Well what use is the $2.7 billion surplus if unemployment is still going to hover around 8 per cent?

What it does for us is one, make sure we that we live within our means. Two, we can start repaying some of Labor’s debt. And as we repay Labor’s debt that means that our taxes will start funding new hospitals, new schools – not being eaten up by Labor’s past failures. And the third thing is that it says to the region, it says to the world, that this is a strong economy which is exactly the kind of message that you’d be wanting to send out at a time like this.

Well you do say that unemployment will fall to 7- per cent through the year but what will push that improvement if economic growth is actually falling?

Well, unemployment at the moment is 7.9, around about 8 per cent, which is the lowest in eight years which is great news. But we still have to go further, of course. And we think during the course of the year we can go further and get it down to about 7- per cent. We would have done better if it hadn’t have been for the downturn in Asia and the affect that that’s had on the Australian economy. But turn it around, suppose we hadn’t strengthened the Australian economy and we walked into the turbulence of the Asian region, you wouldn’t be looking at unemployment in the 7’s. You’d have seen an Australia much more exposed. And having taken that decision to strengthen the economy and to make it, probably the strongest economy in Asia, possibly the fastest growing economy in the developed world, means that we can keep those who are in working jobs and we can improve things.

Just briefly, you suggested in your news conference that tax reform would play a big part in helping to lessen unemployment. Can you briefly tell us how?

I think tax reform is a big part of helping our economy and employment and we tax our exporters, we put taxes on the products they send overseas. Others in the developed world don’t, they have value added tax systems. So their exports go out onto world markets without domestic taxes. So we are handicapping our exports. If we improve our export and tax system, we help Australian growth, we help jobs. Now also, in the other area where we can get a better tax system to help jobs is that at the moment if people go into the workforce, not only do they base high taxes but they also have a lot of their social security benefits taken off them and we actually give people a disincentive to work. So a much better tax system is part of improving employment opportunities as well.

And finally, I notice you have very healthy Budget surpluses forecast in the out years, to 2002. Any chance that they are going to fund election tax cuts, as part of your tax package?

Well let’s wait till we get to 2002. That is the kind of outcome we can have if we stay the course. If we keep delivering good policy, if the Government is re-elected and if the Government is able to reduce debt with Telstra. But it’s a wonderful problem to have. Isn’t it a wonderful problem to be able to say in our country, where we have better services or where we lower taxes. It’s a problem we haven’t had for a long time and it’s a problem I look forward to having in 2002.

Treasurer Costello, thanks for joining us tonight.

Thanks very much Paul.