TRANSCRIPT
of
THE HON PETER COSTELLO MP
Treasurer

Press Conference
Melbourne
Wednesday, 5 September 2001
10.30 am

SUBJECTS: Interest rates, Tampa, election

TREASURER:

Well, this morning’s announcement of a 0.25% reduction in official interest rates is good news for homebuyers and good news for business. The major banks have already announced that they will be passing it on, in both home loans and in relation to business loans. And what that means is, for somebody on a $100,000 mortgage, the interest bill per month will be cut by around about $20, a bit more than $20 a month. And the new home loan rates of 6.5%, some of the lowest rates in thirty years, mean that since the Government was elected the saving on a $100,000 mortgage is about $4,000 a year – $4,000 a year and that is after-tax money. So, this will be great news for homebuyers who will get another cut in their monthly interest bill. It is good news for business that will also get a cut in their interest bill. It means that we’ve got mortgage interest rates back at 30-year-lows, and that will be good for the Australian domestic economy. Now, recent indicators in Australia have shown quite a deal of strength in the Australian economy in both retail trade, motor vehicle registrations and building approvals. But it is clear, that whilst the Australian economy has still got quite a bit of momentum about it, the international economy is turning down. Growth has virtually stopped in Europe, growth has stopped in America, a good deal of Asia is now in recession. But Australia has continued to grow and strengthen. This interest rate cut will give us a cushion to help continue the Australian growth in a very uncertain world and to keep Australia at the top of the pack in relation to growth coming into 2002. Good news for homebuyers and good news for business.

JOURNALIST:

It is also good news for the Government’s re-election chance?

TREASURER:

Well, this Government has always tried to run good, decent, credible, strong economic policy. We have put the Budget into surplus, we have budgeted five consecutive surpluses. We have now repaid $60 billion of Labor’s debt, and that has enabled the opportunity to keep interest rates low. Interest rates now are about 4 per cent lower than they were under Labor when the Government was elected, and that is a $4,000 saving on a $100,000 mortgage. So, I think homebuyers appreciate good economic policy. It means that they have got more money to spend on other things. It means young couples have been able to buy houses that wouldn’t have been able to buy them, and I think the public appreciates some of the benefits that home loan interest reductions have given them.

JOURNALIST:

Are you concerned about a bubble in the housing sector?

TREASURER:

Well, you’ve got to remember in the housing sector we came off a low at the end of last year. The Government put in place the First Homeowners Scheme, $14,000 for people who are buying their first home and it is a new home, buying or construction a new home. And building approvals have increased 6.3 per cent in July, after 3.4 per cent in June and 29 per cent in May. So building approvals are very strong. And the good thing about that, is, that that will work out in construction, I think, in the next couple of months. And as building construction picks up, you are going to see employment coming back, and that should be very good for employment towards the end of the year and the beginning of next year. So you will start getting the benefits of the house building back into the job market again.

JOURNALIST:

Ten days ago, you were, the Government was faced with the Queensland GST controversy. Today the Prime Minister’s, the opinion polls are showing that the Prime Minister is riding a popularity surge as a result of his handling of the Tampa. And you are announcing low interest rates. Did you think ten days ago that you would be here?

TREASURER:

Well, ten days ago I programmed to be here. Look….

JOURNALIST:

The question is, did you think ten days ago when you were in the middle of all of that GST controversy things could have turned around so remarkably?

TREASURER:

Look, the Labor Party was trying to kick up a massive distraction ten days ago, and I pay tribute to them, they managed to keep the `Noodle Nation’ off the front pages. You will recall that the `Noodle Nation’ was going to be the big issue.

They managed to distract the Parliament over the $75 account, $75 account, in Queensland. But our view always, was that the Labor Party could only run distractions for so long. When the big issues of Australian politics came on, they didn’t have the ticker, that was always our view. What did the Tampa incident illustrate? Well, when the pressure was on, Kim Beazley first said he would support us, but he couldn’t do it.

He couldn’t hold his own Party. He said he would make support for the Government’s position on the Tampa, bi-partisan. And he couldn’t hold it for three hours. Let’s come to the economy. When the pressure was on in relation to the economy, when the Budget had to be balanced, the Labor Party didn’t have the ticker to support it. Let us come to tax reform. Tax reform had to be done in this country. Mr Beazley didn’t have the ticker to do it. And we always knew that when the big issues are on, there is a difference between leadership and flip-flop indecisiveness. And I think what the events of the last week have illustrated is just how wide is the difference.

JOURNALIST:

Mr Costello, can you put a figure on how much the Tampa incidence has cost Australia?

TREASURER:

Well, it is something that will have additional costs in relation to the military step-up in our northern waters. It will have additional costs in relation to processing in Nauru. But we would have had costs in any event had the people on the Tampa arrived in Australia. And what drives the cost for the Government or for the taxpayers of Australia is the number of illegals that arrive.

JOURNALIST:

So you can’t put a figure on it?

TREASURER:

What I’m saying to you is, the number that arrive, drives the cost. We had already budgeted for a number of arrivals. If we can keep that number down we can keep the cost down. You may actually get….

JOURNALIST:

So you are saying it is more expensive to take them into the country?

TREASURER:

Well it is expensive, if illegals arrive in Australia it is expensive from numbers of points of view. One is you have to process them; two, you have to pay the costs of detention; three, invariably it ends up in legal action against the Government. What we do in relation to our Budget, is, we set aside money to handle arrivals according to an estimate of the number that there will be. To the extent that we can keep that number down, we actually save. To the extent that the number goes over that, there will be additional costs. But until you finish a particular year, you don’t actually know how many will arrive. I think the one thing that I can say to you is, if, Australia taking strong action decreases the number of arrivals it will save money that the Government would otherwise be forced to incur, or rather I should say taxpayers would otherwise be forced to incur.

JOURNALIST:

So can you put a figure on it?

TREASURER:

Not at this stage, no, because I can’t tell you the number of illegals that will be processed by Australia between now and the end of June. I hope it is less than we’ve budgeted for, rather than more.

JOURNALIST:

Mr Costello, just on (inaudible) rates again. The outlook for the global economy is pretty grim. Does this put in doubt the Government’s forecast that you released in the Budget?

TREASURER:

We will get the June quarter growth figure next week. The March quarter was stronger than we had expected at Budget time. We will get the June quarter next week, that will give some indication as to whether the Australian economy will grow as forecast. I would say at this point that the best estimate is the forecast. Two things are probably happening – one is Australia is stronger than people expected, the other is the world is probably weaker than people expected. So, notwithstanding the weaker world, Australia is probably doing a little stronger than was expected. And the best estimates of what the growth rate will be in 2001-2002 are those that were put down in the Budget. The Budget is the Government’s major economic statement, it was put down only in May, and it is still the best estimate of where the Australian economy will be. The world economy is undoubtedly weaker than most people would have expected at the beginning of this year. Growth has stopped in the United States, growth has stopped in Europe, Japan is in recession, Singapore is in recession, Taiwan is in recession, and a good part of Asia is having negative growth.

JOURNALIST:

Is there a concern it will drag us down too?

TREASURER:

The fact that world growth is slowing will have an effect on Australia, yes it will. It will mean that Australian growth is slower than it would otherwise have been. But Australian growth will still be faster than the United States of America, France, Germany, the United Kingdom, Japan, nearly all of Asia. With the world growing faster, it would be a little faster again. But, the fact is that we will still be faster than nearly all of the industrialised world. And that will be held up by good trade position. We have now had six monthly trade surpluses, our balance of payments figures for the year just finished were at twenty-one year record results, the best for twenty-one years. And building approvals are now strengthening, low interest rates will support the housing construction industry, retail sales have been strong. So there is still a bit of kick in the domestic economy, but it would have been stronger still had the world been stronger and that is the fact of the matter.

JOURNALIST:

When will the date of the election be announced?

TREASURER:

When it is called and that will be thirty-three days, I would think, before it is held.

JOURNALIST:

When will that be?

TREASURER:

I don’t know, I’m not privy to these secrets.

JOURNALIST:

Are you confident the Government can maintain this popularity up until the election?

TREASURER:

I think what the Government wants to do, is, it just wants to get on with the issues that are important for people – keeping interest rates low, keeping the domestic economy strong enough to continue with job creation, keeping the Budget balanced, keeping income taxes low, defending Australia’s territorial integrity. We will just get on with showing leadership on these sorts of things, and the opposition can engage in its stunts, but at the end of the day Kim Beazley has not yet come up with one policy, not one policy to improve the lives of Australians. And after five and a half years you’ve got to ask yourself why. I think it is because he doesn’t have any. And we’ll just get on with the business of governing and we’ll try and show by comparison what the differences are between us and the opposition.

Okay, thanks very much.