TRANSCRIPT OF
THE HON PETER COSTELLO MP

Treasurer

Interview with Brendon Trembath

Bloomberg

Tuesday, 11 May 2004
8.50pm

SUBJECTS: Budget

TREMBATH:

(inaudible) economist say they may contribute to the federal bank increasing

the benchmark interest rates?

TREASURER:

I don’t think it will. We have got seven surplus Budgets, we have reduced

the government debt to GDP to 3 per cent, the OECD average is 50 per cent, some

countries are much, much higher than that. So we have got a very strong fiscal

position. Now when you have got very little debt you have got to balance Budget.

The right thing to do in my view is to reduce taxes and I think that will give

incentives for work. Australia’s income tax system has not had enough

incentive in my view. High marginal tax rates have cut in at levels which are

too low and so we are pushing those out.

TREMBATH:

How likely is it you will have the support to get these income taxes through

the Parliament?

TREASURER:

Well we will need the support from Opposition Parties to get them through

the Parliament. I can’t tell you how they will vote, no. I hope that they

will support them because I think they are important for Australia.

TREMBATH:

Why do you see Australian economic growth slowing in the business year ahead?

TREASURER:

Well we have come through a period where domestic demand has been very strong.

We have had a strong housing cycle and that is coming off now. The housing cycle

is definitely slowing. We think that means that domestic demand will reduce

so the world growth picking up will help us switch a bit from domestic to external

sources. But having said that we are forecasting a growth rate of 3.75 coming

down to 3.5 per cent so it is a pretty fair click.

TREMBATH:

What are the biggest potential risks to your economic growth forecast?

TREASURER:

Well we have got to manage the slowing of the housing cycle. We still have

drought lingering on in Australia, we had the worst drought in 100 years. It

has broken some parts of the country, not others. World oil prices are very

high as you know so they would be the main risks to the Australian economy in

the year ahead I would think.

TREMBATH:

How does this Budget prime the ruling Coalition for this year’s election?

TREASURER:

Well I think it is a responsible document. We have got our eighth year of

continuous growth. Inflation is well within our target band of two to three

percent, seven surplus Budgets, debt to GDP ratio three per cent, the lowest

unemployment in 23 years. So in terms of economic management the Coalition will

go into the election as a well-credentialed firm favourite in the economic management

stakes.

TREMBATH:

You’re seen by many analysts as a likely successor to Prime Minister

John Howard. What’s the next step in your career path?

TREASURER:

Well I have got to get this Budget through. It’s the ninth Budget that

I have done which is a pretty long stretch and I am just focused on that at

the moment. To what the future holds, we will see in the future.