the next election comes up I will let you know then.

JONES:

Good to talk to you Peter Costello.

MR COSTELLO:

Good to talk to you Alan.

JONES:

Okay.  All the best thank you for your time.  Very instructive stuff.  Peter Costello, former Federal Treasurer.