TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Interview with Paul Westpheling
Voice of America

Tuesday, 21 October 2003
5.10 PM

SUBJECTS: Budget; Spending; Tax Cuts.

WESTPHELING:

The first question is, I do interviews with economists all over the world,

and I have yet to find one from a country that is sporting a Budget surplus.

So I guess the first question to ask is why is Australia the exception

in reporting a Budget surplus, when the rest of the world can’t seem

to get its act together?

TREASURER:

Well, we have had strong economic growth now for the last five or six

years. We managed to avoid the recession that the US economy went through

in 2000-2001, and many of the European economies have been through, so

we have had strong growth. And our Government has had a policy that whilst

the economy is growing, we should balance our Budget, produce the surplus

and retire debt. And we have had a very strong debt retirement program

and our debt to GDP ratio has now reduced to about 4 per cent of GDP

which is one of the lowest in the world. And on current projections we

could eliminate all central Government debt over the next two or three

years.

WESTPHELING:

Well, I am looking at the Australian economy, the economic numbers look

fine, but there is one problem. You have gone through a severe drought

and that would seem to drag down almost any economy, but not Australia’s?

TREASURER:

We have had the worst drought in a hundred years in the last year here

in Australia. Australia as you know is quite a strong agricultural producer.

Although agriculture is a small proportion of our economy it is a large

proportion of our exports, and that has affected our exports which have

been down as a result of drought and agricultural production. But the

domestic economy has remained strong, supported by strong employment

and low interest rates. And fortunately that has been sufficiently strong

to outweigh the negative effects of drought and lost agricultural exports.

WESTPHELING:

Now I read somewhere that you were commenting on the possibility, not

the probability, but the possibility of lower taxes if other obligations

are met. Could you explain that?

TREASURER:

Our principle is that if we can meet our social expenditures such as

health and welfare, if we are able to fund our military engagements –

and as you know Australia was part of the Coalition of the Willing in

Iraq – we have substantial engagements at the moment in South East Asia

and the Pacific, and if we can balance our Budget, then any surplus should

be returned to the public by way of tax cuts. And we now have a strong

position where very low debt, as I said, 4 per cent of GDP, so if we

can meet our expenditures and balance our Budget, then the principle

I have announced is that surpluses should be returned to taxpayers by

way of lower taxes.

WESTPHELING:

I don’t mean to sound flip Mr Treasurer, but you are the envy of the

rest of the world in terms of juggling expenditures with revenues.

TREASURER:

Well, it is important I think that a Government live within its means,

particularly when the economy is growing. And the point I keep making

here in Australia, a Government spends more than it has, is just passing

on problems to future generations. Somebody will have to meet the debt

repayments and if you can grow an economy, and keep it growing, then

you should live within your means, because that is the current generation

being fair to future generations.

WESTPHELING:

Do you have any groups in Australia that are pressing the Government

to spend more money as you know we see in the United States, more on

this social program or that social program? The reason being, you have

more money in the Treasury, why not spend it?

TREASURER:

I often say that in Australia, there is no end of groups that have plans

to spend taxpayers’ monies. And whether it be health, or whether it be

infrastructure, or whether it be pensions – many of them good causes

– but the Treasurer is the person that is responsible for balancing the

Budgets and you have got to keep all of that in perspective. And there

is another element here that I think is important. Our society is ageing

as are all the societies of the developed world. That means that there

will be less people in the workforce supporting more people in retirement.

Those people in retirement will be drawing down more heavily on health

expenditures in the years to come and so we have to live within our means

now if we are going to cope with the demographic changes over the next

20 and 30 and 40 years. So, I am focussing public opinion pretty squarely

on those issues.

WESTPHELING:

That sounds like a very admirable goal but you realise that in most places

around the world that would be political suicide. I gather you have a

lot of support?

TREASURER:

Well, I think if you can explain to people what the significance of these

changes are, that whatever our difficulties now, the difficulties of

balancing budgets are only going to increase. That is because the proportion

of people in the workforce to the proportion of people in retirement

is going to decline as the population ages. And if we can’t balance our

budgets now, we are going to have increasing trouble in 10 and 20 and

30 years time. The message that I have to the Australian population is

that we are going to have to cope with this ageing demographic. If we

start with small steps now, we will do much better than if we leave it,

and are forced into much more extreme steps later on.

WESTPHELING:

Mr Costello, thank you very much for talking to me. I wish you luck and

I would like to talk to you in a year to see how things go next year.

TREASURER:

It was a great pleasure to speak to you. Thank you very much.