Doorstop Interview: Banks, Current Account Deficit, WTO, Budget Surplus

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Appointment to the Financial Sector Advisory Council
November 30, 1999
Doorstop Parliament House: GST & Charities
December 7, 1999
Appointment to the Financial Sector Advisory Council
November 30, 1999
Doorstop Parliament House: GST & Charities
December 7, 1999

Doorstop Interview: Banks, Current Account Deficit, WTO, Budget Surplus

Transcript No. 99/92


The Hon Peter Costello MP


Doorstop Interview


Wednesday, 1 December 1999

11.30 am


SUBJECT: Banks, Current Account Deficit, WTO, Budget Surplus


Do you have any concerns about St George as a takeover target at the moment?


Well look, various banks have got shareholdings in relation to St George. St George

has, at the moment, still restrictions in its Articles. And of course if you want to take

a large stake in a bank you need the Treasurer’s approval. No approval has been

sought. And as I understand, it would be contrary to the Articles of Association for quite

some time. But if any shareholder were to seek approval from the Government or the

Treasurer to lift its stake in a bank then we would have a careful look at it to see

whether it was in the public interest – whether it was going to give benefits to

customers, whether it was going to give benefits to competition, whether it was in the

public interest. We would investigate all of those things before approving it, but as yet

we’ve had no such request.


Have you any concerns over the current account deficit given that in ’95 you in

fact said, accused the then Labor Government of a total failure of economic policy when

their figures came out? Are you concerned over these figures?


Well, we’ve always got to make sure that we don’t get complacent about the

current account deficit. I think the current account deficit is probably at its peak now.

We’re in much better shape because it’s largely been brought on by external

factors, particularly low commodity prices and weak external economies. And it’s much

better to be in a position where you have low inflation and a Budget surplus. During the

1990’s when current account deficit was peaking at much larger amounts than this, the

Budget was massively in deficit. And this illustrates the importance of bringing our

Budget back into surplus and keeping it there. It’s very important to keep the Budget

in surplus to ensure that you have an insulation against pressure on your current account.

And if a Budget is in surplus it means that your current account deficit involves no

government borrowing. Our Government isn’t borrowing, hasn’t borrowed since we

came to office. The current account deficit represents private borrowing. And private

borrowing in a low inflation economy, as long as it goes into good investment, can

actually bring some added economic growth.


At the (inaudible) World Trade Organisation talks, Australia has been labelled

hypocrites by the European Union for complaining about their trade regulations, saying

that it’s difficult to get products into Australia. What’s your comment on that?


Australia’s got a very strong record in relation to trade. We have an extremely

efficient rural sector which we don’t subsidise, and the Europeans do. The Europeans

have an agricultural sector which is subsidised and inefficient. And their consumers would

benefit if they opened their markets and allowed better, cheaper Australian produce in.

Now I reject absolutely any criticism from Europe that somehow our trade policies are as

bad as theirs. Our trade policies in the agricultural sector do not involve subsidies. We

have an efficient agricultural sector. And we would be very happy if Europe ran on the

same principles as we do. Very happy indeed. Because that would amount to a substantial

opening up of European markets for Australian agricultural exports. And that would be in

the interests of European consumers. That’s the point that we keep on making.

European consumers would get better produce at lower prices.


Do you have a comment on the general (inaudible) WTO meeting in Seattle?


Well these are important meetings. If the WTO in Seattle can get to a stage where

barriers to trade are reduced, that will be good for Australia. Australia has, in

particular, a very efficient agricultural sector. Good produce at low prices. And if we

can negotiate down trading barriers that will be good for Australia, good for farmers and

if I may say so, good for European consumers who will also get better produce at lower



The RBA Governor expressed on Monday concern of the surplus shrinking to $500 million

next fiscal year. Are you planning any measures to try and bolster that surplus?


Well, we’ve just announced measures to lock in the Budget surplus. The measures we

announced last week in relation to the East Timor temporary levy. That was important for

East Timor, it was also important for budgetary reasons. But let’s not forget its

importance for East Timor. Australia currently has a major military commitment in East

Timor. You don’t fight wars or engage in peacekeeping operations out of thin air. You

have to fund it. And we put in place measures to fund it. And the cost is about $1 billion

a year. We won’t let down the Australian troops and we will fully fund that

commitment. Thanks.