Doorstop Interview

Sydney Opera House

Tuesday, 19 December 2007

9.30 am

SUBJECTS: Advance, MYEFO, drought, Labor Party, debt

TREASURER:

It was great to be here today to open Advance, an organisation that brings together Australia’s talented expatriates who want to promote our country overseas and who are being successful all around the world.  And to bring them here to Australia, to get them together to talk about ways in which we can promote our country – from a tourism point of view, from an investment point of view, from a business point of view – is a very big part of Australia’s economic effort, and I congratulate the organisers on their wonderful efforts in bringing this conference together.

JOURNALIST:

Mr Costello, have you (inaudible)

TREASURER:

We will be releasing the Mid-Year Review in Canberra tomorrow and it will update our economic forecasts for the year and, of course, our Budget position and that will be the update since the May Budget and the update before next year’s May Budget.

JOURNALIST:

Wayne Swan has accused you of exaggerating the impact of drought on economic growth – what is your response to that?

TREASURER:

The trouble with the Labor Party is they do not have anyone who understands economic policy.  To have somebody who could make light of the drought and its impact on the Australian economy – like Mr Swan has – not only shows ignorance, but it shows a callousness to Australia’s farmers.  And he ought to be pulled into line – Mr Rudd should repudiate his shadow Treasurer.  It is one thing to be ignorant, it is another to be callous to the plight of Australia’s farmers.  To suggest that somehow this drought is not impacting on them or somehow they are making it out to be bigger than it is really is quite a callous thing for the Labor Party to say and to think.  We know they think that, but this time they have said it.

JOURNALIST:

Is it (inaudible)?

TREASURER:

Well, ABARE has estimated that the direct effects would be to detract 0.5 a percentage point off growth – that’s not me, it’s ABARE, and that is direct.  It will be larger taking into account the indirect effects as well.  These are independent organisations that make these assessments.  Because Wayne Swan cannot understand it he tries to dispute it.  Not only is that ignorant but it is callous to Australia’s farmers.

JOURNALIST:

What do you think of the Qantas pilots fight-back?

TREASURER:

Well look, the company is listed on the Stock Exchange.  Anybody, provided they comply with Australian law, is entitled to make an offer for shares.  So you can have the consortium that has made an offer, you can have pilots, you can have mums and dads, anybody is entitled to make a share.  Provided it complies with the laws it is up to the vendors to decide who they are going to sell to.

JOURNALIST:

Just on that point, there was a report this week that companies are looking to increase their debt levels to avoid being targets for private equity – what do you make of that and how may that affect the economy?

TREASURER:

There is nothing wrong with private equity.  Private equity is where people put their own money up in relation to a company.  What worries us is where people put their own money up and then borrow huge amounts to complete the transaction or borrow huge amounts to gear against the company.  If they borrow too much then the company can get into trouble.  It is like a home owner – if you borrow too much against the value of your property you can get into trouble, if you borrow too much against the value of a company you can get into trouble.  And I think it is incumbent on company directors, I think it is incumbent on buyers to make sure they do not get into trouble.  To watch their gearing levels.

JOURNALIST:

So you caution them against increasing their gearing too much?

TREASURER:

Well I would say company directors are obliged to act in the interests of the company and they have got to make sure they prudently manage the company and they ought to be careful that they do not get to unsustainable debt levels.  Alright, thanks.