TRANSCRIPT
THE HON PETER COSTELLO MP
Treasurer

Full Transcript

Interview with Alan Kohler, Inside Business

Broadcast Sunday, March 30, 2003

SUBJECTS: Budget; War in Iraq; Ministerial Council Meeting; Graeme Samuel;

Ian Macfarlane

KOHLER:

Mr Costello, thanks for joining us. When discussing the cost of the war this

week, you have been saying that the most important thing is supporting the troops

in Iraq. Is that more important than keeping the Budget in surplus?

TREASURER:

Well, the Australian Government will ensure that our troops have every support

and that is our priority at the moment. I have made that entirely clear. We

will do that and we will try and run good economic policy as well. I don’t think

they are necessarily mutually exclusive.

KOHLER:

What do you estimate the cost of the war to be?

TREASURER:

Alan, it is hard to say because we don’t know how long it will go, but it is

certainly hundreds of millions, hundreds and hundreds of millions.

KOHLER:

$750 million do you think? $750, something like that?

TREASURER:

I can’t be more precise, but it is hundreds and hundreds of millions.

KOHLER:

Given that the price of oil is well above what was assumed in last year’s Budget,

which will lead to higher taxes than expected, is it possible that those extra

taxes from oil will actually pay for the, pay for the war?

TREASURER:

No, because the excise on petrol is fixed, as you know, and in relation to

GST on petrol, that goes to the States, so there is no benefit that comes back

to the Commonwealth from the oil price. In fact we have noticed that as oil

prices rise, your economy tends to slow a bit, so if anything, it overall has

a bit of a dampening effect on revenues.

KOHLER:

Well, given in fact, the weakening economy generally and the world economy and

the situation there, is there any possibility, do you think, of the Budget going

into deficit?

TREASURER:

Alan, I put out a Budget in May and a Mid-year Review in November, and I do

not give a day by day, week by week assessment. What I can tell you, is, when

we put out our Mid-year Review, we were forecasting a slight surplus, a couple

of billion dollars, since then we have had additional expenditures of the order

of hundreds of millions of dollars as a consequence of the war. And that is

where I would like to leave it, and you can make your own conclusions.

KOHLER:

What is your assessment of the economy generally now?

TREASURER:

My assessment, is, that the economy is being buffeted by international events.

The weakness of the world economy, not just the United States, but Europe, which

continues to disappoint in terms of its economic performance. We have had, in

addition to that, the worst drought in a century. So, we have had a bad international

situation coupled with a very dramatic domestic down-turn. We have had both

external and domestic events which have come together, and in years gone by

either of those events would have been enough to put the Australian economy

into recession and both of them would have certainly put the economy into recession.

Now, we have managed to avoid recession and to continue to grow. That is why

the OECD said that this is the most resilient economy in the world. But the

fact that we have continued to grow, does not ignore the fact that things would

have been stronger had neither of those events occurred.

And they have buffeted the Australian economy.

KOHLER:

Now you attended a Ministerial Council meeting of State Treasurers on Friday.

Was the chairmanship of the ACCC discussed, and is there still a deadlock over

Graeme Samuel’s appointment?

TREASURER:

There is a deadlock between the States, in the sense that four of the States

support him out of the eight. And there is no other candidate that has anything

like that support. So, he is the person certainly with the most support, and

the Commonwealth also believes he would make a good Chairman, so a majority

of Governments support him.

KOHLER:

So, are you going to break the deadlock, and how are you going to do that?

TREASURER:

Well, I think the fact that a majority of the Governments support him, and

in the absence of any other candidate who has either his ability, or has significant

support, I think that he is the most qualified person for the job.

KOHLER:

So when would you think it would actually go ahead and make the appointment?

When will he take over?

TREASURER:

Well, the term of the current Chairman does not expire until June, so no new

Chairman will be taking over before then.

KOHLER:

And that will be Graeme Samuel?

TREASURER:

Well, he has the Commonwealth’s support and more support than any other person,

and what is more, he is the most qualified candidate, so, he certainly is the

person who I think is the best suited to fulfil that vacancy when it arises.

KOHLER:

Speaking of important successions, the Governor of the Reserve Bank, Ian Macfarlane’s

term ends in September. Will you actually ask for a short list of alternatives,

alternative candidates, or will you simply ask Mr Macfarlane to serve another

term?

TREASURER:

I will give that careful consideration. I think that Mr Macfarlane has been

an outstanding Governor. He has worked well with the Board. He certainly has

my confidence and I appointed him, I think 7 years ago. And I think as you look

at the performance of the Australian economy over the last 7 years, it has been

such a stand-out performance that he has obviously discharged his duties very

finely.

KOHLER:

Sounds like you won’t even bother looking at a short list alternative?

TREASURER:

Well, I don’t go into the way in which these things are done. But you have

just given me the opportunity to state my view on the Governor and I did.

KOHLER:

We’ll leave it there. thanks very much Mr Costello.

TREASURER:

Thank you, Alan.