Transcript No. 2000/45

TRANSCRIPT

of

Hon. Peter Costello MP

Sky TV News

Wednesday, 10 May 2000

7.20 am

SUBJECTS: Budget

JOURNALIST:

Treasurer, Peter Costello, thank you very much for joining us this morning.

Thanks, John.

Now some are saying it’s a smoke and mirrors budget, that that $2.8 billion

deficit of which you are so proud isn’t real.

Well the Budget is in surplus for the fourth time in a row and if you want to look at

the best indicator of how our finances are going, we will be paying off another $9 billion

of Labor’s debt this year. And just as Labor ran up $80 billion of debt by

accumulating deficits through the 1990s, in five budgets, our first five budgets have paid

for themselves and will pay back $50 billion dollars of Labor’s $80 billion debt.

Yeah but that’s looking backwards. Let’s look forwards…

No, that’s including this year.

Right well…

That’s including the $9 billion that we’ll pay off this year. We’ll pay

$9 billion making a total over five budgets of paying back $50 billion of Labor debt.

Your opponents are saying that you’re banking on this asset sale of the

telecommunication spectrum. That it’s going to raise at least $2.6 billion. That

you’re selling an asset to get this glowing figure.

No the spectrum sales, all of the proceeds of the licence, and it’s a licence,

it’s not an asset sale, first of all, lets make a few points. It’s not an asset

sale it’s a licence fee. Just as broadcasters and TV stations pay licence fees, and

it’s always been treated as revenue to the Government. But that revenue from the

licence fees will go to retire debt. The Budget is in balance. All of the proceeds from

selling licence fees on new spectrum goes to retire debt. Additional monies go to retire

debt mainly out of the Telstra sale. We retire $9 billion worth of debt this year. $50

billion over five years. We haven’t paid back all of Labor’s debt which was $80

billion but 5/8 of the way there.

Let’s look at a couple of other realities. Within seconds of your announcing the

Budget last night, the Aussie dollar went down quite dramatically. There is a real risk of

interest rates going up. Now you keep saying that a healthy world budget is good for

Australia but it doesn’t seem like the rest of the world likes this budget.

Ah, well the dollar’s been down, been up again this morning. And I think if you

looked at the dollar it’s been moving over I think weeks if not months obviously

that’s related to a whole lot of things and quite a lot of it is related to

what’s happening with the US dollar. Because when you talk about the dollar you are

really talking about where the US dollar is going as much as the Australian dollar. But a

healthy world economy will actually be good for Australia. It means that we’ll be

able to sell more exports. We came through the Asian financial crisis where a lot of our

markets were down, in recession, weak. We had trouble on the export side. A world economy

is boosting those exports. Our trade position is improving and that means that a big part

of our continuing growth will come out of the export side.

But some of the fear is that you haven’t in factored enough protection should the

American economy decide to take a dive. We’ve seen the NASDAQ up and down. If it

should continue to keep going down or if Alan Greenspan say puts his interest rates up

again which in turn bumps ours up again, that there is not enough fat, not enough cushion,

not enough protection for Australia in this Budget.

Well obviously the authorities in the US are looking at slowing the US economy and

that’s been part of their policy over the last couple of weeks. But in Australia

we’ve maintained 4 per cent growth on an inflation rate below 2 per cent. It will

come off to 3 – which is still good decent growth. We’ll still have a low inflation.

We’ll have the biggest tax reform in Australian history. We’re paying off $50

billion worth of debt and our debt to GDP ratio at 7 per cent compares with 50 per cent in

the US or Europe or Japan which puts Australia in a very strong financial position.

To wrap it up, you mentioned inflation, and yes you quite rightly say that we’ve

had ongoing inflation of a very generous 2 per cent but we’re going to get hit

with another 2.75 after the GST comes in. Is business in a position to cop that?

That’s a huge jump.

Well the important thing is that it’s a one-off. There is no reason for anybody to

seek a wage increase on the basis of the one-off price effect. Why? Because income tax has

been cut and family assistance is being increased, and they’ll have more disposable

income. And it’s important I think from businesses point of view to see that as a

one-off as the Government does, as the Reserve Bank does. It’s a one-off caused by a

tax change which when you look at underlying and ongoing inflation outside of it, is on

the basis of a low ongoing inflation rate which is consistent with our economic program.

To finish it now. Are you satisfied that this Budget is the Budget that will win you

back enough votes to get you re-elected next time around?

Oh look this is a budget which will secure our financial future. It’s a budget

which allows us now that we’re paying less in debt interest payments to put money

into families and better health care and invest in education which is a great investment

for the future.

Treasurer, Peter Costello, thank you.

Thanks John.