Transcript No. 2000/99

The Treasurer has joined us in our Melbourne studios. He’s speaking now to

Alexandra Kirk in Canberra.

Good morning Treasurer.

Good morning Alexandra.

The dollar has dropped below 52 cents, you’re going to New York to talk it up with

investors, but you’ve been doing that since the dollar started its plunge, and

apparently it’s had no effect. Why isn’t Mr Beazley right when he says that

it’s a fundamental problem of the Government’s own making?

I don’t think Mr Beazley is considered to be an expert on finance. He’s

trying to take a political shot. As it turns out it’s a bad one, because his policy,

of course, right throughout the time when he had his regrettable period as Finance

Minister was to run huge deficits – $17 billion, $13 billion, $10 billion deficits. And I

think we can say with some surety, that if the Government did not put the Budget into

surplus, if it were not in surplus now, that would be a real problem for the Australian

economy . . .

But if the economy . . .

. . . that’s one of the reasons why we intend to keep the Budget in surplus which

is very important, if I may say so. But . . .

The economy is doing so well under your stewardship, why are smart US investors dumping

our dollar, and why is your trip even necessary?

Well, my trip is necessary because there’s a meeting of the G20, which Australia .

. .

(inaudible) . . .

. . . which Australia is a member of. And this is an indication of the respect that

Australia now has in the international financial community. The G20 consists of the G7

developed nations, and about 11 or 12 nations that are considered to have problems in the

international financial system, with Australia admitted to this group as a wealthy nation

which has a role to play in international finance because of the role we played in the

international architecture. And the G20 had its first meeting in Berlin in Christmas, and

this is its second meeting, and this is a very important forum for Australia to be part

of, and that’s why I’m going to it. It gives us the opportunity to talk about

the international financial architecture which is something that Australia has made some

great contributions on. You asked me about the dollar, and as I’ve said before, the

big story in world markets over recent times has been the rise of the US dollar which has

risen to records, not just against Australia and New Zealand of course, but against the

Euro which is the French Franc, and the German Mark, and the Irish Punt, and the Italian

Lira. And one of the principal reasons for that, is that capital has gone back into the

United States. Now we saw overnight one of the reasons why there was a flight out of

Europe, with some comments by the European Central Bank, and then there was a recovery in

some of those exchange rates because of some data that came out of the United States. My

view is, that the US dollar, which is now so strong, will become of concern. And it

appeared that there were some comments of concern by the Federal Reserve in the United

States yesterday, and as investors take that into account they’ll start to reassess

their positions.

And when do you think that might occur, and to what effect?

Well, obviously the US dollar is now a very strong currency against all the currencies

of the world, and you saw some comments made about that in America just overnight. The

important thing from Australia’s point of view is:- one, we don’t lose sight of

the exchange rate, and we watch it very carefully, I can assure you of that. But the most

important thing is to run a strong economy. It’s a strong economy that we need to

run, strong growth, low inflation, more reform in our tax system, more reform in our

industrial relations system, and above all, if I may so, a strong Budget position. Having

got this Budget into surplus, imagine where we would be if we were still haemorrhaging

with the Government out there borrowing on markets to try and fund its expenditure outside

its revenues. And those people that now say, oh well, the Government can give the game

away, it ought to go back and give away revenue, or spend more, or go back into deficit,

those are the people that are prescribing what could be a very bad economic outcome, and

it’s one which the Government will not be taking.

If we could move to another issue, and that is the National Australia Bank announcing

that it’s closing 10 per cent of its branches and putting up fees at the same time.

Labor’s talking about setting up a social contract. In your view, is this move by the

Bank a socially responsible one?

Look, I haven’t got the details of it. I’ve read what was in the papers this

morning and I was a bit concerned about some of the fees for telephone banking, and

concerned about some of the other transactional fees. And I will be asking the National

Australia Bank to explain that to me during the day, and to explain it to the public. I

think the public has a right to know about these things. As I understand it, this was

leaked out from some seminar they had with their employees. But on first glance, I

can’t see why the transactional fees are moving to the extent that they are, and

I’ll be looking for an explanation, as will the public.

And do you really think that’s going to change the, the bank’s going to back

off?

Well, let’s see how they explain it. I don’t know if there are reasons for

it. These are banks that have customers, and they’ll only be in the business of

banking while they can keep them, and they’ll only keep their customers while they

can explain to their customers that their behaviour is justifiable. So, let’s hear

the justification . . .

But this is not the only bank that’s doing this. This is a . . .

Well, I make the point of all the banks, I put all the banks in the same position. One

of the things that we’ve started to do, of course, is to allow non-banks to start

offering services. Now, you’ve seen a lot of these credit unions, which we gave

access to the payment system, starting to spring up. You’ve seen organisations like

the Bendigo Bank start to open local community branches. And we changed some of the

financial regulations to allow them to do it. If the big banks are going to price

themselves out of the market, what we’ve got to do is, we’ve got to open up

competition to allow these new entrants to come in and take that customer base and give

people the service that they’re looking for. I think it’s a very important part

of getting more competition to the big banks in the system.

On the Reith Telecard matter, as the man in charge of the nation’s purse strings,

and also you’re a lawyer, can you explain why, for example, Mr Y who, according to

the Solicitor-General’s report, offered to pay thousands of dollars worth of calls on

Mr Reith’s Telecard, why he isn’t being pursued? And why, also, shouldn’t

the Government pursue Ms X, who Mr Reith has accused of setting out to fraudulently use

the card for her own benefit?

Well, what the Government did, and it was the proper thing, was it asked the police,

the Federal police, to look at everybody involved, that’s Mr Reith, his son, X and Y,

and anybody else, and to interview them and to see whether or not legal steps could be

taken against them. Now, the police put the report to the Director of Public Prosecutions,

who concluded that there was no basis for charges. Now, and I can’t go behind that,

the Government can’t go behind that. The DPP is the Government’s lawyer,

he’s the prosecutor…well he’s an independent prosecutor…but he advises

the Government, and he’s the bloke that knows whether the evidence is capable of

sustaining a charge. I can’t second-guess him. John Howard can’t second-guess

him. The DPP is a much more eminent lawyer than all of us combined.

Why couldn’t the Government though pursue these people for the money?

Well, that is the way the Government does pursue people, as it were. It puts an inquiry

into the hands of the police, and the police recommends to the Director of Public

Prosecutions, and then the Director of Public Prosecutions brings a charge in the courts.

You know, the Government doesn’t, you know, you can’t get debt collectors to

turn up and threaten people. That is the process of law, and that was the process of law

that was put in place. In any event, if I may say so, Mr Reith has actually paid the money

back. So, from the taxpayers point of view, they have been reimbursed in full.

Mr Costello, thanks for joining us.

Thank you.