Interview with Paul Bongiorno

Meet The Press

Sunday, 18 February 2007

11.10 am

SUBJECTS: David Hicks, Iraq, economic management, interest rates, Murray-Darling Basin plan, climate change, carbon trading

BONGIORNO:

Welcome back to the program, Treasurer.

TREASURER:

Good to be with you, Paul.

BONGIORNO:

I think – could we first – I think I’d like to go, I know that, but could we first go to the David Hicks issue? Is the Government confident of getting Mr Hicks back before the election?

TREASURER:

The situation with Mr Hicks is that charges have been laid. They’re very serious charges. The Government’s position is that they ought to be brought on for hearing as soon as possible and he should be given the opportunity to answer those charges. Evidence should be led against him. That cannot be done in Australia. The charges include the fact that he armed himself and prepared himself to kill coalition soldiers – could easily have been Australian soldiers; that he was there as a devotee of al-Qa’ida; that he’d been through a terrorist training camp with al-Qa’ida, and the Government’s position is that those charges should be heard.

BONGIORNO:

Well, the Prime Minister says he’ll be urging Dick Cheney to expedite things. We’ve seen that the Americans have been promising to do that for four of the five years at least. Is there a point whether – if Mr Hicks has not been brought to trial that the Government will say, ‘Well, send him home”?

TREASURER:

Well, I think we all regret that it’s taken as long as it has, but you need to bear in mind that part of the delay – a very large part of the delay – was the fact that constitutional challenges were taken by parties in relation to this procedure, and that took several years. Now that the constitutional position has been clarified, there is no reason why the charges can’t proceed forthwith. They should. The Australian Government is making it clear that it expects those charges to proceed forthwith. If they do proceed forthwith, then he has the chance to have his day in court and the prosecutors have the chance to lead the case against him. Now, if there were any undue delay, of course the Government would be concerned about that, and the Government is making it very clear to the American authorities that we want this matter to be expedited.

BONGIORNO:

Late in the week, former Prime Minister Malcolm Fraser raised the issue of just how fair a trial this military commission will be, and Dick Smith is very outspoken on this. He just believes that Hicks will not get a fair trial. Now, you’re a former barrister. You understand the need for habeas corpus, you understand that hearsay evidence shouldn’t be admitted and you understand that evidence under coercion shouldn’t be admitted. Isn’t this also a problem, that at face value he’s not going to get a fair trial?

TREASURER:

Paul, I actually think the case itself is pretty straightforward. There he was in Afghanistan. He wasn’t on a backpacker tour. There he was…

BONGIORNO:

But it sounds like you’re finding him guilty before he’s tried.

TREASURER:

No. There he was, he had undergone training, and provided you’ve got witnesses, and I don’t even know that he denies it, that can give evidence that, yes, he was training with al-Qa’ida, yes, he was there in Afghanistan, no, he didn’t have the ‘Backpackers’ Guide to the Galaxy’ with him, I think it’s a pretty straightforward case. And I must say if that’s the case…

BONGIORNO:

Therefore there’d be nothing to fear from a fair trial; from due process.

TREASURER:

All of those procedural issues I doubt will come into play. So, look, the problem, Paul, is that it has taken too long. We all acknowledge it’s taken too long, but I think it’s fair that he had the chance to answer the charges, I think it’s fair that the evidence be led against him.

BONGIORNO:

Our involvement in the Iraq war has cost us in the vicinity of $2 billion, but US presidential wannabe Democrat Senator Barack Obama questions our commitment.

SENATOR BARACK OBAMA (Monday): We have close to 140,000 troops on the ground now, and my understanding is that Mr Howard has deployed 1,400. So if he’s ginned up to fight the good fight in Iraq, I would suggest that he calls up another 20,000 Australians and sends them to Iraq. Otherwise it’s just a bunch of empty rhetoric.

BONGIORNO:

Strong words there from Senator Obama, but can Australia afford to put its money and even more troops where its mouth is?

TREASURER:

Well, Paul, the Australian Defence Force is better funded and better equipped than it has been probably since the Second World War. And this Government has really increased expenditures, including expenditures on major defence acquisition. This is not a resource problem. This is the question as to what contribution we make and the best contribution that we make. Now, nobody is suggesting that Australia will be increasing its commitment to Iraq by 20,000 or anything like it. Let me make that clear, it’s a good debating point from Senator Obama, but it doesn’t actually deal with the situation on the ground. Australia has a responsibility in the province where it is patrolling. It is doing it well. It will continue to make that contribution, and there is no suggestion that we’ll be going outside of that.

BONGIORNO:

Okay, if you were running al-Qa’ida in Iraq, would you put a circle around March 2008 and pray as many times as possible for a victory not only for Obama but also for the Democrats?

TREASURER:

Well, look, if al-Qa’ida knows that there is a lack of will in the West and amongst the coalition, it will exploit it. That’s the point. That’s the point. Now, we now have a situation where al-Qa’ida, which is essentially an international terrorist or mercenary group, is working in Iraq for the defeat of the coalition partners. It can’t do that militarily, but it hopes it can do it by sapping the will of the West. And if it believes it is being successful that will give it a great morale boost, and that’s the point. That’s the point the Prime Minister’s made and I thoroughly agree with that point. What, do we want to boost the morale of terrorists and killers? No. When we actually come to deal with these people we’d like to deal with them from a position of strength.

BONGIORNO:

Okay. Time for a break. When we return with the panel – is the Treasurer getting jittery?

TREASURER (Earlier this week): I’m asked about risk in the Australian economy and the point I’m making is there’s a lot of risk in the Australian economy.

[Ad break]

BONGIORNO:

You’re on Meet The Press with Treasurer Costello. Welcome to our panel, Steve Lewis, The Australian. Good morning, Steve.

LEWIS:

Good morning, Paul.

BONGIORNO:

And Peter Hartcher, The Sydney Morning Herald. Good morning, Peter.

HARTCHER:

G’day, Paul.

BONGIORNO:

After praying together at the service to mark the first sitting of Parliament this year, the Treasurer shared a car with Kevin Rudd and his wife back to the House. And last week Mr Rudd claimed the two shared a basic view on keeping the economy healthy.

RUDD (Last Sunday): What you can do when it comes to interest rates is run a responsible fiscal policy, which means making sure your budget is in balance across the economic cycle. In fact, we go one better than that. When it comes to budget outlays, the percentage of tax to GDP should not increase beyond that which currently exists under the Howard Government.

HARTCHER:

Mr Costello, you like to say that the economy doesn’t run itself. But with an independent Reserve Bank setting interest rates, with those sort of commitments from the Labor Party, doesn’t it just about come close to running itself?

TREASURER:

Well, what does Mr Rudd say? He’d like to freeze tax to GDP at the place where I’ve got it. And he’d like to freeze the monetary policy into position where I took it, and he can do whatever this Government has put in place. That’s what he says. Of course, what he overlooks is (a) he opposed all of those decisions when they were put in place, and (b) being a me-too copycat on past work doesn’t equip you to be an author of future work. You see, there’ll be a new challenge in the future, Peter, and a bloke who says, “Well, I’ll just copy what you did in the past” won’t rise to a new challenge. That’s the point. And if you’ve got a bloke who doesn’t really understand economic policy saying, “I’ll copy what you did in the past,” he’ll be fighting the last risk to the Australian policy, not the next one.

HARTCHER:

You have made a point of his lack of experience with economic management, but when you started in your job as Treasurer your experience was as an industrial barrister. You had no macro-economic experience either. Isn’t he coming from a similar sort of point of experience? Isn’t that why there is such a thing as the Treasury Department to make it up for things like that? I don’t understand that he’s at any bigger disadvantage than you were when you started as Treasurer.

TREASURER:

Well, Peter, I’d been self-employed, I’d done national wage cases, I’d been involved in every major industrial dispute that had been going in this country. And what’s more important, I’d argued for difficult policy. I was arguing for labour deregulation in the ’80s, 20 years ago it wasn’t all that popular then. A lot of people say it’s not all that popular now, let me tell you 20 years ago it was a lot less popular. Now, Mr Rudd may have argued for a major economic structural change somewhere in his past, but hitherto we have not been able to locate it.

LEWIS:

Peter Costello, you’re behind in the polls. Your colleagues are rattled by the success of Kevin Rudd. There’s going to be a very strong temptation for the Government to spend its way out of trouble in an election year, isn’t there?

TREASURER:

Well, the important thing with expenditures is that they are geared to (a) important objectives and (b) they are consistent with our overall economic settings. Now, our overall economic settings will be a budget surplus; the Government building savings, as it should be doing, preparing the country for the great demographic challenge to come. But within that framework if there if there is room for important key spending on national infrastructure, like the Murray Darling Basin Commission, it should be done.

HARTCHER:

Do you have a guide post for the size of the surplus that you intend to bring down?

TREASURER:

Well, it’s important that there be a surplus, that the Government add to saving, particularly at a time when the private sector is drawing down on savings. That’s important to our overall macro-economic objectives. And the second reason it’s important, Peter, is our country, like every other western industrialised country, is going to hit a crunch in the next couple of decades, and that crunch is the ageing of the population. My message to the Australian public is this – we will face it, we either start preparing early or we will be caught out late and I want to start supporting this very, very early.

LEWIS:

Treasurer, in terms of this budget which you are preparing now, aren’t you going to have to deliver a stronger than expected surplus to rein in the temptation for the Reserve Bank to lift interest rates again?

TREASURER:

Look it’s important that we run a surplus, Steve, and we’ve had nine surpluses during the period that I’ve been Treasurer – nine – and I hope to deliver a 10th.

LEWIS:

We’ve also had three interest rate rises since the last election – three, or is it four interest rate rises?

TREASURER:

Yeah, but as the Reserve Bank will tell you, and Governor Ian Mcfarlane used to say this over and over and over again, fiscal policy was not his problem. Fiscal policy might be a problem for Ben Bernanke in the United States, where you have a big budget deficit, or for Mervin King in England, where you have a big budget deficit, or France or Germany. These aren’t countries that actually run surpluses let alone nine surpluses. It’s important that we have a surplus, and there will be a surplus, but you don’t want to overstate the difficulty in Australia of fiscal policy. Australia is a model for the rest of the world. That’s why Mr Rudd wants to adopt it.

HARTCHER:

While we’re on the subject of central banking and interest rates, will the Government have the hide to campaign on interest rates again at the next election?

TREASURER:

Well, the Government will campaign on its record.

HARTCHER:

Which is promising to keep rates at record lows and then watching them go up.

TREASURER:

And its record is over the course of this Government, on average, a much, much lower interest rate than the average over the course of the Labor Party. Of course we’ll campaign on our record. Nobody who lived through it would want to risk their mortgage to the Labor Party again, let alone to Mr Rudd.

HARTCHER:

With those sort of commitments to a independent central bank and the same fiscal policy you have, how do they pose that risk? Hard to see.

TREASURER:

Look, he says that, Peter, but you know enough about this subject to know that in his heart he doesn’t believe it. You see, they claimed they had a central bank in the last Labor government. And when I came along and said, “Oh, we’ll have an inflation target and we’ll have an agreement between the Governor and the Treasurer of the day,” they said that was illegal. They were going to sue me for doing it.

BONGIORNO:

But didn’t the Governor…

TREASURER:

Their understanding of what an independent central bank is and what I’ve put in place is quite different. Let me make another point. You say, oh, he’s committed to surplus budgets. Peter, you know this – they said the budget was a surplus in 1996. Pity the fact that it was $10 billion short. What they say and what they do are completely different, and you know and I know and anyone who follows these things closely knows that a mouthing of words from the Labor Party does not mean, in practice, the delivery of an outcome that the Coalition has put in place.

BONGIORNO:

Coming up after the break – is John Howard’s $10 billion rivers takeover plan still credible? And Nicholson’s animated cartoon on The Australian’s web site has the opinion polls sending the Government barking mad.

ANIMATED PETER COSTELLO: John, have you seen the latest opinion poll?
ANIMATED JOHN HOWARD: Oh, I never look at the polls.
ANIMATED PETER COSTELLO: Yes, but this one’s different. We’re losing.
ANIMATED JOHN HOWARD: Oh, that’s fantastic, at last I’m the underdog.

(Barks like dog). Come on Costello!
ANIMATED PETER COSTELLO: (Jumps on desk and barks like dog). (Security guards walk into room and take Costello away)
ANIMATED JOHN HOWARD: What a shame, he might have made a great

Prime Minister.

[Ad break]

BONGIORNO:

You’re on Meet The Press. During probing in the Senate Estimate earings, the Government admitted costings for the $10 billion takeover plan of the Murray Darling river system were given a light lookover by Treasury and Finance, and the biggest change to constitutional arrangement since federation had not gone to cabinet first.

SENATOR JOHN FAULKNER (Tuesday): $10 billion over 10 years. This is

absolutely unprecedented in the history of the Commonwealth of Australia for

this not to happen, and you know it.
FINANCE MINISTER NICK MINCHIN (Tuesday): I’m not sure that’s

necessarily right.
JOHN FAULKNER: I am certain it’s necessarily right.
NICK MINCHIN: $1 billion a year, which is less than, you know, half a

per cent of Commonwealth Government expenditure, let’s keep it in perspective.

LEWIS:

Treasurer, do the sums stack up on this $10 billion water plan? We’ve seen the Premiers already reject the costings and ask for more. Are you confident, and is Treasury more to the point, confident that this package stacks up financially?

TREASURER:

Oh, very confident about the financials, very confident. I don’t think there’s a doubt about that, and I don’t think that’s what the Premiers are complaining about, by the way. I think the Premiers are complaining about other issues. They want to know issues like title, ownership, flows, and that’s fair enough. All of those matters will be worked out and they’ll come back to it next Friday. But to be frank, the financials are not a problem here because we decide to allocate an amount of money for works, and that’s it. The money lasts for the works that it buys. There’s no doubt about the financials.

LEWIS:

Well, Victorian Premier Steve Bracks said he wants billions more on top of the $10 billion before he is prepared to sign-off. Premiers come to Canberra next Friday. Are you going to meet that request? Is there more money for the Premiers?

TREASURER:

No. Here’s an interesting…

LEWIS:

Not one cent extra?

TREASURER:

The package has been allocated $10 billion. Now here’s an interesting question for Mr Bracks. How much was he budgeting to put into the Murray Darling Basin Commission over 10 years?

LEWIS:

But this is a Commonwealth takeover. I mean, Victoria will lose its responsibility for the Murray Darling.

TREASURER:

Absolutely. How much was – how many billions – here’s an interesting question. Ask him. How many billions was he going to put in over the next 10 years?

LEWIS:

But surely the Commonwealth will be prepared to stump up another $1 billion or $2 billion over a 10-year timeframe if that is what it takes to get the Premiers to sign on the dotted line.

TREASURER:

Steve, this is $10 billion. If this plan doesn’t go ahead, you would be lucky to get out of the States collectively a 20th of that. So, you know, let’s not sit around here and say “Oh, it’s only $10 billion.” This is the biggest investment we’ve ever had. The Commonwealth is offering to take it over. The States will save whatever they were planning to put in, which was a paltry amount anyway, as a consequence of that. For them it’s a saving, for the Commonwealth it’s a cost, but most importantly for Australia it’s a win, and that’s why it ought to go ahead.

HARTCHER:

Mr Costello, just changing the subject slightly to climate change. Your finance minister during the week was quoted as saying, on the subject of the connection between human activity and global warning, “I doubt you could ever say the matter will be settled.” Do you agree with that?

TREASURER:

No, I think the scientific evidence is now accepted, and that is that climate change is occurring, that human activity is leading to carbon emissions, which is slowly leading to an increase in temperature. I don’t think that’s in dispute any more. I think there are two things that flow from it. One is the rate of change, and there’s still a little bit of a disagreement about that. There are worst case – least worst case. And the second thing is what can be done about it. I think the debate ought to move on to those two issues. And that’s where the Government’s going.

HARTCHER:

So on that point between now and the election, what should we expect, what can we expect, from the Government on climate change and greenhouse?

TREASURER:

Well, I think that the Government will be taking the measures which will ensure that we do everything we can to meet our Kyoto cap. This will involve a big investment in new technology, and I in fact announced the largest solar-powered plant in the world as part of a new technology late last year. And the second thing that the Government will be looking at is a system, a trading system, which may help to allocate the cost in relation to carbon emissions.

LEWIS:

Will you give an iron-clad commitment on a trading system before the election? Can we expect that?

TREASURER:

Well, Steve, I think that the world will move to a trading system, and I think…

LEWIS:

So you’re confident we’ll have something over the next several months?

TREASURER:

Look, I can’t give you a time, but let me say this. I think the world will move to it, I think Australia should be part of it. We should be part of negotiating the shape of it so that it suits Australian ambitions and our country, and I think long-term, in allocating the cost, and there will be a cost, of reducing carbon emissions, a market based system, a trading based system, is better than a Government intervention based system.

BONGIORNO:

Treasurer, before we go, the Bulletin magazine during the week had an article entitled ‘Peter’s putsch’, the thesis being that if the opinion polls continue going as badly as they are that your colleagues will turn to you to save the day. What do you think of that article?

TREASURER:

Well, I thought, I thought the author was amusing himself.

BONGIORNO:

Have your colleagues missed the boat? Is that your message?

TREASURER:

Look, I don’t, I think that’s completely fanciful. It’s so fanciful it’s hardly worth worrying about, and that’s the way I read the article. I thought it was just a piece of fanciful conjecture.

HARTCHER:

Mr Costello, do you have Kevin Rudd’s measure? Could you beat him?

TREASURER:

I’m sorry, Peter, you’ll have to say that again.

HARTCHER:

Do you have Kevin Rudd’s measure? Could you beat him?

TREASURER:

Well, I think the Government as a whole can do that, but it will take a lot of work and a lot of effort.

BONGIORNO:

We’re right out of time, thank you very much for joining us today, Treasurer Peter Costello, and thanks very much to our panel – Steve Lewis and Peter Hartcher.