TRANSCRIPT

of

HON. PETER COSTELLO MP

Treasurer

Radio National – Interview with Kathy Vanextel

Wednesday, 15 May 2002

7.40am

 

SUBJECTS: Budget

PRESENTER:

…. Prime Minister in waiting. Certainly most political observers agree he

has delivered a khaki budget on the back of the electorally successful khaki

election and he is pumping even more money into fortress Australia. But at what

cost? This year’s Budget is in deficit and next year’s forecast surplus is small.

Yet there are massive spending cuts for the Pharmaceutical Benefits Scheme and

for welfare. Kathy Vanextel is back with us in Canberra now with the Treasurer.

Kathy what can we read from this Budget in the political context?

VANEXTEL:

Well it looks like the Leftenant has donned the General’s khaki cloak with

a focus on defence and border protection. For a Treasurer who would like to

take over the top job, it can do no harm at all to claim the electorally popular

territory to broaden his own appeal. And if in any doubt in his Budget speech

last night the Treasurer mentioned border protection something like ten times.

If you look at the Intergenerational Report, it is also being seen as the Treasurer’s

attempt to cast himself as a future leader, proving he can look beyond the next

electoral cycle. The problem is that it may be a case of the Emperor’s new clothes,

talks about the issues, but still to see the real cloth to deal with the problems

and the Budget forecast themselves are also being seen as part of the Treasurer’s

job application for the Prime Ministerial post. Surpluses building to something

like $7 billion by 2005-06. Which of course would give some room, perhaps at

the next election for some appealing tax cuts. Now to join us this morning,

as you mentioned joining us in the studio this morning is the Federal Treasurer,

Peter Costello. Thanks for coming in today.

TREASURER:

A great pleasure.

VANEXTEL:

Now this Budget is being seen through the prism of the leadership issue. One

commentator this morning, Tony Walker from the Fin Review says `you almost look

Prime Ministerial, which was partly the point of the exercise’. Were you feeling

just a bit Prime Ministerial?

TREASURER:

No, I was feeling very much like a Treasurer, delivering a Budget which was

a hard Budget to put together because we had to have very extensive commitments

arising out of the war in Afghanistan and border security and aviation security.

And we had come through a very difficult world economic situation so that is

very much what was rattling around in my mind, I can assure you of that.

VANEXTEL:

The point is though, that embracing those issues of security and border protection

does you no harm in broadening your electoral appeal.

TREASURER:

Sure, but where you got troops that are in Afghanistan with land, sea and airforces,

you have got to fund them. Where you assess that there is a security risk in

Australia, you have got to secure the airports and we are raising for example

a regiment to deal with chemical and biological outbreaks. Now this is one of

those situations Kathy where I hope it never gets to work. I hope our regiment

dealing with chemical and biological outbreaks never has an incident. But if

there is an incident and we didn’t have a regiment, how would we meet it? So

to some degree these decisions that you make almost choose themselves. And I

don’t think anybody in a responsible position, sitting down in the aftermath

of the September 11^th terrorist incident would have done other than

what I have done, which is to determine, to build up Australia’s security.

VANEXTEL:

Well, looking at the defence issues though, we have got an extra $1.3 billion

for defence, the heart of that is $1 billion under the White Paper, now you

have allocated an extra $1.3 billion for border protection. In these uncertain

times, isn’t it odd that we are spending more on keeping people out of the country

rather than on that war on terror?

TREASURER:

Well, when you say we have allocated another $1.3 billion, yes, that is in

addition to I think about $13 billion that we already had for defence. So you

have got to see what the base is before you see the increase. In relation to

border protection, yes we have allocated about an extra billion on top of about

one and a bit billion that we had. So it is still nothing compared to the defence

budget, but the border protection measures that we have put in place, I think

are proving to be successful. Let me take you back to August of last year. We

had over 2000 arrivals in three weeks. Now you know, 2000 a month doesn’t take

much to work out that you would have had a very, very large arrival rate in

this country. We put in place these border protection measures and there hasn’t

been an unauthorised arrival by boat, since December of last year.

VANEXTEL:

And that is a point that is being taken up, why are we pumping so much extra

into border protection when, as you point out, the boats are not coming here?

TREASURER:

Well, the boats are not coming here because we are pumping into border protection.

If you were to cease your surveillance in the northern borders and cut back

on coastal surveillance, and if you were to say as we previously did, the moment

you hit Christmas Island, a lawyer was entitled to take legal proceeding on

your behalf to sue the Australian government to let you in, believe me the arrival

rate would return to the kind of arrival rates we had. This is proving successful

and people say oh there is a great cost, well it is a great cost, but I can

assure you of this. IF you weren’t doing these measures the costs would be much

greater.

VANEXTEL:

It is not only cost though, it is also the sustainability of the measures themselves.

I mean there are certainly concerns within defence circles about just what sort

of impact the border protection measures are having on our, particularly on

our Navy.

TREASURER:

Well, our Navy is funded to patrol the waters of Northern Australia and I think

they are doing a very good job. And I believe it is a proper role for the Australian

Navy to be patrolling the seas around Australia, and they are properly funded

and they have the Government’s every support in doing that.

VANEXTEL:

Looking at this Budget, we have a deficit this year. Now I know you are forecasting

a surplus for the next year of $2.1 billion, but the books are currently in

the red. During the election campaign, you gave a guarantee that the Budget

would be kept in surplus. Was that a non-core promise?

TREASURER:

No, we have come through a year which has probably been the most difficult

year, well since the Asian financial crisis and before that since Labor’s recession

of 1990. We had an American recession, we had Japanese recession, German recession,

Europe turned down and in the midst of all of this, we had substantial war commitments.

VANEXTEL:

We also had substantial spending in the lead up to the election.

TREASURER:

Sure on border protection and a whole host of other things and I didn’t hear

anybody criticising that. But to have got the Australian economy through an

American downturn, I think has been really a remarkable performance. I can’t

remember Australia surviving an American recession before. In 1990, when the

economy turned, when America turned down, the economy turned down. I think the

Australian Budget went into deficit by $17 billion.

VANEXTEL:

The point that is being made about the surpluses you are forecasting now, particularly

for next year, is that it is predicated essentially on the economy and the continuing

growth of the economy. There are no guarantees that the world economy won’t

suffer another set back. I know you are confident that there is a turn around

now in the US, but there are, the point is being made that there are no specific

measures within the Budget to protect our growth, apart from relying on the

economic growth.

TREASURER:

Well here we are, we’ve, America’s gone into recession and Germany’s gone into

recession and Japan is in its third recession in a decade and Australia grows

at 3 ¾ per cent. Why did we grow at 3 ¾ per cent, well in part, because

we stimulated the economy with the First Home Owners Scheme, we had a tax system

which took taxes off our exports, we cut the company tax rate and we cut income

taxes. Now we grew during a global slow down. Look around the world, find another

economy, an advanced industrial economy that grew during this global slow down

like Australia. Now what we are saying is that our fundamentals are strong,

as the world comes back, that will, that will underpin Australian growth. And

we are actually forecasting in the next financial year Australia to lead the

world again. Now, you know, I know it might be hard for sometimes in Australia

for people to say, well this is a pretty good run, but I don’t think people

overseas have any doubt. There is a lot of people in America and in Japan, we

had the Japanese Prime Minister here last week who made this point. That the

Australian economy stands out, and not just by a short way either. Now the fact

that we were able to grow during a global recession, we weren’t untouched, but

the fact that we were able to grow means that as the world turns that will underpin

out strength and that is a good thing for more jobs. Our unemployment rate now

is at 6.3 per cent and we haven’t been in that territory for awhile and we want

to keep the Australian economy growing so it can fall further.

VANEXTEL:

Alright Treasurer, thank you very much for coming in this morning.

TREASURER:

A great pleasure.

PRESENTER:

Federal Treasurer, Peter Costello in Canberra with Kathy Vanextel.