Transcript No. 2000/55

Mr Costello, do you feel anyway powerless that we’re, sort of, dictated to by the

effects of the US economy at this stage?

TREASURER:

Well, the American economy is very strong at the moment. And its stock markets are at

very high levels, and authorities in the United States have been warning about that for

some time, been calling it irrational exuberance and other things. Obviously policy makers

in America are focused on how to ensure that the stock market doesn’t boom and then

come down on a crash. And they’re focused on getting sustainable growth in the US,

that’s a matter for them. We don’t advise them, but obviously the effects of the

US economy have wider implications around the world.

JOURNALIST:

Is it frustrating for you that that’s the way it is?

TREASURER:

Well, in the long term a strong US economy is good for the world, because it means a

stronger world economy, it should be good for our exports. What’s worrying policy

makers in the United States at the moment is, how do they get strong consistent growth?

They’re obviously worried about the way growth has kicked up, and they want to

moderate the pressures and keep it continuing, it’s a matter for them, it has

repercussions around the world.

JOURNALIST:

(inaudible) do that?

TREASURER:

Well, the Americans will make a decision about their own interest rates. I won’t

speculate on how much it will be.

JOURNALIST:

Treasurer, the dollar continues to fall, is that a vote of no confidence in your

Budget?

TREASURER:

I don’t think these are related to budgetary matters. I think what’s

influencing currency markets at the moment, and not just Australia incidentally, around

the world, is the strong US dollar and interest rate movements in the United States which

are contributing to that. And these are international developments, they effect Australia,

but they are international developments which we and other countries have to take into

account.

JOURNALIST:

Are you happy with how the Reserve Bank handled the situation so far? Could it have

done more?

TREASURER:

Look, I support the Reserve Bank. I entered into steps to enhance its independence.

We’ve always respected that independence, and we support it in its independent policy

making role.

JOURNALIST:

Sorry, does that mean that you think the Reserve Bank shouldn’t intervene to top

the dollar up?

TREASURER:

Oh, we never speculate about interventions.

JOURNALIST:

Treasurer, what do you think will happen, the next Reserve Bank meeting, is it ruled

out that they’ll be discussing interest rate rises here again?

TREASURER:

Look, the Board meets on a monthly basis. It looks at monetary policy on a monthly

basis. I don’t speculate about future movements in rates. If I do it can be

misunderstood or taken the wrong way, so I just, as a matter of practice, don’t

speculate about future movements.

JOURNALIST:

Does Labor have a point about its unchained ads? It’s talking about taking them to

the High Court, do you think that it’s a waste of public money?

TREASURER:

Everywhere I go people say to me, they want more information about the tax changes.

They want to know which taxes are being abolished like wholesale sales tax. They want to

know what effect GST will have on prices. They want to know how much they’ll have in

their pocket to cope with items that go up, along with items that stay the same, and some

that come down. And wherever I go, I was on radio in Adelaide this morning taking phone

calls, people say we want more information. Now, here is a Government which is responding.

It’s putting more information out there. And the Labor Party’s silly for

criticising more information, it ought to support it. After all the Labor Party is now

committed to keeping Goods and Services Tax. I would’ve thought that it would support

efforts to explain to people how it works, because one day the Labor Party wants to take

advantage of it. So, I would’ve thought it would be supporting informational

campaigns.

JOURNALIST:

How confident are you that the Australian community will be able to handle the

changeover to the New Tax System on July 1, and what do you foresee as perhaps the major

problems?

TREASURER:

I think from the community’s point of view, on 1 July not all that much will

change. Some prices will be the same, some will go up, some will come down, and

they’ll have more money in their pocket to spend. From a business point of view, for

some businesses it will be a new system, and it will take a little bit longer for

businesses to get their account keeping returns in order, because the first return is due

after the first quarter, after the first three months. So obviously it’s going to be

a new period for them in those first three months. But I think for the community,

they’ll find on 1 July that not much has changed. Some prices have gone down, some

have stayed the same, some have gone up, and they’ll notice that they’ve got

more spending power.

JOURNALIST:

Treasurer, how big a threat do you think GST-based wage claims are, and what can the

Government do about it?

TREASURER:

Well, there’s no basis at all for people to seek wage claims on the basis of GST.

There’s going to be a one-off effect on prices from GST for which everybody has been

compensated in advance with income tax cuts. They’ve got more disposable income to

cope with those price rises. If they then went around and sought a wage increase as well,

which would feed back into prices, they would be seeking a double claim as it were. In

addition to the tax cut a claim on the wages front, and that could have an ongoing effect

on prices. Very important that people understand there is no basis for wage claims on the

basis of GST because everyone, everyone, is getting an income tax cut.

JOURNALIST:

Do you see Country Labor, does it pose a threat given the result in Victoria?

TREASURER:

No, I don’t think so. Look, I think the Labor Party ought to be honest and call

itself ‘Union Labor’, because that’s what it is. The Labor Party is

controlled by the trade unions. And it doesn’t matter what word they put in front of

Labor, at the end of the day the reality is it’s ‘Union Labor’. And the

trade unions haven’t got the interests of country people at stake, I can assure you

of that.

JOURNALIST:

So the result in Victoria wasn’t significant for Labor?

TREASURER:

Look, I think the result in Victoria turned on a lot of factors, including the fact

that you’ve got a new State Government, the fact that you had an ex-leader who was

retiring after he’d been elected and not served out his full term, and I think there

were a lot of state based factors involved in it. But for the Labor Party to put the word

“Country” in front of their name doesn’t change anything substantively,

because at the end of the day trade unions control the Labor Party. They have the majority

of appointments at their conferences and in the Parliament. And whatever they like to call

themselves, the reality is that they’re ‘Union Labor’, always Trade Union

Labor. They don’t have the interests of country people at heart. Thanks.