TRANSCRIPT

THE HON PETER COSTELLO MP

TREASURER

Interview with Neil Mitchell

3AW

Monday, 27 September 2004

8.30 am

SUBJECTS: Coalition’s Election 2004 campaign launch, Budget surpluses,

Childcare, Tech Schools policy, drugs, James Hardie, economic management

The Federal Treasurer Peter Costello, good morning.

TREASURER:

Good morning Neil.

MITCHELL:

Now these promises are unbreakable are they?

TREASURER:

Yes.

MITCHELL:

What if the predicted surplus’ don’t happen, do you run down the surplus,

even go into deficit or do you adjust the promises?

TREASURER:

Well we have looked at the spending very carefully. We think this is affordable.

It still leaves the Commonwealth in a positive position and it gives us

some margins so I am very confident that the margin will be there to cover

any unforeseen events.

MITCHELL:

What will it bring the surplus down to?

TREASURER:

Well in next year the surplus would be around about $2.7 billion and the

year after about $4.5 billion.

MITCHELL:

Not a lot of room for error there, I mean if interest rates go up, the

economy turns down, what do you do? Do you break the promises or go into

deficit?

TREASURER:

Well not a large room for error but that is about ½ per cent of

GDP and about ¼ per cent of GDP. We were forecasting amounts of that

order but less in the Budget so we are actually in a stronger position we

think, after these promises, than we were at Budget time.

MITCHELL:

How is that?

TREASURER:

Because since Budget time we have actually revised our projections up and

we think we have got a stronger starting position than we did at the Budget

time.

MITCHELL:

But they are projections…

TREASURER:

Yes.

MITCHELL:

…they are fragile…

TREASURER:

Yes.

MITCHELL:

…do you agree?

TREASURER:

Well when you say they are fragile, I have done nine Budgets. When I did

my first Budget the Budget was $10 billion in deficit. Since then, there

have been seven surpluses. So you would have to say that the track record

is pretty strong. I don’t think there’s been another Government that has

had as successful financial management as we have. I don’t think there have

been seven surpluses out of nine for a very long time in Australia so, we

don’t take it for granted Neil, but I think it is affordable.

MITCHELL:

Are you promising to stay in surplus?

TREASURER:

Yes, whilst the economy grows, yes we do.

MITCHELL:

OK, so what if the economy stops growing? What happens to these promises?

Do you go into deficit or do you cut them back?

TREASURER:

Neil if the economy goes into recession everything gets knocked apart.

MITCHELL:

Including these promises?

TREASURER:

People get unemployed, Budgets go into deficit, businesses collapse. The

most important job that I see myself as having is keeping this economy out

of recession. The recessions destroy economies. We had a recession in 1990,

Paul Keating put interest rates up to 17 per cent. We had a recession, it

smashed the Budget, it smashed employment, it smashed business, it smashed

retail. Now, I just want to say this Neil, people shouldn’t think that there

is anything inevitable about economic growth in Australia. Sure we have

had eight good years but countries bigger than ours have been in recession

– the United States has been in recession and France and Germany and

Singapore and all of these countries – so, what I am absolutely focussed

on is keeping this economy out of recession because as long as you do that

you keep people in work and you keep your Budget strong, that is what gives

the framework to everything.

MITCHELL:

But that is exactly the point, countries bigger than us have gone into

recession, there are other factors which influence us, if we are forced

towards recession or just a downturn, how do you pay for this?

TREASURER:

Well you have got to keep your country out of recession. That is what you

have got to do Neil. Because let me tell you, if Australia were to follow

say, the United States went into recession, in previous years, in the seventies

and the eighties and the nineties, we were always in recession when the

United States was in recession. How did we keep Australia out of recession?

Well we kept low interest rates, we had improved industrial relations, we

had a strong Budget position. All of these things come together, but what

is your object? Your object is to keep your economy out of recession or

you lose everything…

MITCHELL:

You also had a healthy surplus which helped keep interest rates down. Do

you agree this spending potentially puts pressure on interest rates?

TREASURER:

Well how did we get our healthy surplus? It didn’t just materialise, we

built it.

MITCHELL:

Yep, but are you risking it?

TREASURER:

No, you see, I often, Neil I often, I am amused when I hear the Labor Party

talk about spending surpluses, you know. When I became Treasurer, nobody

talked about surpluses, let alone spending surpluses. The big present that

I got becoming Treasurer was a $10 billion deficit, that was what Labor

was into the business of doing and the only thing I say is, here is the

track record: nine Budgets, seven surpluses, $73 billion debt reduction.

We are much stronger than we were eight years ago and we are going to keep

it that way.

MITCHELL:

Is it possible this package puts interest rates under additional pressure?

TREASURER:

No.

MITCHELL:

Why not?

TREASURER:

Because at the end of this package our Budget bottom line is still stronger

than we were forecasting back in May.

MITCHELL:

Have you worked out how many dollars this could mean to the average family

over a year or whatever you like?

TREASURER:

It depends who you are. If you are family that had children in childcare

it could mean quite substantial dollars.

MITCHELL:

But that childcare thing isn’t means tested, correct?

TREASURER:

Well you have to qualify, you have to be in work to get the childcare benefit,

you have to qualify for the childcare benefit, but it is not means tested,

no.

MITCHELL:

Is it capped?

TREASURER:

No it is a 30 per cent rebate on your tax.

MITCHELL:

Well how do you know that it won’t blow out? The health care rebate did.

TREASURER:

Well because we know the number of children in Australia today that are

in childcare, we know the kinds of expenses that are being incurred by families

and we are giving a 30 per cent rebate. Now what that means is that you

are not getting all of the costs back, you are getting 30 per cent back,

so you still have incentive for people to minimise their costs but you have

a really good encouragement for them.

MITCHELL:

What if I hire a Nanny for my kids, do I get a 30 per cent rebate?

TREASURER:

Well that is not classified as childcare.

MITCHELL:

So there is no rebate on Nannies?

TREASURER:

Not on private, not a private situation, no you have got to qualify in

an approved childcare provider.

MITCHELL:

Are there enough places with approved childcare providers? People tell

me they have trouble getting in.

TREASURER:

Well look, over the years we have increased them very dramatically. Now,

I can’t promise that there is no vacancy, that there is no over commitment

in any place, I mean there are people that will always, in particular areas,

have trouble but gee, the number of places have increased dramatically and

there are all sorts of different forms – there is long day care, there is

centres, there is home based centres, but you have got to be able to qualify

for that childcare benefit.

MITCHELL:

What is your answer to the claim that it is just middle class welfare?

TREASURER:

Well, what, a reduction off your tax is now called middle class welfare

is it? You know, I would have, these people are paying tax by the way, they

are in the workforce, they are paying tax and what, you reduce their tax

and people say that is welfare? I have got to say, you do have to be working,

you do have to be paying tax. Somebody comes along and says we would like

to defray the cost to you of childcare which enables you to get into the

workforce to pay these (inaudible) and someone says that is middle class

welfare. I don’t think it is, I think it is tax relief myself.

MITCHELL:

You have expressed a lot of interest over the last year or so in talking

about areas outside of your portfolio which is why I ask you about this

tech schools idea. Now, what do you see that achieving and one of the issues

that you have picked up often is children, the issue of kids and their directions,

is that the theory behind the expansion into tech schools?

TREASURER:

Absolutely, when I was young and you were too, we had tech schools remember

and at the end of primary school some kids would go to the tech school and

some kids would go to the high school. And the idea if you went to the tech

school was that you would have a technical education, you would get a much

more practical education, mostly you would have the opportunity of taking

up an apprenticeship and you would go into a trade-type occupation. Then

tech schools were abolished and everybody went to high school and then the

ambition seemed to be everybody go to university. I don’t think university

is for everybody actually. And we now have this situation where we have

lots of kids with university degrees who are looking for jobs and shortages

for plumbers, electricians, tilers, where employers can’t find people. And

the funny thing is Neil, if you become a plumber or an electrician, you

are probably going to end up making more money than you will in a desk job

with a humanities degree or some such unless you get a really good desk

job. So why is it that these high paying jobs, we have shortages, when in

other areas we have oversupply? And I think that it is because we haven’t

explained to kids the value of a technical education, we haven’t given them

the career opportunity. We are facing looming skills shortages in Australia

at the moment and we want to do something about it and a technical college

to say to these kids, look, don’t think technical education is second class

education, this is fantastic first class education, it is going to give

you a great career. Get into this tech school and you will be set up for

life, that is the idea. I think it is an absolute ripper of a policy.

MITCHELL:

$200 million a minute, it is estimated that the Prime Minister spent yesterday

during his speech, $66 billion since the Budget, are you making savings

anywhere?

TREASURER:

Yes, we have put in place some savings…

MITCHELL:

How much?

TREASURER:

 …and we may even be announcing some more.

MITCHELL:

…more cuts in an election campaign?

TREASURER:

No, no, not cuts, savings for good Government, you know there are still

areas where we can push ahead and make sure that we get best value for dollar.

MITCHELL:

So $66 billion in spending, where have you saved? How much have you saved?

TREASURER:

I don’t know where you get these figures from…

MITCHELL:

Well (inaudible) the Budget together.

TREASURER:

…well let me say the (inaudible) are costed at $6 billion over four

years leaving cumulative surpluses over four years of 17.

MITCHELL:

So how much have you saved?

TREASURER:

So let me just put that into context. Well, I can tell you Neil, the biggest

amounts that we have saved under our Government we have saved on unemployment

benefits by getting 1.3 million new people into work, that is the biggest

saving we have made. Now not only have we saved on their unemployment benefits

incidentally but those people have become taxpayers and where you get more

people into work and they are contributing rather than drawing down, that

is the best way to strengthen your Budget.

MITCHELL:

We will take a break and come back with more from the Treasurer, I see

you now you even support independent contractors, that is a change.

TREASURER:

Always have.

MITCHELL:

Rubbish. More from the Treasurer. Did you like being warm up man again

yesterday?

TREASURER:

Are we still on air?

MITCHELL:

Yes, you can answer it honestly anyway.

TREASURER:

Yes, I did actually, I tried to, I wasn’t the immediate warm up man, I

was warming up and then John Anderson came on and then the Prime Minister

came on so I was only second warm up man yesterday, I have been demoted

by one.

MITCHELL:

Who is going to be your warm up man if you are Leader?

TREASURER:

Well look it is a hard mantle to pick up Neil and I am not sure I would

wish it on anybody.

MITCHELL:

A break and more from the Treasurer.

[AD BREAK]

MITCHELL:

Eleven to nine, the Federal Treasurer is with me. Mr Costello, is there

a chance you will merge with the Nationals after the election?

TREASURER:

I don’t think so.

MITCHELL:

 (inaudible)?

TREASURER:

No, I think if there were a merger between the Liberal Party and the National

Party, you would probably get some new rural based Party which would try

and set up a bit like One Nation or Bob Katter or something like that and

would try and siphon votes off for that kind of agenda so I am not sure

it would solve the problems that it is designed to. We work pretty well,

we don’t have arguments with the National Party, and the Coalition, I think

it has been very stable.

MITCHELL:

You were interviewed yesterday talking about the (inaudible) Christmas,

is there a possibility you will step down as Treasurer?

TREASURER:

No.

MITCHELL:

Is there a possibility you will get out of the Parliament?

TREASURER:

No.

MITCHELL:

So what are you consulting with your family about at Christmas?

TREASURER:

The man said would you like to spend time with your kids at Christmas and

I said yes, I would.

MITCHELL:

So you are not…

TREASURER:

Which I thought was a pretty unobjectionable statement, I would like to

spend time with my kids at Christmas. I’ve been away, (inaudible), 30 or

40 weeks during the year and if I can get a Christmas holiday I would like

to spend time with them. But to say on the back of that that is foreshadowing

some kind of career change is completely wrong.

MITCHELL:

Are you happy to stay Treasurer for the next three years?

TREASURER:

Yes, I have said, I am running again to be Treasurer.

MITCHELL:

For three years?

TREASURER:

For as long as it takes.

MITCHELL:

As long as what takes?

TREASURER:

As long as it takes to make sure that the Australian economy is strong.

It might take longer than that for all I know and I am running again for

Treasurer because I can’t believe that Australia will want the damage that

Mr Latham will to do to it.

MITCHELL:

Are you offended by those Labor ads that sort of cross out or paint out

John Howard and your face comes up as Leader?

TREASURER:

No.

MITCHELL:

Does it not irritate you that you are seen as a negative as a Leader?

TREASURER:

I think they are really weak actually. I don’t think, I think what they

are designed to do is it try and hearten the Labor Party Branch Members.

You know, the Labor Party Branch Members feel, oh go on, you have got to

have a go, you have got to get stuck into somebody, you know, look, get

stuck into Howard or get stuck into Costello, you know, and I think they

go to the Branch meetings and say, oh, great, fantastic. But amongst thinking

people I think they are particularly ineffective.

MITCHELL:

But they are saying you are a liability.

TREASURER:

I think they are particularly, (inaudible) I don’t know what they are trying

to say, but whatever they are trying to say they are not very effective

at saying it.

MITCHELL:

As I said before you are interested in other areas, what would you like

to achieve personally if you are re-elected? What do you want to achieve

in Government in the next three years?

TREASURER:

Well I think the biggest thing that is facing Australia is the ageing of

the population. I bought down the Intergenerational Report. It is a picture

of where Australia will be in forty years time with declining birth rates

and extended life expectancy and my message to Australia is this, if we

don’t start now, the country is going to have big problems in 20, 30 and

40 years time and we have got to start to change and we have got to start

to adjust and I want to put in place the policies that will put us there

in 10, 20, 30 and 40 years time.

MITCHELL:

What about the youth issues, because you have expressed interest in that,

the sort of violent music and that sort of thing. We had the video footage

last week of the bunch of, a group of, gang of youths beating up a security

guard, there was the house invasion I was talking about earlier. Do you

think we have got a problem with kids?

TREASURER:

Well I think our society is as affluent as it has ever been, that kids

today have material prosperity of a degree that their parents never had

and their grandparents never had. They have got good education and we want

to keep it that way, but that doesn’t solve the values problem. You do have

these episodes and you know, you ask yourself what fuels it and what can

be done about it. Now obviously alcohol is a big part of it, drugs are a

big part of it, the availability of drugs to our kids still scandalises

me, and I think it is every parent’s nightmare that their child could be

given drugs or take up drugs. I am, you know, really scandalised by the

fact that we have got these gangs that control the drug trade in Melbourne

and kill each other for the profits. That is what has been happening. All

of these gangland murders, do you know what that is about? That is about

killing people to get the profits out of the drugs trade of supplying drugs

to our kids, that is what that is all about.

MITCHELL:

Well I presume that the court will make a judgement on that.

TREASURER:

Well I think, no, no, no, I don’t think there is any doubt. The court will

make a judgement as to who has done the killings, but I don’t think there

is any doubt as to why the killings have been taking place because the drug

barons want to control the right to supply drugs and ruin our kids lives.

That is what they want to do and that is happening in Melbourne as we speak.

So the problems of drug abuse, alcohol abuse, violence, are still with our

kids. It is not to say that all of our kids are bad kids, they are mostly

really good kids, but we have still got some problems that we have got to

work on here, Neil.

MITCHELL:

 (inaudible) a couple of other areas to touch quickly, James Hardie, do

you think they should be boycotted as a company?

TREASURER:

Look, the first thing I would like to say is that the people who are suffering,

I think have the sympathy and the support of everybody in the public, and

to die from a disease like this is tragic and they require full compensation.

The only thing I would say is that if this company is going pay full compensation

it is going to have to have profits, it has got to have profits to pay the

compensation. Now there are also, I believe, 600 other employees still employed

by James Hardie, not in this business (inaudible) asbestos business but

in other businesses. If you boycotted the company and put those 600 out

of work and the company’s profits fell, I don’t know how they are going

to pay the compensation, that is the only thing I would say. This company

needs to trade to make profits to pay the compensation and a boycott is

not going to help it do that.

MITCHELL:

David Hicks, do you think he should come back here to trial?

TREASURER:

I think that the trial should proceed in the United States under the rules

that have been laid down and if people say bring him back here for trial,

it is very unclear what the legal situation of Hicks would be in Australia,

it is very unclear what the charges would be. He was picked up in a foreign

country fighting with the, well we don’t want to prejudice his trial, but

he was in some pretty bad company, let’s put it that way.

MITCHELL:

Are you going to win the election?

TREASURER:

It is very tight.

MITCHELL:

What is your instinct?

TREASURER:

Either side can win.

MITCHELL:

Schools policy, Labor’s schools policy is one issue that has had, really

held public attention, the rest I am not sure it has, (inaudible) dull this

campaign?

TREASURER:

I think the schools issue is a huge issue. You know, I know from talking

to my own constituents, parents who are struggling to put their kids through

these schools suddenly being told they are rich and they ought to have money

taken away from them. Even on Sunday, I was talking to mother who was working

on Sunday and she raised this schools thing and I said, why do you raise

that? And she said, ‘the reason I am here working on Sunday is to

try and pay the fees for my kids.’ And they don’t like to hear anybody tell

them that they are rich and they ought to have money taken away from them.

That is number one. Number two, what they don’t like about this Neil, is

the way it is pitting parent against parent. You know, you go down and you

see which schools are on the hit list and which aren’t, there is no rhyme

or reason to it except that Labor has singled some people out for punishment,

and for political reasons, quarantined others and I think it is has given

a really bad taste and a feeling to a lot of parents, that.

MITCHELL:

(inaudible) is a bit dull though, maybe people, they are certainly not

talking about it in the streets, have they made up their mind, or are they

waiting?

TREASURER:

I think they are talking about it in the streets, you know, I was standing

out in the street corner in my own electorate on Saturday morning and they

were certainly talking to me about it, I can assure you of that.

MITCHELL:

Do you agree that this policy launch yesterday, that this will decide it,

they will either say, yes this is for us, or else it is economically responsible

and not vote for you?

TREASURER:

No I think that people make their decision on a broader canvas Neil. I

think they will say well here is the Coalition, here is its record, here

is its experience of economic management. Here is Mr Latham, here is his

record, here is his experience. And I think, well, this is what I hope,

at the end of the day I think they will say, who am I going to trust with

my mortgage, my job, my farm or my business and I think they make these

decisions at a much broader level.

MITCHELL:

Now in Government would you legislate to have a Melbourne Grand Final every

year?

TREASURER:

Yes, keep going.

MITCHELL:

Well, what did you think of it, (inaudible) I know you are an Essendon

supporter, you support Melbourne footy…

TREASURER:

Well look it was a good game, that is the first thing that I will say and

I think it was good for Melbourne in the sense that it was probably good

for our tourism industry. It was hard to get a hotel bed here. But I think

the AFL has given too many concessions, particularly to the Brisbane Lions,

in relation to salary caps and in relation to draft picks. You know, they

have won three premierships on the trot. When was the last time anybody

did that? They are still getting concessions and poor Victorian Clubs, like

the Essendon Football Club…

MITCHELL:

And others.

TREASURER:

…are being persecuted under this policy.

MITCHELL:

You must be happy they didn’t win four in a row.

TREASURER:

Well you know, I said, two out of three ain’t bad, three out of three is

almost unheard of and four out of four is too much in football.

MITCHELL:

Don’t apply it to politics.

TREASURER:

But there are different rules when it comes to politics.

MITCHELL:

Thank you for your time.

TREASURER:

It is great to be with you Neil.